NEWSBYTE Subscription-based Internet of Things (IoT) businesses are growing revenues at an annual rate of 25 percent, outstripping growth in other subscription economy businesses. That’s according to Software as a Service (SaaS) provider Zuora, which itself is a subscription-based platform.
The company publishes a bi-annual Subscription Economy Index (SEI), based on anonymised, aggregated, system-generated activity on its own cloud service.
According to the company, that index reflects the growth metrics of hundreds of companies worldwide, spanning industries that include cloud computing, media, telecoms, and corporate services, among others.
According to Zuora, subscription-economy businesses grew revenues about five times faster than S&P 500 company revenues and US retail sales (18.1 percent, versus 3.3 percent and 4.1 percent, respectively) from 1 January 2012 to 30 June 2018.
With new constituents joining the SEI every quarter, the IoT sector – including connected devices, industrial manufacturing, transportation, and construction – now has its own sub-index on the SEI.
According to Zuora, the new IoT index beat the SEI average, growing at an annual rate of 25 percent over the 12 months ending in Q2 2018, while the main index grew 21 percent in the same time period.
Internet of Business says
For B2B subscription companies, growth rate is the leading indicator of a company’s success, says Zuora. In the software sector, for example, a company that grows less than 20 percent annually has a 92 percent chance of failure (according to McKinsey). Successful B2B companies must scale sales teams, add new product editions, and up-sell paths, pursue international markets and larger enterprise accounts, and optimise their business models by taking on usage-based pricing.
For B2C companies, net user growth is the key metric. Successful B2C companies increase subscriber acquisition rates with rapid pricing experimentation, increase retention by tailoring offerings based on behavioural insights, and increase capture rates by simplifying electronic payments.