Wix: Deep Dive Interview with Former Executive

Below is an edited transcript for an interview with a former executive at Wix. The interview touches upon Wix's valuation proposition, customer segmentation, risks & challenges, and more.

ARPU: How would you describe the company's products?

Former Executive: Yeah, so, I would split it into two. First, Wix is a do-it-yourself website builder. Actually, reinventing this vertical, if you like. And I would like to emphasize it's a multi-vertical do-it-yourself website builder, which is the differentiation from a single vertical platform, such as Shopify, which is dedicated for eCommerce, or others, which are dedicated for specific verticals for graphics or for other verticals. So it's a multi-vertical website builder.

The other way to look at it, is that Wix is a base for all your online presence. That means, beyond the website builder, which everybody is focusing on, Wix is the base for the development of all your online presence, including all your frontend and backend needs. It is not only the website, but it's actually where you manage all your online presence from issuing invoices and logistics, and all the back office things. Some of them might be online, some of them might even be offline, like the logistics and drop shipping and things like that. Wix can take care of your backend, as well as many solutions in the frontend, like orders, making reservations and marketing tools. So it's way beyond just a website.

Actually there is a third way to look at it. Some are looking at it as a sophisticated hosting company,

Sophisticated hosting company?

Eventually it's a hosting company as well, but I think the right way to look at it is a base for all your online presence, I would say.

Does that mean hosting is actually a very good source of revenue for Wix?

No it is not.

As in people do not use the storage as you guys are kind of estimating?

Actually yes. The answer is yes, but it's not a business focus. It's not one of the targets or business focus of the company, but it's just the way it is. I mean, it's something that's dragged into there, because eventually, you are hosting a website, you're hosting all the content, you're hosting video, you're hosting whatever. It's not a company target or goal or upfront focus, but it's part of it.

Got it. Does Wix use any third party hosting, like AWS or Azure, or do you guys have your own?

No. Wix used to have its own. We made the shift pretty early, maybe seven years ago or even more, into a cloud. So yes, in a way we provide AWS and Azure services, but not as a third party. I mean, it's not providing hosting services per se, but it's using and rely on AWS and Google.

So when you get hosting, when you buy a package with X amount of hosting with it, or X amount of data in it, it's based on AWS and Google services.

So, getting back to the questions relating to our value proposition. What do you think is the most critical problem that Wix customers are paying to solve?

As I said earlier, the website's presence. That is, to have your presence online — cheap, fast, and yet good looking and with a complete set of solution that you might need. So the main solution is for SMBs and SOHOs. Usually people make a confusion in the terminology. SMB is already a shaped company with a few good number of employees. A lot of Wix users are SOHOs, one or two people, or up to five. Some even working from home. So those that are really looking to have the online presence, without investing tens of thousands in website development.

What is the most common shared characteristics of your client base? This is to get a better on understanding of what is your very typical user base.

It would be difficult to say, because again, as I said, it's a multi-vertical website builder.

I would say are two aspects. One is again, just a landing page or your web presence. And the second one is the biggest vertical, which is eCommerce, obviously. I would say that most of the users are using it for a landing page or for e-commerce.

In your best understanding, how would you describe the company's core philosophy, when solving the key problems that we just discussed, that you guys are solving at Wix? For instance, I hate to bring up a competitor, but like Squarespace seems to be that very design oriented as their core philosophy. And how would you describe the Wix's core philosophy when it comes to problem solving for customers?

One main aspect would be, or target audience, if you like is again, as I said earlier, solving the issue for SOHOs, for really small users, that's going to launch something fast, quickly, and cheap, relatively, and easy to create and easy to maintain. Simply to be fast to market or easy launch, a real do-it-yourself tool.

And moving on to the question of competition, who do you think is the primary competitor to Wix?

Yeah. Well, if you want me to elaborate, I'll give you my way of thinking about the whole market.

I'll start from the macro, which people tend not to look at it. If you look at the market in general, the internet markets, then you see that there was, and still is a very strong tend to go into platforms, or marketplaces. The way I see it, the competition on the macro level is between two ecosystems. On the on hand you have marketplaces like eBay, Alibaba, Amazon, and YouTube, which are closed gardens. On the other hand, you have open gardens, which Wix and Google to an extent represent. Have your own domain; own your customers.

While in recent years there has been a very strong movement towards marketplaces, I think more and more people understand that the downside of being in a marketplace is that you don't own your destiny, you don't own your customers. You're actually working for the marketplace. You're fighting very hard to bring users, but eventually you bring them to your Amazon shop or whatever.

And people understand recently that they need both. It's not instead, it's not a real head to head competition. People understand that they need to use Amazon marketplaces in order to generate the traffic. But eventually a lot of them want to move, and this is something that came up in recent years — want to move their user base to their website, to their app or whatever.

When you go one level below, you’ll see a competition between multi-vertical solutions, which Wix represents, and the single-vertical ones, which might be Shopify. It might also be all kind of specific marketplaces for accountants, for dentists and you name it.

If you go down another level and look into the specific segment of Wix — the do-it-yourself website builder — then the head to head competition is with Squarespace, GoDaddy, Duda, Weebly, and few others. Those are the main competitors. And if I need to choose two, it will be GoDaddy and Squarespace.

GoDaddy and Squarespace?

That's if I'm trying to narrow down from the micro to the macro, eventually to crystallize the head to head competitors.

GoDaddy's an interesting one, because if you just simply generalize industry and competition, I think Webflow, Weebly, Squarespace type comes to mind. But then GoDaddy — you bring up GoDaddy because when you purchase a domain with the registrar, they offer to build a website for you?

Correct.

Is that because they're at the top of the conversion funnel, is that why they pose as a significant source of competition?

Well, almost all of the hosting companies and registrars have their website builder solution today, whether it's internal developed or some kind of a white label. They are pushed to be there. They have to be there. But I mentioned GoDaddy because I think they're the most serious player, on both fields and on the hosting side specifically. They are doing a real job on website builder and not just in order to tick the box and say, "Hey, we are there, we have this as well."

I think all of them are forced to go there, but that's also one of the advantages of Wix if you would. That will be one of your next questions on Wix’s differentiation against the vertical of hosting companies that moved into having a website builder. Wix was built on technology; it's a technology company from day one. They are very strong on the technology and on the product. It's a product company. You can also see it in their management team, which is technically oriented, and a lot of them are still the same guys that started the company.

GoDaddy is the other way around, they started from a less technical product, selling hosting eventually. It’s not much of a product development, relatively speaking. And therefore their website builder was something that they were pushed to have.

This is also where you see the differentiation between website builder companies like Wix and Squarespace, that started from this angle and moved into offering hosting solutions, and hosting companies that do website building.

Now that people can run small businesses through apps like Instagram, the need to have a standalone website is diminished. But as you said, having both seems to be the correct path. On that theme, is there any kind of macro tailwind or headwind that you see as taking place for Wix?

Yes. I think a few things happened in recent years, which led to people’s understanding that they need to have their own presence, and own their business in a way. Let's start from the obvious. The pandemic gave us such a boost to the e-commerce market and online services, and we also see a lot of privacy issues coming up lately with platforms like Instagram, Facebook and others. People became more sophisticated, and they are not saying, "Thank you for letting me have a shop on your platform." Because they understand that eventually they need to do the work, they need to bring the users. The tools became more user friendly, and to build your own website or online presence, you don't need a professional hand anymore. So the whole thing became way easier.

And the last point is that more and more small businesses managed to create a user base and a real business out of it. And they grow to the next stage. They start to build their own e-commerce, their own whatever, their own app, their own online presence, because they understand if you're a company, you can't be only on Amazon, only on Alibaba. You have to have at least your presence, even if you don't sell there. If the users grow and use the website more and more, and they start to do it more professionally, if you like. There is a lot of limitations in a marketplace, what you can and cannot do. You can't simply do whatever you want. You're limited either by feature set or either by company rules, or whatever.
So, this also pushed a lot of people's towards building their own presence. If you combine all those issues together, and the fact that it became so easy and cheap to build your online presence, whether you do it for yourself, or whether you hire a professional, which is cheaper today then back in the day. If you put all these together, it just simply makes sense that this movement will grow.

If you were to start a new company, until two years back, you would be starting from saying, "Okay, I need to find a professional, an agency to build my website." Today, the first thing that people will do is to look online and to go to one of those, Wix, Weebly, Squarespace, and try to do it themselves. Maybe they give up later, and maybe they understand they'd better take a professional, but they will give it a try at least. And there are lots of solutions that allow it — for example, with ADI, Artificial Design Intelligence. So a lot of people eventually get to a point where they say, "Okay, what I got now is good enough, before I spend money on building a real website on WordPress with a professional.”

In my understanding of our discussion thus far, Wix seems to be the fast, affordable, easy to manage, a one stop solution for people who are just starting out their online presence. This makes me wonder, if the client’s business grows beyond a certain size, do you think there’s a point after which Wix can no longer handle or support?

It's an excellent question. Up until a few years ago, I would tell you that, yes, there's a clear barrier. When a company — as I said it's very much a SOHO — becomes a real company, they might go and build something themselves. But I think that in recent years, Wix has been very successful, and they have a strong product and technology team. So as the product evolves, more and more features are being added, almost on a daily basis. Whether it's internal features or third parties.

So I think it got to a point where, you have the 80/20 rule. 80% of the users will use enough features that it does not justify for them to move on. Of course, having said that, if you really grow, you become really, a real serious company. You might want to move to a dedicated website, dedicated platform for yourself. But that's usually not necessarily. It might be because you have a lot of very specific feature sets you want, and or which you can't get enough, or it's not flexible enough and where you can't find a solution on a do-it-yourself site.

Secondly, a lot of them might leave for other reasons. Even for a startup company, you might have a good reason to have your own platform because it can be an issue of valuation. And I can see why you want to own your own IP and technology.
So those are the main reasons to leave. When they get to a certain size, they might leave. But the size and the point of the churn become higher and higher as the feature set is evolving. Makes sense?

Which of the two segments offer more attractive ROI: upselling to existing customers through introduction to new features, or simply going after new customers?

That is a good question, and I have two questions in my mind that you asked, I'm not sure which one of them. One is, is it better to go after new customers, or get stronger with resale to existing customers? Or is the question about customers going to the professional market, the higher end?

My question was coming from how the company determines capital allocation, especially in the marketing area. So it’s more about whether going after existing customers or new customers offers a better ROI.

The main focus is always to gain new customers. You still try to resell or upsell your existing customers, but the main focus is on new customers because it's more profitable. There’s a limit to how much you can resell to existing customers.
Of course, it’s much cheaper marketing wise to get your existing customers, mainly revolving the product offering: how much hosting you give there, what features you put on each package and stuff like that. But companies like Wix are very much growth oriented, and therefore gaining new customer acquisition is, I would say, the main focus of the marketing.

Has Wix done major acquisitions in recent years?

No, no. Wix is not a believer in acquisition. As I said, the management team is very much technical oriented. You need to remember the CEO is still the founder, and they're very strong and technical background. Because of their history and the fact that they grew up from deep tech, there's a very strong R&D team within Wix.

Wix is more a believer in core development. And even when they're doing M&A, it's usually a small transaction in order to build a new product or a new service around it. So there are no major acquisitions yet, maybe beside DeviantArt, and even then it wasn't that big. And it was for other purposes, not technology. Wix is not very strong on M&A.

When they identify a need for a new feature, is it always preferred that they're going to build it in-house?

As a strategy, they prefer to develop in-house because of their capabilities. It's doable. And secondly because the Wix product is very tight. The main product of Wix is the Wix editor, where you edit and create your website and all of the things coming out from within the editor. It is very difficult to take a third party SaaS, especially if it's a SaaS platform, and embed it into another complicated platform. And the Wix platform is very complicated, with thousands of features and the product. It's not a one singular, relatively straightforward email solution. It's not a one product with a few features. It's really multiple, thousands of different features, products, updates daily. So to integrate into this platform is almost impossible. It's not impossible, but it's very complicated, very difficult.

Everything they do has to be in conjunction with the editor and with the Wix brand name. If you acquire another SaaS platform, not only would it be very difficult to integrate into the Wix editor, it would also be very difficult to drive those users to Wix. So then you lose your focus in a way, because you find yourself trying to handle two brands, if you like.

If Wix is doing M&A's, it would be more the specific technology, as I said, with acquihire or whatever, and less on a real SaaS platform. But again, and we're talking generally now, of course, there always might be something that specifically makes sense, or a good deal or whatever. But it's not natural that Wix looks to purchase another SaaS product.

From your perspective, what do you think is Wix's primary weakness?

I'll start by saying that the pros are also the cons. When we're talking about the management team, which is, I think a pretty strong management team, don't get me wrong. But it's not a professional management in the sense none of them ever managed that 5,000 employee before. And it doesn't have the well organized manner, relative speaking, of the US port, and again, in conjunction with GoDaddy as I said earlier, as an example. So that might be some kind of a weak spot — but also a strong point. Because that's also what keeps Wix on its toes in a way, and in a way in a startup mode.

Also, the way Wix works, is all the different verticals, each one of them is being treated like a small startup for itself. It always has the different features that every startup would need, meaning having its own development team, its own marketing, its own product and UX/UI guys etc. So this is a weak and also a strong point in my eyes. The other point is maybe, the fact that they are multi-vertical, is again, a strong point from one point of view, but it also means that you cannot focus totally on the vertical and being the strongest in the vertical. Yet, the way they answer is that every vertical, as I said, is being treated as a single standalone division, standalone company, internal company. Not accounting-wise, but you get my point.

Of course it's always easier if you focus on a specific smaller market, it's easier to get to shine, brighter, if you like? And maybe the last point is that, the smaller and bigger brands that usually would go to Shopify when it comes to e-commerce, or do it on WordPress for other reasons. You need to understand that the customer base of Wix is much larger, but the output of the customers is way smaller or lower than, for example, Shopify. It has more users than Shopify, but the output is way smaller.

Is there some kind of customer insight that Wix learned or unearthed from your client base, that you guys believe the competitors are totally missing out on?

Well, first of all, there are tons. I can't say competitors are missing or not. I can't speak for competitors. You understand that within Wix you have, I think again, don't catch my mind on the exact number, but I think there's around 150 analysts at the analytic division, if you like. So that's what we thought, taking insights on a daily basis, and improving and changing accordingly. So maybe that's one strong point; they're putting so much effort on analytics, internal analytics, really up to crazy levels. Second is, again, coming back to the multi-vertical issue, the fact that have so many pre-built templates for so many different verticals. It's almost unheard about, unheard that you'll come as a new user and you won't find a few templates that fit your needs. And they're very focused on templates and the knowhow they put into the studio design.

Another unique point is, of course, the variety of services, whether internal and whether through their app market, where you can find hundreds of third party APIs and services to add on. So basically there's almost no chance that you'll come as a new user and you won't find the template you want in an easy manner, and connect it with all the different services you might need for your vertical. So I think this is also very unique, because it's really thousands of templates and features. Those are the things that come to my mind.

What do you think is the most misunderstood aspect of Wix?

I think one misunderstood belief is, or used to be, that Wix does not work well with SEO, with Google SEO. To say today about a company with hundreds of millions of users, that Google search engine can't index it good enough, or can't index it for some reason — that's needless to comment, right? But this is an example of how a very strong misbelief for many years was around this SEO thing, which used to be true, I don't know, 10 years ago. There was also a misbelief that Wix wasn’t flexible enough to do a lot of the stuff. You better do your own. It's coming from the professional market where job security is involved. So I think a lot of the misbelief is around the capabilities of Wix versus building your WordPress from scratch or using some other alternatives.