The State of SaaS in WordPress -- a Conversation with Chris Lema, Josh Pollock, and Vova FeldmanI chat with a lot of WordPress Business Professionals and Product Developers. That’s a big part of my role here at WordImpress. It helps me understand the landscape in which our business lives and thrives in. It also helps me be informed on best practices for plugin development, business models, and more.

There’s a small handful of folks who I listen to religiously. They’re like my daily devotions of WordPress business. Some of them are folks like Pippin Williamson, James Laws, Steve Zehngut. But recently three favorites of mine had a bit of back and forth on the question of WordPress products and SaaS: Chris Lema, Josh Pollock, and Vova Feldman.

The Backstory:

Josh started by saying that SaaS is just going to get you Recurring Revenue, and there’s actually several other relatively easy ways to get that recurring revenue instead of SaaS. Chris followed up saying actually SaaS is more than recurring revenue, it’s that plus the ability to control your product and more fully understand your customers. Josh understood and agreed with Chris’ point and followed-up with an article saying that wordpress.org should give plugin authors more data to better understand our customers there. That was met with a lot of push-back from the WordPress Core Team and Meta Team (the volunteers who run .org) by saying “All the data that we collect is basically public already.”

Interwoven throughout all of this conversation is Vova Feldman from Freemius. He didn’t even know he was part of this three-way conversation, but everything that happened between Josh and Chris was relevant or had been echoed by Vova on his blog and in many Hallway Track conversations with me and others.

Vova has been building a platform for plugin authors to get more information about their customers called “Freemius Insights.” It’s a fascinating and refreshing product that I see a lot of value in. Beyond Insights, he also has been writing some excellent articles on the Freemium business model in WordPress and done some interesting experiments on recurring revenue and different revenue models for WordPress plugins.

In light of all of that, there’s a lot of nuance and wisdom for WordPress Product Developers that I want to highlight. Let’s start first with dispelling some of the myths of the SaaS business model. Chris jumped on a quick hangout with me to discuss that.

The conversation continues with Josh Pollock:

So after all of that back and forth, I just had to keep the ball bouncing. I hit up Josh Pollock again and gave him this pitch:

“Chris says SaaS is valuable not as much because of the recurring revenue but because of how it gives you insight into your users. Does that change the way you think about SaaS and does it make you want to change the way you sell your products in the future?”

Here’s what Josh had to say:

Chris is 100% right. WordPress theme and plugin developers are often totally unaware of who their customers and free users are and what their needs and problems are, which is a bad way to run a business.

We’ve been discouraged from asking for consent to record this data. Also, there seems to be some notion in our community that user analytics gathering is wrong. Which is funny since our users almost always have Google Analytics and Facebook/Twitter share buttons and pixels that track their users.

So SaaS makes sense; but it’s not like I can’t gather a lot of useful data from my users and we do — with incentivized opt-in — in Caldera Forms. It’s not as good as a SaaS, but it is a start.

Every WordPress plugin company should be doing this.

So there’s consensus. But the wrench that Josh throws in here is that he believes WordPress.org has a responsibility to help provide plugin and theme developers the ability to have more data about their users.

So between the conversation with Josh and Chris, Vova’s body of work at Freemius, and the interactions I had with each of them, three main points become significant, and one big question.

Building blindly is not a good business model.

“You don’t want to build products blindly.”
~ Chris Lema

The phrase “Building Blindly” is something you can notice across the articles of all three of these WordPress Pros. Vova uses the term often in his marketing of Freemius. Chris said it explicitly in his article and in our interview. Josh echoes this in his Torque article as well.

The crux of the matter is that there is no reliable way for WordPress product developers to require information from their users AND have their plugin hosted on the WordPress.org Plugin Directory.

For those deeply embedded in the WordPress culture that seems obvious. But to any other software company it’s lunacy. You can’t get a Facebook account without giving your information. Or a Gmail account, or a Dropbox account, or a Calendar App on your phone, or Netflix, or Amazon Prime, or a million of the other general purpose apps and online services that we all take for granted today.

I don’t think any of us are advocating for WordPress.org to change it’s policy to require an opt-in to gather this data. But I do think that all of us are acknowledging that that reality severely limits the effectiveness of a business which is reliant on the exposure and audience that you can only get on WordPress.org.

Knowing your customers is important to true success.

“The thing you want more than recurring revenue is you want knowledge and insight.”
~ Chris Lema

A while back Pippin Williamson decided that he was going to make all of this Easy Digital Downloads themes 100% free. But he also purposely decided not to host them on WordPress.org either. Instead, he chose to host them on his website as free downloads. Why? To collect the customer data. Pippin knows that his themes were basically sales funnels for his core business: EDD and all its Add-ons. So by giving his themes away for just a name and email address, he gives his business a way to communicate directly with potential customers of his core products.

This is why Chris Lema is a major advocate of SaaS. It allows you to offer your services at whatever price-point you want, but also require your customers to provide you with necessary contact information. It’s that information which allows you to understand more specifically how your product is being used, by which audience, under what circumstances, etc.

Vova knows this instinctively. This is the major selling-point of his product Freemius Insights. He takes the restrictions of the WordPress.org Directories, and allows users of free plugins/themes to opt-in to anonymous usage tracking as well as provide direct feedback of the product.

Here’s a really clear example: Based on the data Vova has been collecting, he knows that 25% of plugin users deactivate the plugin within 15 minutes after install. But why? How can we know? Freemius Insights triggers a popup with a form in it that simply asks the user that question: “Help us understand why our plugin didn’t meet your expectations.”

The responses to that form gives the plugin author direct and actionable information on how they can improve their product. Perhaps the plugin readme wasn’t clear on the functionality. Maybe the plugin needs to add dismissible admin notice to point users where to go after activating the plugin so they know how and where to start using the plugin.

Still, that’s opt-in, not a requirement. Vova says that generally the opt-in rate for new users of a plugin that is using Freemius Insights is around 60%. He says that while it’s not 100% it’s easy to extrapolate the data you need based on that opt-in rate alone.

The other complexity of building a SaaS and collecting all this user-data is having the right tools to analyze the data correctly, and actually do something with it. Just because you are collecting data doesn’t mean your products are going to improve. That is another major benefit of Freemius Insights. The data is collected for you on their platform and is presented in a way that makes analysis easier.

The down-side of Freemius Insights for larger plugin shops is the idea of having to share customer data with a third-party. Developers who are just beginning could get a big leg-up by implementing Freemius Insights into their plugins — it will save them time and energy from building their own system.

Distributing value across time makes for better products.

“If the value is distributed, the revenue can be distributed.”
~ Chris Lema

Lastly, it needs to be said that not every plugin is suitable for a SaaS model. Chris highlighted clearly that having distributed value is important for it to make sense to the user to spread their payments over time. The example he gave in our interview is something like a website migration tool is really something you do once for one website and then leave it. But forms, or sliders, or anything that’s a custom post type give value to the website continually.

Further, the value of your support of your product is spread over time as well. If a user makes a one-time payment in February and submits five support tickets immediately, that’s already a costly user. But they have eleven more months in which they can continue to submit tickets. So plugin authors need to either make that one-time payment high enough to support users like this over a twelve month period, or they switch to monthly payments and support stops when the monthly payments stop.

The question is: how do we move forward?

So let’s summarize. WordPress product developers who depend on the freemium model depend largely on the exposure that the WordPress.org Directory brings. But there, they cannot require customer data be collected for their products to work. Software as a Service is one business model that allows you to create a recurring revenue model and collect data outside of the WordPress.org space, while having a free connector plugin on the Plugin Directory for the exposure. Freemius Insights is another option available to plugin developers to allow users to opt-in to data collection to improve your products.

The obvious hurdle with building a SaaS product is the additional development skills and time required to build that platform. Spinning up a quick WordPress plugin and hosting it on WordPress.org is relatively straight-forward and not too challenging from a dev perspective. It’s only a little more moderated than a Github repo. In fact, the Theme and Plugin Directories really are, in many ways, a precursor to Github.

But hasn’t WordPress itself grown in leaps and bounds and isn’t it perhaps time to reconsider the purpose and benefits of the Theme/Plugin Directories?

Or, as Chris Lema would suggest, spend the time to do your homework and create a strong product on a SaaS model so you can have real control over both your product and customer experience and your customer data. After all, Automattic itself has been leading the way in that department for a long time with products like Akismet and VaultPress.

None of this answers the question of whether your product should be a stand-alone plugin or built on a SaaS model, but it does raise the question of how you are going to get to know your customers. That is the crux of this whole conversation. As it stands today, we know that depending on WordPress.org for that is not going to give you want you need and there are other viable alternatives like Freemius or going SaaS.

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Matt is Head of Support and Community Outreach at WordImpress.com. He's the author of many free WordPress plugins, a popular blogger at his website, an admin of the Advanced WordPress Facebook group, co-organizer of the San Diego WordPress Meetup, and a frequent WordCamp speaker and attender.

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