WordPress is an open-source project that was never meant to generate revenue. Yet, the project’s founder has used it to create a company worth $7.5 billion.
So who owns WordPress and how do they make money?
WordPress is a massive platform that powers 43% of all websites. It’s important to understand the different types of WordPress that exist, as well as the platform’s parent company, to find out how WordPress can make a profit.
In this guide, we’ll break down Automattic to find out how it emerged from an open-source project, how it found relevant products it could monetize, and how it plans to power the majority of the web.
1. Understanding WordPress.com and WordPress.org
2. Who Owns WordPress?
3. History of WordPress
4. How Automattic Started
5. Business Model Of Automattic – How They Make Money
6. Business Model of WordPress.org
7. What is the WordPress Foundation?
8. Automattic Challenges (And How They Overcame Them)
9. What Makes Automattic Unique?
10. How Much is Automattic Worth?
11. What’s Next for Automattic?
Understanding WordPress.com and WordPress.org
To understand who owns WordPress, you first have to understand the WordPress ecosystem and how WordPress works.
WordPress.org is the popular Content Management System (CMS) that you know about. This is what powers most websites. WordPress.org is completely free, where users can create customized websites with plugins and themes.
WordPress.com is a hosting service that offers a simplified version of WordPress. This service makes it easy to set up a blog. WordPress.com doesn’t have all of the plugins, custom themes, and the level of customizability that WordPress.org has.
It’s important to understand the difference between each WordPress platform to understand who owns them and how Automattic’s business model works.
Image source: isitwp.com
Who Owns WordPress?
Both WordPress platforms share the same branding and name, but they’re completely different. How does this work and who owns them? Let’s break this down between the two different products.
Who Owns WordPress.org?
This WordPress site is open-source. Open-source software means anyone can freely access the code and make their own contributions to it.
Thousands of independent developers all around the world have contributed to WordPress to make it what it is today.
This means that the base code of the WordPress site belongs to everyone. All of the developers who contributed to WordPress did it freely, without any direct compensation. So, WordPress.org is not actually owned by anyone.
If you create a website using WordPress.org, that site is completely owned by you, along with any content you upload.
Who Owns WordPress.com?
WordPress.com is owned by a private company called Automattic.
Matt Mullenweg was one of the founding developers of the open-source WordPress software. He started Automattic soon after WordPress.org was developed, to make WordPress hosting easier.
So how is Automattic able to own WordPress and use the WordPress trademark?
To answer this question, you need to understand the full story behind the WordPress software and how it all started.
History of WordPress
The story of WordPress and Automattic starts back in 2003 with Matt Mullenweg. He was just 19 years old at the time and an early adopter of blogging.
Matt noticed that the blogging software he used hadn’t been updated in months. He described the issue in a blog post, saying:
“My blogging software hasn’t been updated for months, and the main developer has disappeared, and I can only hope that he’s okay. What to do?”
The post got the attention of a few developers, and together they began working on what would become the open-source blogging software WordPress, officially launching it in May 2003.
Matt Mullenweg teamed up with a guy called Mike Little who was in England. They had never met before, as many open-source projects work. The two started hacking away on what would become WordPress.
According to Mullenweg, he never intended it to become a revenue-generating project. He wanted to make it easier for people to publish their own sites and blogs – even if they lacked the technical know-how.
Mullenweg’s success so early on earned him a job offer at CNET – a San Francisco-based media company. His role was as a product manager.
Above: Matt Mullenweg. Image: inc.com
How Automattic Started
While working at CNET, Mullenweg also dedicated a fair percentage of his time to WordPress.
During his time at CNET, Mullenweg noticed that the company owned tons of domains from their acquisitions, with ‘online.com’ being one of them.
Mullenweg thought this domain would be perfect for an even more accessible version of WordPress, where users could start a blog in a few clicks, no coding required.
As great as this idea was, CNET just wasn’t on board. Like the rest of the industry, CNET didn’t see the potential that blogging held. Back then, traditional publications and journalism were considered legitimate sources of news. Compared to them, blogging just fell short.
However, Mullenweg wasn’t one to give up.
After wrapping up his projects with CNET, he quit his job. Alongside a few of his fellow WordPress developers, the young entrepreneur started investing all of his time and energy into his new startup – which he named Automattic.
This is what Mullenweg had to say about starting WordPress:
“The idea was to create a company that tried to build and flourish from the open web and open source. I wanted to create a place where I can work on open source full-time and all the other developers who worked for us could benefit from it. We also wanted to create a company, a for-profit, that was paired with a non-profit where each one would be stronger than either on its own. The non-profits can do awesome things, the for-profits can do awesome things. With WordPress we essentially have wordpress.org which is not owned by Automattic and we have Automattic which creates services for WordPress and then there’s a huge ecosystem outside of that.”
Working at CNET, Mullenweg saw how the platform battled with spam bots on sites that allowed comments. This gave him an idea for his first commercial product.
He decided to develop ‘Akismet’ – a spam filter that you could use for WordPress and other blogging software. The idea was that the Akismet plugin would go through the comments on your blog and filter out spam using a complex algorithm that Mullenweg developed.
Over the years, Akismet has caught more than 523 billion spam comments from blogs and websites of all kinds. It’s safe to say that this product was one of Automattic’s biggest successes.
When Automattic officially launched in 2005, Akismet was its first product. Next came WordPress.com, initially launched to a limited audience.
The difference between the open-source version of WordPress and this one was that it fell under the umbrella of Automattic, which meant that the company handled hosting, leaving the users to focus on their content – a big selling point.
Business Model Of Automattic – How They Make Money
If starting a WordPress site is completely free, how does Automattic make money from WordPress sites?
Currently, the company generates revenue of $155 million annually. They achieve this through five main revenue streams.
1. WordPress Plans
WordPress.com has a freemium version, but they also offer three different premium plans that give you more control over WordPress sites.
The free version of WordPress is fairly limited based on its storage size, limited customizations, and inability to monetize your WordPress site. These sites also have to have a wordpress.com subdomain.
Paid WordPress plans fix these issues, allowing WordPress.com users to create a higher quality site.
Automattic offers a subscription-based model with WordPress VIP. This includes better support, security, and technical guarantees that aren’t available in the regular paid plans.
Above: WordPress VIP
WordPress also makes money through the free plan by selling advertising across web pages.
The free version of WordPress allows the company to host ads on your WordPress blog and take all of the revenue generated from them.
4. Premium Themes
All your WordPress sites can be customized with different themes.
There is a library of free themes available, but users can also choose premium themes provided by WordPress and other third-party companies. WordPress earns profits or commissions from each theme sold.
5. WordPress Features and Products
WordPress started developing new plugins and features, depending on what their customers needed to grow their sites. Each new feature has its own business model and a target audience that would pay to use it.
Today, Automattic makes most of its money by selling subscriptions that go hand-in-hand with WordPress, such as WooCommerce – an e-commerce plugin, Jetpack – a customization and security plugin, and Enterprise WordPress for businesses.
Business Model of WordPress.org
If WordPress developers are contributing towards a free non-profit project (the WordPress Foundation), how do they make money?
WordPress developers contribute to the platform for two reasons. First, they often create and sell products and services on WordPress. This includes things like plugins, themes, and web development consulting.
The other reason is that these developers work for a company that sells WordPress products or services.
So WordPress developers don’t get paid by WordPress, but they make money through WordPress-related services.
And as WordPress becomes more popular, more WordPress software is developed. This means the WordPress community has more commercial interest in continuing to develop the open-source platform.
This is much like what Automattic was doing when WordPress first came out. Except that now there are many different companies with a commercial interest in WordPress.
This means these companies want to continue to develop and grow the WordPress project so that their businesses stay relevant.
What is the WordPress Foundation?
The WordPress Foundation is a non-profit organization founded by Matt Mullenweg. The WordPress Foundation exists to make sure the WordPress software remains freely accessible.
Because it’s a non-profit organization, the WordPress Foundation makes money through donations.
The donations are mostly made by businesses that use WordPress to make money and want to continue its existence as an open-source platform.
Automattic Challenges (And How They Overcame Them)
Despite the genius idea behind Automattic, the company had to go through some growing pains initially.
One of the biggest challenges that the company faced from the tech world was the fact that it was creating a commercial counterpart to an open-source project which people could use and modify for free.
The second problem was that when Automattic launched, their first-ever employee resided in Ireland.
Then they had people working from places like Vermont and Texas while Mullenweg himself was in San Francisco. This was back when the idea of remote work was not mainstream. So people had a hard time believing that this kind of work model would ever prove to be productive.
But, even at the young age of 21, Mullenweg proved to be a capable leader and managed to beat the odds with his excellent team of developers – who worked and contributed to his ideas from all over the world, bringing in new perspectives.
The model just made a whole lot of sense for a project that was so community-driven and diverse. This allowed Mullenweg to hire talented people from all over the world, while maintaining constant company communication online.
The company has been entirely remote since 2005. With 1700 employees. With the kind of success that Automattic has experienced, it’s safe to say that the model has worked out for everyone involved.
Now that this part of the challenge was over, Mullenweg knew that he had to bring someone else onboard to raise funding for his venture.
Tech writer and WordPress early-adopter, Om Malik, put him in touch with a Yahoo executive named Toni Schneider, who already had experience with a few startups, including a successful exit to Yahoo. The two automatically clicked, and Mullenweg quickly brought Schneider on as the company’s CEO.
What Makes Automattic Unique
Automattic has found pretty tough competitors in other cloud-based web development services like Wix, Squarespace, and Shopify in recent years.
While all of these platforms have taken the same idea that Automattic started with, they’ve narrowed it down to specific niches, which significantly reduces their use cases.
On the other hand, Automattic has developed its software to be used by all kinds of people. This is why, even without a proper marketing department – compared to websites like Squarespace or Wix – Automattic has managed to stay relevant with WordPress even decades down the line.
2014 proved to be a big year for Automattic after the company raised $160 million in funding – the only money that the company had received since 2008. This was also when Mullenweg finally decided to take on the role of CEO again, replacing Schneider.
_“My big learning under Toni was that by changing code, I can affect that part of the program, but [by] changing people, you can affect the world.” _
Said Mullenweg in an interview.
Over the years, the company has acquired several other smaller companies to improve their services and overall user experience. With acquisitions like WooCommerce, the company could tap into new markets.
One of the most famous acquisitions by the company was in August 2019, when Automattic acquired micro-blogging and social networking platform Tumblr for an estimated $3 million.
How Much is Automattic Worth?
As of now, WordPress has a market share of 65% when it comes to content management systems.
Because of this dominance over the market, Automattic has managed to raise more than $985 million in funding over 13 rounds. Their latest funding round took place in February 2021, bringing the company’s valuation up to $7.5 billion.
What’s Next for Automattic?
So, what does the future hold for Automattic?
Mullenweg has no plans of stopping anytime soon, and he believes that one day, WordPress will reopen the web by disrupting the dominance of platforms like Facebook.
In the CEO’s own words, he wants 85% of the world’s websites to be powered through his open-source content managing system.
“I think that we can take it from 28 or 29 percent and take it to something more in the 80 to 90 percent range. At the same time the web is going to continue to grow with another 6.5 billion people coming online.”
Said Mullenweg enthusiastically.
Having emerged from the open-source WordPress project, Automattic was a pioneer in remote work and open-source software commercialization.
Through the development and acquisition of WordPress plugins that extend the functionality of the blogging platform, the company has managed to build itself into a holding company for these diverse yet related businesses that support the world’s most-used CMS.
If you’re a blog owner, you’re probably on WordPress. And even if you’re not paying WordPress directly, the project’s founder has found a way to generate billions through the platform and Automattic’s self-hosted WordPress product.
What do you think of their ambition to reopen the web? Do you think they’ll achieve their desired market share?
Let us know in the comments below.
- What is OpenSea? OpenSea Business Model Explained
- How Does Discord Make Money? Discord Explained
- Impossible Foods Business Model: How Fake Meat Built a $4b Company
- Pinterest Business Model Explained – Inside the $31B Social Platform
- Building the $1B Dating App – Bumble Business Model and Story
- How Canva Became a $40 Billion Business
- What is Twitch and How Did it Become a Live Streaming Giant?
- Building a $95 Billion Startup: The Stripe Story
- What is GoPuff and How Did it Become a $15 Billion Business?