Running an Open Theme Marketplace

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One of the best things about working on the internet is being able to engage in open dialog about your business. Recently one of our ThemeForest authors, the very talented Mike McAlister, weighed in with a thought provoking post here on WPCandy. From the rate at which comments flew in, it was obvious this is an important discussion to be having.

WPCandy have very kindly allowed me to write an editorial in response to the post and the comments. I hope I can add a little more to this important conversation!

Small Beginnings

Years ago as a web designer I remember looking at the sprawling empire that is TemplateMonster and thinking that I was sure I could make much nicer, more authentic looking templates. I kept thinking how cool it would be if there was a place to sell them, but at that time there wasn’t. So I contented myself with making Flash components instead and selling them on iStockPhoto. When I became fed up with the focus on photos at their marketplace, I came to the conclusion that maybe I could build a marketplace that suited my needs.

When we built ThemeForest, it was really made to be the marketplace that I personally wanted to sell on.

Creating a marketplace for Flash soon had me thinking back to how cool it would be to sell site templates. And since in the interim I’d fallen in love with WordPress and was using it commercially, I thought we could extend the concept to make a marketplace for both templates and themes.

When we built ThemeForest, it was really made to be the marketplace that I personally wanted to sell on. We fixed pricing, because I was worried about authors undercutting and inadvertently delivering less value for everyone, as had happened with iStock in their early pricing system. We made support optional as I couldn’t think of a way to guarantee it without straying into mediation land. And of course we made it open to anyone to become an author.

ThemeForest was to be a place where we would provide a very easy runway to becoming a theme seller. I remembered myself doing client work as a web designer, and how much more I would have enjoyed putting together awesome designs and selling them without the pressures of freelance work. That was the experience we aimed to create.

The Evolution of ThemeForest

Working at Envato, I often feel like a custodian rather than an owner. I feel it’s our community who really drives our sites, and often I’m very surprised and amazed at the places the community takes us.

Working at Envato, I often feel like a custodian rather than an owner.

It’s now almost three years since we launched ThemeForest, and in that time the depth and sophistication of our WordPress themes has far surpassed anything I’d imagined. Like any open market, there is of course a big range, but at its best I think ThemeForest is right up there with the best WordPress themers on the web. Guys like Mike, Kriesi, Epicera, Orman and many more, produce themes that are way better than anything I could personally make.

Along the way we’ve been evolving the marketplace to match the changes we see our community making. It’s a bit before Mike’s time on ThemeForest, but our pricing actually used to live mostly in the $15-25 range. Yes, I know!

Today our pricing predominantly sits in the $30-35 range, with items still as low as $15 and as high as $45. Despite this gradual increase, Mike has put forward an interesting case for looking at a further price rise. But we’ll get to that shortly.

Quality, Support and Code

Recently Carl Hancock, one of the creators of the fantastic Gravity Forms plugin, tweeted jokingly (I hope!) that he was going to invoice me every time he had to fix a ThemeForest theme. If anyone would know whether ThemeForest themes cause problems, it certainly would be Carl. Gravity Forms are used all over the place! So when I heard his complaint the first time here on WPCandy six months ago, along with some other commenters who felt our code quality wasn’t where it should be, I and our site team began to take steps to improve.

Since then we’ve had two rounds of culling of older themes, removing almost 20% of the library where the authors didn’t respond to update the themes. We’ve implemented more recommendations to theme authors, including to use tools like Theme-Check to test for common issues, and Unisphere-notifier to make sure buyers are notified about updates and fixes. We’ve also added more reviewing checks for things like plugin hooks and common code quality issues.

On the support front, we’ve since added API tools for authors to create their own support forums, and we’re now working on a dramatic improvement to the support system on-site, as well as ways for authors to clarify what level of support they offer.

And while our library is already much better off for the changes, particularly in the newer themes, there is still much more for us to do. While we have more plans to roll out, I’m always interested to hear recommendations, leave a comment or email me (collis [at] envato [dot] com)! We are always looking to improve on these fronts and welcome any constructive ideas.

Contributing to the Wider WordPress Community

Another criticism, arising from WPCandy comments, that we’ve been working on is the level of involvement Envato and ThemeForest have in the WordPress community. In the past our biggest contribution has been the huge number of tutorials we publish on Nettuts+, however it’s become clear that there is more we can do.

When Matt Mullenweg clarified in 2009 that it was possible to license code separately under the GPL as a way to comply with WordPress’ licensing, we were delighted to jump on board.

This year we’ve embarked on a program to sponsor and support WordCamps around the world. So far, we’ve sent Envato’rs to speak at three, sponsored eight camps, two meetups and a conference, and I was particularly excited that ThemeForest authors like Chris Molitor are starting to get involved with speaking at WordCamps too.

When Matt Mullenweg clarified in 2009 that it was possible to license code separately under the GPL as a way to comply with WordPress’ licensing, we were delighted to jump on board. Offering a solution that protects our author’s designs and allows them to use non-GPL items like icons in their work, while simultaneously working with WordPress’ license was fantastic news.

More recently I had an interesting phone call with Automattic’s CEO Toni Schneider. Toni was charismatic enough that I kind of felt like quitting Envato to go work for him! In speaking with Toni, we got to share some of our insights from running ThemeForest for his then unlaunched WordPress.com theme market.

And in the last couple of weeks I’ve been exchanging some interesting emails with WordPress UI Team member John O’Nolan about getting more Envato’rs contributing to the WordPress codebase. John is passionate about cleaning up the CSS, and as a fellow designer I can understand. I’m looking forward to finding a way for us to get on board with John’s suggestions and put back into my favourite CMS, in this way too.

The Question of Price

While much of what I’ve so far said was in response to the deep commentary running here on WPCandy, at last I come to the question that Mike himself raised – the question of price.

My personal philosophy on price is to make things as affordable as possible so that our products are highly accessible to anyone and everyone. Balancing this is the requirement to generate revenue to make our business and our author’s businesses sustainable.

I’ve seen a place where only some people can afford stuff, and frankly it sucks.

I grew up in a country called Papua New Guinea, which was one of the last places on earth to be exposed to the outside world. It’s a country that has tremendous natural wealth, but very poor socio-economic conditions. In short it’s a place where some have plenty, and others have nothing.

This background raised me with a predisposition to making things accessible. I’ve seen a place where only some people can afford stuff, and frankly it sucks. I think it’s vastly preferable to have more equality in opportunity, and the internet is a fantastic tool for driving that direction.

That’s one of the reasons I’ve always loved WordPress, because it puts in reach of people around the world, what might not have previously been in their grasp. As Mike reminds us, you can get Skynet in WordPress form for the price of a tank of gas. Heck for free you can get some pretty darn cool themes (stop in at WPShower and see just how cool).

For me, this is nothing short of miraculous and speaks to the herculean efforts of the whole WordPress community in making such a greatly accessible piece of software.

At Envato our philosophy of accessibility of price is also about providing the best opportunity for authors. Large markets and high volume equate to big sales. On top of that we have worked hard to provide commission rates that make sure our authors receive a high portion of those sales. Three times in the past we’ve increased our author rates, despite the large cost this has to Envato’s profit line. For a counter case, look at iStockPhoto who keep growing but paradoxically have taken steps to reduce the rates they offer!

We have many authors on ThemeForest earning thousands, even tens of thousands of dollars a month. Our record for a single author in a single month is over $40,000 earned – and to clarify that’s after ThemeForest has paid for transaction fees, marketing, affiliates, the cost of running the site, and lots more. That’s actual take-home earnings!

The Subscription and ‘All Themes’ Ceiling

What’s clear from Mike’s post however is that there is a tremendous amount of support and brand building that goes into selling on a marketplace like ThemeForest. Moreover the themes themselves have gotten vastly more complex than our early themes. And if we want to drive up quality, pricing is one mechanism to do so.

And potentially a price rise is needed. As I tweeted back to Mike, this is something the team is now looking at. Of course it’s going to take a while as we need to model and analyse the situation thoroughly. Even small increments of a few dollars have massive effects when you multiply them against a library as big as ThemeForest. And as custodians of ThemeForest we have to ensure that it remains a successful place to sell themes and that we stay competitive.

Mike mentioned a couple of fantastic WordPress theme shops in his post with higher priced themes in the $70 region, namely WooThemes and Press75. While this is true, it’s also true that both these outfits and many others also offer access to literally all of their themes for not that much more.

These subscription rates, 90 themes for $125 over at WooThemes at the time of writing, and 20 something for $100 at Press75, effectively cap how far we can take pricing on ThemeForest if we want to continue to deliver value to our authors by attracting buyers.

Take an even more extreme example, consider the wildly popular Elegant Themes who have been voting up a storm in WPCandy’s Theme Madness contest and have a site ranked in the top 1000 by Alexa. By Elegant’s own advertising on the ‘join’ page of their site:

With a total of 61 designs in our collection, the price per theme is a mere $0.64!

Moreover Elegant’s subscription is actually for a whole year with 2-3 new themes added each month. Holy toledo batman!

Still, at the end of the day there is a big WordPress landscape out there, and we all offer something different. Sites like WooThemes offer one corner of the market even contributing their code into WordPress core, others like Elegant offer another corner for amazing cheapness, WordPress.com’s marketplace is distinguished for its full GPL and exposure to a captured market, and of course ThemeForest is a whole other ballgame.

At ThemeForest we offer access to an enormous pool of buyers. Not only do these people come from around the site itself, but from our other marketplaces, and our other sites. Collectively the Envato network registers close to 20 million visits every month.

This buyer pool, combined with our vibrant community life, combined with the unique split-GPL, combined with our services, and our price point, is where ThemeForest lives. In business terms, it’s the unique value proposition we offer.

Envato Elite and a Price Adjustment Tool

As I’ve stated, it’s going to take time and careful planning to make long term changes to ThemeForest’s pricing. However Mike’s post has encouraged me to bring forward a plan we’ve had for a while to reward and recognise elite authors like Mike himself.

But importantly, as an entry point, the 80 something qualifying members of Elite will immediately gain access to a new tool to adjust their prices upwards.

Today we’re launching our Envato Elite program which provides achievements and rewards to authors, including things like massive promotions, superbowl style rings, and eventually even first class flights to Australia.

But importantly, as an entry point, the 80 something qualifying members of Elite will immediately gain access to a new tool to adjust their prices upwards. Elite Authors will be able to increase the price on any of their items by up to 30% rounded upwards to the nearest dollar. This will mean for instance $35 themes can be moved up to $46.

I’m excited about this as it allows authors like Mike to test out higher margin themes, recognises that they have built brands and followings, and also that our Elite authors have achieved this status because they build and sell great products.

Aside from the price lever, I also think it’s a very cool, very fun addition to our community life at Envato. You can learn more about the program at elite.envato.com

In the meantime, we will continue to plan and analyse pricing models, and as always we’ll be working to improve ThemeForest for authors, buyers and the whole WordPress community. It’s my hope that in the end more than anything else we do, building the world’s largest open marketplace for websites, where new and unknown authors can upload and flourish, will be our greatest contribution to WordPress.

Update: Matt asked me to clarify in this article that my earlier wording made it sound like he recommended taking a split GPL approach, this is however only the minimum legal compliance. A full GPL licensing for themes is the recommended approach. I’ve updated the text in the article to a more accurate statement.

38 thoughts on “Running an Open Theme Marketplace

  1. For me this article has cleared a lot of questions about the sale of WordPress themes on the marketplace and its good to see that you are passionate about WordPress and the steps Envato is taking to fix some of the issues raised on WPCandy

    • Great to hear Anthony, it certainly seemed like there was a lot of questions floating about!

      And most definitely very passionate about WordPress! That’s why I wrote this book … and yes, that was a shameless plug! πŸ™‚

      • hehe come to think of it i actually own a copy of your book, I purchased it a while back and i highly recommend it, has come in handy many of times, would love to see a printed version. πŸ™‚

  2. Whew, an exhaustingly thorough rebuttal. Excellent points on all fronts. You’ve built an incredible empire in a very short amount of time. I remember seeing the birth of PSD Tuts, etc, so it’s nothing short of impressive to see how far you’ve come.

    All of the steps you’ve outlined above sound like ones in the right direction for improving the overall quality and user experience for theme authors and customers alike. I’m interested to see where this takes everything in the months to come.

    • Thanks Brian! There was a lot to say πŸ™‚ Hope it wasn’t too exhausting!

      Oh wow, the birth of Psdtuts, that *was* a while ago!! It’s gotten so much better thank goodness. When I look back at my early tutorials it’s a little embarrassing. These days we have some reallllly amazing talent writing there!

  3. Thanks for the follow-up post. I think this will really help clarify some of the questions and comments that have risen from Mike’s post and in the community as a whole.

  4. Hey Collis,

    Great post! It’s clear you’ve taken the time to put together a well constructed and well thought out response to the debate and commentary raised in Mike’s recent post.

    I think you’ve given a very fair and balanced perspective on the issues at play here and it’s clear Envato are listening and responding to the community of theme developers while also looking out for the interests of your customers – not always an easy task I can imagine!

    I think the big big challenge you face (along with the WordPress.org theme repository) is quality control. I think no one has yet to really crack this in a way that scales well. In one way, an Apple App Store type approval process would ensure quality is maintained but would perhaps add a huge overhead to your operations.

    With this in mind I have another idea for you πŸ™‚

    As a theme developer who is considering dipping his toe in the themesforest waters, I would LOVE to pay for an optional theme audit which would allow me to display a “ThemeForest Verified” badge on both themeforest and my own site (kind of like a Verisign badge for SSL’s). Maybe this is where you’re headed with Envato Elite? I think theme authors who want to stand out from the crowd and are proud of the quality of their work would pay for this on a per theme basis or to take a smaller % of sales.

    Something to consider.

    In the meantime, keep up the excellent work!

    Ed

    • Oh wow that’s an interesting idea, a ThemeForest Verified audit! I’ll definitely have to give it some thought!

      Our reviewers do of course review all incoming items and many go through multiple rounds of review. But ultimately it’s a review against a certain set of criteria and is by its nature not exhaustive. As anyone who has ever coded knows you can hide all sorts of fringe bugs and anomalies and only *really* thorough testing will reveal them.

      Having said that, as I mentioned in the post our reviewing standards have been climbing and will continue to do so. We’re also working on improving the responses we give back to authors, as the more informative we can be the more useful it is.

      In that sense I like the idea of an audit service, not so much as a way to say ‘this has been verified’ but as a tool to help authors improve their work.

      At the end of the day, what is good for our authors is good for ThemeForest!

      • If I had the time I would love to explore this as a service myself but seeing as I don’t I thought it would make most sense for ThemeForest – I’ll just expect the royalty check when ThemeForest Verified launches πŸ™‚

        The theme review process is lengthy and isn’t foolproof as you say – but I think this is the direction we all need to strive for.

        Ed

        • Great idea Ed,
          As a theme purchaser I’m always trawling through comments and feedback to get a sense of support levels and quality. Another quality signal such as this would help streamline things for purchasers from the point of view of theme selection and also selling in solutions to clients.

  5. Great article – really good read and good to see people such as yourself being so open. Out of curiosity, what’s the highest level a seller has currently reached within the program?

    • Thanks Chris! The web is made for openness πŸ™‚

      We have a few authors around the half million mark, and one author out in front who is steadily approaching the million mark which is pretty darn amazing. Once you get down below quarter million though there are lots of authors, and some of them are going up very, very fast!

      • It’s astonishing really when you think about it – 80 people at lets say an average of $150k and that’s over $12m paid out. It’s just an incredible achievement / statistic, especially with it being only 3 years old.

        Why I’ve never seriously looked at selling themes at TF beyond me, this is just another huge indicator as to why I should be!

  6. Great read. Certainly I think there are still areas of improvement to be worked on, but it’s great to hear you are working with the WP community and making changes. πŸ™‚

  7. I’m glad to hear Envato is taking steps to insure their themes follow best practices.

    My tweets and comments related to the Envato marketplace have nothing to do with price or business model, it’s entirely based on experience supporting a popular commercial plugin and dealing with conflicts caused by theme developers not following best practices. My comments are born out of frustration. ThemeForest accounts for no less than 85% of support issues we encounter caused by poorly developed themes.

    I know Envato is taking steps to improve the quality of the code found in their themes. Requiring theme developers to properly enqueue their Javascript and CSS is one of the ways they are doing this, which is great. Here are two more things that would go a long way to limiting conflicts caused by ThemeForest themes.

    – ONLY ENQUEUE SCRIPTS WHEN NECESSARY, DON’T OUTPUT THEM IN THE ADMIN

    By default when you enqueue Javascript using the WordPress enqueue function in your themes functions.php file, it’s going to be output on every single page. This includes the admin. Everywhere. This is bad. Very bad. Scripts and CSS should only be enqueued when it’s absolutely necessary.

    Ideally these scripts would only be output when necessary, such as specific to a theme page template for instance. But at the very least the enqueue function call needs to be wrapped in an If statement to make sure it is NOT output within the admin.

    If you need to output scripts in the Admin because your theme has theme option pages, then learn how to enqueue the scripts so they are only output on your theme option pages. You shouldn’t be outputting scripts on every Admin page. This is how conflicts are born.

    If you are using Gravity Forms and you can login to your WordPress Dashboard, navigate to the Gravity Forms form editor, view source and you see scripts and CSS being output by the theme? It’s probably not following best practices when it comes to enqueuing scripts and CSS.

    – BE SPECIFIC WITH YOUR CSS TARGETING

    Many themes include their own built in simple contact form. They style these forms using CSS. The problem is the CSS isn’t specific enough and it globally applies styles to Form elements such as Inputs, Labels, etc. Why is this a problem? Because they aren’t specific enough. They target ALL Labels, ALL Inputs, etc. They don’t wrap the Form in a container and then target only the Labels and Inputs in that container.

    This means that when you globally target Inputs, Labels, etc. you better be sure the styles you are applying are generic enough that they aren’t going to cause problems with Plugins that may output form elements. The main content container is also not specific enough, because plugins such as Gravity Forms output code in the main content container.

    So if you are targeting an element such as Labels and using CSS to float the Label, you may have just defined your styles in such a global way that it causes problems with Labels used in plugins like Gravity Forms… causing display issues for your users in the process. CSS Inheritance is both a blessing and a curse.

    These are probably 2 of the most common problems found in themes that cause plugin conflicts.

  8. Great article Collis! πŸ™‚

    I’m glad that you are so passionate about the accessibility aspect of ThemeForest, and I truly hope that the prices do not increase more than a few dollars. Otherwise, many people like me wont be able to afford themes, sales will drop, and authors will complain again.

    But again, nice read πŸ™‚

  9. Collis,
    This is an incredible stride for authors on ThemeForest. Not only giving the top earners the ability to price adjust but also adding incentives most wouldn’t even have imagined. This is that elusive creative solution that I was talking about in my article! I’m really looking forward to seeing how my theme building comrades react to Envato Elite. So far everyone is really excited, myself included.

    Thank you for taking the time out of your incredibly busy schedule (even with that tiny new Envato memeber) to play with us on the WPCandy playground. It’s really great to be part of such an important discussion that affects so many people and I’m glad you and some of the marketplace managers were able to join in and help alleviate some of the concerns we were all feeling about the marketplaces.

    See you at the next Envato meetup? Hopefully we can do one of those again soon!

    http://is.gd/MCoyML

    • No problem at all Mike!

      And definitely next Envato Meetup πŸ™‚ I’m hoping it’s going to be in KL, Malaysia in 2012. At least that’s the plan, I just have to figure out a way to get it all organized hehe

  10. Great response Collis, and I have to say I’m stoked on the new Elite Program. Looking forward to testing out the Price Adjustment Tool, and of course the hot new badge!

    • Hey Chris, thanks for the feedback, I’m also very excited to see what people do with the tool. Will be fascinating to watch the effects!

  11. Collis I just want to personally thank you for Envato as a whole. ThemeForest has opened up an entirely new revenue stream and has literally completely changed my life. You guys do very smart business and I respect that a lot. I wish you guys nothing but great fortune on all future endeavors.

    Congratulations as well on recently becoming a Dad. πŸ™‚

    Blessings from the US

    • Oh you’re most welcome! It’s always really heartwarming to hear stories from our authors. Sometimes when work is feeling a bit stressful or exhausting I enjoy reading through the forum threads of authors who’ve had great experiences or done crazy things like buy cars using their earnings. It’s very rewarding as one of the people working on the sites!

      And thank you for the congratulations, definitely being a Dad is one of the most life-changing experiences I’ve gone through!!! It’s super cool having a mini-collis in the house, even if he throws a lot of tantrums and eats like a fiend!

  12. Collis, thanks for sharing some great insights on the theme marketplace. Your words are very encouraging and I look forward to one day selling themes on ThemeForest.

  13. Hi Collis,

    Thank you for sharing! When I started looking at selling themes, I had come across Theme Forest but then decided against it as I didn’t want that sort of dependency if I planned on WP themes being a significant part of my income (the same way a business shouldn’t rely on Facebook for its homepage, they should get their own). The last thing I wanted was not be being able to control price or fall victim to a random TOS violation (not that Theme Forest has any history in that regard, but places like Paypal, Ebay, Facebook, etc. have enough to leave a bad taste in ones mouth).

    Shortly after, I created my own shop ( http://www.theme-force.com ) and haven’t looked back since. At the time I couldn’t fathom selling for half of $30, which was probably the largest push factor in my decision. My pricing now is $99 plus $7/month, single site license (it is important to note however that I don’t view other theme shops as competition, as my target market are not predominantly designers & developers).

    My point is, I feel your pricing isn’t too far off then what it should be for 90% of your theme authors. The few edge cases (or better said, excellent designers that provide awesome support) could probably be creating their own marketplaces (though some of them are benefiting from significantly better commission rates today, which again, is a powerful motivator at this stage). I personally believe you’re still very well positioned for the price range you are competing in, and the recently added “perks” for strong sellers is a good way to deal with the edge cases. At the end of the day, I think you’ve done a great job of attaining or getting very close to the point of maximum revenue with Theme Forest. Congrats on bringing it this far…

    Cheers

    Noel

    • @Noel,
      At first when I read that you charge $7/month, I thought that’s crazy. However the more I think about it, it makes a lot of sense. Few bucks to purchase theme for lifetime and monthly subscription for support/updates is a neat idea. If the customer is not happy with your support / theme updates, he can cancel anytime. This is an incentive for author to keep the theme up-to-date and provide good support. Also a recipe for consistent income for theme author.

      Justin Tadlock gives away his theme for free and has a very successful annual subscription (I am a subscriber too). Maybe themeforest should adopt this too. I just hope that $7/month is optional during theme purchase to not scare away the buyer.

      Wishing you more success.

      • Hi Vasu,

        Thanks for your reply & well wishes! When I first saw themes for a one-time fee of $35 and then free updates/support for life, I thought that was crazy πŸ™‚ There are other theme sites that also charge similar rates as I, and their reasoning seems to be very much similar.

        You don’t buy a car or a computer and get free updates or support for life. If one is to argue that those are tangible products, then look at Photoshop. The products I sell are for restaurants, i.e. a brick & mortar business, why should I be giving something away for free to another for-profit business? “Theme Shops” are a business like any other, and need a revenue model from which they can actually still survive with. What happens when one of these “one-time fee” sites accumulates 10’000 clients and they still have to provide quality support to them whilst making zero revenue?

        The $7 is optional indeed πŸ™‚

        Cheers

        Noel

        • What happens when one of these β€œone-time fee” sites accumulates 10’000 clients and they still have to provide quality support to them whilst making zero revenue?

          That’s a scary thought!! You are right…a theme is not a movie / lunch that you pay to watch / eat and forget after 2 hours. Low theme purchase price along with optional monthly / annual support subscription sounds ideal.

  14. Pingback: Must read WordPress theme development tips from Carl Hancock | themesforge.com - Wordpress Themes, Tutorials, News, Tips and More

  15. I can only say: Thank you a thousand times for Themeforest.
    I am very much for the low price range, because it has allowed me to buy themes and try them out without much thinking. As it is now, I usually buy 3-5 themes per project, if the prices will be raised this number will definately fall back to 1-2.

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