Over the course of several weeks, the Easy Digital Downloads team executed a series of changes to their marketplace to remove all third party plugins from their ecosystem. The move affected 55 plugins from 27 authors.
- Some were acquired.
- Some were delisted.
- Some were discontinued.
Easy Digital Downloads also purged some of the plugins they created in-house if they weren’t getting many sales and required maintenance.
For plugins they purchased from third party partners, the prices varied from $50 to $40,000. In total they paid out $144,700. Prices were determined based on 8-18 months of historical revenue for the plugin. The variances depended on growth (or weakening sales) trajectories and other negotiations.
Of the 55 plugins, three plugins accounted for $100,000 of acquisition cost, and 52 accounted for the other $44,000, approximately. Some plugins were bought with the intention of retiring them so Easy Digital Downloads could reduce support burdens or maintenance efforts.
Their goal is to make the money back from those purchases in one year.
Motivations for the change
I talked to Pippin Williamson about the change and the motivations for it.
- The ability to be agile and make changes to products without needing to operate through a third party was a major motivation. Pippin said they’ll also be able to more seamlessly integrate various add-ons, together and with EDD core, and they'll have control over what goes where. Previously they could make recommendations to partners, but in the end the partner controlled development.
- They want to expand the tiered and/or bundle pricing model their other products use. That includes getting away from a la carte purchasing. This goal was limited with third party vendors involved because “calculating commissions in that scenario is prohibitively difficult.” For instance, if 10 plugins are in a bundle, knowing which ones were driving the purchase, which ones are actually used, and other key sales metrics are difficult to determine. And if Easy Digital Downloads wants to adjust and test variations of bundles, it would require recalculating the various commissions and making a lot of changes.
- Enabling and empowering the support team was another key motive. Easy Digital Downloads purged outdated plugins a year ago to ease their support burden, and this is another step along the same lines. There have been times where nobody wanted to take on a support ticket because it involved a third party plugin that they didn’t have full control over. Now that they have for control, they can suggest changes to the development team or any other part of the company as they see fit.
Reactions from partners
This was a drastic change similar to the one WooCommerce made a while back. (However, WooCommerce is opening up their marketplace again now — as announced at the latest WooConf.)
Easy Digital Downloads received mostly positive but mixed reactions from their community of partner developers. Many were happy and pleasantly surprised by an upfront check for a plugin they never paid much attention to anyway. A few were hesitant or unhappy, due to various issues, like different views of what their plugin was worth, versus what Pippin and his team felt they were worth. The vast majority of negotiations were straightforward and pretty simple, Pippin said.
Effects on long term partner engagement
I wondered if these changes at Easy Digital Downloads would limit third party support and engagement in the future. Pippin thinks it’ll be good in the long term, although the barrier to entry is higher now. Extension makers will have to sell their plugins on their own site rather than within the EDD marketplace. Pippin believes this will ultimately benefit the third party developers and the whole market, predicting “there will be more and more plugins being successful because people will put more effort into [them].”
Historically, some partners would create a plugin, and put it on EDD with a “set it and forget it” mindset, and then it would rot over time. Closing their third party marketplace will “encourage people to put out more robust products and keep them updated,” Pippin said. There may be fewer people involved and fewer extension plugins released, but those that do emerge will be better and more robust on their own.
Easy Digital Downloads had to deactivate charges for subscriptions to plugins that are now offsite or (sometimes) discontinued. Some discontinued plugins will still be supported but not actively sold, so Pippin had to account for that scenario as well.
Also, the licensing add-on in EDD was released with a new feature not too long ago that lets a single license key to apply to all plugins or all plugins in an bundle. That change enables Easy Digital Downloads to take advantage of the full control they now have over their add-on marketplace. They’ll start using a single key for the extensions in their core extensions bundle, and if it works well, they’ll trickle it down to other bundles and plans.
If things go well with these changes, they may eventually move to tiers of access like they do with AffiliateWP.
Average lifetime value for EDD is $150 for all customers who have ever purchased anything. With the changes they're making, they hope to be able to increase that number with more bundled products and eventually a tiered system.
Past changes (subscriptions in March 2016, and a price increase in December 2016) are keeping Easy Digital Downloads profitable and able to afford a mass acquisition like this; they are a small business after all, and $144,000 is real money. Without those previous changes — which were agonizing to make at the time — Pippin doesn’t know where they’d be now, but it certainly would not be one where they could afford these purchases.
None of this year’s price increases are part of renewals yet, so come December they will be, and they will provide even greater profit margin. Among other changes in pricing, renewal discounts will be eliminated in the future. Other product makers have not reported lost revenue after taking this step, so Pippin doesn’t expect to either.
This moves lets him put his team first: “If there’s one thing we’ve learned over the last six years, we can’t take care of anybody if we don’t take care of ourselves first.” Pippin sees these changes as another step in achieving that goal, making EDD more profitable and keeping it a project his entire team enjoys working on.
I have a feeling they’ll look back on this decision and be glad they made it. I find it quite impressive that they negotiated so many deals and made so many changes in just a few weeks. I’m sure we’ll learn more about how it is going in Pippin’s next year-in-review — posts that are always full of great insights.
It’s easy to get stuck in a rut and keep doing things the same way, even though we see troubles ahead if we continue following the same path. It can be scary to make changes, especially when they may upset some people you really value, but they are often necessary, and I think Pippin and the EDD team made the right call here.