Is there a profit ceiling to the premium theme market?

6 Comments

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?

6 thoughts on “Is there a profit ceiling to the premium theme market?

  1. Interesting.

    I’ve supplied and bought themes from most of those you’ve listed but I continue to look for one that really, truly satisfies me. I’ve recently started supplying http://www.superhug.com/ with some of my designs. They’re in Beta and just starting out but I like their platform and personalised, friendly attention.

    Given yesterday’s Microsoft announcement and subsequent tie-in with WordPress, I can’t see the demand for themes going anywhere but up anytime soon. If anything, it’s set to explode again.

  2. There may be a profit ceiling … some day. Unlike real estate, the WordPress market is brand new with lots of experimenting going on. I can think of tons of business models that haven’t been attempted on a large scale within the WP marketplace, and until its been around long enough everyone will still be figuring out how to build the most profitable business.

    So even some of the WordPress-based companies out there today that are considered the “big boys” may not have even scratched the surface. Its just too early to tell.

    • I think that’s a good point about how WordPress is experiencing new growth, whereas in real estate the business model was relatively static. However, cost barriers to entry will remain low, so I personally think it’s going to take really really good talent – like at DevPress 🙂 – to create a profitable venture.

  3. There may not be much of an economic barrier to entry, but I think there is another: time & skills. It takes really solid design and WP skills to create great themes. It takes time to develop those skills, time to create the themes, time to promote your work.

    So while I can see the premium market getting a lot more action I think those are real barriers that will keep some people out or make it difficult for them to succeed.

    As to your question: I suppose it might mean the big theme players who offer marketplaces for individual developers’ work will have a good advantage with these barriers. They have momentum on the promotion side, and access to an international market of skilled developers’ work.

    • I think that’s a really great point. Those are 2 significant barriers. Beyond that, promoting a theme company effectively is not something that everyone who surmounts those barriers can manage. These are the people who would benefit from signing on with marketmakers.

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