UPDATE 2013-08-05: Since we published this, WooCommerce has decided to offer the choice to existing customers whether they want to grandfather their unlimited licenses in or not. Read the update post
Full Disclosure: Our company derives the majority of its income from sales of WooCommerce plugins we’ve written, and by performing WooCommerce-related client projects. Still, we think we can be fairly impartial as it’s not like we have someone ordering us around to build WooCommerce plugins, we chose and continue to choose to focus the majority of our time on WooCommerce plugins and projects rather than pursuing some other opportunity.
Today WooCommerce announced totally new pricing / licensing for their premium WordPress themes/plugins and WooCommerce extensions. With over 270 comments (and growing) on the announcement post, there is a clearly a lot of positive and negative opinions on the change. Let’s try and break it down and share our perspective as developers. We’re going to focus on extensions since that’s what we know.
All extensions have been raised by $20 (with a few exceptions) and a select few have been raised by $99 (most notably WooCommerce Subscriptions and Product CSV Import Suite). Since price increases fund development for new features and stability/performance fixes, let’s look at one of the most popular, and most complex WooCommerce extensions, WooCommerce Subscriptions, to give us a way of thinking about the pricing/licensing changes.
The Lifecycle of an Extension
Released in June 2012, the WooCommerce Subscriptions extension has been around for just over a year. In that time, it’s seen 21 minor updates and 3 major updates. That’s an update about once every two weeks. These updates have ranged from simple bug fixes to massive feature additions. Since we have some experience in estimating the time required to build and update WooCommerce extensions, let’s do some guessing at the time the developer spent (note we’ll be using the subscriptions changelog for reference, so feel free to follow along if you’d like):
Minor Updates — minor features and simple bug fixes typically require 1-3 hours, unless you’re including the time it takes to find and reproduce the bug. We’ll be conservative and say 2 hours per item. A quick glance at the changelog shows about 3 features/bug fixes per update. So, let’s guess each minor update required about 6 hours.
Note that we’re excluding testing, QA, communication with customers affected by the bugs, deploying the update, etc. These extra tasks are non-trivial and can easily double the total amount of time spent.
So overall, minor updates total 126 hours (21 minor updates x 3 features/bug fixes per update x 2 hours per feature/bug fix)
Major Updates — now were getting to the big stuff. Major updates typically involve rewrites to pieces of the extension in order to add features requested by customers that are complex to implement, as well as a long list of tiny features and bug fixes. As an example, the latest major release of the Subscriptions plugin included 25 items on the changelog, ranging from WooCommerce 2.0 support (not a simple task) to improving shipping strings.
Remember that the changelog doesn’t detail all of the actual changes, only the ones that are worth writing about, so the actual list of changes is much, much longer. Now let’s try to take a guess at the amount of time spent developing these updates.
Based on our experiencing writing major updates for our own extensions, a conservative guess is 50 hours of development time per update. So these 3 updates represent about 150 hours total.
So, with just updates alone, we’re estimating that the developer spent 276 hours. But wait, we’re forgetting the time invested to actually build the extension in the first place! Let’s make a rough estimate of 150 hours, based again on our own experience building an extension of similar complexity. Now comes the fun part. How much would it cost you to have a developer build and maintain an extension like this for you?
UPDATE: Brent Shepherd, the developer of WooCommerce Subscriptions extension, has confirmed the actual time spent for updating the extension is over 1,000 hours. See his comment below.
We’ve seen hourly rates for experienced WordPress developers in the $65 to $125 range, so let’s pick a nice even $95/hour. So we take the amount of time spent to develop the extension (150 hours), add in the time spent to maintain and improve the plugin over a year (276 hours), and come up with our total hours spent.
426 hours. Wow, that sounds like a lot. Like, working every day for almost 18 days without food or sleep (which we know we can’t do, even with Mountain Dew). Yikes. Ok, now let’s multiply that by our $95 per hour rate, for a grand total of $40,470.
Is the New Pricing Still a Good Value?
Clearly the new $199 price is still quite a bargain compared to paying a developer to build it (or even simply maintain it). When you factor in a year of support and automatic upgrades, it becomes even more compelling. But what about the renewal cost after the first year?
Let’s assume the next year follows the first year. The extension will see another 20 or so minor updates and 3 major updates representing about 275 hours of development time. The extension will work with the latest version of WooCommerce and it’ll have new features and fixes that have significantly improved it over last year’s version.
Now, in order to get access to the updates (and support), you’ll need to renew your license. The cost will be roughly 50% of the original cost, or $100. The cost of development time to maintain and improve the extension over time was roughly $26,125 (275 hours x $95 per hour), so you continue to get a significant bargain over what it would cost to build this yourself.
Obviously this is an extreme example of a very complex extension (many extensions are somewhat simpler to build and maintain, though not always support ????), but the principle remains the same. The value that these extension provide far exceeds their cost, even when factoring in an annual cost.
Future with WooCommerce?
In spite of (and in some ways because of) the recent pricing and licensing changes we still believe WooCommerce is the best eCommerce solution out there in terms of functionality, ease of use, and yes — cost. The reality is that WooTheme’s policy of unlimited support and updates for a one-time price was unsustainable (see this comment), something we’ve been witness to first hand as a de-facto tier 2-3 support team for our roughly 40 extensions. Since each sale previously resulted in a one-time revenue for WooCommerce, with a potentially unlimited support liability, it simply became an untenable situation.
Running a business is difficult, you start out with one idea or plan and before you know it you’re doing something else entirely, and you almost always have to make corrections along the way, sometimes even large ones. It’s going to be far better for shop owners that WooCommerce charge a higher premium and still be around 5, 10, 15 years from now to continue to support merchants, than it would be for WooCommerce to find themselves in an unsustainable position and have to shut the whole program down or take other drastic measures.
We realize how unfortunate and unexpected this is for people who previously purchased and expected unlimited usage or support, and there’s not a whole lot that can be said, besides that we truly believe WooCommerce is doing what they feel they must in order to create a lasting business.
This can be seen in their honest disclosure that they don’t know how much of a discount they’re going to be able to provide for early renewals at this point, they want to base that on the level of support and maintenance costs actually incurred by a plugin, rather than saying that all plugins renew at say a flat rate of 80% of price.
In the end these changes will discourage some would-be and even previously loyal customers who will seek out other alternatives, and there’s nothing wrong with that; no single solution can or should serve everyone. The bottom line is we believe these changes will make WooCommerce as a company, and WooCommerce as an ecosystem, stronger than it was before. Those who find sufficient value in the work that the 30-odd WooCommerce employees, and roughly 50 third-party developers perform day-in and day-out, will continue to choose WooCommerce.
We won’t be going anywhere, and hope neither will the majority of WooCommerce customers when all is said and done.
— Max & Justin
Nice analysis Max! The “$xx,xxx worth of a developers time for $xxx” is a good metric for demonstrating value.
All I can add is that the 276 hour estimate for Subscriptions is off, by something like a factor of 3 or 4 from my anecdotal estimates. The 12,000+ lines of code put into bug fixes & new features over the last year come from easily 1,000+ hours of development time. The new database structure for version 1.4 alone and its upgrade script took more than 40 hours – lots of time spent pulling out my hair on that!
And I look forward to working with you both for many more years!
Ha, I was too conservative! It seemed like a lot of the comments felt like the renewal costs were expensive, so we were trying to show they’re outrageously cheap compared to the cost of hiring developers to maintain a site for you.
Hi Brent! I’m a user of the Subscriptions extension and agree with Max and Justin that the price increase is justifiable and that the equation favors customers like me. HOWEVER – I don’t feel that I’m getting the support despite having paid for it. I hope that the price increase will mean better support for people like me who want to stick with Woo. Because if support doesn’t improve then the equation is no longer in our favor and eventually WooCommerce will lose customers and go out of business…
I think improving support is absolutely a huge part of this license/price change. We shall see, but I’m hopeful customers will see a big improvement over time. I can tell you from personal experience, those support guys work *constantly*. I get included on tickets for our plugins (when there’s an actual bug that needs fixing, or a question that isn’t clear from the docs) from some of those guys at midnight and later. They just receive and unreal volume of support questions and need to scale their internal team up to meet the demand, hopefully now they have the resources to accomplish this
@ Max & Justin
Thanks for sharing your thoughts,I was wondering if we’d be seeing a post from you. As someone who purchased almost every single one of your extensions and even custom work from you I can truly appreciate a developers time and effort.
Reading through and even participating in the almost 500 comments on that post 2 things are clear:
1) The community as a whole is not against a pricing/structure change going forward. Many believe it was a needed/welcome change. We want to help Woo grow and support excellent dev’s like yourself in the future.
2) The community does have an issue with the way previous license terms are being handled. We never paid a subscription fee for our unlimited licenses, we were told repeatedly (shown in the original pre-sale faq) that we would never have to pay additional fees; yet all of a sudden some users could come due with some hefty renewals, upwards of $10k per year, and license restrictions. I personally own approx. 78 unlimited licences for different extensions, purchased within the last year as an investment in my business and Woo’s, and the fees are no joke. The TOS does state that they can change pricing at any point but in no way indicates they can change the agreement terms for existing license holders. It’s become a real issue that have several individuals in the comments seeking legal council on; especially when those individuals were encouraged to make purchases with the guarantees they would be grandfathered in.
Apparently Woo has another announcement that they plan on sharing with the community in the near future regarding all this according to one of their comments. I’ll definitely be waiting to see what’s their about to say.
Hey Amber, thanks for reading and for being one of our best customers 😉 I think WooCommerce was in a very tough position and made the best decision possible given their situation. I’d much rather them make this change and be around to support all the massive investments everyone has made in WooCommerce rather than go out of business in a few years because the support became too costly.
Hey Amber, thanks for leaving your thoughts and some hard numbers from a most loyal customers perspective. I think the lamentable position you and others are find yourselves in, as expressed by your comment, juxtaposed with this telling admission from Adii serve to highlight just what a sucky situation this is for everyone involved. On the one hand people such as yourself purchased expensive licenses with the understanding they were unlimited/forever, which are now valid for two years. On the other hand Adii is saying that these very licenses would have contributed to the bankrupting of WooCommerce inside of two years, at which point the unlimited license agreement would have been rendered obsolete anyways; no more WooCommerce, no more support/updates period. So they chose to meet customers as close to halfway as they felt they could: increase prices across the board for new customers to “stop the haemorrhaging”, honor their agreement with existing customers for the next two years despite the mounting costs to themselves at which point either the renewals will kick in and keep them going, or people won’t renew but will no longer be eligible for support, making or saving enough money to keep Woo afloat, operational and healthy. I think they tried to avoid this situation with the steps they took over the past year and a half making changes to their support system, adding licensing tiers and the like, but clearly it hadn’t been enough and they felt the time for half-measures was over and the ship must be righted once and for all.
I do hope Woo is able to find some way to soften the blow for folks like yourself, lets see what they have to say next and hope it’s good news. Thanks again Amber
Well that was an unexpected announcement. Does this make it right for you Amber?
It sure was; I didn’t expect it at all. I hated to be the harbinger of doom but doom was what I thought was going happen. I 100% thought their Monday message was going to be “tough luck” but I was wrong.
I have to say I honestly feel that the only reason this turn of events occurred was because Woo got caught with their hand in the cookie jar and it got quite a bit of negative attention drawn to them (WP Tavern, DevPress, etc.).
I’m not nearly as ready to spit fire and brimstone ( I can be a total dragon lady haha ), and I am thrilled to have my original licenses back (all 75+), but as mentioned below I’m still wary about purchasing in the future. Not to say that I won’t but if/when I do I’ll have mulled over options first instead of just auto clicking the “buy” button.
My concern is that the value proposition of a woocommerce solution is becoming less competitive and less accessible.
It is common for a commercial-grade woocommerce solution to have 10 or more extensions. That could easily adds up to $1,000 one-time fee.
With the new annual renewal fee of about 50% to keep the extensions updated and secure, the ongoing cost comes up to be $500/year. Does that not make alternate ecommerce solutions now more attractive from the Client’s viewpoint? look at the pricing of Shopify and and Cart66 Cloud.
I will hesitate now to recommend woocommerce to all my clients!
In the end when people add up the math and realize that woocommerce is not that compelling anymore, the entire ecosystem will shrink, and the extension developers will ultimately be affected too! Its a lose-lose situation.
To add on, one could argue that if a client is not willing to pay $500/year to upkeep their online store, they should not be using woocommerce in the first place. Would that line of reasoning not shrink the market size for woocommerce?
Hey smehero, thanks for adding your comments and thoughts. I’d say your analysis could be correct regarding the market size of WooCommerce, basic economic theory would indicate that as you raise the price of a good/service, the volume of sales should decrease. Of course just as immutable is the law that says if you sell a good/service below its cost you’ll have plenty of sales but ultimately run out of resources; the old “loose a little on each sale and make it up in volume!” joke. Only time will tell, but my hope/belief is that as people do the calculations for themselves, both monetarily as well as functionality/feature-wise, that in the end just as many, if not more, will choose WooCommerce. I’d say the biggest mistake WooCommerce made was not implementing some of these changes sooner so as to catch less customers off guard. Indeed Max and I have speculated for some time now that these sorts of licensing changes may be necessary, just based on our own calculations of the cost of maintaining/supporting plugins versus the single-purchase income generated. We would have ultimately found ourselves in a similar (albeit smaller scale) quandary as Woo if things had continued as they were.
The bottom line is simply that software ain’t cheap, you can hide this fact for some time with the sort of explosive growth that WooCommerce has experienced, but ironically in the end it’s that same growth when converted into support/maintenance costs that does you in. Now would be a very interesting time to do a post with some cost-comparisons of various ecommerce options. You mentioned Shopify, which don’t get me wrong, I think is a very cool and powerful product, but my hunch is that even with the updated Woo pricing/licensing, Shopify is still going to come out as a more premium/pricey solution for the average shopkeep. And don’t even get me started on the costs of implementing a shop in Magento…
To quote Hillary Clinton: “What difference does it make….” if a plugin costs $40,000 to produce? The issue is how much revenue does it produce. If your revenues for that plugin over 2 years are $120,000 then you have made $80,000 profit.
All we have heard thus far is how much it costs them, but never how much do they earn from selling it. I could produce a plugin that costs $1,000 but only sell 7 of them, does that mean I’m doing better than Woo just because my costs are lower?
Hey there, appreciate the comment. WooCommerce hasn’t shared revenue numbers for their extension sales, so I think we have to trust them at their word when they say that the one-time revenue was not enough (over time) to pay for their internal costs of supporting them without some additional revenue. I can say from our own experience as a seller of extensions, there are some extensions that far exceed the cost of development + ongoing support, and some that most definitely do not 🙁
Oh, wait. Did you just say to “trust” the business who just broke a couple of thousands of contracts? Good one…
“so we were trying to show they’re outrageously cheap compared to the cost of hiring developers to maintain a site for you.”
Of course it’s cheaper, but that goes for everything produced in volume. How much would it cost for you to design, produce and manufacture your own iPad from scratch? Probably hundreds of millions. Does that mean Apple should be able to double their prices and ask you to pay more money for the IPad you bought last month or they will no longer provide you with warranty and software upgrades that they had offered when you first bought it?
Be honest now, what would you developers say if Apple did that? Would you find that acceptable?
@Bill
That’s a nice anology of using iPad. And both Apple and its direct Comeptitor Samsung are earning very good profits!
Unfortunately there is currently no credible direct alternatives to WooCommerce (the equivalent of Samsung in Apple’s case). I switched over to WooCommerce from Cart66. One promising alternative is the iThemes Exchange, I am actively exploring them now.
For Woo Canvas, I am swicthing to the Genesis/Dynamik Web Builder combination for the PSD to WordPress Folks.
The cost to Apple to provide warranty service is built into the retail cost of the product (indeed their actual manufacturing cost for the iPad Mini is only $189, with a retail cost of $329 – source), not to mention the other costs associated with R&D, distribution, marketing, etc. Of course this warranty is only provided for a single year, although you can purchase an extended warranty with AppleCare, which again, offsets the costs to provide the service.
The cost of upgrades for iOS certainly isn’t free either, as Apple takes a 30% cut on all apps sold in the App Store, so actually each time you buy an app you paying an invisible tax that funds the iOS development costs.
If Apple announced they had to start charging for iOS upgrades or risk going out of business, I think most people would have no issue with paying more. For others, the value proposition wouldn’t make sense anymore and they would find other substitutes that fit their needs better. Ultimately I think those who are seeing massive value from the extensions + the support provided by WooCommerce will pay a bit more to ensure that Woo is still around 5 or 10 years from now 🙂
“Ultimately I think those who are seeing massive value from the extensions + the support provided by WooCommerce will pay a bit more to ensure that Woo is still around 5 or 10 years from now”
A bit more? Some people will have to pay several thousand dollars more a year based on the number of extensions they own.
Have you seen Woo’s balance sheet? Or are people supposed to just trust what they said? Trust the same people who have already gone back on their word several times.
Lets face it, many of the Woo Extensions are not even written by them, they just sell them. That means their cost to develop them is zero. They make profit from the time they sell the first one because all the costs have been paid for by the third party developers like yourself. Woo has a great business model, no development costs on many of the plugins they sell, therefore lots of profit right off the bat.
If you want to have an open discussion about money why don’t you tell us how much money each extension you wrote makes you per year and how much Woo makes. Would you be willing to do that considering that you want Woo customers to act as if they are all partners in this business together and it’s all for one, one for all?
True, many extensions are not written by them, but they support all of the extensions they sell, regardless of whether they developed them or not. This cost of support is very real (they mentioned $5 per ticket), and when multiplied out over a number of years, a single extension can be very costly, so it’s not fair to say they profit immediately from each sale.
For example, an insurance company takes premiums up-front for writing a policy, but they incur a long-term liability in that they may need to cover a loss for the policy far into the future. Would you say they make a profit immediately on each policy sold? Of course not — they won’t know if they made a profit until after the policy ends. The same goes for WooCommerce, they don’t know the exact cost (in terms of support) for each extension sale in advance, so while they’re making a paper profit upfront, that same sale might cause them to lose money over the life of the extension. Indeed this is exactly what they wrote about in their original announcement post and reiterated in their update by asking existing customers to support the new sustainable model.
FWIW, I doubt that we can have an “open discussion” when you’re posting from an anonymous account on Mailinator 😉
You are not leaving Woothemes but I am. Not as much for the new price (for old contract) but for the trust. I have been out in the countryside for a couple of days and back home started to check emails and then twitter where I found out about this. I have been a loyal customer and always supported Woothemes but this is too much. They change (break) our agreement in a blog post. They could not even send me an email, something they are soon to send when it comes to selling. I have not bought many plugins and I could have payed for the updates of them and the themes but I have lost confidence in them. It will be interesting to see (in two years time) if people stay or go.
I think they had a tough decision to make for the long-term sustainability of their business which appeared to some people as a breach of trust. They certainly listened to the comments and feedback from everyone on the decision and changed their terms today to give existing customers an option to grandfather in the unlimited licenses — read more here
Hey Guys (Max & Justin),
I was just perusing your Products page and noticed that it appears that they are all only being sold on Woo. I think I remember checking not to long ago and you had plugins that were only on your site but don’t see those anymore (or maybe I’m going kookookachoo). Are you going to be exclusively selling your extensions via Woo going forward?
The reason that I ask is that while I am 100% glad that I didn’t have to fight until the bitter end (I was prepared to) for my license purchases to be honoured I’m not 100% sure that I’m willing to put all my eggs in the Woo basket going forward and am now checking individual developers (whom I trust) to see if they’re going to be selling on Woo and their own sites or exclusively on Woo; I might just opt to start purchasing directly from the dev’s when it’s possible.
Hey Amber, well we still do sell a grand total of two plugins directly (Nested Category Layout and Order Status Control). Recently we added the rest of our WooCommerce-listed plugins to the product list on this site so that we have a portfolio of sorts to present to people, though I do realize it makes it sort of tough to pick out the ones we sell directly; perhaps I’ll have to tag them or something to make them easier to find. Anyways, our policy regarding extension sales is always: first try to list them on woocommerce.com, and if they’re rejected for one reason or another, sell them directly. We approach it this way for a number of reasons, but some of the top reasons are that woocommerce.com generates far more traffic than we do here at skyverge.com, and secondly we prefer to have WooCommerce’ dedicated support team as the first line of support handling defense. It all comes back to managing support, and WooCommerce has a much bigger team for that than Max & I do (since it’s just us at the moment 🙂 )
Gotcha. Thanks for the reply!
In the event that you ever think about branching out on your own site more, 75nineteen.com looks like they have a unique way for selling some of their products. They are currently selling extensions as a Support License with options to buy with “no support” or with 3/2/1 support requests. I would imagine they would sell more requests if you exceed your quota; seems like a fair model to me. 🙂
“FWIW, I doubt that we can have an “open discussion” when you’re posting from an anonymous account on Mailinator”
And why is that? I’m a customer, someone who paid money that benefited you. That should be more than sufficient. Just remember the relationship here. We are the ones paying you and Woo, and you are the ones asking us for even more money.
If you want something more from us then it is you who needs to justify it, our actual identity is irrelevant to this equation.
Just remember something. WordPress is open source. WooCommerce is open source. PHP is open source. Programmers are freely available to work and get paid. Our custom plugins will only be more expensive when we keep them for ourselves, but if start selling them too then we can recoup our costs and even make some money too. 🙂
But don’t forget you’ll have to provide support for those plugins too 😉
It’s fine for them to sort out their pricing model, but changing the license out from under existing users was wrong and probably illegal. I’m not sure whether their walking back on that has really rectified the situation, but to me the deeper problem is their focus on correcting a pricing mistake and not the customer communication mistake. What is the expected lifetime of the product? What does “support” really mean? Without a product roadmap and clear policy about how they will (or will not) handle bugs and changes in browsers, coding standards and javascript dependencies, customers have no idea what to expect in any practical sense. The type of support appropriate to a regular theme differs from that of a regular plugin and both differ from Canvas and plugins like WooCommerce. The latter are going to be actively improved and are commercial developer tools. Everything else just needs (at minimum) to stay secure, bug free, and compatible with current browsers. Being able to communicate these things in plain English within the prominent marketing areas of their site would really help them out. They may benefit from strongly segmenting their customers (developers/non-developers) and pricing as well.