Is WordPress bigger than Wal-Mart?

An investigative report into the true nature of the WordPress economy.

Piggy Bank

As the classic Dad Joke teaches us, there are three types of people in this world: those who can count, and those who can’t.

In that spirit, I am going to dig into the numbers around “The WordPress Economy,” a concept popularized in a WP Engine marketing white paper a couple years ago, and recently brought to the forefront again by a Post Status article that WordPress co-founder Matt Mullenweg called “fundamentally flawed” over the weekend in the Post Status members’ Slack.

This is also nicely timed to the series I’m working on about Funding the Future of WordPress – in my most recent installment, What is WordPress worth to you?, I did my best to estimate the utility of WordPress as a public good. My numbers are much lower than WP Engine’s estimate and much closer to Matt Mullenweg’s estimate – so I want to take a look at the methodology behind each of these estimates and talk about why it matters how “big” WordPress really is in financial terms.

Are we thinking too small?

In the article, Market Size and Market Shares: Thinking Bigger About the WordPress Economy, Dan Knauss and his co-authors argue that people “sell WordPress short,” and that the sheer size of the ecosystem is a reason to be confident in its strength:

“It’s a time of overall economic uncertainty when all trendlines seem to be pointing down. There’s concern about the post-COVID recovery of local WordPress meetups and WordCamps. It will take time, effort — and money. And it will happen. Let the stability and size of the WordPress ecosystem assure you of this. It’s not going to just break down. But we may also be our worst enemy by thinking small, acting fragile, and dampening our advantages as parts within a much bigger whole.”

[emphasis added]

Dan’s assertion that the size of the ecosystem should be reassuring, and that we are perhaps thinking too small, is based largely on the 2020 WP Engine-commissioned report that claims that “the WordPress economy” generates $635 billion a year. So let’s interrogate the numbers and see if, as Matt asserts, they are indeed fundamentally flawed.

The WordPress Economy is another way of saying “annual revenue that comes from WordPress.” This is supposed to be similar to the Gross Domestic Product of a country, which is defined as “the value of the final goods and services produced in the United States (without double counting the intermediate goods and services used up to produce them).” So when the WP Engine report attempts to measure the “economy” of WordPress, it seems to me that it should be valuing all the goods and services sold in a year, but not double-counting things that pass through and are later captured in the value of a finished website, like plugin licenses.

However, in contrast to the GDP of a country, it is very difficult to determine exactly how much of each company’s revenue is a result of using WordPress. There are so many things intertwined, even for a 20-person agency like mine. It’s kind of like asking me how much of my revenue is a result of me using Zoom. Um… some?

The WP Engine report attempted to quantify this by surveying WordPress-centric businesses and “end users,” but it’s not clear to me why they have confidence in self-reported data for a question that is essentially impossible to answer. It’s sort of like saying, “What percentage of your child’s future income is a result of your amazing parenting?” No one knows! You don’t get closer to this answer by asking parents what they think – you just get random guesses. (By the way, if that parenting question interests you, this article is a good starting point.)

The WP Engine report is a nice marketing tool, but I don’t think it is particularly useful for a business owner or someone with an interest in making decisions based on real numbers. It’s full of weasel words and buzzwords – the “independent” researchers (who paid them?) did a “regression analysis” (can we see this data?) and a “comprehensive review of academic and industry literature” (can you link us to the literature?). I don’t blame WP Engine for publishing this – it is supposed to be marketing material and certainly makes WordPress look good – but I would not use it as a basis for any important decision.

(Side note: check out my similar analysis of a WordPress Security marketing white paper from Patchstack, and Robert Rowley’s rebuttal to my analysis.)

Matt and I both have significantly lower annual revenue estimates that we use for actual business decisions – he ballparks $10 billion a year in revenue attributable to WordPress companies, and I estimated that the total economic utility generated by WordPress since its creation is in the $67 billion range. (Did the independent researchers forget to interview Matt? Are they concerned that the co-founder of WordPress thinks their estimate is off by 98.4 percent?)

I don’t think our lower estimates are perfectly accurate, but they benefit from being “bottom up” estimates – that is, we know some real data and reasonably scale it up. By contrast, what the WP Engine report does is a “top down” estimate – they start by valuing the global “digital economy” at $19.73 trillion/year and then try to estimate how much of that is a result of WordPress. This produces a nonsensically high number, as top-down estimates often do. (The quintessential example of this is the entrepreneur who says, “If we can just get 1% of this $1 billion market, we’ll be rich!” The smart investor says, “Go get your first 100 users and we’ll talk when you come back to reality.”)


The fever dream of $635 billion

To make matters worse, the WP Engine report takes that nonsensical $635 billion number, which is supposed to be annual revenue from final goods and services, and starts comparing it to the total market capitalization of major companies. These two things both involve money, but beyond that, it’s comparing apples and oranges.

For example, the report tries to compare WordPress to Tesla, which is very highly valued in market capitalization as compared to revenue because investors think it has a promising future. Its revenue is about $18 billion/year and its market cap at the time the report was written was $550 billion (it is about $720 billion today). However, Tesla is a weird company because its “multiple” – market cap divided by revenue – is so high. (This multiple is also why Elon Musk is considered the world’s richest person.) So let’s look at Ford instead. Their revenue was $136 billion and their market cap is just $47 billion – investors think Ford is worth less than the cash it brought in last year. Intel, which I think is a good example of a stable old-school tech company, did $79B in revenue and has a $157B market cap (a 2x multiple). Apple does $140B in revenue and has a $2.43 trillion market cap (an 18x multiple). Microsoft’s numbers are similar to Apple’s.

You can see that the ratio of market cap to revenue is different for each company – revenue is what actually happened last year whereas market cap is what investors expect the company could sell for in the future. Some companies have a much higher multiple than others because investors believe those companies have bright futures.

Now that we’ve distinguished between market cap and revenue, you can see why the WP Engine report is so confusing. It makes a comparison between the revenue of the WordPress “economy” and the market cap of Tesla. The Post Status authors then paraphrase the report and say:

“The report, The Value of WordPress: The World’s First Study of the WordPress Economy, noted that $635 billion is in the range of Tesla’s market cap. Tesla’s value was already on the downslope from its peak at that time, but even so — $635 billion dollars! And with one more crazy tweet by Elon, who knows? WordPress could surpass Tesla and approach the value of the top six companies by market cap — in the world.”

This framing makes the $635 billion number seem at least plausible – but, unfortunately, we are comparing two totally different things! If you said, “Tesla sells $18 billion a year and the WordPress economy sells $635 billion a year,” it would be much more obvious that the $635 billion number is wrong.

If WordPress were really generating $635 billion a year in revenue, that would be as much as Apple and Amazon combined, and more than Wal-Mart (the world’s highest-revenue company). I love custom post types as much as the next guy, but this is simply not reality.

To put it another way, let’s look at what the market cap of the theoretical WordPress economy might be. If it had the same multiple as Intel, it would be worth $1.2 trillion (more than Amazon and almost as much as Google). If it had half the multiple of Apple, it would be far and away the world’s most valuable company, with a valuation of $5.7 trillion, more than double Apple’s valuation.

Back on Planet Earth, GoDaddy’s market cap is $11 billion and Automattic’s most recent private valuation was $7.5 billion – in other words, it would take about 320 Automattics to make one Apple.

Comparing revenue-to-revenue and market cap-to-market cap makes it clear that the $635 billion number is ludicrous. WordPress is big, but it’s not at all clear that the companies in this ecosystem are doing a good job of turning that size and growth into cash, and it is not at all plausible to suggest, as both the WP Engine report and the PS article do, that “the WordPress economy” is comparable to Apple in size, revenue or “economic impact.”

The world would be worse if WordPress followed Apple’s lead

One reason that it’s important to have reasonably accurate numbers – rather than an estimate that is 10x to 40x too high – is that it allows us to get a proper sense of where the WordPress industry stands, and what we can do to best help it thrive.

For example, when the article authors think about WordPress as roughly equivalent to Apple, it leads him down a path where he compares tickets prices at Apple’s Worldwide Developer Conference ($1,599) to those at major WordCamps ($50), and suggests perhaps WordCamp could charge more.

But as Matt points out, that is the exact opposite of WordPress’ goal:

“I think the interesting part of the WP story is not the big companies using it, but the millions of small businesses, freelancers, students, people getting it for a few bucks a month from hosts… also people who I think appreciate inexpensive ticket prices for WordCamps. Again in flawed reasoning, what problem would raising the price of tickets for WordCamp solve? And how would that help our mission of making world-class publishing software available for free to the world, thereby democratizing publishing?”

Matt Mullenweg

I’m not sure if Apple’s goal is to maximize their revenue from WWDC, but that is clearly not the path WordPress should take. If anything, we should be making WordCamps as close to free as possible and having more of them, so we don’t have to worry about missing out if the big ones sell out quickly, as WordCamp US did this year.

Likewise, the WP Engine report and the PS article both compare WordPress’ fictional $635 billion in revenue to the amount of money that passes through the Apple App Store every year. What goes unsaid here is that the App Store is a shockingly predatory and spammy rent-seeking environment that violates pretty much every one of WordPress’ open-source values. We shouldn’t be attempting to be like the App Store or fantasizing about making as much money as Apple – we should be building open software that is demonstrably better than our closed competitors.

But aside from this detour into Apple envy, overestimating the value of the WordPress economy really does have a negative effect on everyone. It clouds our judgement, and it makes us think about Apple ($140 billion/year) when we should be thinking about Shopify ($3 billion/year). It also makes the big fish look inaccurately small. For example, GoDaddy’s total revenue is $3.8 billion a year. If we believe the $635 billion revenue number, that means there are 200 other Daddies out there – sadly, not true. When your numbers are totally wrong, you can’t accurately analyze any individual company’s role in the ecosystem, including your own.

In Dan’s conversation with Matt about the article in the Post Status members’ Slack, Dan asks:

So is your overall take “The WP economy is not that big, and there’s danger in thinking it is?” versus our take, “It’s big (but lumpy/unevenly distributed) and there are losses in not noticing how big — and finding ways for Big and Small actors to help each other grow and sustain themselves together?”

Dan Knauss [emphasis added]

Matt never used the word “danger” – that was Dan’s paraphrasing of what Matt was getting at – and I wouldn’t put those words into Matt’s mouth, but I will put them into my own mouth. I’d say, from a business owner’s standpoint, there is clearly a danger in being 10x to 40x off in your understanding of the market you are addressing. It would cause you to create the wrong things, to expect gigantic audiences where only small audiences exist, and generally blunder your way through your days as an entrepreneur.

Dan’s claim that “there are losses in not noticing how big” the market is can produce similar problems – for example, Matt Medeiros of The WP Minute recently estimated that there are only a few thousand people who care about WordPress news, which I think is incorrectly low. But I’d much rather underestimate and be pleasantly surprised by a larger market than vice versa. I’d much rather see myself as something of a scrappy underdog than incorrectly believe that I am as big as Apple.

In this case, I think Matt Mullenweg’s focus on thinking like a smaller, scrappier organization – something I think he’s done well over the years, despite recent growing pains – serves the WordPress economy nicely, and is something we should do more of. Dramatically overestimating the size of the WordPress economy may create an enticing web-hosting lead magnet, but it doesn’t help us focus our efforts efficiently and build a thriving community.

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Rob is the CEO of HDC and the Publisher of MasterWP.

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