Envato Passes $1 Billion in Community Earnings While Continuing to Aggressively Market Its Elements Subscription Against Marketplace Authors

Envato has passed $1 billion in community earnings after 14 years in business. The company reached the goal a year earlier than anticipated, thanks to the contributions of 81,000 different creators around the globe and millions of customers who have purchased products from Envato Market, Envato Studio, Envato Tuts+ and Envato Elements.

“To this day, we’re very proud that our community earns more money than our company does,” Envato co-founder Collis Ta’eed said. Last month Ta’eed stepped down from his position as CEO to pursue a new ethical chocolate e-commerce venture. He was replaced by former HotelsCombined.com CEO, Hichame Assi.

Due to the pandemic, the Australian tech company recently transitioned to all employees working from home during the global lockdown. Along with the announcement of Ta’eed’s exit, Envato delivered a 20% profit share payout, totaling $3.75m AUD, to its 630-person workforce. The company reported that this is an increase on the 10% allocation from the previous financial year.

“Profit share has become an integral part of Envato and helps connect the team with a share of the success they create through their efforts,” Ta’eed said.

During the past several years, the company has focused heavily on driving profits through Envato Elements, its subscription service. Ta’eed said the business is now “more subscription oriented than at any time in our history.”

One WordPress plugin author, who sells on Codecanyon, commented on the milestone post, urging Envato to renew its focus on the marketplaces.

“Please focus on the marketplaces as well,” FWDesign said. “In the past 2-3 years, you guys focused on Elements, cannibalizing the marketplace, is time to give us something back. Personally, I feel forgotten.”

While the community earnings have allowed creators to improve their lives in various ways – from paying family medical bills to buying apartments – the increase in focus on Envato Elements has been highly controversial. Envato’s forums are replete with complaints about Elements “poaching clients from existing marketplaces,” after many authors spoke out about Envato advertising Elements on authors’ marketplace product pages.

Authors employ various marketing channels to bring traffic to their items, such as Facebook ads or Adwords, and have complained for years that potential customers were whisked away from their product pages by Elements ads. Many authors reported declining sales on individual products as a result.

In May 2018, Envato rolled out a critical change that made all items across all item types available to all subscribers (monthly and annual). This was particularly controversial for WordPress theme authors and many reported significant decreases in sales as a direct result.

At that time, former Envato employee James Giroux responded to authors’ concerns, characterizing the new subscription service as “a long-term play:”

“With Elements, you are buying into a revenue stream rather than a one-time transaction. So, when you compare the value of a Market customer vs an Elements subscriber, you may see less from the subscriber in the first month, but more in their cumulative lifetime revenue.”

Elements may not be the right choice for every Envato creator, but the company’s investment in the service is now pulling in $40 million in annual recurring revenue as of 2018-2019, accounting for 35% of Envato’s $113M in revenue for 2019.

“This year we continued to reinvent ourselves as a subscription company, with a major uptick in subscribers across Envato,” Ta’eed said in Envato’s 2019 Annual Public Impact Statement. However, this new business model is coming at the expense of authors who sell exclusively through the marketplaces.

Envato authors have begged the company’s leadership to take down the banners that boost Elements’ sales by siphoning customers off the marketplace, but the aggressive push towards subscriptions prevails. The frustration is palpable in numerous threads across the company’s various marketplaces.

“It’s one thing to advertise Elements on the web or wherever Envato likes, but to have this banner on all of our item pages is actively poaching potential customers away when they are moments away from buying our items,” AudioJungle author Alister Bunclark said.

Many authors have seen a decline in sales that is outside their control. No amount of marketing traffic to their own portfolios can make up for the $16.50 “all you can eat” offer that is plastered to the top of every page. The banner for the in-house competitor even appears directly in the cart for customers who are trying to checkout with products from non-Elements authors.

“The fact that we are even having to request that Envato stop relentlessly promoting a competing, lower-priced alternative to our portfolios (many of which are exclusively offered at AudioJungle) – on the marketplace where our portfolios are – is discouraging,” one author said.

WordPress authors selling on Themeforest are also frustrated with the banners. In 2019, Envato sold an item every 5 seconds, with WordPress accounting for a third of sales. The company claims to be the “market leader for themes and templates for WordPress,” despite the marketplace’s overall poor reputation among WordPress professionals.

One byproduct of Elements including WordPress products in the subscription is that it tends to encourage the use of outdated themes and plugins. Users can download thousands of products but the WordPress themes do not come with support. Many users are not aware of this when they purchase their subscriptions. Users can get updates only while their subscriptions are active, but they have to be downloaded manually.

“Despite tons of complaints from authors (who made this place what it is in the first place) it is even pointless to promote your items elsewhere to attract some ‘buyers’ because they see the Elements promotions everywhere, even on our own product pages,” Themeforest Elite author Bedros said.

When authors took to the forums to report no sales or declining sales, one user responded, “Don’t panic. They killed the market with Elements.”

Certain marketplaces, like AudioJungle and WordPress themes, are disproportionately impacted by Elements, given the significant time investment to create these types of products.

“I wonder what’s the point, in these circumstances, to spend months (in some cases even a year) to build a decent WordPress theme to sell on Envato,” Bedros said. Another author on the same thread reported working on a theme for 16 months and had only 17 sales two months after it was approved.

“The big buyers (ad agencies and the like) will see an immediate savings on the subscription plan opposed to buying the products individually,” AudioJungle author Daniel Warneke said. “This pulls the high volume purchasers out of the individual market.

“Envato hand picks the authors that have products in Envato Elements, so it stands to reason that they selected a broad range of the most popular products. This would make the service the most appealing.”

Envato Reports 0.18% CTR on Elements Banner Ads But Will Not Remove Them

In the responses to Envato’s 2019 Annual Public Impact Statement, Collis Ta’eed confirmed that market sales are declining. He blames the “movement of the industry” towards other business models as the reason for the decline:

To your question on Market sales, they’re holding up better than we’d hoped, though they are down year on year. Internally we look at the combination of Market and Elements both in gross revenue (which is up) and in authors earnings (which is up). But Market itself is down a few percent on this time last year, and that looks like an ongoing trend (though one that’s not as steep as my worst fears at times!)

It’s tempting to think the driver of Market’s changes are Elements, especially as we drive subscription customers over. But we’d been mapping the trend of the sales curve for years prior to the launch of Elements and had been seeing changes before we ever launched into subscriptions, because of the movement of the industry, first to ‘bundles’ and then to ‘subscriptions’ and ‘free’. From what I can tell the bigger forces on Market are actually industry ones.

Despite the vast undervaluing of their individual products, authors in general do not seem to be opposed to Elements entirely but rather they are opposed to Envato’s aggressive advertisements on their portfolios. The same question surfaces every year and the company’s leadership continues to dance around it.

“Can you explain to authors why they should spend money on advertising their products when as soon as they land on the landing page they see a great big dirty banner saying they can get everything unlimited for a monthly fee?” template author Patchesoft commented. “I feel like this question came up last year and we got a ‘we’ll see what we can do about it’ and yet here we are a year later.”

Ta’eed responded, characterizing the banners as a cross-promotion of traffic between Market and Elements. He claimed that after the company performed some tests, removing the banner “had negligible impact on sales at a daily level.”

Definitely I know that the header bar on Market is up there amongst the most annoying things to authors. But at the same time, it’s important for us to be transparent about the different offerings we have for customers so they can choose what’s best for their needs. While it’s pretty annoying, the traffic diverted from Market item pages is minimal (0.18% of visitors actually click through). That said we’re exploring ways to let customers better know about Elements (and Placeit).

Authors are not buying this justification for the banner ads, and object to the use of the term “cross-promotion,” when the promotion only goes one way. Meanwhile, Elements, which enables non-exclusive sales, is treated like an ad-free, exclusive library.

“’Annoying’ is not the correct word,” AudioJungle member Purple Fog said. “You gotta understand it’s much, much more than that. It’s infuriating, it’s a betrayal, it’s you flipping us the finger.

“If it’s so important for you to let buyers know what all their options are, then why isn’t there a top banner on Elements telling them they can also get the item for a one off fee, in case they don’t want to subscribe?

“That 0.18% is pretty far from the figure you previously gave us (around 2%), and is even harder to believe. Do you mean that you are willing to antagonize the vast majority of authors just for 0.18% CTR? Makes little sense. It’s also hard to believe when there are countless threads opened by buyers who felt they were tricked by that infamous banner. Either your people are lying to you, or you didn’t set up the analytics properly, but in any case, something doesn’t add up here.”

Envato’s Transformation Into a Subscription Company Comes at the Expense of Its Exclusive Market Authors

Envato continues to write its own rules due to its early success and has now amassed a vast labor force who depend on the company’s offerings for their livelihoods. Those who are willing to devalue their work for inclusion in a subscription product (that is guaranteed to sell with a more compelling pricing point) are allowed to continue as cogs in a much more profitable machine.

It’s not wrong for Envato to pivot towards becoming a subscription company. To do so at the expense of market authors is unfair. These authors are paying to advertise for a competing library with lost sales from their own products. It exploits the marketplace authors who were hoping to make a sale, since their higher prices are now just a prop for making Elements look more attractive. Their portfolios become a gateway to the subscription service.

Unless Envato changes how it advertises Elements, the company will remain at odds with exclusive market authors’ interests. This is especially true for creators in markets where having their work available to more customers doesn’t instantly translate into more payments.

“Many authors have chosen to set up shop here exclusively and have supported and promoted this marketplace for years,” AudioJungle author Promosapien said in a thread where authors called on the CEO to remove the banner ads.

“Envato is presently making strategic choices that they obviously feel strongly about and feel are necessary for their own viability. Unfortunately, those choices are diminishing the benefits of being an exclusive author here.

“In fact, you could probably make a good argument that there has never been a worse time to be an exclusive author at a marketplace – when that marketplace is actively and continually using its considerable promotional resources to move website visitors away from your portfolio to a newer, cheaper licensing platform (Elements subscription).”