Wix Is at $1 BILLION (!!) in ARR. 5 Interesting Learnings.

Hey everybody, let's talk about wix. WIX is one of the leading tools to build your own website. You've probably used it or Squarespace or Webflow. All of them are on fire. Squarespace is about to IPO Webflow raised around at multibillion dollar valuation. But WIX is public already. And Wix just crossed $1 billion in AR. It's become the latest member of the billionaire club. It's been around a while, was founded back in 2006. And it's interesting for a whole bunch of reasons that $1 billion in ARR and a $15 billion market cap. It's interesting because it sells primarily to SMBs. So it certainly disproves the notion, like HubSpot and others, that you can't get to a billion just selling to SMBs. Of course you can. WIX did. And it's also an interesting story about how to decommodify a space. When Zoom launched, it seemed like the space would become free. When people aren't going to pay for web chats anymore, for web sessions, obviously Zoom proved them wrong. It also seemed that Slack was something they wasn't sure people were going to pay for. But websites, didn't those become commodities? Aren't those free? No. WIX has built a billion dollar business doing websites. And a little bit more, and a little bit more as we'll talk about. So, billion in revenue now, a $15 billion market cap and importantly 29% year over year growth. So it's growing 30% at a billion. So it's adding 300 million in ARR each year, selling primarily to SMB. So no excuses folks, no excuses. Selling to SMBs that you can't get big because WIX shows you can. So let's talk about five interesting lessons from Wix at 5 billion at rather 1 billion in ARR. So the first interesting lesson is WIX actually sets out how much its existing customer base is worth. And we've talked a lot about in SaaS in general, we've all gotten religious around net retention rates. How high is my net retention rate and what does that mean for customer lifetime value? And customer lifetime value is often a complex, more complex calculation than it looks, but WIX has done it. While WIX does not explicitly disclose its nrr, unlike most other folks, probably because it's mediocre. It used to be below 100%. Not sure what it is today, but no matter, it's close. Because WIX says its current 1 billion arrangements is worth 9.2 billion over the next eight years. Right? That's implicitly a little bit more than 100% NRR. But any event, think about the power of recurring revenue. WIX is going out to Wall street to the public market and saying recurring revenue is so powerful that we have visibility on 9.2 billion in revenue from our 1 billion in error. So think about that. That means if you're anything like WIX or better, your customers are absolutely worth 9.2x what you have today or more if you it is so powerful and it proves that this awesome wave of recurring revenue, it doesn't stop, it doesn't stop at 100 million AR, it doesn't stop at a billion. Wix can see 9.2 billion of ARR coming out of its current 1 billion in ARR of customers. Okay, second point. E commerce and payments and business tools are the biggest driver to accelerating growth. And we've seen that for most of our cloud leaders as we approach a billionaire, we have to add either a second product or a second way to monetize things. Let's go back to Shopify. I mean Shopify is one of the great Covid success stories like Zoom. Both are now worth over 100 billion market cap. It's crazy, but although Shopify is almost doubling with E Commerce, actually its SaaS business is only growing 50 some odd percent. Great. Incredible. At a total 3 billion arrow for Shopify. But when you add in payments, when you add in e commerce and merchant solutions at Shopify, the growth becomes jaw dropping. And similarly, look at wix. Wix's website tools are growing nicely but but its e commerce and payments tools are growing 60% and they're 200 million of the billion. So that's where the outside growth is is in payments and e commerce. So think about your product. Can you add a fintech element? Can you add payments? Bill.com became turbocharged when it had payments to its bill management product. Shopify was 5050 in terms of payments and SaaS revenue until about 2017. And then payments just took off or merchant solutions just took off. And now SaaS is a relatively small amount of of Shopify's almost 4 billion in revenue. So can you add a fintech element? Can you add a payment element? Many of us can't in SaaS it's fine. Okta hasn't, Box hasn't, Twilio hasn't. But if you can can be an incredible growth lever. Okay, number three, Wix is pretty good at SMB marketing. We looked at other companies in the five interesting things series. We saw that GoDaddy is not actually that efficient at marketing. GoDaddy is at 4 billion in ARR, but boy, it has to. It doesn't go profitable on its SMBs until year two. It spends. GoDaddy has to spend four hundred and something million dollars a year acquiring its customers. But Wix is much more efficient. Wix has an eight month CAC, so a lot of folks don't really publish these datas that are public now. We have a few comps. We know that WIX says a billion in ARR will become 9 billion in eight years. And Wix is clear its CAC is eight months. It's real and that's fascinating. And I don't know exactly why the CAC is reasonably low. Wix certainly has a premium brand along with Squaresp. SEO could be a big piece of it. SEO and blog and the other pieces create the majority of the new leads for HubSpot. And that could be the case with Wix. But it doesn't mean you have to be inefficient at marketing even SMBs, even at low price points like Wix. If Wix with a relatively low price point has an 8 month CAC, you could do the same. Okay, for 43% of Wix's revenue is from outside North America and the US. That's pretty high. That's pretty high. Only 57% of the revenue is in North America. Now this may be because WIX was originally started in Israel. That may explain why Europe is a quarter of the revenue. But in any event, the real lesson is embrace internationalism, embrace localization. Most SAS leaders have a very large international component. A browser works everywhere. So. So if you see early hints that you're strong in Europe, that you're strong in Asia, that you're strong somewhere, when you're ready, lean in, hire a person or two to manage that. Do a little work on localized, maybe translate your app earlier than you planned. Because SAS is global. And if you have early hints of traction in other geographies, if any geography might become say 10% of your revenue, that's sort of a materiality line. Lean in, hire a few extra engineers, put a few nickels after Covid, go back and put a local resource on the ground or two, because it really works. If WIX stayed in North America, it would be almost half the size it is today. So go where your customers are is the meta learning. And point five. This is kind of the flip side of fintech. Wix's gross margins are 70% and that's fine. But they're much lower in this E commerce and payment there the margins are only 29% and gross margins used to be a huge deal in SaaS. Software traditionally has had 80% or north gross margins. It didn't cost very much to print a DVD ROM and sell it. Many things Internet cost more. The cloud is not as cheap as it looks. I mean, 70% is fine. 70% still counts as software. In fact, anything north of 60 is software, but 29% isn't. And if your gross margins are relatively low, which sometimes happens in payments, you have to be massive. You have to be massive. So wix is kind of blending a lower margin but faster growing product in E commerce and payments. At 29, with an 80% plus margin for its websites combined, it's at 70. It's great, but you have to keep an eye on it. You have to understand, make sure your gross margins dip too low. Twilio as an example, is now in the 50s and the market doesn't seem to care. Twilio's worth almost 100 billion because it has a lot of hard telephony costs. But it's worth thinking about. It's worth being conscious and understanding what your gross margin targets are. And if you can keep them in the 60s or north of 70, even with some fintech or other elements, you're still going to be a SaaS company. So congrats to Wix. Pretty impressive to take something that used to seem like a commodity, build it to a billion in ARR, growing 30%, selling mainly to SMBs worth 15 billion. Don't let folks tell you it can't be done. Don't let folks tell you the SMBs aren't big enough. Don't let folks tell you something's been commoditized. Wix proves the opposite.