The $200 Million Marketing Budgets Behind Shopify, Squarespace and Wix
Yesterday, Shopify, the e-commerce website building platform, filed for an IPO.
A couple of months ago we covered the website platform industry and saw that it was growing fast, but some of the Shopify numbers were still shocking.
In particular, Shopify revealed that they spent nearly $46 million dollars on marketing in 2014. That’s about equal to their entire revenue in 2013!
I decided to take a closer look at the marketing budgets of these website services.
Here’s Techcrunch on Shopify’s revenues last year:
“The company has full-year, 2014 revenue of $105.01 million, on which it lost $22.31 million.”
Let’s compare their revenues to their marketing budget. On page 10 of their IPO filing you’ll see they spent $45,929,000 on marketing. So, Shopify budgeted 43% of their revenues for marketing in 2014.
Squarespace actually boasted about their marketing budget in press releases from 2014:
“Our marketing budget for the year is $40 million”
A large chunk of that budget went on SuperBowl ads which were $4.5 million each.
Their revenues are private, but a couple of years ago they only had revenues of $17 million. They raised $40 million from outside investments and spent almost everything on marketing.
Oh, and their plan for 2015 is to spend $60 million on marketing. Hiring Jeff Bridges as their pitchman certainly wasn’t cheap.
According to their public filings, Wix spent $53,776,000 on “Selling and marketing” in 2013.
That sounds like a lot, but Wix say they increased the marketing budget by 80% in 2014, which would take them close to $100 million.
They may see another major increase in 2015 because they ran their first SuperBowl ads, featuring Brett Favre.
The 3 companies listed here are on course to spend well over $200 million on marketing in 2015.
In total, the 3 companies had revenues $141 million (Wix), $105 million (Shopify) and perhaps around $100 million (Squarespace), although they don’t disclose their numbers.
These 3 companies, making about $350 million, are spending far over 50% of their budgets on marketing this year. In comparison, according to Gartner, the average company spend only 10.2% of their budget on marketing.
And, we haven’t even started to total the spending by GoDaddy, Web.com, Weebly and others in this space.
Websites platforms are becoming a very competitive market.
I’m thinking there’s a misspelling on the page. In the Shopify section this is mentioned: “Spotify budgeted 43% of their revenues for marketing in 2014.”
I’m guessing you mean to say Shopify, not Spotify.
Thanks for that, Justin. I got caught myself confusing those twice while writing – that makes it three times.
As a die hard Joomla fan, it’s astounding to me that Joomla still has a healthy market share in this David and Goliath marketing battle. I wonder what would happen if Joomla had a $50 million marketing budget?
I suspect you’ll find some answers in posts like this: [url=http://www.blackboardguru.com/2015/04/blackboard-admin-an-endangered-species/]http://www.blackboardguru.c…[/url]
As Blackboard moved to SaaS, “the user community which thrived years ago seems to have become stagnant.”
With SaaS companies, there’s really only the marketing. Communities, events, user groups and an ecosystem of evangelists around the product are things that $200 million can’t buy.
“I think the secret here is the ecosystem of evengelists” as you have stated Steve. We as a community are more than a company, we volunteer our time in different ways to further the community because of our passion for the product and are not just driven by profit, plus the best advertising is word of mouth and where better to get that then via our community members.
I am a web developer.
I’ve never tried squarespace. I see on their website : No code necessary ([url=http://squarespace.com/home/commerce/)]http://squarespace.com/home…[/url]. I can’t believe it’s true. Each client has his own needs and on every project i have to modify code. What do you think about that ? Do you think these companies will one day take all the website market ?
Not the way these folks are doing it. A website needs unique marketing and has unique needs. However, I do believe ecommerce can be modularized because those needs are pretty much commoditized. However, when you mix the two, then one or the other suffers. If you look at [url=http://salescart.com]salescart.com[/url] and a few others, they have a different approach that makes more sense. In their approach, you can use whatever website tool/approach/language/server platform you want, Joomla, WordPress, Wix, or hand crafted and then you “cut” the ecommerce module in after the fact. Its also more secure.
Shopify sucks so they need to spend that much to lure in new suckers.
Beware, if you have a problem with any of the apps in the shopify store and cannot get them to give you a refund for the one time charge they will shut down your store if you issue a charge back even though the charge back has nothing to do with your monthly hosting fee and you are paid in full.
● Chat started.
Rob S: Hey there! Rob here from Shopify! Feel free to ask your question and I’ll be with you in just a moment!
Robert Basil: What is going on with my store, just had a conversation with a rep and let her know that I would be cancelling my account once I got my data out, she should be where to go once I was ready. The chat has not been over for 5 minutes and my store is shut down?
Rob S: Let me take a look!
Rob S: Ah, it looks like you issued a chargeback on one of your invoices, which is why the account was closed.
Robert Basil: I did not give permission for my store to be shut down.
Robert Basil: I am paid until the end of this month.
Rob S: You issued a chargeback on an invoice which is a violation of our terms of service. Your account is immediately frozen when that happens.
Robert Basil: I issued a chargeback for an app. Not for the store. I am paid till the end of the month.
Rob S: The apps are charged through your monthly invoice.
Robert Basil: So if I have an issue with billing you shut down my store even though I have already paid for it?
Rob S: When you dispute a valid charge, for sure.
Robert Basil: The app was a one time charge.
Robert Basil: The app is not a monthly charge.
Rob S: Which is invoiced through Shopify.
Rob S: You disputed an invoice that you were charged, so your shop was frozen.
Robert Basil: So am I going to be refunded for the app or my monthly hosting fee which you charged my for but I am not receiving?
Rob S: Since you disputed the charge, we will not be issuing any refunds until the dispute is resolved.
Robert Basil: So if I have a billing problem and contest it you take away my store (even though the dispute was not for the hosting charge and in fact I am paid till the end of the month for my hosting) and don’t offer any way for me to get my customers data for orders I’ve received out of the store?
Rob S: If you have an issue with your billing you should discuss it with us before filing a dispute with your credit card provider.
Robert Basil: I’m not contesting the monthly hosting fee. I’m contesting a one time app charge. So why not just remove my access to the app and leave my hosting working since I have already paid in advance for it.
Robert Basil: I did discuss it with you (look at my prior support tickets).
Rob S: As I mentioned, disputing an invoice in this manner is a violation of the terms of service, leading to your account being frozen immediately.
Robert Basil: Ok so let me understand this correctly. I contest a one time charge that has nothing to do with my monthly hosting fees. I am paid in full on my monthly hosting fees, but since I contested a charge that has nothing to do with my hosting fees you delete my store and do not allow me access to my store which is paid in full till the end of July?
Rob S: Yep! The invoice is charged through Shopify, but Bold apps does have the power to offer a refund on it if they feel its warranted. You just needed to speak with them about it. Once we get the go ahead for a refund from them we will issue it, but since you disputed the charge that is no longer an option. The account was frozen as soon as the charge was disputed.
Rob S: And for clarity, the account has not been deleted, it is frozen. Once the chargeback claim is resolved we’ll be able to discuss access to your data.
Robert Basil: Thank you for the information. I’ll pass this information along to my Credit Card company, they had asked me for details on the charge. Now I’m glad I have this info in writing from a company representative.
● Chat ended.
Geeze that is horrible, what a racket they got going lol. Id do a chargeback on that month they stole from you as well
Doesn’t matter if their code is good or bad, this one is the real showstopper. As heavy handed as paypal at their worst. Buyer beware of shopify. I would almost bet this is illegal in many states. They won’t stop it until they are sued though.