Matt Mullenweg: The Future of WordPress and the Web | TechCrunch Disrupt 2024

WordPress and Automattic's History and Business

• WordPress started as an open-source technology in 2003, allowing anyone to download and use it, and has since grown to run over 40% of all websites on the internet, which is 10 times the number two (1m27s).
• Automatic, the company behind WordPress, was started in 2005 to commercialize the technology and now has a dozen or more properties, including hosting, anti-spam plugins, Jetpack, and Kismet (1m44s).
• Automatic's portfolio also includes Tumblr, WooCommerce, podcasting apps like Pocket Cast, and day one journaling, all of which are centered around being privacy-centric, user-centric, and open-source (2m18s).
• WordPress.com, the web hosting service, is Automatic's primary business, generating over half a billion dollars in revenue per year, and scales from free sites to enterprise-level services (2m34s).

The Conflict with WP Engine

• Automatic has a vested interest in the future of the web, with a history of working with TechCrunch, which started as a WordPress.com blog and has since grown to a large audience (16s).
• The company has also invested in other WordPress-based businesses, including WP Engine, but declared war on them six weeks ago due to concerns over branding and ownership (3m23s).
• WP Engine was bought by private equity firm Silver Lake in 2018, after which Automatic was kicked out, leading to a change in the relationship between the two companies (3m48s).
• Automatic's mission is to make the web independent, open, and free, and it is part of a coalition working towards this goal (2m1s).
• A company was taken over by Silver Lake, which led to a shift towards profit maximization, resulting in the abuse of trademarks and cutting corners for user experience, with reports of turning off features like revisions for WordPress, and despite this, they built a large business with estimated revenue of $450-500 million and $50-60 million in free cash flow (4m13s).
• For 18 months, efforts were made to do a deal with the company, working closely with board member Lee Willinger and WP Engine CEO Heather Bruner, but it was realized that they were delaying and had many opportunities to negotiate, with previous term sheets and a final one that was published (4m42s).
• The final term sheet included a trademark license for WooCommerce and WordPress, as well as access to WordPress.org events, but the company refused to negotiate, leading to a declaration of a "scorched Earth nuclear approach" (5m2s).
• The company's refusal to negotiate was seen as a sign of bad faith, and it was felt that they were trying to take advantage of the openness of the WordPress community, leading to a decision to stand up to them (5m47s).
• The company had been stringing along the negotiations, and people have questioned the evidence of this, but it is claimed that they were given a 48-hour window to respond to the final term sheet and did not, leading to public criticism (6m11s).
• The company has been accused of trying to weaponize their customers against the WordPress community and of misleading them about the negotiations, including releasing text messages that were taken out of context (6m41s).
• It is also claimed that Heather Bruner was interviewing for a job as the executive director of WordPress.org during the negotiations, and that this was not disclosed, with many one-on-one meetings taking place during this time (6m55s).

Negotiations and Breakdown

• A negotiation took place between the parties involved, with discussions about WP Engine's use of the WordPress trademark and potential contributions to the WordPress community (7m21s).
• The negotiation was verbal, with no written agreements, but involved discussions about the individual's salary and equity at WP Engine (7m57s).
• The individual claims to have evidence of the negotiation, including selfies and meeting records, but acknowledges that the negotiation was verbal (8m5s).
• The individual does not regret sending texts about the negotiation, as they believe a discovery process in a potential trial will reveal the full story (8m20s).
• WP Engine has selectively released some of the individual's texts, but not their own, in an attempt to paint a certain picture (8m31s).
• The individual believes that WP Engine's actions, including abusing the WordPress trademark, have caused confusion in the market and led to a loss of customers (9m11s).
• It is estimated that WP Engine has lost tens of thousands of customers since the issue began, including a friend of the individual who had eight sites on WP Engine (9m19s).
• The individual had asked WP Engine for 8% of their revenue or equivalent engineering hours to contribute to the WordPress core, as they felt WP Engine was not contributing enough to the community (10m4s).
• The 8% figure was based on a business analysis, but the individual does not elaborate on the specifics of the analysis (10m44s).
• Automatic's estimates suggested that even if they had paid $32 million, they would still have been free cash flow positive, and this amount was considered fair based on negotiations over the past 18 months (10m47s).

R&D and Community Contributions

• The reason R&D is profitable for some companies is that they don't spend money on the primary thing they're selling to customers, and instead, they outsource their R&D costs (10m59s).
• Automatic's competitors spend more on R&D, and the company claims to have spent millions of dollars developing their business and contributing to the WordPress community (11m7s).
• However, it's argued that Automatic's contributions to the WordPress community, such as sponsorships to WordCamps, are actually a form of advertising, and other companies have taken their place as sponsors (11m24s).
• The total amount Automatic has sponsored since they started is estimated to be around $400,000 (11m38s).

The WordPress Foundation and Trademark

• The WordPress open-source software and trademarks were contributed to the WordPress Foundation, a nonprofit, 14 years ago to ensure access to WordPress and related open-source projects in perpetuity (12m8s).
• At the time, it was envisioned that for-profit and nonprofit companies could coexist and balance each other out, and the WordPress brand would continue to be a beacon for open-source freedom (12m32s).
• The context of the trademark transfer is important, as Automatic was a young company at the time, and the founder did not have control over the company, which was controlled by investors (13m2s).
• The founder now has founder control again, voting 84% of the shares, but at the time of the trademark transfer, the company could have been sold or taken over by investors (13m35s).
• The trademark belonged 100% to Automatic, and the founder had to negotiate with investors to transfer the trademark to the WordPress Foundation, a 501(c)(3) nonprofit (13m52s).
• WordPress has an educational arm that teaches people to code in other countries, with a focus on teaching women to code, and has given the WordPress trademark to the WordPress Foundation, which has a three-person board consisting of Matt Mullenweg, Shell Farley, and Mark Gosh (14m15s).
• The WordPress Foundation has given Automatic a commercial license, and Matt Mullenweg has a license to run wordpress.org, which he has been doing personally since registering the site on GoDaddy in 2003 (14m28s).
• The WordPress Foundation's board is independent, and if Matt Mullenweg were not a good steward of the wordpress.org website and trademark, the foundation could take it back from him and give it to someone else (15m8s).
• The other two board members, Shell Farley and Mark Gosh, are supportive of Matt Mullenweg's actions, and the foundation recently published minutes from a board meeting on the WordPress Foundation site (15m27s).

Community Reactions and Support

• Matt Mullenweg has been facing negative reactions from the community, with some people expressing hatred and hoping it's his last year at WordPress, but he has also received support from other executives, investors, and companies in the WordPress ecosystem (15m36s).
• Despite the challenges, Matt Mullenweg has been wearing a Whoop to track his recovery and sleep, which has been weak in the past few weeks, but he has also seen an incredible showing of support from the community (16m18s).
• WP Engine's PR campaign has been successful in drumming up negative reactions from the community, but other major WordPress hosts, including SiteGround, Bluehost, and DreamHost, have come out in support of Matt Mullenweg and Automatic (16m41s).
• The WordPress ecosystem is about $10 billion per year, and while some people are threatening to leave, Matt Mullenweg is not worried about a potential fork, as WordPress has had forks before and the open-source nature of the software allows for it (17m10s).
• Matt Mullenweg believes that the community might fork, but it's not something he's worried about, as it's one of the beautiful things about open source, and WP Engine and other companies can't prevent a fork from happening (17m26s).
• WordPress has a large community of contributors, with over 600 contributors to the upcoming 6.7 release, and only about 10% of those are from Automattic, showing the diversity and strength of the community (17m54s).
• Despite some contributors taking a break, the activity of WordPress remains strong, with 40 million downloads of the core software since September 17th, and many hundreds of contributors actively working on the platform (18m12s).
• The battle with WP Engine is not a frequent occurrence, and it's normal to have conflicts every 5-10 years, but it's worth taking the risk to protect the community and the platform (18m35s).

WP Engine's Actions and Legal Implications

• WP Engine has made changes to their website, adding registered trademarks and changing plan names, which suggests they are aware of potential wrongdoing (19m32s).
• The fact that WP Engine is not publicly addressing the issue and is instead using lawyers to communicate suggests they may have something to hide (19m50s).
• Automattic has a strong legal team, led by Neo Catal, who has experience working with the Supreme Court and has faced off against Quinn Emanuel, WP Engine's law firm, in the past (20m14s).
• Automattic has replaced a previous lawyer with Neil's firm, Hogan, and is confident in their legal position (20m35s).

Automattic's Buyouts and Growth

• Automattic offered staff buyouts with options for either $30,000 or six months of salary, which is a generous offer for most employees (20m47s).
• Automatic offered a six-month buyout to its employees, which around 8.3% of people (159 employees) accepted, with some employees receiving nine months of pay after a second offer was made due to a leaker at the company (20m55s).
• The initial buyout was made available to employees who were unhappy with the way the business was being conducted, and it was not just a cost-cutting measure, but also an alignment offer to ensure the company's goals and values were met (21m1s).
• The second buyout was created specifically for the leaker, who was offered nine months of pay and a shorter window to accept the offer, which the leaker accepted within the first hour (22m14s).
• The leaker confessed and was given the nine months of pay, and the company has since seen a huge boost in business, leading to new hiring efforts (22m30s).
• The company's employee count is public and can be found on automatic.com, which currently shows around 1,700 employees, up from 1,000 at the start of the year (23m17s).
• The company is hiring as fast as it can, with 26 new hires this month, but is also being cautious not to hire too quickly due to the current distractions (23m42s).
• The company acknowledges that it may have been a little bloated before the buyouts, with a total employee number of 2,100, and the buyouts may have been an opportunity to downsize (23m59s).
• Automatic is growing efficiently with the help of AI and productivity, and it's possible that the company could reach $1 billion in revenue with fewer people than it has today (24m11s).
• Automatic was valued at $7.5 billion in 2021, but BlackRock marked down the value of its holdings to half of that amount in March, leading to theories that the company is in a state of duress (24m36s).
• Automatic's financial health is strong, with half a billion in revenue, no plans to raise primary capital, and aggressive hiring and growth (25m13s).

WP Engine's Valuation and Potential Sale

• There have been rumors that Automatic wants to acquire WP Engine, but the company's financial struggles and lack of intellectual property make it less valuable (25m28s).
• WP Engine's valuation has decreased, and it's been rumored that the company was shopping around for a sale earlier in the year with a $2 billion valuation, but was unsuccessful (25m38s).
• Private equity firms have looked at buying WP Engine, but were deterred by the company's lack of intellectual property and trademark issues (25m53s).
• Automatic's CEO believes that WP Engine's valuation is under its revenue due to its lack of growth, ongoing legal battles, and loss of customers (26m12s).

Ongoing Legal Battle and Potential Outcomes

• The legal battle between Automatic and WP Engine is ongoing, with a preliminary injunction response due by the end of the day and a hearing scheduled for a few weeks (26m46s).
• WP Engine has lost access to WordPress.org tools, but has replicated the plug-in update service and is serving its customers (27m9s).
• If Automatic loses the injunction, WP Engine will regain access to WordPress.org, but the company's CEO is confident that they will win the legal battle (27m25s).
• The estimated time it would take to resolve the ongoing lawsuit, in the worst-case scenario, is around 2 years, with a possible resolution in 2026 or 2027, due to the slow pace of the legal system (27m37s).
• There are mixed reactions from the community, with both animosity and support, towards the handling of the lawsuit and the push to move forward (28m7s).
• Efforts are being made to manage the frustrated community, including press coverage, magazine articles, and calls with the community to connect with people and share the story (28m37s).
• A quick poll in the audience revealed that not many people thought WP Engine was officially associated with WordPress, and the legal threshold for trademark confusion is 15%, which has been exceeded in polls (29m2s).
• WP Engine's point that they have helped grow awareness of WordPress is acknowledged, but it's noted that WordPress is much larger, and their market share is under 5% (29m26s).
• The market share of WP Engine in WordPress is under 3%, and if they weren't around, other hosts like Bluehost and PyGround would have taken their customers (29m51s).

Automattic's Board and Advisors

• Automatic has a strong board, including Tony Schneider, Phil Black, and General Ann Dunwoody, who are advising and mentoring throughout the process (30m18s).
• Other mentors and advisors include Su Decker, former CFO of Yahoo, Mark Benioff, and a network of other CEOs, including Brian Armstrong and the Callis and Brothers (30m40s).

External Observer's Perspective

• A company close to the subject matter has been following the recent developments and bad press, leading one of its key figures to reach out over the past few weeks due to concerns. (31m16s)
• This individual, who is close to the open source movement, has been learning more details about the case and has since changed their stance. (31m35s)
• The company has expressed its love for WordPress over the years and will be closely following the next moves in the situation. (31m41s)