Op-ed: devot:ee Economics
This is an op-ed blog post written by EE add-on developer Eric Lamb.
A couple months ago while researching an add-on to I noticed a concerning trend in ExpressionEngine add-on sales. Some add-on devs charge more for their add-ons on devot:ee compared to their own sites. Let’s get right to the point: charging the customers a premium to use devot:ee to purchase add-ons is short-sighted and bad for both the ExpressionEngine ecosystem and the add-on market. The collateral damage this creates should be unacceptable to every single add-on developer.
The main argument centers around the fact that devot:ee is paid a 20% commission on all orders done through their site. So, an add-on like Backup Pro, which retails for $30, earns devot:ee $6. I personally find this to be more than a fair arrangement. devot:ee handles any returns, deals with fraudulent orders, allows customers to transfer licenses, pretty much markets the product for me, and allows customers to find related add-ons to what they are looking for. Compared to other outlets for third party code, like CodeCanyon, 20% is a straight up bargain. Further, considering just how much effort (lots and lots) and overhead (lots and lots) an operation like devot:ee requires it’s almost a wonder they’re able to operate under such a low commission. Yet some developers essentially want to tack that 20% on to the price of their add-ons sold on devot:ee which would, for example, make the cost of Backup Pro $36 (give or take) on devot:ee while undercutting them on their own site.
Without devot:ee we’d have to build out an infrastructure to handle support, painless returns, fraudulent orders (of which I’ve personally had a few), license transfers, and promotion, and would be prohibitively expensive to developers. Sure, a couple add-on devs would thrive, but the large community of add-on devs we have now wouldn’t exist. Frankly, devot:ee is needed for the ExpressionEngine community and ecosystem. I don’t believe it’d be possible to refute that. If you’re an add-on developer, keep this in mind; it’s important.
And why shouldn’t devot:ee profit? We, the developers, do. Without devot:ee it’d be pretty much impossible to reach the heights a lot of developers have hit doing what we love without building out our own e-commerce sites. Then we’d have to also handle all the ancillary parts of actually running an e-commerce store, something that would have prevented me, personally, from even entering the market. Were it not for devot:ee I’d likely still be doing Open Source work which would definitely affect the quality of some add-ons (you’d may be amazed how motivating profit is). I think we all understand, if not even respect, this. The point though is that it’s pretty back handed IMHO to use a platform to build a business and then undercut said platform at the last step.
That said, when developers charge a premium for their products on devot:ee it increases the mental costs when purchasing add-ons and creates a lack of trust in devot:ee. This then creates a lack of trust and ease of use for the ExpressionEngine community and platform as a whole. I’ve heard a couple stories of various customers returning add-ons to devot:ee because they found it cheaper elsewhere. It’s even gone so far as a couple customers drawing the conclusion that devot:ee is themselves increasing the prices on their end which definitely makes devot:ee look shady and untrustworthy. This should be unacceptable to all add-on devs.
Moreover, considering that the number one competitor of ExpressionEngine has solved the plugin “problem” so elegantly and completely it’s clearly ill advised to do anything to increase the transactional costs of extending the platform. Charging more on devot:ee does this unequivocally. It changes the paradigm for purchasing add-ons from a simple process of checking devot:ee and purchasing an add-on to instead being one that is motivated on price and comparative shopping (our clients/bosses demand this after all). This, to me, is the big one (I’m lazy like that). I use devot:ee because it’s convenient. The fact that I can go to one site and handle 100% of every aspect of add-on purchases (as a customer) is huge.
But the issue doesn’t seem to be the amount devot:ee is paid but rather that some developers don’t see what their actions mean in broader terms. Depending on who you talk to it’s either the perception of a developer losing 20% or customers getting a savings that is at issue. Either issue doesn’t really exist though in any real way that can’t be alleviated with a little change in perception.
Taking the perception of loss first, this one’s simple. Include the cost of devot:ee into your add-on. This is just simple economics. You cover the costs of your expenses within the product you’re selling. The great thing about this though is that when you do sell consistently across both devot:ee and your personal/business site you actually gain an additional 20% from each purchase not on devot:ee. This is the picture of win/win; customers get to choose how they want to purchase their add-ons, a devs expenses are kept in check, and devot:ee loses nothing in terms of perception and trust. Plus, when/if a customer buys direct from the developer the profit increases. Win/win/win/win.
The flip side is the idea of saving a customer some money. There’s no other way to describe this than plain silly. Competing on price, especially at the margins an add-on sells for, is just not really needed IMHO. Think about it; using Backup Pro as an example, compared to the cost of ExpressionEngine alone, $6 give or take is just not worth noticing in any meaningful way. When you add in the cost of the developer, designer, and all the software, a saving of $6 is just laughable. Even at a larger scale, with, for example, 10 add-ons spread across all the premium add-ons that are over $100 each, the savings is less than even an hour of a professional’s time. Focusing on a single add-on developer the savings are straight up laughable. Seriously, it would cost more to even consider any discount than the discount would save. Still, our clients and/or bosses will expect us to pinch pennies regardless of time investment.
With all that said, I honestly can’t think of a single compelling reason to undercut devot:ee. There’s just too much at stake. Sure, there may be some short term gains for developers but customers have almost nothing to gain when compared to the already extensive expenses for building and maintaining a website. The potential for devot:ee to look shady is very real when customers see the discrepancies. Worse though, is that the ancillary costs of purchasing an add-on are increased which, when compared to the competition, is simply unacceptable.
Obviously, we’re all able to do what we want and price our products as we see fit. I just hope this has given some food for thought and the bigger picture is taken into account.
Posted on Sep 21, 2012 by Eric Lamb
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Justin Kimbrell — 15:25 on 09.21.2012
Hey there, this is @objectivehtml on Twitter. First off, I will say that I agree with your post, and at the time this was published, my add-ons are 20% less on my site than the Devot:ee cost. (Full disclosure) I have gone back and fourth with this for a while, and have even gotten feedback from both sides of the fence.
A lot of people knowingly, and willingly buy from Devot:ee with an increased cost. They just push this cost on to their client, and like you said it’s marginal compared to what we charge per hour. The majority of individuals agree that they buy their add-ons off Devot:ee say they are willing to pay more for that convenience. It’s like going a retail location that sells everything under one roof, so customers end up paying more for an item than they would had they bought it directly from the manufacture. Obviously this doesn’t translate 1:1, as physical goods are bought and sold at wholesale prices in huge quantities. I do think there is some validity to this argument. (Perhaps not enough validity to offset the cost on Devot:ee, but still worth noting.)
In my vase, very few people have reported feeling ripped off. When someone does compain about this, it really makes the product look bad. Each time, they returned their add-on on Devot:ee and bought it on my site. I almost felt like I owed them a free copy, even though I definitely do not agree with this. (It has only happened 2 or 3 times, which a tiny percentage of total sales.) And when asked if prices on Objective HTML should be raised on my site to match Devot:ee, every single person said no. Making less money is not an option, given the costs of support are raising.
So from my perspective, I can raise the price and let people compain. Or continue with inconsistent pricing and let people will complain. I guess at the end of the day, I want a consistent and reliable brand. I want people to feel like they get the quality and value in my products, no matter where they are bought or sold.
So for me, the only solution to make this a reality is for all add-ons developers to raise their costs acrossed the board to account for the 20% markup. Obviously in my case, the cost on Devot:ee would remain the same and the cost on my site would increase.
Any thoughts?
Jonathan Matlock — 16:49 on 09.21.2012
If addon devs are concerned about making an extra 20% on their own site (which I don’t think they should be), why not split the difference? Lower your price on Devot:ee and increase it on your own. Meet in the middle.
Jonathan Matlock — 16:52 on 09.21.2012
Curious how addon devs determine their prices to begin with. What’s your breakdown of your price?
20% - Distribution (selling it on your own site or devot:ee. There is an expense to selling on your own site!)
50% - Production
30% - Support
Do devs think this way?
Eric Lamb — 17:15 on 09.21.2012
Hi Justin,
I agree; a lot of people knowingly buy add-ons from devot:ee with the increased costs. Hell, I’m one of them. I do have to reject the claim that a majority are ok with it though (that’s anecdotal conjecture at best man).
But, those aren’t the people I’m concerned with. It’s the people who don’t understand the background, those who are new to the platform, or those who aren’t a part of the community where we discuss this sort of thing, that concern me.
I’m also not sure I’m on board with the retail vs wholesale idea. In my experience buying direct from the manufacturer is usually more than a retail purchase. For example, buying a printer, computer, car, or television is, in my experience, less expensive retail than direct from the manufacturer. I’m not saying the reverse isn’t true as well; just that I don’t think it’s the example to hold up as to why it’s ok to charge more on devot:ee.
The fact that some people do feel ripped off is the problem. Mostly because it’s completely avoidable. In your own experience 2 or 3 people have felt ripped off enough to return an item over this. What do you think their view of devot:ee is now though? I wager they’re going to think twice the next time they need an add-on and look askance at devot:ee as a market. What about when someone asks them about devot:ee? Are they going to be positive or negative? Do you think you’re alone in this experience? Likely not; customers of other devs have probably been through the same. This hurts us all man.
Yes, with the exception of me, every person said no about raising your prices (I did recommend not to :p). But that ignores that, when given a choice, pretty much everyone everywhere for any and all products ever made and will ever be made will always say no to raising prices.
Which is really the point; people want lower prices. Always. Think about this; how much time was spent by 1 of your customers considering the return, returning the add-on to devot:ee, authoring the note, and then purchasing on your site? Even if it was 5 minutes the savings were immediately eaten through the salary of the person making the return. Essentially, they spent at least as much to go through the process as they saved. It makes no sense but that’s people for you.
You can’t please everyone and some customers are going to complain. You can’t stop that. I just think that considering what’s at stake, and the no win situation we’re up against when it comes to attempting to please everyone, it’s in our best interest to not hurt or kill the golden goose.
Eric
Justin Kimbrell — 18:09 on 09.21.2012
>> What do you think their view of devot:ee is now though?
I agree. It can’t be good, and their perception upon me for trying to get a few more dollars out of them can’t be good either. It was my mistake for not charging more upfront to cover the cost of supporting Devot:ee.
>> What about when someone asks them about devot:ee?
>> Are they going to be positive or negative?
>> Do you think you
Causing Effect — 18:31 on 09.21.2012
Post 1 of 2
I recently heard this from a likeminded confederate:
Causing Effect — 18:32 on 09.21.2012
Post 2 of 2
Yes, CodeCanyon has crazy prices. Why is that relevant? Just because another retailer charges *ridiculous* fees or makes terrible arrangements with their sellers, doesn
Justin Kimbrell — 18:50 on 09.21.2012
I think what matters most to me is that developers get to choose what they charge, and not have to comply to a Devot:ee policy stating that add-ons prices must be the same as their manufacturer stores. It’s one thing to choose to raise the costs because X, but to do it because another retailer enforces…
I don’t even think Apple’s AppStore should do it, but the difference:
AppStore pays developers billions of dollars. I guess I would be much more open to the idea of being told how to price my stuff if there was a chance at getting a piece of a billion dollar pie. But given the size of the market I am reluctant to feel that way towards Devotee.
I still don’t want to raise my costs, but would be willing do it for a better user experience and brand consistency.
Jonathan Matlock — 19:29 on 09.21.2012
Justin - I think you’re good with charging whatever you want on your site, even if it undercuts devot:ee.
Devot:ee is a blessing, but developers shouldn’t feel a need to have to support it financially, or determine their prices because of it. I remember buying add-ons from devs before Devot:ee. I still do. If Devot:ee’s business model isn’t working, then they will just figure out one that does. I remember paying for a membership to devot:ee when it first launched. That didn’t work, so they went with more ads, now selling add-ons. The free market is a beautiful thing!
Justin Kimbrell — 19:31 on 09.21.2012
Thanks a lot for sharing your opinion. It’s truly appreciated. I will definitely be thinking about this some more this weekend.
Justin
Brian — 20:00 on 09.21.2012
This is an interesting topic and a timely one for me, so here is my 2 cents.
I don’t see it as undercutting Devot:ee at all. As stated before they were not the first site to sell addons. I love Devot:ee and am thankful that I can organize (most) of my purchases in one spot. For me I choose to use Devot:ee when I can, and I’m happy to pay the extra “Devot:ee tax.” Thats my choice, and customers deserve a choice.
When someone buys an add-on they might ask: “do I want to spend a bit more for convenience, or get it a bit cheaper because I’m on a budget from another site?” Lets say I created an add-on and I feel the price should be $80, b/c that is what I feel I should be compensated for my time and continued support, but I have to raise the price to $100 so I can make that $80 then the end user ends up paying more for it. This is an even bigger deciding factor when there are competing add-ons. A competitor might be selling for $80, so if I were to price it at $80 to compete, then now I’m only making $64 a sale, which might not be fair for the 200+ hours I spent initially developing something, and the countless hours supporting it afterward.
The argument that a buyer might discover they could have gotten it cheaper elsewhere and feel ripped off is ridiculous. I buy crap all the time online then see it cheaper somewhere else. Its just the way things are. Do I go back to the store that was charging more and complain? No, I move on. Thats how commerce works.
Eric Lamb — 04:24 on 09.22.2012
Causing Effect,
My assertion, as stated at the end of the article, is that “we
Causing Effect — 07:09 on 09.22.2012
>> My assertion, as stated at the end of the article, is that
Causing Effect — 07:10 on 09.22.2012
>> I contend that they earn more doing client work than devot:ee
—
I couldn
Brendon Carr — 00:26 on 09.23.2012
There’s another benefit to developers from having their addons available through Devot:ee—aggregation of demand (i.e., customers). Just like a department store, in fact.
Acquisition of a customer costs money in any case. Whether it’s the purchase of advertising to drive demand, or travelling to conferences to give presentations and demos, or seeding review copies with influencers, or buying AdWords on Google—it all costs time and money. But the retailer saves the manufacturer the trouble of doing all of that. That’s why manufacturers offer a margin to retailers, and that’s why Devot:ee asks for its 20%.
Developers should stop thinking of it as “Devot:ee takes 20% from me” and start thinking of it as direct sales offering an extra margin to the developer.
Justin Kimbrell — 00:55 on 09.23.2012
I don’t think any legitimate developers claim that Devot:ee unjustly takes 20%. If so, they have no logic and shouldn’t sell their stuff on their on Devot:ee.
But that’s not really argument anyone is trying to make. This is where the 1:1 comparison breaks a part, and is why retail sales was a rough analogy. Retailers can offer reduced costs based on volume. Wal-Mart can make less per item because they sell more items than any other retailer in the world. Manufacturers can afford to make less per item because they sell so much volume at one time for huge sums. Devotee doesn’t buy anything, and they don’t support add-ons. Retailers buy goods upfront, and even have their own teams of customer support. What exactly does Devotee do for me? In my mind, they bring additional traffic and awareness which makes it worth their while. But they don’t actually “do” anything for me directly (and I don’t expect them to).
I think in some ways, it’s critical developers have visible and active websites that take priority over Devot:ee. Who is to say that won’t make an unfavorable policy change in the future? Who says they will be around next year? In all likelihood they answer is yes, but in all seriousness, anything can happen and I don’t want to rely on another company to conduct business any more than I have to. I can’t count how many times I have tried to support my add-ons and Devotee was unresponsive or too slow to use. This is not a negative comment on them, bugs and errors happen to everyone. But my point is that since I have my own site with multiple support channels, I can still communicate and conduct business without Devotee just fine. In fact, it costs me time to support Devotee than my site. (The additional revenue makes this worth it, but just something to point out.)
Devot:ee definitely adds value to the community, not nearly as much as the developers themselves. This should be about developers making more money. Developers should never have to assume the cost of Devot:ee, even it brings it more business. More business means much more support, and for less money? I don’t think so. The only solution is have different pricing, or including the 20% in the base price of the add-on.
Brendon Carr — 00:59 on 09.23.2012
Yes, Devot:ee adds less value than the developers themselves. That’s why the revenue split is 20-80, with the developer keeping four times more than Devot:ee.