WordPress.com is free: that’s free as in beer, as in gratis, as in at a price of zero. This post is a look at WordPress.com in the light of Chris Anderson’s Wired article Free! Why $0.00 Is the Future of Business. It is the second part of my series of posts addressing the question: How is Automattic going to make money?. (Hence this post is not about how bloggers can make money: but see the update note at the end).
There’s a particularly good fit between Chris’s article and WordPress.com. Chris identifies six business models. As we will see, Automattic uses each of the six in making money from WordPress.com.
The first model (following Chris’ order) is freemium: basic service is free, but there are extras for which you pay a premium. WordPress.com offers free hosted blogging; it also offers premium features under the heading of advanced services. One such feature is domain mapping: since I pay for domain mapping, this blog shows up as changingway.org (rather than just as changingway.wordpress.com).
I provided more details on WordPress.com premium features in a previous post. That post compares WordPress.com with its competitor TypePad in terms of feature pricing and packaging.
The “most premium” and least free option at WordPress.com is the VIP Hosting package.
The second business model relies on advertising. Automattic has run Google Adsense ads on blogs at WordPress.com since mid-2006. It has considered for at least that long offering bloggers control over the ads at their blogs. Currently, however, the only bloggers who can run their own ads or run their blogs ad-free are those paying for VIP Hosting.
WordPress.com uses the third business model, cross-subsidies, less directly than it uses some of the others. The essence of this model is that the free product entices you to buy another product. The different product is usually a complement to the free product, Gillette giving away razors in order to sell blades being the prime example (and indeed the example with which Chris opens his article).
One type of blade for your free WordPress.com razor is the Sonific SongSpot. An earlier post provides a description and an example. I just “snapped” the song in to the post.
The cross-subsidy model applies rather indirectly because I didn’t buy the song/blade from Automattic: I got it, free of charge, from Sonific. Sonific makes money from ads and affiliate transactions related to the music being played (e.g., the reader may buy music from Amazon).
I won’t discuss here the question of whether Automattic makes money from these “blades.” It may be doing so by charging Sonific for the prominent placement of the SongSpot service. I am not aware of any public statement from Automattic or Sonific on the terms of their relationship.
WordPress.com provides a very straightforward example of the fourth model: taking on a new blogger represents a near zero marginal cost for Automattic, since servers and other infrastructure are already in place to support the two and half million blogs currently hosted.
The fifth model is labor exchange: “the act of using the service creates something of value.” The main use of WordPress.com to create content, in the form of blog posts. There are many ways in which this content may be valuable. It may, for example, constitute pearls of wisdom that enrich the life of those who read it. Of more direct relevance here is that the content is also a source of economic value for Automattic when it is accompanied by AdSense.
The sixth and final model is the gift economy. I read Chris’s use of this term as an implicit reference to Eric Raymond’s assertion that the society of open-source hackers is in fact a gift culture. In this context, the free/open-source WordPress software was and is a gift from Matt Mullenweg and his fellow hackers to the wider hacker community.
It’s not much of stretch to view the free blogging service WordPress.com as the gift from Matt and his fellow Automatticians that seeded the WordPress.com community. That Automattic makes money, or will make money, from gift-giving is in no way counter to the ethos of free/open-source software.
We can relate the gift economy model back to the freemium model and note that the freemium model allows Automattic to receive gifts from bloggers. If, for example, I am unsure whether to pay for a premium service (e.g., CSS upgrade) for a further year, I may decide that even if I don’t really need the premium service, I feel good about paying Automattic the money, thus reciprocating the gift-giving Automattic initiated by giving me the free blog in the first place.
It is to this kind of gift-giving that the web-based photo-editing service Picnik appeals when it includes among the reasons for upgrading to its Premium Service “the warm fuzzies” you’d get for supporting Picnik.
Thus the sixth of Chris’s models (gift economy) brings us full circle to the first (freemium). It also points on to the next post in this series, which will be about making money from WordPress, the open source software. While the current post is about Automattic profiting from a free (as in beer, as in gratis) service, the next will be about the firm profiting from free (as in freedom, as in libre) software.
Before moving on to that next post, this one merits a couple of closing points. The first is about the post itself. It’s more about identifying and classifying than it is about evaluating. I haven’t attempted to estimate amounts of money, or percentages of profits, made by WordPress.com from each of the business models. Neither have I expressed opinions as to how well Automattic is executing each of the models.
The second point relates to affiliate programs. With respect to Chris’s list of business models, it’s not clear to me where such programs fit: somewhere between ads and cross-subsidies? Although WordPress.com bloggers (other than VIPs) may not use advertising programs such as AdSense on their blogs, we are permitted to use of affilfiate programs such as Amazon Associates.
I can’t think of any affiliate program used by Automattic at WordPress.com. I can think of one used at WordPress.org, but that really does bring us to the next post in the series on Automattic profits.
Update: If you’re a WordPress.com blogger who arrived here hoping to find a post about how you can make money, you’re in the wrong place. Or at least, at the wrong post: but see my post on how bloggers can make money. At the same time as I added this note, I made a few edits, but nothing major.
I also read the Anderson article. It helped me make sense of where the capital comes from to provide free services on the scale that can be found online.
I’m also interested in the effects of open source on old business models. Open source “gift culture” flies in the face of traditional models of market capitalism because men are not technically acting rationally, at least in the way market theories suggest.
I’ve just started a blog and my first post is somewhat related, in case anyone’s interested
Gift; One of the many economic philosophies behind Anarchism…
If you are interested in other models of economics beyond capitalism, check out mutualism, parecon and trade economies.
Please please forgive my ignorance here…but someone once said that there is no stupid question…or maybe what I’m asking isn’t relevant, but I don’t know who to ask…I’d like to make $ with Google Ad Sense…but I’m not sure if it would pay given the WordPress monthly premium. I average about 100 hits a day. Would you, or anyone else, be willing to weigh in on this for me?Thanks so much,
Psychscribe
http://www.psychscribe.wordpress.com
Oops! I obviously meant the VIP monthly premium.
Psych, glad you made the correction comment: we can’t read your mind, you know 🙂
Your question is certainly not a stupid one. My responses are:
– you are nowhere near WordPress.com VIP territory
– of the VIP package, I’d say that “if you have to ask, you can’t afford it.” That’s not a criticism, but a reflection of what the package is
– if one of your major aims in blogging is to make $, WordPress.com is the wrong place for you
– there are many other places you can blog for $ – including hosts that make WordPress installation very easy
– I realize that the title of this post might mislead. It’s not about how bloggers make $ from their WordPress.com blog, but how Automattic makes $ from the free service
Hope this helps,
Andrew
Thank you Andrew, it does help, a lot 🙂
Enjoy your weekend.
Psychscribe
Great post. The title caught my attention because I’m considering moving my only WordPress blog to Blogger and at first I thought this was a post related to bloggers making money from WordPress.
Move from WordPress to Blogger? I know, shocking, huh. Why “downgrade?” Well, I didn’t realize WordPress was so against bloggers making money from their blogs. I have had no such issues with Blogger (and using Live Writer makes Blogger much more fun to use).
YOu mentioned using our being allowed to use Amazon Associates at WordPress.com. I’ve tried and have yet to get that to work. All of the Amazon widgets seem to be java-based and therefore prohibited.
I have run WordPress.com sites for a while.
I have also run WordPress.org sites (i.e. hosted on a commercial web host) – and the biggest ‘gift’ WordPress has given me is a gentle hand-hold into the mysteries of tweaking php and css and learning about mySQL and cpanel.
That leads to the positive feelings I have for the WordPress framework.
But nothing stays the same, and I find myself wanting to break away from the mould completely and work on a something that has none of WordPress’s layout restrictions.
For example, Textpattern promises a more free-form skeleton, but at the expense of having to learn more to get a usable site.
Then there is the problem of trying to squeeze the WordPress skeleton into an e-commerce mould – ZenCart it isn’t.
I guess the lure of cheap domain names and web hosting will encourage more and more people to try the wordpress.org package, and as they find themselves wanting to tweak things the way they want, without bumping into restrictions inbuilt into the design, so will they discover the limitations of the package.
I think maybe Automattic’s model will continue to be attractive only if it develops WordPress to allow more flexibility.
Meanwhile it is the quickest, neatest, best-working package out there that I have found.
Fascinating insights! (Much of it over my head)
Your outline of the six “business models” seems particularly interesting as we watch what is possibly the gathering of a “perfect economic storm” in world financial markets.
Regarding the “gift economy” and “gift culture,” I agree wholeheartedly that the free blogging platform provided by WordPress.com is a gift — a wonderful and empowering gift — from the WordPress founders to individual bloggers, and to the community of bloggers and readers.
Looking at gifting from another perspective, individual bloggers are giving a gift to WordPress.com when they start and maintain a blog. WordPress.com would not exist without bloggers willing to give the gift of free content, and most bloggers could not blog without the gift of the free WordPress.com service. And of course, readers benefit from the gifts freely given by both WordPress.com and bloggers. If I think about this too hard, my head hurts. — Bernie
I cannot tell you how grateful I am to WordPress and this “gift” your founders have given to me. Although I am not that experienced in terms of how to use all of your features (tech-wise) behind the scenes, and I do not know all the tech stuff you have mentioned, I would be very happy to host some kind of advertising for your company if it gives back to you?
As a writer, I see WordPress filling in a terrific gap where journalism has failed the public.
I think that in the future, wordpress might be the virtual home of journalists if you did something that way?
Let me know, when you come up with a plan that works for WordPress?
I’d be happy to “sell books” on my page? For you.
My own first one is at the editors right now…
Many of my poet friends publish at lulu.com.
I wonder if WordPress and Lulu might find some kind of partnership, or Xlibris? Even though Xlibris is part of a huge corporation (Random House)– their model might fit yours?
All the best to you, WordPress. You are beautiful people, whoever you are. I mean that.
It seems to me that Mozilla is part of WordPress, maybe? To me, WordPress is where Apple has left off, where Mozilla is going, and it feels like it’s “Green” in terms of green living? I can’t explain, but if you keep it “green” like that it will be a very good promotional device for your company.
Thank you again for all you have given to me,
Valentine
Thanks to all those who’ve commented (except the spammers).
Tracy, Amazon offers a confusing (to me) variety of ways to link these days. I go to into the Associates part of the site, build a product link, and specify that I want text only. Here’s a recent example:
http://changingway.org/2008/03/11/soldier-on-andrew-bird/
Actually, Amazon tries to give me an image, as well as text, in the code it generates. I don’t copy and paste the img part of the code into my post.
David, interesting contrast with TextPattern – which I never got round to trying.
Bernie, we are in agreement that the “gift culture” is a two-way street.
Valentine, Mozilla isn’t part of WordPress, although both are part of the open source software movement.
Jimmy, clearly we disagree on some important points, and that’s a good reflection of the wide variety of points of view to be found on WordPress.com.
I am an experienced dot com ad sales executive. I have a blog, using wordpress software, but hosted by liquid web. Liquid web is $15/month and includes your URL. So you can have 3 google ads per page. However, unless you are getting HUGE traffic, you make about $1.25/day. So you need to market your blog and spend $$ doing that. Anyone want more info on that email me at larasdean@yahoo.com. http://www.laraslousylife.com
Cheers,
This is what I think “open source” means. Does it mean that the “open exchange of ideas” worldwide, ie: wikipedia (as learning device) is free and that anyone can access vs. a huge corp “owning” access to various parts of the web and making people pay to get in?
I’m not sure what all those boxes are like the one for auttomatic, but auttomatic is a great thing right now–I’ve said some political things of late and auttomatic has caught all that stuff in its net.
When I get a comment on my blog it’s from a real live person out there. I’m not even sure what some of the things autto is catching are? You can probably see what they are behind the scenes, tho.
The only outside of wordpress thing I have put is a sitemeter because I wanted to see the locations in the world that are looking at what I’m saying.
Are those boxes like the sonic song or flickr part of the things that might bring money to wordpress if people had those up and running?
Yesterday I talked about how journalists worldwide might need to depend on a place like wordpress in the future. I worked for a long time for the biz, as a designer. All the writers are being laid off in newsrooms all over and yet increasingly newspapers are referencing web blogs, even today in LAT. It seems they get their “ledes” in the web– that means “tips” for stories.
The blog “No Quarter” or the blog “Savage Politics” that you can get to off my links are examples of writers who are doing “the new journalism” in a way.
In todays LAT, there is an article on women being the biggest users and a site called wowowo.com — that someone just set up and it cost them a million to get it going. My guess is that “news aggregation” like reuters is –is something wordpress might make some $$ off. I don’t know how though, but it’s a thought.
What I don’t like is the G’s way of advertising things?
It cheapens and clutters the pages — and animated things do too, unless they are beautiful. Most of the graphic design is very poor, or too simplified. If WordPress sticks with “elegance” — a kind of “green” elegance? That is what I meant. I hope all this rambling made sense!
If you want to tell me how to put in another box like that auttomattic one, or if that would help you let me know. I am only familiar with flickr, and now youtube for inserting art.
I haven’t explored designs I might make if I wanted too–because I’ve been more interested in writing. I don’t really know what CSS is, but I can tell you, when I tag, I’m on page1 of the G. Even our guv has looked during political posts. It’s bizarre, but sometimes I’m higher that Huffpo is? You probably know much more about the whys of all these things.
I was writing about target marketing and O’s moves with the G and something called a bubble sort? Could wordpress use this kind of thing to stay on top,but with more elegance?
WordPress stats on G. searches are what are interesting behind the scenes to me. Journos are using technorati? I bet. It’s a “just words” kind of thing I’d love to ask somebody about and we could email privately if you want.
anyway– I love wordpress! and I guess I like the concept of whatever is Mozilla-esque or open? Best.
I have been writng on my blog for about four months now. I roughly understand how to monetize my blog. But unfortunately I am unable to plug in those required plug-ins. I hope deanelds can help me.
Swiss, for WordPress.com blogs, you don’t have control over plugins.
Another way for advertise, try promotional items. http://www.hipremium.com
Thanks for the topic
شكرا علي الموضوع
http://www.freeprogam.com
I would recommend to promote or post the topic under free classifieds such as OrientalAds.com which can help to get more response world wide at free of cost.
As an aside, TypePad gives you full control over your blog (yes, advertising from whichever provider you choose) from the “Basic” level of service. That’s with a ton of hot designs, lots of TypePad and third-party widgets, stats about your blog and the ability to upload video/audio/pictures/whatever you want. Live Writer is supported as well. When you’re ready to upgrade to a blogging tool that takes care of their bloggers, just head on over and sign up!
Re: Nick’s comment. Nick not only blogs on Vox, he works on it too. Vox is a product of Six Apart – like TypePad, as recommended in Nick’s comment.
I’m not sure where this fits in– but one of my few irks with WordPress.com is that the focus on making it easier for bloggers to do blogging isn’t as important as flashy -looking blogs. That is especially so with the new dashboard with many accessibility flaws that increase user effort and time and the “tags” which link to other blogs (out of my control). It seems to me that if the user interface were designed more for users to use with greater accuracy and speed, then more users would use it and therefore more new users would be attracted to Automattic.
While WordPress.com is a gift, it is one which is sometimes manipulated for purposes of the giver over that of the recipient, at times. Maybe it is just inexperience of the giver?
yes. WordPress.com can help you to earn more money. using Blog in wordpress.com, you can publish ur articales, make affiliate programs and more.
Hey. I’m sorry for offtopic. Where you download this theme for site? I realy love it.
Amalia
It’s the Simpla theme, as available at WordPress.com, with a few changes to CSS. See:
http://changingway.org/2007/02/09/simpla-way-theme/
and some of the posts and other places it links to.
I hope can to making money too. Visit my blog to making money with blogspot.
I really am gonna try this out!
I prefer blogspot rather than wordpress, but word press is more popular !