Envato: success story of WordPress themes and PSD tutorials business

If you have a wordpress blog then it is more likely you heard of themeforest, marketplace for wordpress, joomla, opencart and many other CMS themes. Envato is parent company that manages 30 web properties on separate niches. This is story of how it is started and what make them successful. As success measurement we measure income that they generate. Envato don’t disclose precise numbers, all they reveal is they are more than a million on revenue per year.

Here are notes from Envato success story.

  • Marketplace business: They started as a website for selling flash compopnents called FlashDen in 2006. Then renamed website to ActiveDen due to getting warning from Adobe regarding using name Flash in domain.
    • They created mini portfolios and used their flash components, fonts, videos and then shared that portfolio to show how easily you can create such portfolio.
    • Items were selling for couple dollars, and created by others. Developer would get 25% then as sell more they will get 40% revenue share from the market. Nowadays those numbers are 50% at beginning then 70% as they sell more.
    • Most content is exclusive to Envato network.
    • They promoted content on flash and design forums.
    • Changing point was when they offered 10$ for every registered new member. Member then can use it during 2 week time. Total 10,000$ were scheduled to give away out of these 8000$ were registered, 6000$ used.  This will actually cost Envato 2,500$ because of revenue breakdown of 25%. And that money will boost authors to create more content.
    • Before this giveaway 3 month in they were earning 100$ per month, after they started earning 1000$ per week.
    • They promoted this offer on flash gallery showcase with a banner saying register and get 10$ credit.
    • They repeated this promotion 3 times after realized that existing members started registering again, this happens when you grow big in members.
    • Initially they were 3 founders, husband, wife and friend, invested their savings 40,000$. After couple month in they forth member to company.  Collis Ta’eed and his wife were freelance designers.
    • Then they added more marketplaces for themes, audio / video files, images etc.
  • They hired Rubi developer, were looking for php developer but one friend suggested a rubi developer, which they agreed to develop system in rubi.
  • They had problem with accountant, everything was not reported and documented properly. What almost lead to financial crisis in future.
  • They started planning in February, projected to finish in April, finished in august, October saw some income and December started earning 1000$ per week.
  • Job board, content and eBook business:In 2007 started freelanceswitch.com as a blog about freelancing. Then added job board to it. Site became popular because of freelancing articles. Blog was getting more traffic than ActiveDen.
    • Freelanceswitch is monetized by 8 ad blocks 1000$ each. Income was not steady because one month 4 advertisers could disable their ads. It was expensive ad option.
    • To make revenue more stable they used 7$ / month subscription for freelancers to contact advertisers.
    • Because it is freelance site and project may be with 100$ budget charging advertiser 300$ model would not work.
    • Freelance site generates 8000 – 10000 $ per month
  • They build different sites because they didn’t want to jam everything into one site. Because then sites code will be very complicated.
  • Then bought Photoshop site psdtypes on flippa.com for 1000$. Site was using adsense for monetisation and should repay for itself in 6 month. But it didn’t work that way because adsense income stats were a bit inflated.  Then started to use it as blog and write psd tutorials.
  • For pricing they prefer starting with low cost like 7$ and then grow that slowly. With themes they started as 8$ and now some themes are 35-40$. Same method is used by iStockphoto site.
  • Tutorials and premium subscription business:Then they launched psdtuts. It was getting lots of traffic from dig back then. Site is monetised by adsense and earning well. They wanted to balance advertising with paid options.
    • They started to sell PSD files from tutorial for 1-2$ on using E-junkie. It didn’t go that well, was generating 100$ per month or couple month.
    • They started a premium subscription model with bonus tutorials. Subscription model brings 2/3 of revenue, advertising is 1/3.
    • Premium subscription has a trial, visitor views beginning of tutorial and then to view complete tutorial have to pay 9$ a month subscription.  Most of revenue comes from this type of tutorials.
    • They paid for content 200-300$ one-time payment to author.
    • Subscription was 7$ then they changed it to 9$ differentiate from other payments. Price goes down to 3$ if you pay ahead for couple month.
    • Initially there was 1 premium tutorial and 40 PSD source files from free tutorials.
    • Then they expanded this idea of tutorials to web design, programming, wordpress and other fields.
    • Initially it was different subscriptions for different tutorial sites. Then they merged all subscriptions into one 9$ per month and massive spike in customers happened. No they can use any files from any resource and view all premium tutorials.
    • Now they have 500 bonus tutorials, 1000 source files.
    • Also user can subscribe and download everything and ask for refund. But it is not common because customers appreciate content and effort spent for creating these tutorials.
    • 80% of content is free then 10-20 % is payed content.
    • Subscribers keep subscription to get new content.
  • They also have eBook sales on FreelanceSwitch which is profitable but compared to other areas very small portion of revenue comes from this. It is alwas good to have variety of revenue sources.
  • Every project is planned ahead on a paper, how to bring initial traffic, how to monetize, how to grow.
  • After a while they had so many projects that some of them started to loose attention and interest by staff. They started to sell those small projects and focus more to main projects.
  • Envato has 50 staff, half in office in Melbourne and other half is remote employees.
  • On themeforest, activeden and other digital goods sites they have 2$ price difference. Which is in early days when item was sold for 2-8 $ paypal would take commission 40 cents or so minmizing income for company. So they added 2$ for direct sales without registration. And some people prefer registering with 30$ and buy many items instead. There was time limit 1-2 years before customer have to spend their money in their account before it expires. But it is not actual for current prices because they are 30-35 $ per theme on themeforest.
  • Company name Envato is made up name to make it easy to trademark, Name costed 1000$.
This is how Envato makes money. Apart from making money for themselves their marketplace also generates income for other people around the world. Some of themforest authors break 1.000.000 $ mark. Here is a story of Peerapong, theme developer from Thailand, which is also motivating if you are planning on starting to make themes for sale on themeforest.

These are notes from mixergy interview, full interview can be viewed here.

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