Vertical fever: WordPress's new small business strategy extends from bands and weddings to cities

By Sarah Lacy , written on November 14, 2012

From The News Desk

WordPress has one of those good startup problems to have. It has a gargantuan reach: Powering some 17.2 percent of the Web with a combined global reach of 669 million uniques. And it does that with just about 130 people.

The company is very profitable: The vast majority of the money it has raised either went to partial liquidations for the early team or is still in the bank.

So its future is very much assured. Congrats. A tiny number of the thousands of startups launched every year get to say that. But what now?

WordPress wants to gobble up a larger percentage of the Web, and if new users were more likely to convert from the free open source version to premium paid services, that'd be nice too. It'd also like to expand away from blogs and more into basic websites.

The company has hit on a pretty novel strategy to do that, without adding much costs to the bottom line: Focusing on verticals.

Earlier this year WordPress launched a vertical around setting up quick and easy wedding sites and followed it up with one around bands. Today, it's launching one around cities.

WordPress doesn't put a ton of work into these -- and that's part of the genius of the model. There are so many built out themes and features that are already appropriate for each vertical, it's really a matter of pulling them together in an easy to implement package and adding a few new features here or there.

For the cities launch, WordPress pulled together a custom navigation that would include things most cities would want featured on their sites like a "Parks and Recreation" tab. They also developed a quick and easy events calendar.

From a technical point of view, there's little in these vertical packages that techy do-it-yourselfers couldn't have already created on their own using WordPress. But the company has made it easy for a novice to get a site up and running. These are part of the, not offering. Meaning, it's hosted by the company, but the basic product is free.

The last numbers I saw showed that nearly half of all small businesses still don't have websites. I know that stat is sort of shocking for our techy readers, but it's well known by a handful of companies who've been gunning hard after those Web holdouts. A year or so ago, there was a heady race between a handful of startups like Wix, Weebly, and Yola and giants like Intuit. Success was largely contingent on building a sales force, doing deals with people already selling into small business channels, and getting bundled into existing small business software and hardware.

Each of these efforts -- and some are still ongoing -- learned the hard way why there aren't many large companies out there selling to small businesses. They can be just as expensive to reach, sell to, and maintain, and the dollar amounts per deal are so much smaller. And each vertical has its own specific desires and needs.

Back in my BusinessWeek days, I spent a week following around ethnographers for Intuit who watched how small business folks used QuickBooks. It was a constant tug of war between features that a plumber would want but which would only confuse a merchant. Keeping the product simple was a constant battle given all the feedback flooding in from the huge diversity of customers.

But WordPress has a big leg up on everyone else here: None of these vertical launches have to work. This isn't a startup relying on immediate traction to get its next round of financing. WordPress stays in business whether this works or not. It's putting all of this out into the market for free, and it has a whole list of verticals to go through.

There's not a ton of development work that goes on, nor is WordPress manning a call center full of salespeople to push the products. Like everything else the company does, it's relying on its open source community to evangelize it. "Our entire business model doesn't survive or fall based on these verticals," says Toni Schneider, CEO of WordPress parent company Automattic. "That gives us a better chance of this working over time. It can grow slowly and organically."

So far the number of Wedding sites are in the thousands, and the bands are in the hundreds. Schneider doesn't expect any of them to get into the millions of sites -- so each vertical will be a drop in the bucket for WordPress on its own. "If you wanted to go build a business just on a vertical like cities, you'd have to charge a lot of money, because there are only so many cities in the US," he says. "Because we can do it without adding costs, we can offer it for free."

Eventually WordPress anticipates it could launch hundreds of these verticals. In aggregate and over a long time, that could be huge. If just one vertical hits big or many of them do okay, it'll be worth it. Particularly since small businesses are far more likely to convert to some level of paying customer than individual vanity sites are.

Of course, the reason this could fail -- or just wind up with "meh" results -- is the same as its edge: It doesn't need this strategy to work. The lack of sales and marketing might limit how many small businesses WordPress can reach. But you won't convince Schneider of that. The no pressure open source conversion strategy has brought WordPress here, and he sees no reason to ditch it.

[For more on WordPress's culture watch our excellent PandoMonthly with its founder Matt Mullenweg.]