Zuora snaps up paywall start-up Zephr to push further into the media Subscription Economy

Stuart Lauchlan Profile picture for user slauchlan August 25, 2022
The shift to the Subscription Economy continues as Zuora gets acquisitive.


A busy day for Zuora yesterday as it announced plans to acquire subscription paywall software start-up Zephr for $44 million in cash, while turning in its own Q2 numbers.

Zephr offers an identity, access management and customer experience platform that it pitches as allowing for the deployment of personalized trial, selling and upselling journeys at high speed and large scale. Notable customers include DAZN Group, News Corp, Guardian News & Media and Penske Media Corp.

Zuora CEO Tien Tzou explained the rationale behind the acquisition, the first since Silver Lake’s $400 million investment in the firm back in March:

Our internal innovation machine is cranking, as you know, but we continue to see a strong appetite in our customer base that exceeds even what we can develop. So we've been building our inorganic innovation machine…Zephr is actually an existing partner. It's a team we've gotten to know well over the years. We've always been impressed with our shared vision, their people and the technology and the feedback from joint customers who are using our pre-integrated solutions.

What Zephr offers is a leading subscription experience platform, and they work with some amazing brands across industries. Particularly, they've had a lot of traction in the media and digital publishing industries, which has been one of our core focus areas as well.

The appeal for the media industry for Subscription Economy is clear,  Tzou noted:

If you look at the success that this industry is having, specifically companies like Disney, who just overtook Netflix in subscriber growth, or The New York Times who exceeded 10 million subscribers this year and is ahead of the subscription growth plans, what you see is the winners in the media industry are the ones who have been able to consistently experiment with new services, new bundles, new offerings, and they're figuring out new ways to connect these services to the right subscribers at the right time.

This is what it means to deliver an optimal subscriber experience. And this is exactly what Zephr helps companies do. They offer capabilities like identity management, intelligent trials, dynamic payrolls and entitlements and access management. But most importantly, all of these capabilities is backed by a decision engine that helps deliver experiences personalized for every subscriber.

So for example, Zephr will know that this is an anonymous user and to throw a promotion for its free trial, or that, that user is an existing subscriber but is prime for an upsell offer. And all this is already working at scale. This technology is already handling nearly 8 billion requests a month for some of the biggest publishers in the world.

Add to this, data from Zuora's Billing, Collect and Revenue products, which amounts to tens of billions of transactions each quarter, and things move up a notch, he added:

Now you've got an incredible platform that can help companies understand their subscribers, formulate the right digital offerings and optimize the digital experience, which we believe will drive up for them, conversion, retention and growth. And finally, here's a rough, where the media industry goes, other industries will follow. From software to financial services to retail and more. Companies in the subscription economy are ultimately going to have the same need to nurture the subscriber experiences and monetize these relationships over time.

In the near term for Zuora, this means we will have additional path to both land new customers and expand within our existing customers in the media and publishing space. But we also see the potential of this platform to go beyond this vertical with additional new products and platform enhancements that we expect to be able to monetize in the coming quarters.


For Q2, Zuora turned in revenues of $98.8 million, up 14% year-on-year. Subscription revenues were $83.8 million, up 17%. Net loss was $29.9 million, compared to $23.7 million last year. Other stats of note from the post earnings analyst call:

  • 745 customers with ACV equal to or greater than $100,000.
  • Over 60 large enterprise customers with annual contracts of $1 million or more.
  • $21.0 billion in transaction volume passed through Zuora’s billing platform in Q2, up 16% year-on-year.
  • ARR of $337.6 million compared to $280.2 million at end of July 2021.  

The macro-economic climate is turbulent, but Tzou reckons that Zuora’s business model is robust enough to ride it out:

The net-net is that we have built a very resilient business, and I feel confident in our ability to navigate the current macro-economic climate. Not only do we have a recurring revenue business, our customers do as well. But the recurring revenue is a resilient business model, we actually have a double layer of recurring revenue protection. But more than that, what we do is mission-critical for our current customers. So it's an area that they are continuing to invest in.

And finally, the shift to the Subscription Economy continues on and is strategic to the growth prospects of companies in a variety of different industries. And so the forces driving demand for what we do continues to be intact. Against that backdrop, the strategy that we laid out 18 months ago is proving to be the right strategy.

He concluded:

We are mindful of the macro-economic conditions, but we continue to be confident in our ability to navigate those conditions because of the resiliency of the subscription model and because our technology is mission-critical. We have the right customer base. We have the right product. We're confident that our land and expand strategy is working. We continue to innovate organically, and now through acquisitions, and all of this while making steady progress towards our financial goals.

My take

An interesting acquisition move in a Subscription Economy sweet spot.

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