Freemius: Growing Beyond WordPress

so we've been doing that for, like I said, the last, year and a half. We went through rebranding process. You ask about several years, you know, so we grown as a team hired leadership team. I'm really excited about the people that I'm working with and helping me, you know, to get us to our next iteration, basically trying to be that go-to solution for selling any type of software.

Years and years ago, in fact I was talking that we, I just coming back from press conf, part of the conversation was, man, it's been great. It's great to be back in a room with a bunch of people. We are building WordPress software again, and, and like talking about the business side of it. And I was sort of, you know, reliving the past where in the hallway tracks of word camps.

Like we were talking to Pippen Williamson of Easy Digital downloads and he was like building the software for people as we were selling it, right? Like he was taking feature requests in the hallway and like, I'm gonna build this for you. And that's like the, the process we all kind of grew up in Frees really took. What I would say that took the throne of like the go-to place for any serious. At the time, WordPress, software business, right?

Produce licenses, connect it up to, a e-commerce platform, and then have like these different modes of, of being able to sell and get emails and capture, like you were really to simplify it like you were really looking at the big picture. Of the e-commerce world for WordPress agencies and product owners beyond just the license key. Whereas where like EDD stopped, EDD was like, here's a license, here's some cool graphs, good luck.

Like you were building everything else, that infrastructure around that. Are you still trying to build that same infrastructure for WordPress software and beyond now? Like how has that changed, if at all?

And I think our approach or realization is that, developers, technical founders, software makers, they can build software, they can innovate and you know. Offering them the tool to sell is one thing, but just offering the, that was the cat. But offering the, just giving you the, you know, the tool to sell is not enough. 'cause just the payment part of thing solves you a technical problem, but you still need to think about the pricing, all the marketing automation in place.

Like in order to maximize the, the money side of the business, you need someone. To direct you. Either proactively with advice or the, the, the platform needs to be opinionated towards your category of whatever you're selling in order to solve those things. Otherwise, there is a very long like learning curve that you need to figure out. Those things yourself and the commerce space keep evolving all the time.

There are new techniques, how to sell, new things are getting popular, and now with ai, like usage based. Kind of pricing is something that became very popular. but what, what I like saying is that, you know, if I give you, like the fastest racing car in the world, right? You won't be able to get the most out of it. You need the team behind it. You need the person, you know, the, the engine guy, the, the people who will replace the, the wheels will.

Whatever, you know, all the team behind, so we sing ourselves as. That team that offers you that fastest car in the world, but also gives you the backing so you'll know how to get the most out of it. So this is the approach we take and definitely, you know, looking on the SaaS ecosystem, the situation is the same, right? Building the app, the SaaS, like today with ai, it's becoming very easy. I mean the, the row initial MVP, I would say.

But taking that and actually turning that into a business requires so much more knowledge, guidance, direction, experience, the right emails to be sent. How do you phrase those emails? The upsells, you know, the, the surveys that you need to avoid to reduce churn. There are so many moving parts and this is what we want to tackle as a whole package.

I truly believe in that stuff, and I mean this in the best sense. My friend, our friend probably, sed bulky. I often think about when I look at things that I'm doing that are unscalable, I go, would Syed do this? And I think he would not do this right because he's a very dollars and cents optimize the business profitability, at least in my opinion. But I can't let go of this. Like I love the fact that you're helping folks, but is it scalable and, and how have you solved it over the years?

When you're pricing and packaging something which can come in multiple, every few years, you better do some pricing and packaging. It's not like constantly there is how do I grow the team, you know, hiring my first developer, my first support engineer. How do I tackle my first, I don't know, partnership? until you get to the point of, oh, I am ready to sell my business. So if you think about it, it's not like we need to speak with every maker on a weekly basis.

In fact, we had several periods where we had a full-time, call that, you know, maker success role, and we kind of posted, Hey guys, like we, here we are. You know, we wanna scale this. Like, meet us whenever you want. And we actually saw that people are very busy and we didn't get like the, you know, the, the amount of interaction that we, thought we'll get. so I would say a lot of that can be solved through educational content and just by guiding people to the right educational content, right?

Because we're kind of conquering the software niche or previously the WordPress niche we tackled. Each of those growth stages and we have an article that is like hyperfocused on that, a video that is hyperfocused on that. So when someone either reach out to us or we know we see an opportunity that you know, they better, Consume that knowledge. we can just like very targeted, tell them, Hey guys, like look at this. If you want more than that, like, we're happy to chat.

So I think educational content and the fact that we are very focused on the, the niche of software, like we can provide very targeted advice. Through content and not necessarily having that one-on-one conversation. Many times one-on-one makes it easier, right? Because you hear the story, you hear the background, the needs, and you can like tailor feedback specifically for the use case. And that's also an option. So like we are very encouraging people to schedule time with us.

so I would say it's, it's a mixture of being reactive. To what's coming through support and encouraging and different. Touch points in FIUs in the software itself. Like in the pricing, we say, Hey, like if you don't have experience in pricing, you know, schedule a call with us. We're happy to help like in those places.

And obviously we're very open, so if people are reaching out to us as well as if we see opportunities, you know, so we analyze data, look on some things, we say, oh, you know, this person, they have an amazing product. Like they should make more money. Right? Let's see what's happening there. But we, we definitely need to scale that. It's not there yet.

What was that aha moment for you and your team to be like, okay, we're gonna shift away from purely WordPress and focus on all software at this point.

But it's not this big, you know? So I had to think that, okay, what would be next after WordPress? And I still have those slides, that there are many ecosystems. SaaS was actually not one of those options because the thinking was more about platforms. Basically ecosystems that extend something, right? I did think about mobile apps, but again, those are conquered by Apple and Google, right? Because they own the distribution.

But there are Wix and HubSpot and Drupal and there, there are many ecosystems. browser extensions is pretty massive. but yeah, so, so it was always the plan. We're not sure when would be the right moment to do it. And actually the timing it, it's not because of what happened, you know, with all the workers drama or ai. It's just, I would say that I got the right people to go through the process, do the rebrand.

It just happened, you know, the timing was good and right before all the mess started. But, so, so it was always a plan. I was forced to think big just because of those initial presentations.

People have always like questioned like, oh, pricing and percentage, and you know, all these other things that maybe the user experience as you've grown over time and I have to commend you. I. For holding your ground so positively, when you do get, when you did get criticism on Twitter and, it is always just like, man, people, what, what, what do you want? You know, like, what more do you need from FIUs and Nova's team, you know, to.

To just make the exchange, like you're not gonna build it yourself and you can't complain about EDD at the same time. so then what are we doing here? Like, freemium is gonna help you do all of these things, and Yes, you have to make an exchange for, a percentage of, of your sales. And I say all this because in the WordPress world, I feel like there's always that barrier where the person selling things are, they're just so. I mean, I, I guess price sensitive, for sure.

But it's because they're, they're, they're trying to run like a hobby business, but also think like they're Mark Zuckerberg at the same time. And it's just like, you can't connect these two dots. Like you're either going to think and work on your business, but at the same time, like you can't complain about like a. 6%, 7%, 8%, whatever the transaction fees were as you've been, you know, growing the business.

so I have to commend you on like standing your ground and being very positive and still adding more features and listening to the customers over, over time. I would imagine that the WordPress space. Particularly you're, you're particularly challenged with that, right? over the years. Like people like, oh man, is it 5%? Is it 8%? Why should I pay you? Why should I do this other thing?

I assume you hear that more on the WordPress side than if somebody was just building a random piece of software with React.

But that was okay because there's no other way. Right? And I think the whole concept of, merchant of record, you know, or super payment processors, whatever you want to call that, it's just became more popular and known outside of the WordPress ecosystem. So it has. A longer track record, right, of being used. So if I'm a new player, a new maker, working on my first product, and I'm. Getting into X or LinkedIn and asking, oh, what should they use?

And you know, you hear 10 answers, five of them are payment processor, five of them are merchant of record. Then it's like part of the norm. You know, in WordPress that simply wasn't the case. So FIUs was kind of this, you know, different player. so it's, it's pretty normal and. We set holding my, you know, our grounds. Like we always listening and like when we started framing, the price was ridiculously higher. Right? I remember it was like

And. As part of the process, I realized in the beginning because it was hard to get those, that initial traction that I have to adjust because my point of reference was wrong. Like the way I looked on Fios, I said, oh, you know, what is the WordPress kind of what other similar solutions I. Our charging. And for me the closest was actually marketplaces. 'cause marketplaces solved all those things automatically.

so I, compared to marketplace, which is incorrect, obviously, I also wanna, you know, say kind of what I learned and I, I did try to experiment like. If I could for sure. Let's say we reduce our price for WordPress by certain percentage and know that we can get much more makers to use frame, use much more WordPress plugin theme developers to use frame use, we would likely do that.

But based on what we experimented, and I'll just break down the logic with you, you'll see that it, it doesn't make sense for us yet. I would say that for people who are just starting out, their product free use became no brainer in WordPress. 'cause you don't need to pay anything, right? Instead of, if you go to EDD, you need to spend like 300, $500 something that is a newbie you don't have to spend. So you better go with a solution that it's free for you in the beginning.

So I think we're in the, we are in the space right now that it's. No brainer to go with freemium. If you're starting a new WordPress solution, if you're already processing high volumes, that's when the the pricing kind of thing starts to hurt because you can like really see what it means for you. And you compare weight. I'm paying X amount of dollars, which is a static annual number, versus like, shit, I need to pay a percentage. Right? And you start to think, this is worth it or not.

And I try to reach out to. bakers were in good friends and like really come up. That gave me a lot of signals. Some of them, you know, are mutual friends. They gave me signals that they really want to use FIUs, and it's just a matter of price. And I kind of told them in a number, you know, like if that's, I, I wanna experiment. I wanna see that this is really the barrier. And they came up with a number, and I tried it with several people that are like friends, you know?

And they didn't make the move. They figure out other excuses, you know, found additional barriers to make the trans like, you know, to block them from making the transition. So I don't think this is the price. Like if I would see evidence that this is the price and we can get, you know, many more makers to use the platform, like high volume makers, we would do that. In fact, if you go to our pricing page, we now show.

like, higher numbers, like we, we are the only one that have like transparent pricing. It's experimentation. Everyone, like pricing apps, experts telling us that we're stupid and we should not do that. But we say let's be different on that angle and kind of give you, so you can exactly know how much you're going to pay. And it's kind of, the more you make, the less you pay and it's transparent. and I am pitching that to, you know, higher ticket makers, let's call it this way.

And I don't think this is it. It's still there, it's still public. And we'll see how it goes. The goal is to try to get those, but I don't think it's surprised. There are other reasons and.

Honestly, what I found is that people in general, you know, it's a big move to make a transition because it's like your entire payment and in addition to the psychological kind of challenges, there's also, especially in space, like personal investment, you know, because of all the issues in those solutions you had to yourself learn. And fix bug bugs and develop your own extensions to make it work the way you want it.

So you invested in that, I don't know, like, tens of hundreds of hours in the past 10 years. It's emotionally so hard to give up on that, right? So until they will feel that. The issue like, like there is a higher pain, you know, something that they, they say, fuck it, I'm tired of this shit. You know, I can't keep up with that. Or whatever. Something bad will happen. They won't really make a move and it doesn't matter what we offer them, and it doesn't matter what is the price.

This is not the situation today. Today, when you selling subscriptions globally, there are additional, some of them are hidden fees, some of them are not hidden fees, but the effective rate that you're actually paying a payment processor. It can be easily two, three, even four times more than that base price. There is 1.5% for cross border transactions. Point four 4.4 0.4% for, if you want to do like invoices, you want to do, taxes, just monitoring. It's another 0.7%.

Like there is so many of those additional fees, so they stack up. So. The difference in price. I just wanted to establish that as a base point. The difference in price if you're selling subscriptions globally, not locally, is not so meaningful anymore. It's almost the same in terms of the benefits of merchant of record. So merchant record is the legal entity that basically liable for the transaction and the official relationship, the legal relationship. Between the customer and the seller.

Right? So the way the structure works is that, let's say a software is using FIUs, then we are becoming their single customer. They're like selling us their software. We're legally reselling it to their customers. The benefits of that is that all that liability is moved to the merchant of record, which means that there are, re like we're responsible for the fraud for dealing with disputes, chargebacks. and there a lot of those. Gimme a second. I'm hearing my son coming. So we'll close the door.

This is the way of working from home. You know, the perks. anyway, so, so for, for people who are just starting out, it's a big deal because of fraud. Why? Because if you are just starting out with a payment processor, 'cause those are actually, they call merchant aggregators. You don't establish a relationship directly with Visa or MasterCard. Like Stripe is that aggregator. So. There are a lot of like regulations and risks and you know, compliance shit that they have to deal with.

So if they see a new account without historical, like track record of payment. Once you cross point 75% in disputes rate, you're immediately flagged as high risk. And if it's a bit more than that, it's very easy by them because they can't really predict how successful your solution will be, right? For them. You are nothing in hundreds of billions of dollars, so they don't wanna risk that hundreds of billions of dollars 'cause of that. No one right now. Right?

So they will just block your account 'cause it's very easy. And there are stories like that all the time. So by using a merchant of record, because in the beginning you will not focus on building security to your checkout, it's just not your thing. You know, you wanna focus on launching as soon as possible an MVP, and see that there's demand for your product. You don't wanna spend, I don't know, extra two weeks just on securing your checkout. It's just not, it doesn't make sense.

So by using a merchant of record. Because of. It's kind of a single account for Stripe and accountable for all those, transactions over the years. Right? We develop like multi-layer security, anti-car testing layers because we don't want to get fucked up because of that, right? So you get kind of an insurance. That your account will not get blocked right away. So that's the benefit for someone who is just starting out.

For someone who is scaling their business globally, there's a whole headache of global sales taxes. So once you're just selling to a single customer in the us, usually a Delaware company. There are no taxes involved, you know, so basically all the global sales stack compliance and also there are like privacy regulations, there are compliances happening all the time. Becomes simply the problem of the merchant, of record of frames in our case and.

You know, whether we comply with something or not, you shouldn't care about it because it becomes legally our problem. So I would say this is kind of the, the big differences, the big advantages, for like someone who is just starting out and how someone who is scaling and the price difference is no longer meaningful. So it was a long explanation, but

Is that a fair assessment?

Do you have those conversations with WordPress software folks who are like, okay, it's not just the 7%, it's the 7%, but you're getting all this other, you know, all these other service, a add-ons if you will, to help with the marketing and sales of the plugin. Like do you ever have to make that. Paint that picture to that person to say, you're getting all this other stuff too, or do they just look at it and go, man, 7%, like what am I supposed to do with this?

If they can delegate the entire, like operational headache and hassles to a third party, reducing legal tax liability, it's like very easy decision. If you're very techie, you want to control everything and customize everything and own everything and all, all those perceptional things. And it's becoming more challenging. And like I said, I feel that the price is not the main blocker.

So I think that when I'm trying to kind of draw the story, I'm trying to explain that, like think about you have your own team that focused on your money. Because this is what we do. You know exactly what we do. We on a daily basis have a team that in addition to, you know, marketing Frees, but we keep improving the money side of your business, you just can't get it yourself. As simple as that and Right. The way we offer that is this like fully integrated. Business in a box solution.

With all those best practices, looking on the entire customer life cycle, constantly trying to improve conversion, reduce churn, increase lifetime value. It's like there is all this, you know, minions behind the scenes trying to help you make more money. And based on like data we have. Hundreds of success stories, whoever move to free use, they're more successful in free use and happier because it just reduced a lot of headache. Yeah. For them.

so, so that's the, the story that I'm, you know, trying the, the true story that I'm trying to draw. And rather than trying to quantify, you know, this feature or that feature, I think the most like heavy re like resource that it being. Un noticeably wasted. Is the maker's time, right? Yeah. Like, oh, it's a little bug. Oh, it's a little update on it. But you end up with so many things. Maybe not in the beginning, but over the years it's like all accumulate and it's, it's just very costly.

I call these utility apps 'cause they actually help me with like the day-to-day work that I do with media and stuff like that. I haven't set out to do anything like commercial yet, but I, I feel like I'm starting to get, more foundation under my feet to be able to like build a, a web app, which I could never have done, you know, a year ago, with some apps like Bolt and, and Rep Lit and stuff like that. The point that I'm getting at is.

With a solution like yours, I think people are going to, with AI are going to be hopefully more business driven, where they're like, I've got this app idea, I've got this software idea. I'm certainly not gonna build MIUs with my ai. Like I'm not gonna build a MIUs solution with ai. That's too risky. I don't even know where to begin. But I can make this like nice little utility app that I can sell to people. They might just turn to FIUs. And say, yeah, lemme just plug this in.

Lemme just plug this in As my sales, as my e-commerce for selling this software. and I think that that's a particular advantage you're in, in the world of ai. Have you seen any customers come through that are like, listen man, I'm not even a technical guy person, but I'm building the software with AI and I just wanna plug your solution in because it's easy, fast, and I don't really care about the percentage. Like you said, I just want to build this business.

And then they'll go out and market and, and get customers. So the question is, have you seen any of those types of creators come to you yet that are like, I'm not technical. I built this thing and now I just need to sell it?

That's 'cause again, we're the merchant of record. It's like pretty high risky to get those. But it is very possible that the future of apps. We'll start with people who are not coders. You know, people who are more business driven that go mock an app in one of those solutions and then pass it over to someone who is a developer, but maybe get that initial traction. They will want to connect that to a. To a payment solution in place.

So this is definitely one avenue that we wanna play in and I'm already seeing competitors, like a new, new competitor, starting with that single feature, right, of being able to, with that, with the AI workflows to integrate the payment solution. It's very basic, very simple, but. We definitely want to be in a place where in every api, every AI like app creator, you'll be able to say, you know, cool, it looks good.

Now add it to free use and it will just spin you whatever is needed and integrate it with free use. And it's doable and, like we are on it, you know? So this is one. Kind of place we want to be. The other one is access to data. like right now, the insights and analytics that we show are limited to what we wanna offer, right? So yes, you can export the data and analyze it, can connect it to Gemini if you, you know, already using Google Sheets and all of that.

But. There's no reason not to introduce this little, like, chat where you can, Hey, tell me what is, you know, the amount of money I made in this country in this month, and who were, I don't know, my top customers, whatever. Basically opening up. Access to the database in a more kind of free text, way. This is another thing that we want to do, and obviously insights. We have a lot of data and there's a lot of data out there in the world.

So if we can mix two, right, doing things like pricing insights, right? So based on the data and what's happening outside of your vertical, we think you should increase the price here to this number. So, so there is a lot of disinteresting opportunities coming with ai and we're strategically thinking about that and hiring data science roles. yeah. Where in the ai,

So it's kind of just like, eh, it's not like you don't believe it's a human. Like, you know, it's give it a week. Give it a week. Yeah. Give it a week. Right? That's, that's exactly it. So it's like, give it a, literally give it a week, maybe two, and the thing is gonna look a hundred percent human and your, your, your mind's gonna be blown. And it really actually had me thinking, this is a little off topic, but it had me thinking, you know, maybe this technology isn't.

For like the techies, like you and I and the folks listening to this. But if you're like a landscaping business, like a plumber and you know, concept of like content marketing and like putting yourself on a video and writing a good script and making ads and stuff like that, like this stuff is gonna be, I think, revolutionary for the small business owners as long as they can get it in their hands. I think that stuff is gonna be pretty powerful.

for the folks who have never done this stuff before, I.

And I, I would imagine the directive is like, hopefully all this stuff benefits WordPress. He was hoping that word, that ai, that WordPress can be the CMS of choice for ai. In other words, if, you know, I don't want to, if I went to ai, I could build a blog. I could say, Hey, build me a blog database backend. I could make posts and pages. Why do all that when like, WordPress is already done for you, but maybe you want like it to be 10% different than what WordPress is today.

So his hopes are WordPress can become AI's choice for building a CMS. What's your outlook on how WordPress survives through AI and being able to build any platform with AI coding? Are we in a good position or a slightly nervous position with AI in WordPress?

It's just moving so fast.

And obviously right now that's just like content, but maybe in the future that would be like admin screen or, and, and things like that. And I was like, wow, the concept of blocks actually kind of makes sense with this AI thing. I think you're absolutely right. It's just like if you're in the past and you're backwards, compat compatibility with everything. I think AI is always gonna be thinking about like, what is the latest and greatest? What is the fastest, what is the most optimized?

And it's probably just gonna look at it and go write these 12 lines of JavaScript instead of these 80 lines of PHP that you wrote like 15 years ago.

Getting an app notification that there's attacks happening and you have to go into a bunker for 30 minutes and, and wait for things. And, it, you know, it was very moving presentation and you know, I just hope that you and, and yours are, healthy and safe through all of this.