RB: The Economics of WordPress

I have used WordPress products on many occasions, whether it was integrating their open source blogging software into a website I was developing, creating a personal blog, or using it as part of this class (how’s that for meta?). I have realized, however, that these products are all free – ads are not displayed if I create a WordPress.com blog, and if I displayed ads while using their open source software, the profits would come to me, not to WordPress. At first, I thought that the blogosphere, perhaps like Wikipedia, works on a sharing economy model, where people find value in the shared discourse that the platform provides. While this may be true, WordPress, like Wikipedia still has to pay the real world costs of maintaining servers and the data that they have collected – and unlike Wikipedia, whenever I use WordPress, I never see requests for donations. So how does WordPress stay afloat, and what is their business model?

Well for one, I found out that WordPress does have a store – where users have the ability to purchase their own domain name, more advanced customization and theming options, HD video capabilities, extra storage space, live help, and ad-free sites. (Unlike my original thought, it appears that if one’s blog attracts enough traffic, WordPress will add advertisements into the site). Of course, the majority of WordPress bloggers don’t use these features. It seems that WordPress is taking advantage of a long tail – it is catering paid products to the niche markets, where there are less customers and less overall demand, but they can charge a higher price for premium products, and use that to cross-subsidize their free blogging platform.

WordPress is actually part of a larger group called Automattic.

In addition, on their about page, I was surprised to learn that WordPress is actually part of a larger startup group called Automattic. From their website, they say:

Automattic Inc. is a startup from a handful of people passionate about making the web a better place. We are strong believers in Open Source and the vast majority of our work is available under licenses like the GPL.

They believe in open source products, and provide many other services, both free and paid, open and closed source, including:

  • Jetpack – a currently free set of plugins for people hosting their own WordPress blogs
  • VaultPress – a paid service that backs up blog content
  • Akismet – a mostly paid service that helps prevent blog comment spam
  • PollDaddy – a survey creation service, which, like WordPress, offers a fairly comprehensive free service, but also has extra premium services available for purchase.
  • VideoPress – a premium service linked with WordPress that allows embedding HD videos into blogs
  • Gravatar – a service that creates user avatars
  • IntenseDebate – a free add on that allows for more dynamic commenting on blogs
  • After the Deadline – free open source intelligent language checking software
  • Plinky – a free website that asks users to create a short response to a given prompt
  • Code Poet – a free resource for WordPress coders and developers
  • WordPress VIP – a business and enterprise premium WordPress service.

Looking across Automattic’s products, there are both a number of paid and free services that they offer. Again, they probably make use of the long tail, as most likely the majority of their users make use of the free services, but the majority of the money comes from a smaller set of users who purchase premium or business products and services. These purchases help subsidize the costs associated with the free products. Furthermore, in some sense, Automattic may be making use of some vertical integration techniques, by not only creating a blogging platform, but creating plugins to analyze the blogs, creating extra commenting services, and offering content creation mechanisms through PollDaddy and VideoPress that can be shared on the WordPress blogging platform.  While WordPress is popular, it should be noted that it is also in competition with other blogging and content management platforms like Blogger, Tumblr, Weebly, Drupal, Joomla, and LiveJounral.

It is important to note that Automattic’s goals are to help provide open source products, but in order to maintain those free and open platforms, they have had to also offer various paid services to pay for those. Perhaps this implies that short of asking for donations, many new media companies are trying to find ways to balance the rhetoric and public ideas of a free (both literally and monetarily) internet, with the real costs associated with providing free and open products.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s