Editor’s Note: This story is republished from Medium, with author David Perel’s permission. David has a unique take on the industry and has some very poignant thoughts that I wanted to share with this audience.
The times, they are changing.
Having been in the WordPress Theme industry since 2009, I think I have a rare perspective on how it’s been shaping up these last five years.
Not only do I have perspective, I also have data to back it up thanks to our product SalesGenius and the wonderful world of numbers.
I think it’s fitting that, in March, no less than three WordPress companies born before 2010 released new designs this year . What I saw in all three re-designs (ours included) was a maturation of brands and offerings.
You see, when we all got into this game, there was a lot of learning to be done. No one truly had a grasp on what it meant to create a great, all-round product. We knew how to make themes, but we didn’t know how to serve them in a polished form — from themes, to support, to maintenance, to marketing. It was the wild west.
Fast forward to 2014 and what we are facing are some interesting times. Obox has received no less than four proposals to purchase competitors, all old-school companies who’ve been around the block once or twice.
In three of the four cases the numbers were grimm, a decline in sales across the board. I knew this before opening the PDFs because I’ve seen it happen on Obox and via SalesGenius.
There are a number of reasons for this and I’d like to briefly list them here:
- If you don’t release a theme every 30 days you will see a decline in sales.
- If you aren’t constantly doing guerilla marketing you will see a decline in sales.
- If you spend money on Google/Facebook/Twitter Ads you will see low conversion rates and the time you spent on that means you don’t make themes, which means a decline in sales.
- Every theme company has a theme which looks like the others’.
The nature of these points has a snowball effect and it’s not in a positive way. Every time you launch a new theme you need to maintain it, and as your collection grows, you need to either spend more of your time on it or hire someone to do it for you.
The problem is that maintaining old products does not mean more revenue. After about 60 to 90 days, that theme will hit the long tail and begin to fall short of justifying support and maintenance. This leads to a few scenarios that have to be considered:
Do you retire it?
Retiring a theme and dropping maintenance affects your library count and also affects sales. You also don’t want to upset existing customers by dropping their theme from your collection.
Do you try a redux?
The next option is to do a subtle redesign and ‘relaunch’ it. It means sinking precious hours into a theme which is quickly approaching it’s long tail and dedicating time which could be used on new products.
Do you do a feature halt?
Depending on where your theme is in it’s life cycle, you can also decide to only fix major bugs and halt any feature updates.
In Obox’s case we chose door number three. Using insight, we’ve learned that feature requests decline over time and it makes sense to halt additions at a certain part of the tail.
The Race to the Bottom
None of the above solves a much bigger problem that our industry is facing. The 30 day release cycle and low barrier to entry has resulted in a product which has become a commodity.
Commoditization occurs as a goods or services market loses differentiation across its supply base, often by the diffusion of the intellectual capital necessary to acquire or produce it efficiently.
In the physical world, commodities are a big business and if you hang on long enough you may find that that commodity dries up and becomes rare. The result is the companies who outlasted everyone else will see a boost in profits by controlling the market.
Look at Lenovo as an example of outlasting it’s competitors. They doubled down on the PC industry and as a result have become the biggest player in the PC market. Hats off to them.
WordPress themes are in a similar situation, we are super low on intellectual capital, but the commoditization of our product is still in the early phase and the shape of the market is still forming. The problem is that if you weren’t prepared for it, you’re in trouble. The proof is in the amount of companies trying to sell.
These days there is very little to choose from between theme companies. Themes look the same, have very similar features and all offer decent support. If you look at the industry’s biggest market — business themes — you will be hard-pressed to know who built what.
A low barrier to entry and the same-same evolution of design has resulted in a massive pool of products that are indistinguishable from the next. Each and everyday, a new business theme is released which is hoping to be the next Kriesi or GoodLayers (aka the ‘Theme Lottery’).
Sustainable Business Models
Faced with this truth, it is time we take a new look at the business model. Unlike plugins, which I like to refer to as products, there is very little lock-in. A once-off purchase has meant we are offering customers a lifetime of service which cannot scale.
Only once we settle on a sustainable business model which gets rid of the once-off purchase will we see theme companies last longer than 4 to 5 years.
I honestly believe that we will see a return of recurring payments in the industry. I know that we’re looking at it, I know that our closest competitors (geographically… hint) are looking at it and I know that companies like Elegant Themes have aced it.
The question is, what is that lock-in and how do you justify a recurring charge to customers who’ve come to know a lifetime of love for $69?
With a business model that can rely on recurring payments, you are more able to plan and invest for the future. Your maintenance expenses won’t be in vain and the requirement to gallop from one launch to the next will be negated.
WordPress is used by close to 30% of the internet and, despite its credible competitors, is still the best place to make money for 3rd party designers/developers. The potential for the future is still unbelievable but the current state of the theme industry does not lend itself to long and sustainable businesses.
The only way we can work around that is by buying ourselves longer lead times to create amazing products that are unique and distinguishable from each other.
Obox recently had to consolidate from 6 to 2.5 staff. Basically we’re back to the old days. We knew this was coming and reacted before it was too late. Even though it was an incredibly tough decision we had to face the facts and reposition ourselves.
I put it to every single theme company out there to consider this and to look deeply at the affect of their $69 once-off payments. The days of winning the ‘theme lottery’ and lifetime support are over. It’s time we look further than one or two year strategies and ask ourselves how we’re going to build theme businesses that can last a long time.
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The theme market isn’t what it used to be, a lot of the older shops got used to making a ton of money with hardly any effort. Times have changed, you have to work harder for it now, and it’s very difficult if you are a new-comer. There are still ways to make money, but you need a competitive advantage, just like any other industry.
As someone who has focused almost exclusively on service work, but is interested in themes as products, I find this a bit disheartening. It’s a wake up call for sure, signaling that we can’t just copy/paste a competitor and rake in a ton of money.
A lot of my time is spent talking about educating users and clients, in giving them what they want and not giving them what they don’t need. It’s easy for a theme developer to say this, but hard to pull off in practice while maintaining sales. An education of developers and sellers is in order as well, to give people more of a warning like this when they decide to enter the crowded theme market.
There’s no question that a few theme companies will grow and that many will fail. Putting this into perspective for potential shop owners can help lessen the blow when it comes.
Excellent post, David.
I’m personally still optimistic about the WordPress theme industry. Though it’s not “easy money” anymore, I think there is still so much potential. But it has to be targeted differently.
I think these targets for success can take many shapes. It may be incredible simplicity of themes. It may be creating channels for people to go from template -> live website quickly (hosted theme companies, hosting partnerships, or otherwise). It may be a sharp move into niche themes and companion plugins.
I think we’ll see people successfully hit each of those I note above. In fact, I already see it in some places. But I think each of these and other ideas are difficult to implement, market, and find buyers. The current buying market is well trained right now, and that trained behavior (brought on by theme companies themselves) have to be broken.
But I think it’ll happen. WordPress is still growing rapidly, and the needs are there. I think we’ll see a resurgence of the theme business, but it’ll look quite different from what we’ve seen in the past.
Thanks for letting me republish this post, I really enjoyed reading it and thinking about it.
I think you hit the nail on the head by bringing up the “template -> live website” process. A big wall for new WordPress users is still in going completely live.
Poor host performance, SEO, images, optimization, Theme Updates, Plugin updates, WordPress updates and how they all work together or against each can paint a frustrating picture when they pop up unexpectedly.
So tapping into those areas as a theme shop either with direct support or at the very least assistance is perhaps the easiest path forward right now.
No problem Brian. We hope to solve the WordPress -> Live Site with Obox Instant. Let’s see how that goes 🙂
I feel like some of the issues here (which are real) and the conclusions (finding a sustainable business model) could have been written one or two years ago and they’d be just as relevant. So that makes me wonder. At any given point there will always be one or two shops that are closing up, so what constitutes a larger issue and what is the larger issue?
One of the things that is going through my mind as someone who wants to publish themes is that it is very hard to out-compete the flagship themes, the themes that do almost everything. Not only do they have more features capabilities, but also more momentum and support and history on their side. And maybe those themes are swallowing up sales from less featureful themes/more tailored themes that shops have been churning out. These power themes like Divi are almost always going to be a better value-for-money deal than a standard type of theme.
So really the goal must be differentiating in unique enough ways and figuring out how to reach your customers. And there’s enormous room for differentiation. And I think some older shops maybe struggled to adapt in that way (speculating…). It takes a lot of r&d time to develop something that sets it self apart or serves a niche audience really well. How do you fit that into a once-a-month cycle.
Very good article with good insight into the WordPress industry. I worked the Joomla cms for just over 6 years, but about 4 years now I’ve been focused on WordPress. I can easily say it’s been an interesting experience to watch over the years, especially checking out Theme Forest almost on a daily basis. Unfortunately, so many themes there look the same or all have the same features…even I can be guilty of that.
I think the trick is to never stay still, and to always improve on something with each theme, do something unique, and to try and educate the end-users as best as you can along the way.
However, and from what I can see, it’s getting harder for anyone wanting to get into theme design/development. You mentioned about those who hope to be the next Kreisi or Goodlayers, or even ThemeGoods (formerly Peerapong). I think the timing for that was long ago. Really depends on what the buyer is looking for at any given moment.
Some really good points in this article.
About the sustainable business models part of the article I’d like to add that:
1. Lifetime updates is not a thing (or shouldn’t be one)
2. Lifetime support is not a thing (or shouldn’t be one)
I’ve seen this kind of behavior from many big players around the world and I’ve always had the same question. How is it possible to support someone forever when she just made an one off payment of $69, $49 or whatever?
About the lock-in I think it’s just right there in WordPress core. The development cycle between major releases is getting shorter. From my experience people have no problem paying a small amount just to make sure that their website won’t fall apart when they upgrade to the next major WordPress version. And recurring payments are justified just for that.
About the support, I’m buying themes from competitors just to check their support strategy and it’s far from “decent” as David characterizes it in his article. Replying after 3 – 5 days with a generic / canned answer isn’t enough.
In other words I think it’s not about the design, the 1000 features and the amazing drag and drop builder anymore. It’s a combination of a) solving one specific problem with each theme (did I mention that multipurpose themes must die?), b) be right there for each and every customer and c) all that for small upfront payment + a recurring fee for support / updates.
Often (it varies each month) one of the most asked questions we get over at WPMU DEV is regarding updates and support “Why should I have to pay for updates?”, “Why should I have to pay for support” and they are tough questions to tackle when so many companies have over the years offered the once in, in forever price model.
Even the eat all you can food buffet has limits! 🙂
For years my response has always been sustainability, and a counter question “Would you rather us still be here in 5 years and able to support you effectively”.
Development costs money, support costs money. When a customer starts to cost more to the company than their original purchase you’re then on a downward spiral as more customers join that category which ultimately will cost more than money, reputation.
I’m not saying the customer should just be a number, a financial figure, but a business is about profit and being able to provide and if you can’t provide you fail your customers.
Pricing lies we tell ourselves, I enjoy reason the awesome Chris Lema articles:
http://chrislema.com/pricing-lies-we-tell-ourselves/
Companies are changing their models, and the sooner the whole “Buy once, eat forever” mentality is gone the better as far as I’m concerned. After all, how many people using our premium services offer the same to their clients, and I don’t know of any companies that are hiring staff which say “I’ll pay you once now, you work for me forever”, could you imagine that.
Thanks for the read 🙂
Chris Wallace of UpThemes wrote a good response. He talks about niches.
Are WordPress Themes a Commodity?
http://chriswallace.net/wordpress-themes-become-commodity/
Great post.
A recurring payment plan for updates and support sounds fair to me.
As a regular buyer of wordpress themes I wondered what the average time is when a theme comes to its lifecycle end. Any idea?
It really does depend on the theme but based on our data: 90 – 120 days before it’s deep in the long tail.