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Zuora CEO's message to media: Readers are customers too

22nd Mar 2013
co-founder diginomica
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"Thank God we as the tech industry didn't think the same thing when we launched the SaaS industry!"

Tien Tzuo, founder and CEO of Zuora, gave the media and publishing industry a mild ticking off for its negativity as he kicked off a thought-provoking discussion session in London this week on the future of the media.

Zuora is best know of course as the Subscription Economy company, set up to provide a new form of accounting and revenue recognition for companies operating as subscription-dependent organisations.

With that in mind it's hardly surprising that the company boasts a significant number of major publishing houses and news organisations, such as the Financial Times and News International, as its customers.

"Our role is to start a conversation," said Tzuo. "We hear a lot of conversations where the media is seen as a glass half empty, but we do also hear from those who see the glass as half full.

"Three or four years ago there were a lot of predictions of the death of journalism because of the shift to digital. We saw advertising revenues plummet to a 1950s level. There was a whole school of thought that said that when we move content online people won't pay for it. So we saw a race to the bottom with cost cutting as organisations restructure their costs to match the new realities of their revenues."

But, he noted, some companies took a different tack. "The FT, the Wall Street Journal and New York Times became the litmus test as they set up paywalls and people predicted it would be their deaths," he said "We know now that that wasn't what happened. The success of the NYT paywall is giving this industry some hope."

Overall Tzuo reckons that that industry pessimism is on the turn, arguing that nearly 47% of newspapers are now behind a paywall while according to Forrester Research, online content revenue in Western Europe is expected to rise by 67% through 2017.

"The idea that consumers won't pay for content is just going away," he stated. "In fact the shift to digital can reverse the decline of print. There is an uptick now. Death is not guaranteed anymore."

Put the customer first

Not that all paywall moves have been successful, he admits, citing the example of US entertainment industry journal Variety's abortive efforts as a case in point.

But Tzuo offered an interesting observation on a common theme running through the successful examples and that is focusing on the idea of redefining the reader as the customer.

"If a paywall is just going to be a toll booth then it's never going to be really successful," he argued. "You need to focus on the customer. What do people want to pay for? What are the right price points for them?

"It's never really been about the paywall. The media industry is the only one that walks about walls. SaaS firms talk about fremium models or such.

"It needs to be about the shift away from the advertiser as customer to the reader who's the consumer of the product who's the customer. You have to focus on building a deeper relationship with the customer. Think about the deeper, richer relationships you can have with your cusotmers because you're not limited to a print world.

"Everyone who reads the NYT can now get the same edition all around the world. Editions are not limited to how far the trucks can drive around the tri-state region. Newspapers have a much wider reach."

Organisations also get a more predictable revenue model, he added. "You've been addicted to the drug of the ad dollar. But when you're making money from the relationship with the customer, they don't just go away over night," he argued.

"Your customers see you as a source of value that they can get on a day to day basis so they stay with you and you get a more predictable revenue stream. People do have a lot of affiliation to the newspaper you've always read."

Readers become customers

Tzuo's argument was mirrored by Christina Scott, CIO at the Financial Times. "The FT had the advantage of being a very niche product," she said. "We have never given away the content completely for free so we've never devalued the digital content. We introduced our first paywall in 2001 and went across to a metered model in 2007.

"The FT has a great brand globally and we've been able to take that and apply it to the digital world. I'm not pretending its easy, but we've always put the customer at the centre of what we've done. We put a lot of effort into understanding the customer and what they need. Our overall circulation has gone up."

Katie Vanneck-Smith, Chief Marketing Officer at News International (NI), said she had been preaching that digital was not a substitute choice for customers but a complementary option since back in 2000 when her board of directors were not enthused. What made the change happen for NI was the arrival of James Murdoch, fresh from running the subscription-based Sky.

"We created a division called Customer Direct," recalled Vanneck-Smith. "That looked at what is that digital would afford us, not as a reinvention tool but as an enabler. We can have direct relationships with customers."

But this meant rethinking readers as customers which is a leap to make. "The big mind shift is when you stop using the language of 'reader' and start using 'customer'," admitted Vanneck-Smith. "Telcos are used to thinking about revenue per customer, but publishing has sold against eyeballs. Now you need to start thinking about brands and brand value."

She drew a simple analogy about paid and free content. "It's basically the choice between Weatherspoons or Soho House. You can go to both for a drink, but with Soho House you're paying for the experience. Both are perfectly good, but you make a choice," she said. "One takes the concept of membership. We have effectively got a very defined membership bundle.

"The challenge for us is what we do with The Sun which is a mass media brand," she concluded.

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