David Braun: Then the new threat to the business came into the scene. A lot of web designers started to fear that TemplateMonster will kill the custom web design market. They were saying, “You don’t have to use the template because it’s a bad practice. You’d better order the custom design service.” This was how we got a lot of negative feedback. Still, lots of end users liked the idea that they could save thousands of dollars and learn a little bit of web technology and build the sites themselves.
We were progressing until Steve Jobs decided that Flash is bad and that it should die. This was a major point for our business where we could die as a business because 90% of our sales were for Flash-based templates. It was really fast. Steve Jobs published this letter and in one year, sales dropped up to 75%.
Sramana Mitra: What level were you at when it dropped that much?
David Braun: We were making millions. It really dropped. The revenue decreased by about 75%. Because we were enjoying no competition, we had profitability initially. We were making 70% margins or something like that. Suddenly everything stopped. Because of the AdSense, it killed our opportunities to get custom agreements with the web processors. Everybody preferred to put AdSense on their website and make money. They don’t like banners or any customer affiliate marketing.
Sramana Mitra: What year did the affiliate model fall through?
David Braun: 2008. It was a global crisis, but we didn’t feel the crisis initially. It actually helped us. Lots of companies decided to cut down their budget so they could not afford to go to the web agencies, but they still needed a website. They needed cheaper ways to build a website and TemplateMonster was the way to go.
It was 2010 when Steve Jobs published his thoughts on Flash. This letter almost killed the business. We had to cut down on personnel. We had to take the very hard lesson and accept the challenge. By that time, we were about 200 people already. We had to restructure our business. We could not afford to invest in production. We decided to become a marketplace. Instead of producing products, we would start accepting products from others.
We started to engage lots of designers and HTML coders. We were asking them to put their work on sale. We would promote and market it, and they would get a portion of the sale. We were paying 50/50. It was a good choice, I think. In the next two years, we tripled the revenue. By that time, Joomla, as a content management system became popular. Then Drupal became popular and WordPress was trending. We wanted to identify the platforms for site building and offer templates for them with the hope that some percentage of those people would eventually go and buy the template.
It really worked and we started to grow again, but the structure of the company changed dramatically. If earlier about 70% of our personnel were engaged in production, now 50% of people are marketing people doing copywriting, preparing products for sale, and paid advertising. We still had a very strong working affiliate program with 50% of our revenue coming from affiliates. The other 50% was through direct TemplateMonster channel.