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Report: Flexible monetisation models drive faster growth rates

April 9, 2024

Findings from monetisation suite Zuora’s latest Subscription Economy Index (SEI) report indicate that companies in the SEI have experienced 3.4x faster growth rates than the S&P 500 over the past 12 years.

In 2023, amid economic challenges and slowed digital transformations, companies in the SEI demonstrated resilience through Total Monetisation strategies. By aligning and evolving their monetisation models with customer demand, they pursued innovative approaches beyond traditional subscriptions, including hybrid and flexible bundling strategies. This agility and customer focus have driven sustainable growth despite market uncertainties.

In the latest SEI report, The Subscribed Institute at Zuora found:

  • Companies in the SEI continue to outpace the S&P 500: In 2023, companies in the SEI experienced a 10.4 per cent revenue growth rate on average compared to 6 per cent for the S&P 500.
  • Customer acquisition slowed, but retention is up: While customer acquisition slowed in 2023, companies in the SEI are retaining their customers, with churn numbers lower than the previous three years.
  • Customer expansion, or annual revenue per account (ARPA), is on an upward trend and slightly improved in 2023: Starting with a quarterly growth rate of 0.73 per cent in Q1 2023, ARPA growth ended the year over 2x stronger at 1.76 per cent in Q4. The quarterly average also improved year-over-year, with 1.5 per cent growth in 2023 compared to 1.29 per cent in 2022.
  • While growth rates slowed in the SaaS sector, churn is down and consumption-based models are continuing to demonstrate promising revenue growth: The SEI SaaS sector experienced a 10.1 per cent revenue growth rate on average. The 6-year compound annual growth rate (CAGR) for SEI SaaS companies employing consumption-based models reached 20.1 per cent in 2023 compared to 16.3 per cent for the non-consumption counterparts.
  • In the Media & Entertainment sector, the New Media subset experienced faster revenue growth, but Publishing Media successfully expanded subscriber count over time: Media & Entertainment experienced a revenue growth rate of 6 per cent on average in 2023. While the New Media subset experienced a faster revenue growth rate (12 per cent) than Publishing Media (5.6 per cent), Publishing Media grew ARPA year-over-year (YoY), while New Media ARPA growth slowed.

“Staying competitive means embracing agility and flexibility to incorporate a diverse mix of business models as opposed to a reliance on any single approach,” advises Amy Konary, Senior Vice President and Founder of The Subscribed Institute at Zuora. “Companies that are able to evolve their monetisation with demand will be better set up for faster and recurring growth.”

“We’re seeing companies increasingly adopt a mix of monetisation models to better align with demand and fuel more sustainable, recurring growth,” notes Simon Blunn, Senior Vice President and General Manager EMEA at Zuora. “As tighter budgets in the UK and around the world continue to impact buyer behaviours, a single approach is often no longer enough to maintain a competitive edge.”

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