Gumroad, a platform that provides creators with tools to sell their digital products, recently reported its largest monthly profits in its 11-year history after implementing a price hike. In a presentation available via Zoom to its crowdfunding investors and creators, Gumroad’s CEO Sahil Lavingia revealed that the company recorded a net income of $82,270 in January and $834,422 in February, after increasing its prices. Gumroad’s revenue in February rose to $1.78 million, an increase from $1.05 million in January, and almost all of the increase went to the bottom line.
The company announced its decision to raise its prices in December 2022, changing its pricing system from a tiered fee structure to a flat fee of 10%, not including payment processing fees. Previously, the more money creators earned on the platform, the smaller the cut Gumroad took, with a 9% fee plus 30 cents for each transaction. The new pricing change took effect on January 31, and although some creators left Gumroad after the price hike, the company also saw the most creators ever sign up for the product in one month.
Notably, most of the creators who left the platform were in the “top tier” of Gumroad’s customers. One such creator was YouTuber Thomas Frank, who uses Gumroad to sell Notion templates and whose fees to the company would have nearly quadrupled after the price hike. He expressed his dissatisfaction with the price increase on a podcast in January, stating that there was no incentive to be a big seller on the platform.
Prior to the pricing change, almost all of Gumroad’s gross margins went to digital payments platform Stripe, according to Lavingia. The CEO has also previously written about the high fees imposed by app stores operated by Apple and Google, which take a cut for in-app purchases and have held back Gumroad’s valuation. He emphasized that people do not realize how thin the margins are for the company.
Overall, Gumroad’s recent success following its price hike suggests that the company’s new pricing system is working well for its business model, despite some creators leaving the platform. As more creators sign up, Gumroad may continue to see growth in its revenue and profits, benefiting both the company and its creators.