UPDATE 2013-08-05: Since we published this, WooCommerce has decided to offer the choice to existing customers whether they want to grandfather their unlimited licenses in or not. Read the update post
Full Disclosure: Our company derives the majority of its income from sales of WooCommerce plugins we’ve written, and by performing WooCommerce-related client projects. Still, we think we can be fairly impartial as it’s not like we have someone ordering us around to build WooCommerce plugins, we chose and continue to choose to focus the majority of our time on WooCommerce plugins and projects rather than pursuing some other opportunity.
Today WooCommerce announced totally new pricing / licensing for their premium WordPress themes/plugins and WooCommerce extensions. With over 270 comments (and growing) on the announcement post, there is a clearly a lot of positive and negative opinions on the change. Let’s try and break it down and share our perspective as developers. We’re going to focus on extensions since that’s what we know.
All extensions have been raised by $20 (with a few exceptions) and a select few have been raised by $99 (most notably WooCommerce Subscriptions and Product CSV Import Suite). Since price increases fund development for new features and stability/performance fixes, let’s look at one of the most popular, and most complex WooCommerce extensions, WooCommerce Subscriptions, to give us a way of thinking about the pricing/licensing changes.
The Lifecycle of an Extension
Released in June 2012, the WooCommerce Subscriptions extension has been around for just over a year. In that time, it’s seen 21 minor updates and 3 major updates. That’s an update about once every two weeks. These updates have ranged from simple bug fixes to massive feature additions. Since we have some experience in estimating the time required to build and update WooCommerce extensions, let’s do some guessing at the time the developer spent (note we’ll be using the subscriptions changelog for reference, so feel free to follow along if you’d like):
Minor Updates — minor features and simple bug fixes typically require 1-3 hours, unless you’re including the time it takes to find and reproduce the bug. We’ll be conservative and say 2 hours per item. A quick glance at the changelog shows about 3 features/bug fixes per update. So, let’s guess each minor update required about 6 hours.
Note that we’re excluding testing, QA, communication with customers affected by the bugs, deploying the update, etc. These extra tasks are non-trivial and can easily double the total amount of time spent.
So overall, minor updates total 126 hours (21 minor updates x 3 features/bug fixes per update x 2 hours per feature/bug fix)
Major Updates — now were getting to the big stuff. Major updates typically involve rewrites to pieces of the extension in order to add features requested by customers that are complex to implement, as well as a long list of tiny features and bug fixes. As an example, the latest major release of the Subscriptions plugin included 25 items on the changelog, ranging from WooCommerce 2.0 support (not a simple task) to improving shipping strings.
Remember that the changelog doesn’t detail all of the actual changes, only the ones that are worth writing about, so the actual list of changes is much, much longer. Now let’s try to take a guess at the amount of time spent developing these updates.
Based on our experiencing writing major updates for our own extensions, a conservative guess is 50 hours of development time per update. So these 3 updates represent about 150 hours total.
So, with just updates alone, we’re estimating that the developer spent 276 hours. But wait, we’re forgetting the time invested to actually build the extension in the first place! Let’s make a rough estimate of 150 hours, based again on our own experience building an extension of similar complexity. Now comes the fun part. How much would it cost you to have a developer build and maintain an extension like this for you?
We’ve seen hourly rates for experienced WordPress developers in the $65 to $125 range, so let’s pick a nice even $95/hour. So we take the amount of time spent to develop the extension (150 hours), add in the time spent to maintain and improve the plugin over a year (276 hours), and come up with our total hours spent.
426 hours. Wow, that sounds like a lot. Like, working every day for almost 18 days without food or sleep (which we know we can’t do, even with Mountain Dew). Yikes. Ok, now let’s multiply that by our $95 per hour rate, for a grand total of $40,470.
Is the New Pricing Still a Good Value?
Clearly the new $199 price is still quite a bargain compared to paying a developer to build it (or even simply maintain it). When you factor in a year of support and automatic upgrades, it becomes even more compelling. But what about the renewal cost after the first year?
Let’s assume the next year follows the first year. The extension will see another 20 or so minor updates and 3 major updates representing about 275 hours of development time. The extension will work with the latest version of WooCommerce and it’ll have new features and fixes that have significantly improved it over last year’s version.
Now, in order to get access to the updates (and support), you’ll need to renew your license. The cost will be roughly 50% of the original cost, or $100. The cost of development time to maintain and improve the extension over time was roughly $26,125 (275 hours x $95 per hour), so you continue to get a significant bargain over what it would cost to build this yourself.
Obviously this is an extreme example of a very complex extension (many extensions are somewhat simpler to build and maintain, though not always support 😉), but the principle remains the same. The value that these extension provide far exceeds their cost, even when factoring in an annual cost.
Future with WooCommerce?
In spite of (and in some ways because of) the recent pricing and licensing changes we still believe WooCommerce is the best eCommerce solution out there in terms of functionality, ease of use, and yes — cost. The reality is that WooTheme’s policy of unlimited support and updates for a one-time price was unsustainable (see this comment), something we’ve been witness to first hand as a de-facto tier 2-3 support team for our roughly 40 extensions. Since each sale previously resulted in a one-time revenue for WooCommerce, with a potentially unlimited support liability, it simply became an untenable situation.
Running a business is difficult, you start out with one idea or plan and before you know it you’re doing something else entirely, and you almost always have to make corrections along the way, sometimes even large ones. It’s going to be far better for shop owners that WooCommerce charge a higher premium and still be around 5, 10, 15 years from now to continue to support merchants, than it would be for WooCommerce to find themselves in an unsustainable position and have to shut the whole program down or take other drastic measures.
We realize how unfortunate and unexpected this is for people who previously purchased and expected unlimited usage or support, and there’s not a whole lot that can be said, besides that we truly believe WooCommerce is doing what they feel they must in order to create a lasting business.
This can be seen in their honest disclosure that they don’t know how much of a discount they’re going to be able to provide for early renewals at this point, they want to base that on the level of support and maintenance costs actually incurred by a plugin, rather than saying that all plugins renew at say a flat rate of 80% of price.
In the end these changes will discourage some would-be and even previously loyal customers who will seek out other alternatives, and there’s nothing wrong with that; no single solution can or should serve everyone. The bottom line is we believe these changes will make WooCommerce as a company, and WooCommerce as an ecosystem, stronger than it was before. Those who find sufficient value in the work that the 30-odd WooCommerce employees, and roughly 50 third-party developers perform day-in and day-out, will continue to choose WooCommerce.
We won’t be going anywhere, and hope neither will the majority of WooCommerce customers when all is said and done.
— Max & Justin