In recent months, there has been an ongoing discussion with the community around how Envato Market works. Some of last year’s rollouts around financial tools made it clear there was some confusion around our business model and how buyers, authors and Envato interact.
Since our launch in 2006, our Market terms have been clear that the sites act as a platform for authors to sell directly to buyers. Similarly licenses issued are from the author of the work to the buyer. Other aspects of Envato Market, such as communication tools between authors and buyers for support and feedback, also work as you’d expect for a platform.
However we didn’t do a good job of some of the language and commercial documentation we’ve used across Envato Market in the past. In particular, we used the word ‘commission’ incorrectly when talking about rates and on payment notes. This unfortunately led to a large amount of confusion.
When the discussion started last year, many authors asked whether we would change our model to a reseller model, and I promised that we would look into what that would involve and loop back to the community. We’ve had a lot of discussion and debate internally, taken into account the interests of authors and buyers worldwide, and done a lot of in-depth research.
From this, we’ve concluded that we’re going to stick to the platform model that Envato Market has historically operated on. And instead we are focusing on addressing the specific author concerns raised, rather than the way the site works.
How Platforms and Marketplaces Work
A platform like Envato Market acts to connect a buyer and a seller. There is however a large range and variation in what a platform can look like and how they work.
On the one hand are platforms for dealing with physical goods. Examples are Etsy and eBay. Money often flows directly from the buyer to the seller (for example through a PayPal transfer), and the buyer and the seller directly interact. The platform provider typically charges very low fees, and is quite hands off.
On the other hand are platforms for dealing with digital goods. Examples are Google Play, Apple’s App Store, and Envato Market. Here money flows via the platform with fees deducted. Digital content is often reviewed for quality. In app stores there is very little interaction between the buyer and the seller, whereas on Envato Market buyers and sellers often engage (for example around support). In app stores the platform provider is hands off on pricing, while on Envato Market we set prices. In these digital platforms, the fees charged are usually higher than platforms dealing with physical products, as there are more services provided by the platform.
In the world of stock photography, a different model is used. Sites like Shutterstock act as a reseller for a contributor’s work. The level of interaction between contributor and buyer is more minimal in this model, often none at all. Resellers exercise more control and responsibility in the transaction, and this is usually reflected in the fact that contributors typically take home a low portion of the sale, often in the 20-40% range.
Why Envato Market will stay a Platform
While we understand many of the concerns authors have raised (more on that below), changing from our platform model doesn’t match what Envato Market is trying to be and to achieve.
Over the years we have been increasing the amount of interaction between buyers and authors. In particular our biggest marketplaces – ThemeForest and CodeCanyon – have an enormous amount of interaction around item support. Last year we announced that we are making this kind of interaction a first class part of the marketplace, and giving authors the tools to further monetize these kinds of interactions.
Our vision for Envato Market is to empower and celebrate authors as a community of entrepreneurs, not to shrink their role in the transaction.
We think that facilitating connections between creators and customers creates a better outcome for everyone. Authors learn about buyer needs, and this inevitably gives rise to additional opportunities to earn money.
That’s why over the years we’ve been steadily introducing features like Google Analytics integration, marketing advice for authors, our comments and updates features, having author contact forms and freelance availability badges, giving buyers ways to follow authors to hear about new items and track them on social media, celebrating authors in Envato Stories, API integration tools for connecting author support centres, and so on.
Our aim is to grow the interactions between buyers and authors for marketing, sales, support, and community. So moving away from a direct platform model doesn’t make sense for Envato Market at this time.
How Will We Deal with Author Concerns
Authors raised some specific concerns around tax and financial issues, which we are aiming to systematically address. When the discussion started last year, the biggest issue raised centred around how EU VAT would be dealt with.
As we’ve previously announced, from the 1st of January 2015 we are managing VAT compliance, collection and remittance. This is rolling out to the site in the coming weeks, and additionally we are liaising with the relevant EU Member State tax authorities to resolve any historical issues.
We’ve postponed the commencement of information reporting in the US and are looking at solutions to the double reporting problems that face the 1099 regime – in particular we’ve been discussing with PayPal an approach to ensure payments made via their service are only reported once.
And we’re rolling out a series of improved statements and commercial documents systems here on Envato Market to ensure authors have all the information and documentation they need to prepare their financials. These go live on February 1st and then will have extra updates with the VAT rollout a few weeks after.
We have more initiatives in train for other sales taxes, streamlining of our withdrawals system and help center material around many of these issues. And we will continue to work on concerns raised by the community.
Splitting off Envato Bundles
Finally, in reviewing the reseller model, we’ve identified that the Envato Bundles we’ve been running, along with our plans for them do not fit comfortably with our platform approach on Envato Market. Nor has our system been built to deal with the invoicing, payouts and so on very well.
So we have ceased running bundles here on Market while we set up a separate business unit and site at bundles.envato.com. You’ll see that spin up in the next couple of months. We’re planning both a better author experience when you contribute items to a bundle, but also some new enhancements to let us do things like include Mac apps and bonuses in bundles and other neat things!
Undoubtedly there’s going to be lots of discussion to be had around these topics. We’re opening a specific forum thread which the Community Team and I will be monitoring all of next week.