I've been thinking about how I want to run Lift Off Summit next year. I had a few technical headaches with Gumroad and I think I could have a much nicer experience using WooCommerce. So I started adding together all of the individual pieces of software I wanted to add onto their site.
- WooCommerce (free!)
- WooCommerce Stripe (free!)
- WooCommerce Memberships – $149.00
- WooCommerce MailChimp – $49.00
- MonsterInsights – $199.00
- AffiliateWP – $99.00
- Yoast SEO – $69.00
- OptinMonster – $108.00
And when you add it all together it costs $638.00 per year. And for an event that made a little over $1,000 in profit last year that's would cut my profits in half. Of course, I expect to make more money next year and some of these plugins might even help me sell more.
But it still feels significant. Especially since I was able to do most of this with Gumroad for $120.
Software Developers Need to Make Money
Software developers need to make a living. If they don't, they'll abandon their software. I've been in their shoes & I've put some of my WordPress plugins up for adoption because I didn't want to maintain them anymore.
Phase One: One Time Fee
When WordPress was young everyone sold software for a one time fee. You buy the plugin and you get updates for life which is an insanely good deal for the consumer.
As a company you make 100% of your sales from new customers. While this was a a good first step (you're actually getting paid instead of giving away software for free) it's not a sustainable model.
Phase Two: Manual Renewals
Then came the manual-renewal model. WooCommerce (WooThemes at the time) was one of the first companies to announce this. At first there was a lot of push back about paying for software more than once. But eventually the WordPress world accepted this and moved on.
In a post about automatic renewals Pippin shares that 14.4% of Easy Digital Download's revenue came from existing customers.
In 2015 we brought in $80,799.26 in renewal revenue. That’s revenue from existing customers that renewed their license keys. This number means only 14.4% of our total revenue in 2015 came from renewals. Ouch.
This was another step forward for software developers. Now they could make some money from existing customers. It wasn't a ton of money but it was something.
Phase Three: Automatic Renewals
And now we've moved into the subscription era. Where every premium plugin has a yearly fee. And there's nothing wrong with this. It's a model that fairly pays software developers for their ongoing work.
And it's allowed companies like Easy Digital Downloads be profitable & grow. And this is a good thing. We need some pillars in the WordPress world to hold us up.
Good For the Consumer
We finally have figured out a way to pay software developers but I worry the business model swung from being too good for the consumer to being too good for the developer.
If you want to spin up a new project the costs can be quite high.
We've spent the past couple years telling ourselves that we're worth it. That we should charge more. But we've been preaching about charging for value while using:
- Slack (free)
- Trello (free)
- Wunderlist or Asana (free)
- MailChimp (free up to 2,000 subscribers)
- Buffer (free)
- Evernote (free)
- Google Analytics (free)
- & RescueTime (free)
It seems like we forgot our roots. All of the above have freemium models. They give you value first and then they charge.
In WordPress world we charge before providing value. That turns my side projects into a $600+ gamble and I'm not a gambler.
Note: since I used to work at WooCommerce I'll pick on them. Not because they're doing anything wrong but because I know they can take criticism and make their product better.
I love that WooCommerce is freemium but I'm starting to realize that the way that their model is setup means that some businesses get to try it for free and others don't.
If you're going to sell t-shirts you can try WooCommerce out for free. But if you run a membership site (like Lift Off Summit) you can't really try it out. You either have to buy the Membership plugin and build it the site or you don't.
The same goes for a bunch of other plugins. If you want to track your eCommerce data in Google Analytics you either get the premium extension or you don't.
We put all of the advanced functionality behind a pay-wall. And this is one way to charge. I just don't think it's the best way.
Usage Based Freemium
Services like MailChimp have an entirely different billing model. You get almost all of their features for free until you get to a certain size – 2,000 subscribers.
This works for Lift Off Summit. We had 400 attendees last year. That means I can keep using MailChimp for another year maybe two before paying MailChimp. It's more in line with how businesses make money. New ventures make almost no money for the first year so why are we charging them?
By the time I have to pay for MailChimp I'm making enough money to pay for it. And I'm happy to do so because I've seen the results. (BTW I actually do pay for MailChimp since I have multiple lists that add up over 2,000 subscribers)
Slack gives you basically all of their features you just can't store more than 10,000 messages. By the time you get to 10,000 you should see the value in Slack and if you want to search through your history then you can pay for it.
Evernote gives you virtually all of their features but you can only access it from a limited number of devices (you can always log into the site via the web though). So again you get to explore the full feature set and if you're nerd like me and you like having it on all of your devices then you can pay for it. (And I do).
The big difference is none of these service make you pay day 1. With MailChimp you don't pay until 2,000 subscribers. With Slack you only pay when you want to archive more than 10,000 messages and with Evernote you get unlimited notes but you can only have so many devices connected to your account.
I still pay for MailChimp & Evernote on a recurring basis but I only have to do so after I have the means to do so. This seems like a much better model for the consumer.
Make WordPress Freemium Again
So how do we translate this over to the WordPress world?
We need to stop feature-gating our plugins & we need to start charging people after they understand the value of the product. This may mean we need more hosted services in the WordPress space. And I'm fine with that. If you want to run a hosted service you can better understand usage and charge for that usage I'm game.
Just charge after you provide value. All of my favorite pieces of software do.
I created a list of all of the monthly & yearly subscriptions I pay for and I could only think of 2 subscriptions that I paid for without first trying a free version: Amazon Prime & Audible. Free two day shipping & a monthly audiobook for $15 are hugely valuable for me. But a lot of WordPress plugins aren't. Lift Off Summit was an experiment that means the payoff may be $0.
Over the past five years we've built a culture that fairly pays developers for their work. They need to stay in business to keep updating the software we know and love.
We need to restructure how we charge for software. Charging for usage means new businesses & side projects can actually get off the ground. We can take the risk out of starting a new project. Less risks means more people are building with WordPress which means we're reinvesting in our own economy.