Squarespace’s Business Is Solid, But It Needs to Differentiate

Squarespace’s Business Is Solid, But It Needs to Differentiate

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Squarespace, known primarily as a website builder, went public via direct listing on May 19. As of late July, its price soared above its reference price. For an idea of how the newly public company can compete in a relatively crowded field, Blair Kennedy of GLG’s Tech, Media, and Telecom practice spoke with Michael Zimmerman, former Chief Financial Officer of GoDaddy. Below are a few select excerpts from the teleconference.

Has recent e-commerce penetration in 2020 made Squarespace, founded in 2003, more attractive in 2021?

Since COVID hit, I’ve seen a massive push online by small businesses and consumers to further transact online. Squarespace has benefited from this push. As they say, a rising tide raises all boats, and Squarespace found it to be a bright spot. The concern is that the market leader in that commerce space, Shopify, during their earnings release said the 2020 growth in e-commerce was not sustainable and would likely resume a more normalized pace of growth. So, while e-commerce penetration was phenomenal for pretty much all these companies, Squarespace needs a strong growth foundation as it has somewhat lagged behind Wix and Shopify.

What are Squarespace’s core offerings across web presence, commerce, and marketing?

Their core offering is like existing companies: building a website. Most of the revenue stems from small businesses or hobbyist bloggers creating a “brochure” website. Squarespace goes up the food chain to try to present an enterprise solution, like what Web.com or GoDaddy does. But it’s not likely that many people are going directly to Squarespace to buy and hold their domain. Squarespace is practically synonymous with the brochure website, which is what they started with and have been working on since the early 2000s.

Is it concerning that more than 70% of Q1 ’21 revenue was concentrated in Squarespace’s core revenue products?

No, that seems to be good. It’s better if the company does one or two things well rather than spread itself too thin. Squarespace has talked about its enterprise group, but that might not make sense for the company right now. Squarespace should stick to what it knows. Its core DIY website builder should drive the company and it should continue to heavily invest in that as well as the e-commerce platform. From there, the company can find different areas that might be of interest.

Could you walk us through e-commerce, security, and member areas?

Squarespace e-commerce grew in 2020 and into 2021. At its core, it allows a customer to sell a product or service. Squarespace has been building this e-commerce engine as part of the DIY website builder to make it somewhat integrated, like a one-shop-fits-all website builder versus Shopify, which is really all about e-commerce. It hadn’t really been the focus until COVID hit. Then as companies and consumers wanted to transact online, it became a big focus.

A good indicator of market trends is a company’s homepage. GoDaddy changes its homepage a lot, and that tells me what’s important. Maybe a year ago, GoDaddy did not present e-commerce on its homepage. Today it does. That shows that e-commerce is becoming a huge piece of the ecosystem for these companies.

It’s good to see that Squarespace is investing in it and talking about how important it is, as it should, since it’s growing 80%. The company sees a lot of opportunity there. There are other downstream revenue opportunities that are part of e-commerce such as the members area, where it allows the setting up of recurring billing without a heavy integration such as Stripe. Squarespace created a much simpler piece. As you get down that stream, fewer customers will subscribe to certain features, but it’s a nice-to-have and probably never going to be a home run.

What is your revenue growth outlook for the core business of website hosting and building services, and the new formats of mobile, commerce, Tock, and Acuity Scheduling?

There are many similarities among the growth profiles of Squarespace, GoDaddy, and Wix. The market is still large for these companies, but it’s not likely that Squarespace will reach Shopify numbers. That said, the company’s acquisition of Tock seems like a good move. Tock has been focused on the restaurant industry and making good gains and providing good revenue.

The core business will grow with the upswing necessity of having an online presence, which was magnified by COVID. There’s a lot of good potential flavors of commerce and presence that Squarespace can present to help continue that heavy double-digit growth rate. The other items, even Acuity and mobile, are almost more of an expectation of compliance versus an upsell feature. Tock may attract some uses, but the main function is as an upsell to existing customers, which is good. That’s part of the growth in potential average revenue per user and helps with that overall growth. Add-on services are always difficult to do, post the initial sales, so we have to see Squarespace get better at it.

What is the competitive positioning of Squarespace, GoDaddy, Wix, WordPress, and Shopify in terms of pricing, marketing strategy, and customer base that would either help or hinder Squarespace in the coming year?

This space is starting to get commoditized. You can get a good, easy-to-use website builder at Wix, Squarespace, GoDaddy, and even Shopify. It’s becoming a branding and land-grab exercise. Squarespace isn’t truly a leader in any of the spaces it plays in. It is competitive, which is good, but when you think of e-commerce, you think Shopify. When you think of domain names, you think GoDaddy. For DIY websites, it’s Wix. Those three companies all have something they’re a leader in that are a pathway to small businesses coming online. Somehow, Squarespace needs to differentiate. It’s started, and invested a lot in marketing and advertising in 2020. Squarespace’s cohort run rates continue to grow with that investment, so it seems to be paying off.

The company has been executing well to get to the point where it is today. It will be interesting to see what Squarespace does through 2022, if it has acquisitions at the end of 2021 to help boost the company and keep it above 20% revenue growth. 2022 to 2023 is when it’ll be interesting to see and model out if Squarespace can keep pace with Wix, Shopify, GoDaddy, or, even down the road, Web.com.


About Michael Zimmerman

Michael Zimmerman was the Chief Financial Officer and Executive Vice President of Finance at GoDaddy Inc. from 2001 to 2015. During his tenure, Mr. Zimmerman helped the company grow from a small, less-than-50-employee business with $10 million in sales to a large company with more than 4,000 employees and $2 billion in sales. He was responsible for several departments, including accounting, finance, tax, HR, payment processing, fraud detection, physical operations, and registry relationships. He was the Chief Financial Officer when three private equity companies (KKR, Silverlake, and TCV) took a majority ownership in GoDaddy, valuing the company at more than $2.2 billion, and in 2015, Michael was an integral part of the deal team that took GoDaddy public. Mr. Zimmerman is currently the President at Zimmerman Consulting Inc.


This technology industry article is adapted from a GLG teleconference. If you would like access to events like this or would like to speak with technology industry experts like Michael Zimmerman or any of our more than 900,000 industry experts, contact us.


Questions addressed during the teleconference:

  • Has recent e-commerce penetration in 2020 made Squarespace more attractive in 2021?
  • What are Squarespace’s core offerings across web presence, commerce, and marketing?
  • Is it a concern that more than 70% in Q1 ’21 revenue was concentrated in Squarespace’s core revenue products?
  • Could you walk us through commerce offerings?
  • Could you walk us through how these three product pillars monetize?
  • And what is their take rate on that GMV?
  • What is your revenue growth outlook for core business (the website hosting and building services) and the new formats (mobile, commerce, Talk, and Acuity)?
  • Who is Squarespace’s current customer?
  • Can you break down Squarespace’s cash retention rates? How much is this driven by website and domain subscription cohort, and how much of this is currently driven by GMV?
  • So, in terms of customer base, should we be concerned about the lack of enterprise uptake?
  • How does Squarespace’s revenue growth compare with the other competitors, specifically Shopify, Wix, and GoDaddy?
  • What is the competitive positioning on Squarespace, GoDaddy, Wix, WordPress, and Shopify in terms of pricing, marketing strategy, and customer base?
  • Do you think Squarespace’s long-term ARPU could be like GoDaddy or Wix?
  • Should Squarespace be concerned that they lack a native payment solution?
  • So how much do you think they can grow users and user monetization over the next three years?