Zuora, a SaaS startup that offers online services to manage and automate customer subscriptions and payments, has raised $36 million in new funding from Index Ventures, Greylock Partners, Workday CEO and founder Dave Duffield, Benchmark Capital, Redpoint Ventures, Shasta Ventures, Tenaya Capital and Salesforce CEO Marc Benioff. This brings the company’s total funding to over $80 million. We hear that Zuora’s valuation is above $300 million but below $500 million.

Launched in 2008, Zuora’s cloud-based billings platform aims to alleviate the need for online businesses to develop their own billing systems, especially to handle recurring payments like those associated with subscriptions.

The startup offers a number of tailored products for companies including a billing service for cloud providers, which automates metering, pricing and billing for products, bundles, and configurations. Zuora has alsoextended its platform to Facebook apps, app developers charge recurring monthly subscriptions for their apps or premium features.

And over the past four years, the company has seen more than 100% annual growth in bookings, 10 deals over $1 million in the last 18 months with largest at $4.3 million, and doubling the company size in 2011 to nearly 200 employees.

Customers include Dell, Concur, IBM Coremetrics, Informatica, News International, Reed Business Information, Qualcomm, Ricoh, Tata Communications, Touring Club Suisse, TripAdvisor, VNU Media, Vocus, Box, Branchout, Cloud9, DocuSign, Marketo, Ning, Ooyala, salesforce.com’s Radian6, Ustream, Xactly, Yammer and ZenDesk.

Zuora has also announced it is expanding its European presence across the Netherlands, Germany, France and Ireland with new offices, staff and strategic partnerships. Zuora has already signed over $2.7 billion in contracted subscription revenue with customers across Europe. That’s compared to $1 billion total subscription revenue in Q1 of 2010. In fact, 20 percent of Zuora’s business is outside of North America.

Similar to the way that Benioff marketed Salesforce as the anti-software option for business, Zuora is portraying itself as the anti-legacy system for billings and payments.

Zuora co-founder and CEO Tien Tzuo tells me that clients are finding that existing ERP systems from SAP, Oracle and others are outdated in subscription business models. Businesses like Radian6 and Dell need a scalable, cloud-based model that can easily be deployed, he explains. ““The product-focused, industrial economy and the systems that support it are part of the past. It’s time for a new system of record for the Subscription Economy.”

Tzuo says that the company is on track to double or triple revenue this year (but declined to give us exact revenue numbers). And the company still has $20 million in the bank from its previous funding rounds.

So why did Zuora raise money? Tzuo says he is going to continue to be aggressive with the international expansion. Additionally, the new funding will be used to invest in core research and product development.

Publishers have been struggling for years. Now local newspapers, magazines and even the New York Times, that Grey Lady, are being treated like old ladies by Apple, stealing their pocketbooks while they’re trying to stay on a fixed income.

This week, Apple announced what the publishing industry has been clamoring for, subscriptions, in exchange for a whopping 30% cut. Clearly, paid subscriptions are a part of the future of all online media, whether tied to a print version or not. That’s what The Daily is all about and even AOL might one day go down that path (Tim Armstrong admitted as much on CNN). It’s part of the shift to the Subscription Economy that’s happening across not just media, but software, cloud computing, communications, consumer services, entertainment, you name it. In just the past year, as one example, my company, Zuora, has signed over $1 billion in contracted subscription revenue.

But something very dangerous is happening. Apple is now calling the shots for the entire publishing industry’s digital strategy. Think about that for a minute. While Apple is prescient and makes great products, it’s hardly a publishing expert. Yet, Apple is setting up new rules that could bring the publishing industry to its knees. As if it weren’t already in that position.

It’s not that Apple can’t save publishers—which I don’t think it will with these financial terms. It’s that its model completely ignores the realities of the publishing business:

• The App Store and iTunes only offers one subscription pricing model. Will a single model work for the San Jose Mercury News, the Wichita Eagle and Runners World? The reality is that it’s likely going to be very different for different titles and subscribers.
• Apple has no way to bundle physical and digital goods. Do you want to give up home delivery forever? Or would you still like to get a Sunday paper every week or monthly glossy magazine along with your digital version? I bet most consumers would like some combination of both.
• With the Apple model, there’s not enough adequate ad revenue from tablet editions of magazines and newspapers. In particular, eliminating the Sunday delivery also means that local papers lose a huge advertising vehicle.
• Consumers won’t stand for one subscription through one device. People want to consume their news on whatever device they have at hand—whether it’s a Blackberry, an iPad or an Android phone. Amazon is showing us all the way with their “Kindle reader everywhere” strategy (with syncing bookmarks to boot), and Google has set a strong standard in its deal with Time Inc around Sports Illustrated subscriptions. Publishers also know that content ubiquity requires platform independence.
• As last week’s article from John Squires, former EVP for Time Inc, so rightly points out, access to customer data is truly the lifeblood of the publisher’s business model. In the Apple world, Apple is the one controlling this data.

To quote Steve Jobs himself, “A functioning media is vital to a functioning democracy.” I agree, and I think there’s a better way to use the genius of the iPad and other devices that enables publishers to control more of their destiny—and benefits everyone financially.

So what’s a publisher to do?

Take Matters Into Your Own Hands: Don’t be tempted by that juicy red apple called the iPad. You need to build your own online subscription commerce strategy, one that allows for lots of different ways to package up your content and sell it.

Not Your Father’s Subscriptions: The industry continues to see “subscriptions” in terms that are far too simplistic. Yes, consumers will never agree to switch to a full “subscription only” paywall, so you need to have flexible billing that can slice, dice and package content by the month, the article, by home delivery days, by online, and the list goes on.

Make It Easy: Provide customers single click convenience while providing a PCI-compliant payment and billing process. You need to be able to bundle, cross-sell and rapidly deploy promotions to capture more readers than you ever could through a call center.

And as for Apple? Can you redeem yourself?

Customers with Benefits: If you want that 30% cut you have to let the publishers own the subscriber relationship. Share that data and you both win. Simply giving subscribers “the option” won’t cut it.

Freedom of Choice: You know consumers want both print and digital. This isn’t music. There’s no love lost for the CD. Most consumers want to keep home delivery, and publishers want to be free to work across platforms and devices. “Control” and “closed” are completely counter to the anti-Big Brother brand.

Help Them Help You: Selling publications is not the same as marketing the latest Black Eyed Peas song. Newspapers and magazine titles will get lost in the iTunes model. Just being part of the App Store isn’t enough. You need to deliver more merchandise value for a 30% cut.

The bottom line? The Subscription Economy is here, and Apple should be applauded for offering content via subscription. Unfortunately its model just scratches the surface. In the end, publishers should think twice before taking a bite of the Apple. This current plan will do more to hurt publishers than to help them make the shift to the online world.

Image credit: Charis Tsevis via Dripbook.

Launched in 2008, Zuora’s cloud-based billings platform aims to alleviate the need for online businesses to develop their own billing systems, especially to handle recurring payments like those associated with subscriptions.

The startup just released a billing service for cloud providers, Z-Commerce for the Cloud, which automates metering, pricing and billing for products, bundles, and configurations. Last year, Zuora extended its platform to Facebook apps, app developers charge recurring monthly subscriptions for their apps or premium features.

The company says that it has seen fast growth in revenue, bookings and cashflow thanks to the shift to the “Subscription Economy” in both the consumer and enterprise worlds. Zuora signed over $1 billion in contracted subscription revenue in the first quarter of its fiscal year, which ended April 30. Plus, Zuora has been cash flow positive since early this year, and has grown in excess of 400% in 2009 and is on track to repeat that in 2010.

And CEO and founder Tien Tzuo says that he believes the marketplace is large enough for the company to eventually IPO.

Clients using Zuora’s service include Rearden Commerce, Ning, Pandora Media, ReputationDefender and HDCloud. The startup will use the new funding for product development, international expansion, and hiring additional staff.

Zuora’s cloud-based billings platform aims to alleviate the need for online businesses to develop their own billing systems, especially to handle recurring payments like those associated with subscriptions. The company says that its growth in revenue, bookings and cashflow is thanks to the shift to the “Subscription Economy” in both the consumer and enterprise world.

Zuora also saw a 102% growth in revenue, a 127% growth in organic cash flow and was cash flow positive for the quarters. Clients using Zuora’s service include Rearden Commerce, Pandora Media, ReputationDefender and HDCloud.

Last year, Zuora extended its platform to Facebook apps, app developers charge recurring monthly subscriptions for their apps or premium features.

While Zuora isn’t revealing exact revenue numbers, this seems like strong growth for a company that was launched a few years ago. And as cloud-based SaaS pick up amongst enterprise users, it’s unsurprising that Zuroa’s clientele is expanding.

While advertising revenues have been disappointingly low for most applications on Facebook and other social networks, another option app developers are increasingly turning towards is micropayments for virtual goods or premium features. Both Facebook and MySpace have admitted that they are working on their own payment systems, and Apple could play a role as well since it already has a payment system in place for iPhone apps (although even Apple is running into some bumps).

While the bigger players are fiddling with their payment system plans, nimbler startups are moving in to fill the gap. One of these is Spare Change Payments, which is trying to become the Paypal of micropayments. A year after launch, more than 700 apps across Facebook, MySpace, and Bebo use Spare Change for micropayments. Spare Change is processing $2.5 million a month in micropayments, which is a $30 million annual run-rate. The apps that are having the most success with micropayments are games and ones that sell virtual goods.

Over a million people have already signed up for Spare Change. Hundreds of thousands of those use it actively on a monthly basis. And it is not all nickels and dimes. Last year, 250 people spent more than $1,000 apiece on digital goods through Spare Change.

Now, the company is making it easier for consumers to pay through Spare Change with a new payment widget that pops up in each app instead of sending people off to a separate payments page. You can choose between several payment methods including a credit card, Paypal, Spare Change credits, or through your mobile phone bill. Once you buy a minimum of $2 worth of Spare Change credits, you can use them as currency for apps that charge as little as $0.10 at a time. It is also introducing a PIN ID for users who choose to tie their accounts to a credit card so that they can use the same PIN across any app that uses Spare Change. The experience is designed to be familiar to anyone who has ever downloaded an app from the iTunes store. You enter your PIN, and then go back to the app. The company accepts payments from 190 different countries.

The first app to launch with the new widget is Mind Games on Facebook. It requires developers to add only three lines of code. Spare Change will roll it out to MySpace and Bebo soon. Spare Change is designed specifically for social networks. Customer support is done via the direct messaging systems inside each network, and the company analyzes the social graph to sniff out fraud. For instance, it looks at how many friends someone has and other factors to assign risk scores to individual consumers. Spare Change has been bootsrapped with only about $500,000 in seed funding, and two of the co-founders (Mark Rose and Simon Ru) previously worked at Paypal.

For micropyaments, Spare Change is much cheaper than Paypal, which offers its own micropayment option. Paypal charges 5 percent plus $0.05 for transactions less than $12, but only for premium accounts that qualify (otherwise, for most small accounts, it is the normal rate of 2.9 percent plus $0.30) . In contrast, Spare Change takes a processing fee of 8 percent for each transaction. CEO Lex Bayer points out that while Paypal has a micropayments offering, it does not seem to be a huge priority. “PayPal is not well designed for micropayments or digital goods,” he says. The logic driving Paypal is to encourage larger transactions because that is where Paypal makes more money.

A bigger concern for him should be if Facebook, MySpace, or Apple ever decide to jump into the micropayments game. Meanwhile, he has an opportunity to stake out a piece of the micropayments market and fight it out with the other startups eying the same prize. For instance, Zuora recently launched subscription billing for Facebook apps, Zong and Mobilecash are trying to tap into mobile payments (although the fees are still too high). Whoever figures it out first will be collecting more than just nickels and dimes.

How much would you pay for a Facebook app? For most apps, most people would probably pay nothing. But for some apps, such as member-to-member online tutorial services, charging could become an option. At least Tien Tzuo hopes so. The CEO of Zuora is bringing his billing subscription service to Facebook, which has more than 50,000 apps in search of a business model. Tzuo argues:

It is very easy to build an application and easy to get distribution, but nobody’s really making money and everyone is still talking about advertising. Advertising never really worked for apps. Subscriptions are the missing ingredient for people to make money.

Zuora lets app developers charge recurring monthly subscriptions for their apps or premium features. Subscriptions can be weekly, monthly or yearly, and as little as 25 cents or $1. Teach the People is already using Zuora. Tzuo is looking for five more developers to test out his beta (sign up here).

Zuora handles the self sign-ups, the billing, the product catalog, and the hand-off to payment gateways such as Paypal or credit cards. In return, it takes 2 percent of each subscription. Zuora has raised $21.5 million so far for its billing-as-a-service model.

Maybe just having the option to charge a monthly or yearly subscription will force Facebook app developers to come up with more apps that people are actually willing to pay for.

When Zuora launched its online billing solution last May, we wrote the company aims to alleviate the need for online businesses to develop their own billing systems, especially to handle recurring payments like those associated with subscriptions.

Its so-called “Z-Billing Platform” that goes live today handles four main billing-related areas: customer accounts and subscriptions, product catalogs, billing operations, and order management. The whole offering is provided a la Salesforce as an on-demand solution. Online businesses just need to configure their Zuora accounts, import data from their old billing systems, and plug in their sites through a set of APIs. Customers who buy items or subscribe to services on their sites will then get handled by Zuora, which tracks orders, invoices and payments.

Zuora launched a new product last month dubbed Z-Payments, which allows customers to also actually pay bills, integration with online payment service PayPal included. Vindicia is another venture-backed startup with a similar solution.

Zuora is led by veterans from WebEx, Salesforce.com, Accenture, DiCarta, Postini and Oracle.

Zuora, the SaaS startup run by industry veterans from Salesforce and Webex, and backed by the face of SaaS himself, Marc Benioff, is launching its online billing solution today.

As Erick explained in March, Zuora aims to alleviate the need for online businesses to develop their own billing systems, especially to handle recurring payments like those associated with subscriptions.

Its so-called “Z-Billing Platform” that goes live today handles four main billing-related areas: customer accounts and subscriptions, product catalogs, billing operations, and order management. The whole offering is provided a la Salesforce as an on-demand solution. Online businesses just need to configure their Zuora accounts, import data from their old billing systems, and plug in their sites through a set of APIs. Customers who buy items or subscribe to services on their sites will then get handled by Zuora, which tracks orders, invoices and payments.

Naturally, Zuora has opted for a utility-like pricing model. The company will take 2% of all invoiced amounts, with that percentage increasing decreasing as payments get bigger and eventually getting capped completely for particularly expensive items.

The startup has already signed up six clients, three of which have implemented the system, but only one of which has been disclosed: Coremetrics, which provides Omniture-like web analytics. CEO Tien Tzuo says that Coremetrics demonstrates the capabilities of Zuora’s billing system particularly well because it requires 27 different pricing models, each of which must be handled appropriately.

Since the founders of Zuora come from a SaaS background, you can expect them to partner initially with other SaaS companies. However, the platform is not limited to this category; it potentially can be implemented for a wide range of services from music streaming to online dating.

That spark turned into Zuora, an on-demand billing and subscription-management service. At the end of 2007, Tzuo left Salesforce after nine years to join K.V. Rao, an early WebEx employee and one of the entrepreneurs who had been pitching that day, to become the CEO of Zuora. The other co-founder and CTO is Cheng Zou, who had built the subscription billing system at WebEx. Benchmark led a $6.5 million A round in which Benioff invested personally as well. “I always support those who have supported me,” says Benioff.

Think of Zuora as a Salesforce.com for online billing. More and more businesses are adopting online subscription models—everything from Salesforce to Netflix to Zipcar. But there is no good on-demand service that these companies can outsource their billing to. The closest thing is Portal Software, which was bought by Oracle, but that is an expensive enterprise application geared more towards Fortune 500 companies.

Zoura is more a pay-by-the-drink model along the lines of Salesforce and every other software-as-a-service enterprise startup out there. In fact, it is those startups who need Zuora the most because they charge customers a recurring subscription. Tzuo explains the deficiencies of the current billing software alternatives:

The existing systems are built for manufacturing companies who bill each customer a one-time charge, instead of recurring billing like a phone company. If you are going to have a service online, you can give it away for free and hope to make it back on ads. Or you can go with PayPal if it is a one-time charge. But if you want a customer to open an account with you, and track their fees, that is the product we are building.

The service is being designed not just to send out monthly invoices, but to manage subscriptions as customers change plans and dispute charges. Tzuo wants to automate all of that. The startup already has one pilot customer (not Salesforce), and plans to charge per billing account. It is not unusual for companies to spend as much as 6 to 8 percent of their revenues just on processing invoices and collecting payments. Tzou is convinced he can cut that in half and still make a profit.