There has been some talk the past few weeks in the WordPress world about the GPL and marketplaces. I’d like to share some lessons on building a profitable WordPress business without a marketplace.

What about marketplaces?

Marketplaces seem perfect on the surface for a few reasons:

• Free marketing and awareness for your product.
• Built in tools to sell your product.
• Minimal friction getting to market.

These are good reasons to use a marketplace, but consider some caveats:

• Subject to the whims (and terms) of the marketplace.
• Lock in factor. How can you leave?
• A (usually) hefty fee structure.
• Brand dilution and customer loyalty.

Notice anything about these caveats? They are easy to dismiss when you start, but they become increasingly unwieldy as you grow. Think of it like bringing home a cute cuddly bear cub. He’s great until one day you look up and realize he could tear your head off. These caveats get scary quickly and can start effecting your life, business, and livelihood.

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I was listening to the latest Please Advise podcast, with guest Jason Schuller of Press75. The show’s hosts Mike McAlister, Jake Caputo and Chris Molitor cover various topics related to WordPress and WordPress theme development.

About midway through the show, the subject of theme options and the new WordPress theme customizer (built primarily by Daryl Koopersmith and Dominik Schilling) came up. I was really surprised to hear the guys on the show say the following about the customizer:

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Over the years we’ve had questions and feedback from customers about our theme pricing. Recently this prompted some thinking about what a premium WordPress theme is worth and why our themes cost what they do.

What is value

Merriam-Webster defines value as “a fair return or equivalent in goods, services, or money for something exchanged.” The modern world most of us live in is predicated on value and exchange of goods. For example, I buy some food supplies from my local grocery store — the grocery delivers value, and I provide money in exchange for that value. This allows the grocery to deliver value to other customers, pay their employees, pay their vendors, and sometimes realize a profit for the business itself. The circular nature of this system allows everyone to provide value in their own way, and receive a widely accepted currency in return for this value. It’s truly a beautiful thing.

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While reading Warren Buffett’s 2011 letter to shareholders this morning I was struck by this passage (discussing the insurance business).

Many insurers pass the first three tests and flunk the fourth. They simply can’t turn their back on business that their competitors are eagerly writing. That old line, “The other guy is doing it so we must as well,” spells trouble in any business, but in none more so than insurance. Indeed, a good underwriter needs an independent mindset akin to that of the senior citizen who received a call from his wife while driving home. “Albert, be careful,” she warned, “I just heard on the radio that there’s a car going the wrong way down the Interstate.” “Mabel, they don’t know the half of it,” replied Albert, “It’s not just one car, there are hundreds of them.”

Warren Buffett. 2011 Berkshire Hathaway Annual Report.

Great message, and it further reinforces our decision to shut down our affiliate program. It takes an independent mindset to successfully operate any business, whether you’re selling WordPress themes or ice cream cones. In either scenario, following “the other guy” is surely the fastest way to the bottom.