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Is WordPress SaaS like plugins the future? In an interview for WPSchool, Matt Mullenweg mentioned that one of Automattic’s BIG and “silly” mistakes during their first years was not adding automated renewals to WordPress.com. After adding renewals, they started to double their revenues.
“We had subscriptions… but they didn’t actually renew! So you had to come back every year and re-buy everything. Which naturally has a higher churn rate than if you renew it, which every company in the entire world does, it turns out that every company does because our revenue pretty much started doubling! as soon as we did renewals. As I think about all the years we didn’t do renewals, I feel a little silly”
If Matt feels silly, why shouldn’t we, plugin developers, feel silly as well?
Looking at the WordPress plugins market today, the most widely used monetization model is “support + unlimited premium updates”, for a period of a year. And if you want to keep getting updates and support, you’ll have to purchase a license for another year. In fact, everyone is actually selling recurring-payments licenses but without the automated renewals. Developers don’t admit it, or probably do not acknowledge that, but that’s exactly what it is! I’ve talked to dozens of fellow WordPress plugin developers about this topic, and once I tell them the “truth”, they suddenly start to feel a bit “silly” and question themselves why they don’t auto-renew, turning their products into WordPress SaaS like plugins.
We all hear how SaaS is a wonderful business model–so why don’t we try to leverage the SaaS’ model for our plugins? Well, most plugins are not exactly “Software as a Service”, but we sell software and provide support as a service with the license — which sounds close enough to me.
What’s the beauty of WordPress SaaS like plugins with recurring revenues?
First, you can estimate how much money you are going to make by the end of the month (MRR – Monthly Recurring Revenues). Then, you can precisely project your growth once you know your conversion rates and churn rate. Recurring payments will enable you to turn your business into a data-driven company by knowing all your KPIs (key performance indicators). These metrics are invaluable for various reasons like budget planning for hiring, marketing, and so on. You can read a lot more about the benefits of SaaS businesses with this terrific SaaS guide by David Skok, serial entrepreneur and a VC at Matrix Partners.
Having said that, monthly recurring payments are much harder at the beginning, since the payments are smaller. But once your customers base grows, you can build a much more sustainable and scalable business than with a model that uses one-time payments – which is much less predictive and market dependent. For example, when you push your Black Friday promotion you can make tons of money, and that’s all fantastic, but what happens for the next month? How do you maintain that momentum? The answer is monthly recurring revenues!
Why are one-time payments bad for your WordPress plugin?
As a WordPress plugin developer, I learned that plugins distribution dependent on 4 main traffic sources:
- Search / SEO
- WordPress Repository
- Affiliation
- Social
For the sake of the example, let’s assume that most of your new users are coming through the .org repository channel. Let’s say that WordPress.org suddenly revamps its directory design (which happened a month ago) and search algorithm, which causes your plugin to lose 50% of its exposure. If you’re selling your premium plugin at a one time purchase it means that you just lost 50% of your monthly sales from your main revenue stream. Will you be able to pay your mortgage for the next few months? I hope so. And what happens if you have employees? How would you pay their salaries?
However, things are different when you are running a recurring revenues business. Even if a giant asteroid hits earth, and your natural traffic disappears, you are still going to earn the same amount of money as in the previous month. Of course, you need to incorporate the churn rate into the equation, but at least your business has some buffers and its not going to suddenly die in one day. One time payments are very risky!
Adding recurring revenues to your monetization model is like adding a capacitor to your electronic circuit.
So yes – you might say that some customers won’t like the automated renewals, and you’re probably right. I hate chasing after my credit card company disputing **unauthorized** payments. BUT if you are designing it right, by being transparent during the checkout process, highlighting the fact there are recurring revenues involved, sending a notification email a week before the next payment with a very simple link to cancel the payments account, then you’re pretty much good and I am sure that your conversion rates will not be significantly affected (if at all).
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Why are monthly recurring revenues also good for your users?
– Based on the amazing research Thomas Höfter has recently published about WordPress premium plugins pricing statistics, an average annual premium license is about $125. From the consumer point of view, it’s much easier and less risky to pay $10 to test drive the premium version for a month, instead of making a big commitment by paying the whole $125.
– You add flexibility and let users use your premium plugin features even if they need it just for a short period (e.g sites build for one time events).
– Most of your customers are SMBs (Small/Medium Business) who use your plugin on their companies site, and the last thing they need is to forget to do the manual license renewal and take a risk to miss your latest security patch. They are running a business, and they are swamped with other 100 stuff. The auto-renewal only makes their life easier (more accurately – doesn’t make their life harder ;-)).
Examining the numbers…
The average license renewal rate for products without automatic renewals is between 10%-30%, while products with real recurring-revenues (automatic renewals) have renewal rates between 60%-95%. Of course, the businesses with auto-renewals have more refund processing and chargebacks (the numbers depend on your product and how well you remind your customers prior to the next payment to prevent surprises). But as you can see, the different is at least 30% in renewals–usually more like a 50% difference. That’s a HUGE difference in the long run.
Adding license auto-renewal for your WordPress plugin will increase your renewals rate to 30% to 50%.
If you are still not convinced, here is a compromise that you’ll may like. If you want the best of both worlds by continuing with one time payments but on the other hand “kind” of doing recurring revenues, you should add an opt-OUT checkbox for automatic renewal. Most of your customers, hopefully, won’t opt-out, but the ones who really care about it will have an option to do so.
Hey, don’t listen to me – listen to Matt Mullenweg, because not having auto renewals is just “silly” 😉
Listen to Matt Mullenweg – add auto-renewals to your WordPress plugin now, because not having auto renewals is just “silly”.
http://asaturdayrant.blogspot.com/2015/03/an-open-letter-to-theme-and-plugin.html
[THIS IS ACTUALLY A "PUBLIC" DRAFT. IN MID-JUNE AFTER RETURNING FROM EUROPE I PLAN TO SHORTEN IT AND "POLISH" THIS FOR PUBLICATION IN SEVERAL MEDIA.]
Web designers like myself rely on our theme and plugin vendors (like you) who have many excellent products I want to buy, and in the past I did buy them, many of them, and would continue to.
But now I can't.
Many of you rely on web designers for a large portion of your revenue base.
If I can't buy from you, how are you going to remain in business?
Up to about eighteen months ago premium (i.e. paid for, not free) WordPress additions (themes and plugins) were sold with a one-time fee perpetual license for updates and support.
But today, a large number of products are no longer sold, they are rented and buyers have to pay a yearly 'update' fee, often the same amount as the first purchase.
Some vendors give us unlimited use but require a yearly fee for updates.
But there are others that restrict us to using the product on one site and requires a yearly update fee for each install.
This just does not work for us!
In the past, our web design company (NewMediaWebsiteDesign.com) as well as others would buy lots of premium themes and plugins. But we can't do that anymore. We can't take what could become a large financial liability for many dozens of yearly rental (ransom) payments.
Yes, it might be possible for us to buy a license for our clients and put the yearly payments on their backs, but not only is that an administrative hassle on the front-end of the sale, clients don't want to be 'captive' to vendors anymore than we do.
While some vendors offer a 'developer' license, it is usually fairly expensive... and we especially don't want to pay you for that when we are not sure that your product will be continued or that we will continue to use it should better solutions present themselves in the market... or that your company will even be around next year!
Here are the four dirty little secret fears that web design shops don't tell you:
Our FIRST biggest fear is that we believe theme and plugin developers will put version-checking code into their products such that when WordPress updates to a new version, the theme or plugin will not work until the site owner pays the ransom for an "upgrade."
The SECOND biggest fear is that the vendor will "cable-TV" us with a low teaser first-time license fee and then double it or triple it (or worse) at license renewal time.
The THIRD biggest fear (a corollary of the first) is that vendors will eventually put in code that if the license is not renewed the product stops working... and the famous 'white screen of death' is the result.
And the FOURTH biggest fear is that developers will put out updates with features our clients have no need of... or worse... they take away features they like.... or the vendor doesn't upgrade anything... they just collect the fee.
These would not be illegal events; there are no laws that I know of that require disclosure (especially from non-USA or non-EU vendors.)
Yes, perhaps market forces and community "awareness" would mitigate the above, but it hasn't done so with the cable-TV industry, cell-phone service providers, or the oil/gas sector. I have little faith in the so-called 'free market' anymore.
We used to buy many themes and plugins for clients, especially from vendors who gave us unlimited use of the product as well as updates. But now the paradigm is shifting to one-payment, one-site, with a yearly payment requirement for updates.
(Note, I'm not mentioning support here because I think that can and should be a separate issue... my bet is that good designers hardly ever require on-going email or phone support. I believe the consensus is that 20% of the buyers are the creators of 95% of the support tickets. Support could be charged on a fee-per-ticket basis, like Apple does.)
So, while I like the products of many developers, I can't put my company in the position of being held hostage by them, at least not while I have options.
Will I pay the yearly costs for Microsoft Office or the Adobe suite? Yes. Why? Because I have to... until Word files are not the de facto standard and until there is an alternative graphic suite, I'm trapped.
But I have alternatives with WordPress... they may not the best alternatives, but the developer community has basically forced them on me and other small design shops.
I now need to find cost-effective solutions with either open-source no-cost products or those that offer a license that has far less financial risk to our company and our clients.
Please understand. I know that developers need a revenue stream to create new or better products. But I don't think the current paradigm of 'ransom-ware' is the answer, at least not in the long-term.
I think most design shops would like to see some changes.
The first and most important change and one which I think is mandatory is that vendors guarantee that their product will always be supported... that the version the customer buys will run (be supported or replaced) forever WITHOUT any yearly fees. However, if the customer wants support and/or upgrades to newer versions, they need to pay for them.
This gives designers the peace of mind that the products they put on/in client sites are not going to 'die' with a WordPress update or on a non-renewal. Designers cannot live with the threat of becoming a hostage and having to pay what the underworld calls 'protection.'
Developers could also offer a license option of yearly renewals for support and updates for those customers who will always want the latest and greatest version.
Perhaps developers could offer a multi-year license with a refund if the product is discontinued? (And we all know how many designers have bought an expensive 'developer license' only to see the product (or company) disappear (a month or year later.)
Let me say it again for emphasis. I used to buy many themes and even more plugins. I can't and won't do it if I'm going to be put at risk of being held hostage for a 'ransom' payment each year.
I'm not even going to take a chance on products from most new companies. If I'm going to have to pay 'tribute' it will be to those companies who have been around for years and years and have a track record seeking feedback on what their customers would like to see in the next version, and then incorporating these' updates, instead of just 'fluff' code.
If you are a new vendor with a new theme or plugin and you come to me saying "Buy my product for $50 now and $50 a year thereafter" I'm simply not going to bother with you.
And if you are an established vendor, you need to sell me on what your roadmap for the product is; that you are going to incorporate features that are worth the yearly update fee.
The days of design shops like mine buying hundreds of themes and plugins each year are over.
I don't think that is good for us or the theme/plugin developer community. A good business 'deal' has to be 'win-win.' The new "pay us now AND pay us later" looks like a win for the developers, but I believe that except for a few very well-run companies, it will become a loss.
Hi Alan, I would have to write another blog post to respond for all your points :) Two main things I want to comment on:
1. You should always care about the developer / people / business behind the product, whether it's a service or a plugin, recurring payments or just a purchase.
2. From the designer / web-developer point of view, I totally understand why you would want to have the "lifetime license". Unfortunately, this is unsustainable for plugin developers. On one hand, you want to get plugin updates for life. On the other hand you expect us, the developers, to continue maintaining the plugin, adding security patches, fixing compatibility to new WordPress versions... And all of that for only $150 (avg. plugin price on the market). It just don't worth it.
As a designer, you probably charge between $50-$200 / hour, so asking $150 / year is not a biggy. What if I'll ask you to change your model to continues maintenance of your designs for life, but only for a one time payment. Would you fix your designs for free when a new browser version suddenly breaks your design? My guess is that you will NOT.
The difference is that a custom design is only sold once - a web developer/designer has to fix an individual product for a single customer.
A plugin developer is selling his product to hundreds or thousands of customers and has to fix the product anyway if he wants to sell it to future customers.
It's very hard to sell a customer a website and tell him that he has to pay renewal for 5-10 plugins every year. This works for bigger customers with big budgets, but it doesn't work if you sell a website for $1000-2500.
Those customers are not willing to pay additional $500/year for plugin renewals. Every additional plugin/renewal will rise the costs and may lead to losing the customer to another developer who doesn't care about updates or security.
As a result we can't afford to use plugins with yearly renewal for that kind of customers and the plugin developer will not only lose renewal, but won't sell his plugin at all.
There is a reason why plugin developers try to bundle bugfixes and support. It's easy money. But if you want us to use and sell your products you have to offer us fair and competitive deals and not deals that are mostly good for yourself.
"Every additional plugin/renewal will rise the costs and may lead to losing the customer to another developer who doesn’t care about updates or security"
I think here you hit the point. I think you have to charge more than these developers. More enough that it covers these security/updates/upgrades ...
Because huge amount of online users think that WP site is free and it cost few cents and everything more than 9.99$ is expensive .... This does not mean, they are right, they just don't have enough knowledge, experience ... Here is your place as agency to tell them about this.
If you are agency what does jobs for small budgets clients - small websites ... don't expect that you can use the same tools/service as agency who will not even answer your email if you are not ready to spend more than 10 - 20 thousands of $.
Personally I think price range of WP plugin is extremely low and would like to see double, triple rise of it followed by quality.
For me its waste of time and money to buy some junk for 39$ lifetime compared to something well maintained with high quality for 199$ or more yearly.
I don't understand why you want to take profit from developers of plugins (tools what you use). You have to do this from your clients and find the right balance and way for that.
Limousine taxi does not cost the same like regular yellow moving tool ;) Not everyone understand this around on-line business.
Btw. that interview with Matt is amazing, really enjoyed it.
@Frank - I want to point out a few inconsistencies just in your own statements, before adding my own thoughts.
You pointed out you buy Microsoft & Adobe software because they are the defacto option. The problem with that statement is that they are one defacto option. You could just as easily use Google Docs which 100% works with and exports to doc & docx formats. You could use linux which is 100% free and has alternative (free) options to replace all of the Adobe offerings.
Lets get real, you use them because they are the simplest, do everything you need and you don't have to learn something new. WP Plugins are the exact same, gravity forms may be expensive but is the defacto best option.
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Next you say that its mandatory for bug fixes to your current versions, lets get real the #1 reason why a plugins developers fall away is because there is no path to financial freedom with that plugin, so they put their efforts somewhere else. If you want to guarantee that a plugin/theme continues to be updated, be sure to buy their highest price license, to compensate for all of the other web designers who think just like you do now. Otherwise its basically a self fulfilling prophecy, you won't contribute more money because you aren't sure they will be around to deliver, but are unwilling to consider that your lack of contribution leads to that outcome.
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You said "Perhaps developers could offer a multi-year license with a refund if the product is discontinued? (And we all know how many designers have bought an expensive ‘developer license’ only to see the product (or company) disappear (a month or year later.)"
That in my opinion is nuts. So not only would our hands be tied to forever working for you even if we go bankrupt, but then we are also supposed to escrow your payment and never spend it cause you could come back, how would we be expected to live, hire another developer, grow our business in the way you are trying to grow yours? We can't and eventually that leads to a very limited market of tolerable / non junk products for you to use.
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As to new companies vs established, goes right back to the initial argument, if your not willing to help them stay in business, they likely won't last either. Existing companies are only still around because they all use a non lifetime license model, nearly all lifetime license model plugins from 2 years ago are dead and gone.
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You say your looking for a win / win, but what your saying is you are actually looking for a win (you) / slowly loses over time (plugin developers).
The fact is you want to buy it once and be able to use it for every future client you have, but expect us to support it (updates/bug fixes) for all of those future clients. You make money continually off those new clients, why is it we should be expected to just work for free when your not willing?
Paraphrasing those who have been doing this way longer than I, if you can't afford the cost of the plugins & themes for each client, you are charging too little, time to re-assess your own pricing and packaging structures as you are behind the curve. I have several friends who run agencies that do $50k a month, they have told me repeatedly that my $199/year bundle is under-priced and they would gladly pay double just to ensure that we are around next year for them to renew. To top it off they don't buy my bundle, they have each client buy the bundle.
First the clients are the beneficiaries here, a well maintained, well developed plugin/theme saves them & you hundreds of hours, lets face it, that is what you are ultimately paying for. If a plugin costs $200/ year but saves you 200 hours a year that you could be billing for, I think that is seriously a no brainier. That means that your client can now pay you for those 200 hours to do something that benefits them even more.
If your just after the perpetual license, I would suggest Envato but I think even they have wised up to how bad that is for developers and started changing.
I will say that its not going to go the way you outlined. No developer is going to throw away their source of income like that, and if anything you will see even the bigger marketplaces like Envato moving toward a recurring system over time.
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In your reply to Vova you mentioned that a client is willing to jump ship over security & updates. I would argue those are not the clients you want to begin with, you should definitely evaluate where you are and where you could be and make some moves to get there. Let the guy who is willing to work for $500 for a website do it, move on to $10k websites and you will.
I agree with Peter that you should either use this as an opportunity to educate your clients on the benefits of security and updates, find new clients. Really you are only limiting yourself by opting to use second rate plugins simply because they charge less or offer the license you want. Is that really whats in the best interest of your clients and yourself? Basically all you have done is handicapped yourself, your agency and your clients by not educating them, and never considering the best tool for the job simply because it costs more.
Some time ago I wrote about the "Five reasons why WordPress services are better than commercial plugins" http://neliosoftware.com/wordpress-plugins-vs-wordpress-services-economic-perspective/ so I can't agree more with what you're saying here. Plugins offer yearly licenses anyway so it´s not so different and an explicit SaaS model makes sure that you (as a customer) are treated with care everyday (or they risk losing you)
I agree... I tend to like services a bit better if for only the reason that we can get our client to subscribe to the service. That's much more difficult to do with a plugin... many of which are done by a buy in Bezerkastan living in a yurt. Most services are better established businesses with a customer service staff to deal with subscription issues.
But the issue of recurring payments is still there. People simply don't like to rent software unless they are assured that added value will occur. Look at the outrage directed at Adobe and to Microsoft Office 365 to a lesser extent. And as I said in my screed above, I can't go out on a limb and subscribe to every plugin/service on the planet!
Vova Feldman, I understand your point of view. It's a paradox. What is not sustainable for me is sustainable for you and what is sustainable for you is not for me!
We both want to stay in business.
If I do a website for a client and I need six plugins and each want $100 a year, in addition to another $100 a year for theme updates, it is going to be a difficult 'sell' to the client. Many are not going to 'buy' my $700-a-year solution and will look to other houses who have a 'better' solution.
I don't believe I can tell my small biz clients (we do many sites for new authors and small publishers) that their site will cost them $1500 (one time) with another $700 a year in costs for upgrades. They won't buy... and I would not blame them (unless of course they were making lots of money off their sites, and we both know most don't.)
So in order for me to stay in business I need to:
- Find vendors who will offer us a reasonable one-time cost for their products...
OR
- Write our own code (plugins) for the functionality we need...
OR
- Move to a platform (i.e. Amazon Business Catalyst) that has all the plugin-functionality I need 'built in' to the monthly hosting price.
As you see, I have some options.
What options do you have?
You don't have any, that I can see.
It's simple.
If you offer me a 'situation' that I can't stay in business with, I'm not going to buy from you.
That means you will have to find a way to make it possible for me to do business with you.
You might decide that 'some money' (one-time payment) is better than 'no money' (if I pass on your theme or plugin.)
We're each going to do what is in our best interest.
The only way you 'win' here is if you have a monopoly on the functionality you are selling... in that your company is so large and that the product is so good and so popular such that no one has the ability to enter the market and compete with you (think Microsoft Office and Adobe Photoshop) such that you can 'force' me to buy.
Tell me how yearly recurring payments are going to work IF your customers can't 'sell' them to the end-users of your product (our clients.) In classical economics, we web design houses are the distribution channel for your plugins and themes... we are YOUR customers.
What is best is a win-win solution. I don't know what that is right now, but my best guess is the demise of WordPress and similar CMS solutions in favor of large integrated systems.
I expect that the major players (Microsoft, IBM, Amazon, Apple, Intel, HP, Dell, the list is large) will see the profitability of what Amazon is doing with AWS and combine it with the "all-in-one" paradigm of Adobe Business Catalyst, and web shops like ours will 'pick' a platform to be our standard (just as we chose WP over Drupal or Joomla or Concrete5, etc.) and we'll continue doing what we do, just using different tools.
Personally, I see what some call a 'money grab' by theme and plugin developers as something that will be profitable for them in the short-run, but will end up destructive to them in the long run.
If theme and plugin authors think my clients are going to pay $700 - $1000 a year to keep their sites going (with little or no extra PERCEIVED value received) I think the developer community needs to re-think that paradigm because we're "out there" talking to our customers every day (it's called making sales!) and most of us know what works for them and what won't.
Believe me, I wish I could get a recurring revenue stream via a percentage of a yearly fee for each and every plugin or theme I 'sell' but I don't see that model happening. Indeed, several years ago web houses tried the retainer model... basically giving away the website in return for a monthly "maintenance" fee paid by the customer. Some houses still use it but most don't and simply charge for one-off changes.
All I know is that to stay in business you need customers. If customers don't like your product or can't afford it, or the business model is wrong for them (as in this case) you will lose them.
Al, I see your point and understand your frustration. Having said that, your customers do NOT have to re-new their licenses (or can cancel in case of an auto-renewal). They can continue using their plugin without the latest updates.
Following all the recent security vulnerabilities in WordPress, would you upgrade the core WP version for clients who you worked with 3 years ago free of charge? I doubt that. Same as those clients will continue using old WP versions, they can continue using old plugin versions.
The fact that WordPress users got used to pay pennies for plugins & themes (due to marketplaces like Envato), doesn't mean it should be like that. Web is extremely dynamic and requires constant development and maintenance, and if users want to stay up to date, they will have to pay for the work.
I totally agree that agencies like you are really important part in the ecosystem and one of our distribution channels. As a developer, I do want to keep my plugins attractive for designers like you. But I cannot grow sustainable business from charging $100 for a lifetime license.
I'm sure you noticed that the market is already there. It's rare to see plugins offer lifetime updates for one time payment. I believe you'll have to adapt to the market movement.
I'd be more than happy to pick up a skype call with you and brainstorm ideas. If you are interested, feel free to contact me via [vova AT freemius DOT com]
Your position is that I should adapt to "the market." However it is I and other designers who make the market.
Without us buying or at least recommending your products, who is going to buy them? Can you reach end-users? You can if you have a marketing and advertising budget large enough. And even if you do, those you pitch are going to come to 'us' to vet whatever choice the plan to make.
You create technology but we implement it and sell it.
I would make the argument that it is you who need to adapt to the market. I have many more options than you do. For example we can either write our own functionalities or we can easily go to any number of freelance sites and get them done in India, China, etc.
There is always a bottom line. Ours is the fact that our customers are not going to subscribe to six or seven plugins that want $50 to $100 a year for renewal licenses. I simply can't sell that 'solution.'
I can tell them all about the need for vendors to be sustained via license fees and they will (and do) tell me "Why should I pay for updates for functionality that I don't want or need?" They say, "I bought a new car last month and I don't have to send Toyota a 'license' payment each year."
Another bottom line is that people hate licenses, especially software licenses. Look at the blowback that Adobe and M$ are getting over the Creative Suite and Office 365 systems.
I understand that vendors need to be able to be funded. However, my position is that you do this by enlarging your market share, not by sitting on your butts raking in license fees for upgrades that users don't want or need.
The only compromise that I can see here is if plugin developers guarantee that the version of the plugin I buy today will be supported in its current state no matter what WordPress does. For those who want to renew their license for added features or support, they will. Those who don't need it, won't.
Otherwise there is too much risk that plugin vendors will 'turn off' the plugin when the license expires.
There is another issue here. Many plugin developers want their customers to agree to automatic renewal. We tell our clients to NEVER give a vendor their credit card number OR to agree to recurring payments... because it is ripe with fraud. Did you ever try to contact some guy in Bezerkastan to unsubscribe from his plugin? Good luck doing that. (PayPal is the way to go with all vendors, even the large ones.)
My point above is that if you have a dozen plugins the support your website you have to deal with a dozen different vendors each year wanting your money. Who needs or wants that hassle?
Others may see it differently than I do, but for our company (www.newmediawebsitedesign.com) and our victims (oops, I mean clients) we simply can't have our client's sites leveraged by a bunch of small vendors each seeking their pound of flesh each year, many of them providing little if any value added.
Perhaps if there was one central payment clearing house that was trusted by all parties to be responsive to subscriptions where we only had to write one check a year... maybe that might work, but there is no way anyone wants to deal with a dozen small vendors, updating license keys, making sure payments are made, etc.
You say "adapt to the market?" I say "I am the market... adapt to me!"
I just want to point out the irony here, you say you want the market to adapt to you.
I would argue the same in reverse. I would love (as a plugin developer) for every one of my users to purchase premium upgrades, pay double, use half, never contact support. But those are just not TRUTHS. People do contact support, we do 100% support our free users already and have only had 1 donation ever for $5 - (Whippeeeee).
I'm sorry but the fact is, you want us to make awesome products, you want us to be around for a long time and continue supporting those products, you want us replying to tickets in a timely manner, all in all you want us full time doing this, well that requires a full time wage, often for more than one person.
Having spent 8+ years as a Web Developer before going full time product development, I know all of those struggles. In my area a $500 website was a hard sell, but the cheapest apartments are $1000/mo. Ok so at those rates how could I survive. Well truth is scraping and clawing, and never buying premium products.. EVER!!!. Only when I started turning down those jobs, and more often educating them on what $500 would really get them did I start to truly grow as a developer.
So heres how it breaks down, you mentioned your $1500 one time clients, then in the same paragraph said they were likely not going to make any money. Well truth is they likely won't even renew the domain, and if they are in fact making money then they are easily sold on the benefits of renewing. So I'm not sure I can see your point at all as I have been there and know where I was going wrong, same place you seem stuck now, but there is hope.. you can both educate those who don't have the money and make more money yourself.
Another thing to consider is do you want a portfolio full of links that don't work any longer or a small portfolio full of clients you are proud of.
Here is what I did locally since I couldn't stop the $500 requests. I started a meetup, I told them that if they attend the meetup I would provide free help while I was there, I also educated them that a website that could really make them money and would help take them where they are going could cost $5000+, but that shouldn't stop them from starting a cheap wp site of their own now and doing as much as they could then asking me for help freely at the meetup. Great way to bring up the tech level, hunt out real clients who can pay what "You are worth".
I invite you to read this one hour book that will change how you think about your services & business: https://www.freshbooks.com/ebooks/breaking-the-time-barrier.
If you are the market and you sell everything so why don't you develop and maintain your own plugins? It's a win/win for you and your clients.
Al, you totally ignored my response - "your customers do NOT have to re-new their licenses. They can continue using their plugin without the latest updates."
And if you don't trust a "guy in Bezerkastan", you should not purchase anything from him, whether it's a one time or recurring payment.
With regards to agencies role in the ecosystem, I can tell you based on my own experience with our plugin, that less than 10% of our customers are agencies. 10% is a substantial percentage, and I'm sure that other plugins experienced higher numbers, but the facts are that the majority of our customers are coming directly to us (WordPress.org, SEO, affiliates...).
Yes, you have an alternative - you can pay $50 for a plugin developed by a "guy in Bezerkastan". It might work well, but might be a disaster. I doubt that a plugin developer that value his time will offer commercial paid lifetime plugin license for these ridicules prices.
Btw I like the idea of centralized & trusted "payments authority". Though I'm not sure if it's a feasible solution.
...and then about 4 years later, Freemius became a sort of "centralized trusted payments authority" and got me sign up from Day1. BTW, I never heard of Freemius before and only stumbled across it as an ad on Quora whilst googling for codecanyon's perks for plugin developers. The link to the indepth codecanyon analysis caught my eye, and that was all the conviction I needed.
I have been on envato market for 6+ years only buying and never selling and I can say for a fact that what Al wants is clear but I'm glad that y'all at Freemius can see through it, having had the experiences long before now. I too had those "dirty secret fears" and brainstormed solo on tactics to circumvent such nasty experiences (I have about 6 plugins I paid over $90 for on codecanyon that simply vanished overnight without notice and all I could do was sulk... that's over $500).
BUT, the moment I wanted to start selling I just knew codecanyon was NOT it (even though I had already signed up as an exclusive author before having my Eureka moment to find SERIOUS alternatives).
I am with Vova and Cadu and Daniel on this one Al... no offense. Your consideration to develop your own plugins (which you will find is nothing like theme development AT ALL) OR patronize BIG names with All-in-One solutions that fit your client's needs and serve your financial goals ( remember vendor lock-in please) are great alternatives (for you).
IMHO, I would suggest you switch roles (as suggested in your comment to begin developing plugins) and see how that works out with your current expectations; most reality checks come after one has walked in the other's shoes OR make good your alternative and jump in head first with the Giants.
My take on the latter is that they know their turf and will only serve you those offerings as an entry-point to their MAIN business which could be IaaS, PaaS, or SaaS (the latter being the model that license-based plugins mimic).
Please remember to drop a comment (for the love of WP and Freemius) here sharing your experiences with these alternatives so we all can learn.
Cheers
Interesting that you are only 'dependent' on design firms for 10% of your business. But let's talk apples and apples. Why would a design firm want your product? Your customer is the plugin developer and we are his/her customer.... not yours.
(While we have terrific plugin we wrote for displaying books, it gives us a competitive edge and we have no interest in making it public and selling it so our competitors can use it!)
In my experience, end-users who develop their own websites use an integrated model like Square Space, Weebly, or one of the e-com offerings like Shopify.
I don't know what the numbers are, but given the huge number of design houses out there I have to assume that most businesses are NOT using the DIY model... otherwise we would not have as many competitors as we do.
I did not miss your main point, but probably did not make my main point too well.
One important issue with any business is minimizing risk. One way of doing this is to "own the stack" or at least as much of it as you can. You really don't want an outside party (especially one supplier) having total leverage over you. (It's one of the reasons open-source is so popular.)
If what I call "ransomware" is the new standard, it won't be long until vendors see an opportunity to put in 'doomsday' code such that when the product license is not renewed, the product stops working. We see the beginning of that now with Adobe and Microsoft model. See what happens to your files if you don't renew your Creative Suite license.
Another opportunity for end-users to be ripped is when module developers put in version-checking code. There is a well-known company that makes virtualization software for the Apple platform such that every time Apple comes out with a new version of OS X (almost yearly now) the hypervisor software stops working and you can't boot to your virtual machine until you buy and install a "patch." (I guess you have to just take my word on the fact that there was nothing in Yosemite that would cause the version running on Mavericks to not run... except greed!)
So if we morph into the paradigm of yearly ransom payments, the "you can run my plugin forever" model will disappear.
Now some would say "Well, if the yearly license fee is negligible, no big deal." But who is to say that vendors won't price their renewals sky-high? If their plugin delivers an essential functionality to a website, the owner has no real alternative but to pay the ransom.
Some would say that the above will never happen. I would say "Look at Adobe."
What you fail to understand is that even if we designers were OK with the ransom model (and say vendors paid us a royalty on each renewal) it's moot because our clients are simply not going to accept a situation where they could be "on the hook" for say $50 each year for every plugin that runs their site. I wouldn't do it on my site, I doubt you would on yours... but for some reason you think others will do it on theirs?
I think the solution is that if you will guarantee that what I buy today will always be supported to the current version of WP, then I'll take a look at what new/better functionality you are offering each year at renewal and decide if I want to pay for it. But to be forced into paying you so that I can get an update each time WP puts out a new version, well to me that's just extortion and I refuse to be your hostage.
And I CAN refuse because I have options. I don't have to buy plugins... I can write them myself or I can hire someone to do it on a work for hire basis. While that can be its own can of worms, I doubt it would be any worse then dealing with 10 different plugin vendors and a theme vendor.
I (also) own a book publishing company (www.adams-blake.com) and while we don't publish much these days, we made a ton of money at it before Al Gore invented the Internet. Back in the day there were hundreds of bookstores in every city. They didn't want to order their inventory (of say 20,000 titles for a small store) from 5,000 different publishers. To solve that issue a company called Ingram Books came along and was the wholesaler (largest in the world)... they had huge warehouses that stocked books for many thousands of publishers and the stores had one catalog to look through and one check to write. The system worked well.
Envato seems to be the "Ingram" of the software biz... and perhaps if they become the clearing-house for the payment of renewal fees, the paradigm might gain a but more acceptance... but again, businesses want to mitigate as much risk as they can... and buying into a ransomware situation is not a good way to accomplish that goal.
I've said about all I can say on the matter. I'm not going to convince you nor will you convince me. It looks like we have less in common than I originally thought. So we'll agree to disagree and I'll gladly let you have the last word.
One of the problems with renewals is, that developers can rise the price anytime. So we tell the customer the yearly renewal is 40% of $129 and 10 months later the product is sold for $199 and/or the renewal is 60% - if you build the website around this plugin the customer either has to pay the new price or pay for many hours of work to replace the plugin. As a result he will lose the trust in the person who recommended the plugin - maybe he will try to push our prices downward instead.
Price changes also negatively affect the time we spent for learning the features of the plugin. It doesn't work for us to spend 40-100 hours in learning the details and usage of a plugin, if we can't be sure that the price of the product is competitive 10 months from now. If we have to switch to another plugin the time we invested in the first plugin is lost.
It's really important for us and our customers to be able to plan for some years in the future. Without fixed prices for renewals or lifetime updates we can't. We don't need new features or forced "premium" support - we need predictability.
Hi Al,
It seems to me that your issue is with the numbers ($50, 7+ plugins) which leads me to ask if you do consider bloat when serving your clientele. While your argument makes a strong case for "ransomware" licensing, I might take a wild shot at arguing that this is a MAJOR concern for you and your team and clients since your core competencies revolve around theme development and not plugin development.
I say this because if for instance your team had a policy to limit plugin inclusion by a certain threshold (say 10 - 12) and you went for trashy plugins under $12 (you see where I'm going with this?) then that scary $500 tag shrinks to $120-$144 per annum, and being GPL, you could tinker the code with your plugin development experience/hire and ditch your worries of being "hostaged" into paying annual license "ransoms" and ultimately give those trashy plugins the middle finger.
I think both your argument and the rest of us here are valid on all fronts, the only difference is that obvious fact that theme developers are not plugin developers and going by classical economics, their economies of scale would differ greatly.
So to recap, I strongly believe your position on this conversation is greatly skewed in favor of theme developers (for which you and your team fit the category) while ours are skewed in favor of plugin developers (for which I am one for sure) so there is no winning argument here.
When you consider also that Frank pointed out the site hosting renewal (which you argued is inevitable and made a case for hosting companies serving licensed plugins as a part of their offering and bundling plugin license renewals with hosting fees so you do not get to realize that this is happening) as an equally "hostage-ransomware" situation, you will find that this situation is rather self-imposed hence the advice to rethink your client acquisition and retention strategy to adapt to changing market dynamics.
FTR, no group (theme/plugin developers) is the market - a fact aptly captured by the 10% share theme developers take up in the plugins market space - since none ever monopolized market dynamics to favour one group and disfavor another. We all contribute to shape the WP ecosystem and its evolving market spaces so I'd say again that your position, while partly true, is not sacrosanct and my suggestion to you would be... take Vova and Frank's 2 cents and see how your clientele portfolio transforms to high-paying clients.
In the spirit of pun statements (Bezerkastan, Al Gore et al), could it be that your books plugin isn't really good and may not resonate with end users and so you would rather not share it and make more revenue OR you do not want to feel guilty selling licenses for you plugin since you already made a strong case for lifetime updates and all that would not benefit you if you did?.. Just a wild thought.
It is hard to believe that this thread is a year old and still going!
More and more plugin and theme vendors have moved to the recurring perpetual pay business model. While, some have offered added value (worthwhile functionality) in the yearly updates for the money they require to keep a license in force, I've noticed that many have not... or they offer new functions that are of negligible interest/value (to us and our clients.)
We've spent the year narrowing down the list of premium themes we offer from 40 to 9 (all for specific niche markets... restaurants, medical, etc.) We have cut our list of perpetual payment plugins from 20 down to 5 (again, very specialized functions like booking, calendaring, etc.)
If there is a free or single payment theme or plugin that will work for the client site, that is what we go with, after we have vetted it, of course.
We've spent the year taking several commercial GPL licensed themes and plugins that we used most often and re-engineering them with our own code. (Perfectly legal.)
I doubt that is an option for many shops, but because we are deep in technical ability it is one for us.
We refuse to empower our vendors to have the kind of leverage over us that they seem to want. As I said in earlier postings, everyone does what is in their best business interest and it is not in our best interest to pay vendors for the kind of basic support we think should be part of their initial offering (i.e. fixing any breakages from WP updates.)
Bottom line, vendors want us to pay them 'protection money' each year... and to us it is just money not well-spent, at least not for the vast majority of themes and plugins we've used in the past.
Every design firm is feeling their way around the new pay-the-vendor-forever paradigm. I know that many have limited the number of themes and plugins that they look at. There is a limit to how many yearly license fees they can support and most of us know that our clients hate license fees and we don't want to propose them if we can avoid it.
As I said, we have looked at the changing landscape and decided it is best (more profitable) if we own "the means of production" and we have spent a lot of time learning how the internals of WP work so that we can grow our own tools (themes/plugins)... or modify the ones we already own. It works for us... but may not for others. (Oh, and let me tell you... some of the code we've come across in some themes and plugins is really terrible! And a lot of the time the more expensive the plugin, the worse the code!)
It has been a productive year for us in working to cut costs and increase profitability. Somehow vendors think that if we raise our costs and lower our profitability that it is a "win" for us. It is only a 'win' for them... and as such I'm not sure the new model is viable because a good business model must be a win-win for both buyer and seller... but I've been wrong before. There has been a 'cost' for us in time and effort in searching for free or one-time cost themes and plugins... or in writing our own. So far it has paid off... we will see how things are this time next year.
@Al - Watch out now, won't be long before you release one of those plugins, see potential, monetize it and end up on the other end of this conversation. My back story lines up with yours exactly up until the time before I released my first free plugin simply because I developed it for client usage.
6 years old and hasn't been updated other than bug fixes in over 2 years, still has 20k installs. Then rebranded and made it 100x better and have hit over 50k installs in just over 18 months. Now make a living purely from supporting and developing that among other plugins.
Just keep an eye out, slippery slope your on ;)
We have a few general utility plugins we could publish and maybe make a few dollars. And we have one in particular that would do well but it gives us a competitive advantage over our competitors in our prime market and so we would not want others to have it.
We're starting to sell more non-WP sites... these are more limited in scope, length, and complexity targeted to a less affluent subset of our prime market. These are based on Bootstrap and are excellent for sites that are more static in nature. The price is lower but our profitability is higher.
We have stared a SaaS application for WordPress. Instead of creating a simple WordPress plugin which will use Customers server, we have created a SaaS, called WPdrift.io. So the user can use our infrastructure. They do not need to manage their server. All the features we'll give through SaaS.
Can you elaboration on what you mean by Affiliation here:
Search / SEO
WordPress Repository
------------> Affiliation
Social
What are the options that make sense for plugins?
Great post Vova and I can see arguments for and against but in terms of revenue models a pay monthly system is in my opinion the best income earning model on the internet. From a SAAS standpoint it makes perfect sense to implement this kind of structure where you can continually build on top of revenue already coming into the business.