Yesterday, I was reading an old column on economics written by Austan Goolsbee, President Obama’s new chief economic advisor. In the article, he referred to, “the oldest line in the economics book: No barriers to entry mean no big profits.” He was talking about real estate agents, but it got me thinking how such an idea may apply to WordPress.
The basis of the theory is that when you don’t have to spend money to get into the market, the providers for the market continue to grow as the demand for the product grows. It’s just too easy to get in on the action. The article references a study that shows that even though the real estate market soared in the mid 2000s, the average realtor wasn’t making any more money than before. Why? Because more and more realtors were entering the emerging market.
WordPress has undoubtedly grown an enormous amount, and we have all seen the uptick of premium theme providers to fulfill the demand for high quality themes. But is there a profit ceiling in this type of venture like there is in real estate due to limited barriers to entry? I think there could be.
Certainly a few companies are going to thrive on truly outstanding themes no matter what, but what about all of those good, if not revolutionary, premium themes? Will it be a sustainable market for these types of companies to grow and sustain themselves full time?
Or will more and more developers enter the premium theme arena so that the majority of existing companies don’t really grow as WordPress grows?