There’s no need to dwell on the fact that the WordPress market saw crazy growth over the last two-year period of acceleration. Only to say that the online ecosystem was one of the very few spaces to not only weather the COVID-19 storm but to prosper as it progressed. Two years on, here’s what I’m seeing based on signals in the community and Freemius’ selling partner network:
We’re entering a period of deceleration and consolidation. After the global scramble to take operations online, things have settled down and growth has slowed. Plugin and theme businesses that mostly rely on one-off sales (aka lifetime licenses) and saw an accelerated growth because of the ‘COVID spike’ will face a meaningful drop to their pre-COVID situations. Companies that mostly sold subscriptions during the two-year period will enjoy a healthy ‘cushion’ of revenue when renewals kick in, leading to a much, much less dramatic drop (if at all) in their bottom line.
If I was to predict how things will go for the ecosystem as a whole? We’ll see minimal growth — and even some shrinkage — across the board come the end of 2022. The “WordPress money” isn’t going anywhere, but the pie isn’t getting any bigger either.
More competition from non-tech, business-savvy outsiders. The last two years have seen more entrepreneurial/business-minded people from non-tech backgrounds enter the WordPress space. They’re not here to build from scratch, they’re here to buy $50k–$250k ARR plugins/companies and grow them as part of larger business ventures. In the same vein, pre-COVID agencies have entered the fray to offer products. This is much simpler to do in an open-source environment, where even if they’ve never built any products, they can fork established plugins (free or paid), improve them, and compete for built-in audiences. And they can leverage their existing clientele for the initial distribution of the products.
Developers need to be mindful that these ‘new players’ are more business-savvy in areas that are typically undernourished in the WP space. UI, UX, marketing, and advertising can make a significant difference if they’re prioritized as much as the product itself.
The recent Stock Market crash shouldn’t affect WordPress (too much). Most WordPress companies are non-VC, bootstrapped businesses started by solopreneurs. They’re capital-efficient, have lean expenses and small teams, and any profit either goes back into the business or to the founder. If you fit into this category, then I don’t believe you have too much to worry about following the burst of the COVID bubble.
Companies that should be wary are those that raised capital during the COVID spike. When a downturn happens, the market turns conservative and companies that burned through cash should consolidate lest they start laying off people to avoid the worst-case scenario of bankruptcy.
While I don’t see this scenario playing out too often in our ecosystem, smaller WordPress companies that overspent on hiring/predicted a longer growth period will need to be more resilient. This may mean reducing compensation and budgets, or both.
WordPress and eCommerce are still great spaces to be in. Despite the boom ending, both WordPress and eCommerce will still benefit from that period of acceleration. The COVID-19 pandemic forced Generation X into the eCommerce market, and ‘boomers’ will continue to purchase online because they get that it’s easier and often cheaper.
If you’re a solopreneur/bootstrapper, now’s also a good time to put your head down, improve your product, and nurture your customer base to get ahead of the competition. But, if you’ve got the capital, you could make a strategic decision and ‘eat your competition’ to extend your market share while others consolidate theirs. It’s a buyer’s market after all.
Product makers and businesses that use the subscriptions model can expect a buffer against the worst of the economic downturn. As long as your MRR remains healthy and your churn doesn’t exceed customers gained during the spike, your business is still growing (even if it’s slow). This is the beauty of the subscription model. It’s resilient in the face of a slow market and provides security to continue operations/product development.
I’m optimistic that the ecosystem will get through this period — the internet isn’t slowing down and it will continue to be a place of great opportunity for savvy solopreneurs who love WordPress. We’ve just got to be more conservative for now ?