January 24, 2008

WordPress secures $29 million in funding

Author: Lisa Hoover

Automattic, the parent company of popular open source blogging platform WordPress, announced this week it received $29 million in funding from four investors who will take a minority stake in the company. Though this isn't the first round of financing for the not quite three-year-old company, it has drawn a lot of notice because one of the investors is the New York Times. It's an unusual pairing of two industries -- blogging and conventional media -- typically thought to be at odds with each other.

The other three investors, Polaris, Radar, and True Ventures, were part of the group that infused more than $1 million into the company in 2006. According to Automattic's founder, Matthew Mullenweg, talks with the Times began only a few months ago at a Google Zeitgeist event.

While Mullenweg won't say much about planned changes to WordPress, he does say, "We're currently heads-down in a complete redesign on the backend interface. We worked with some amazing folks (Jeffrey Zeldman, Jason Santa Maria, and Liz Danzico) to re-imagine WordPress from the ground up. That's going to be coming in version 2.5, which will be released in March."

One thing that won't change, however, is WordPress's GPL license. When asked if the license will be altered at any point during the platform's face-lift, Mullenweg says unequivocally, "Nope. Never. Will never happen."

Some users opt to pay $300 per month for VIP services, while others purchase products from the Web site, such as domain names or extra storage. Most users, though, simply register for a free account or download the free software and manage it themselves. So how do investors expect to see a return on their investment from a company that gives its product away? Mullenweg says, "It's not the cost of something, it's the scale. As a company we're able to use technology and code to leverage 18 people to do the work that takes our competitors 10 [times] the headcount."

"A real milestone"

Automattic isn't the first company to secure funding to enhance its blogging platform. Six Apart, creators of the the Movable Type blogging software bundle and its hosted counterpart Typepad, used the millions it secured in two rounds of funding to increase its employee base and acquire companies like LiveJournal and SplashBlog. In December, Six Apart released Movable Type's source code under the GPL License.

Six Apart Vice President Anil Dash says Automattic's funding is "great news." He notes that the fact venture capitalists are interested in investing in blogs is "a real milestone" in an industry that a scant five years ago had trouble being taken seriously. He says it's these kinds of milestones that "make it worth slogging through the details and doing all the paperwork.

"What we've been able to do in growing our business, both before and after we got funded, was to release more and more of our software under open licenses and put more things out there under open protocols. As long as that trend continues under [Automattic's] new business regime, I think that will be great."

Dash points out that there may still be a few bumps in the road ahead, however. "There may be some tension with the fact that they have largely open source offerings but need to get back a return on their investment. So, there's going to be some tension -- there always is in these situations -- as the community gets a little skeptical and wonders where all that revenue is going to come from. It's inevitable that there will be some stuff that won't be free, or as free, so there may be some backlash. But people will get over it. That's pretty normal. Our customers were very supportive while we tried to figure those things out and I'm sure Automattic's customers will be too."

If Mullenweg is worried about community backlash, he doesn't show it. In fact, he says he remains as committed to the open source community as he always has been. "Automattic and myself personally will continue to contribute to open source in every way possible. It's something I feel very strongly about and it's core to the DNA of our company."

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