Forget Content Publishing – The Real Money in Subscriptions is in Payment Processing Services

Just like Levi Strauss proved during the California gold rush, the real money isn’t necessarily in a popular commodity, but rather in selling the

Just like Levi Strauss proved during the California gold rush, the real money isn’t necessarily in a popular commodity, but rather in selling the tools to mine that popular commodity. During the gold rush, that was picks, shovels and blue jeans. For online subscription sites, it’s payment processing and financial systems for recurring billing.Billing services are somewhat late to the subscription services party. (In fact, major banks such as Citizens Bank wouldn’t give merchant accounts to business customers processing card-not-present, recurring billing for virtual goods until just a few months ago.) The first services firms to the gold rush were, in fact, software firms offering paywall publishing platforms. Although some of these have been profitable, few, if any, have had the kind of break-out growth that attract tons of private equity.If the online subscription world was limited to content publishers, we’d probably still be waiting for great middleman financial services firms to develop. But, due to the explosion of the SaaS industry, aided and abetted somewhat by subscription eCommerce, recurring billing is now a big enough profit center to attract major private investors. Case in point:

Vindicia is backed by Bertelsmann Digital Media Investments, DCM, FTV Capital and ONSET Ventures. With clients including Snap Interactive, Blizzard Entertainment and Intuit, the firm was a winner of Red Herring’s 2012 Top 100 Americas Award, and named as one of the fastest growing companies in the San Francisco and Silicon Valley areas in 2012.

Aria Systems is backed by Hummer Winblad Venture Partners, InterWest, and Venrock. With clients ranging from Disney to HootSuite and EMC, the company more than doubled revenues in its last financial quarter.

Zuora is backed by Benchmark Capital, Marc Benioff, Shasta Ventures, RedPoint Ventures, Index Ventures, Greylock Partners, and Dave Duffield. With clients such as Pearson, Reed Business Information and DocuSign, the company was named a Top 100 Company by OnDemand, and placed on ZDNet’s 2012 CRM Watchlist.

Now, as any publisher who’s ever had to oversee a custom subscription systems build will tell you, software development is an incredibly hard job. And, it sure doesn’t carry the glamor of being able to tell civilians at cocktail parties that you work for a publication or site they may have heard of.That said, there’s surely gold in them there hills. For which we should be grateful. Without magnificent profit potential, recurring payments systems might resemble the somewhat bleak landscape of paywall platforms, where none can be called really, truly great.