Please ensure Javascript is enabled for purposes of website accessibility

Wix vs. Squarespace: Which Will Be the Better Buy?

By Ryan Henderson - Updated May 13, 2021 at 9:41AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With Squarespace scheduled to go public this month, here's how it fares against its main competitor.

Website development has seen a large transition toward low-code and no-code offerings over recent years, and that shift is expected to continue over the coming decade. Two companies that are helping drive that shift are (WIX -4.63%) and Squarespace. 

Both companies enable users to design and build the website they want with an easy-to-use drag-and-drop platform. Squarespace recently filed its S-1 and plans to go public through a direct listing on or about May 19, which means that very soon both companies will be vying for shareholder dollars. Let's see how the two companies fare head-to-head. 

The business models

Though Squarespace and Wix both operate similar business models with a design-now and pay-after approach, there are several subtle differences with each platform. Squarespace is known for putting more emphasis on design, whereas Wix's platform is considered to have more flexible editing capabilities.

Confused looking man wearing a suit

Image source: Getty Images.

And since each platform offers its own perks, this also means that each tends to be more appealing to different types of users. Squarespace is widely considered the best platform for bloggers, while Wix offers greater functionality for sellers and merchants.

Despite the differences in usability, it's important not to overlook the fact that the two companies are still direct competitors. Wix and Squarespace both spend more than 40% of revenue on sales and marketing trying to attract new subscribers. This is the largest operating expense for both companies, as it seems both are willing to spend more to attract users because of the stickiness of those users. In fact, Wix reports that 85% of its registered users subscribe for a year or longer, meaning that the lifetime value tends to be pretty high.

While most of the revenue for both companies comes from these multiyear subscriptions, Wix and Squarespace also drive revenue with additional features, which Wix categorizes as 'Business Solutions." These solutions comprise essentially any services that customers use outside of their base subscription. They include payments or shipping services, ad campaigns, additional apps, and plenty of other offerings.

By the numbers

The year 2020 drove an acceleration in low-code and no-code web development as businesses all over the world rushed to build an online presence in response to COVID-19. This drove record new subscribers to both Wix and Squarespace and helped propel both companies financially. Here are the results from the latest fiscal year. 

FY2020 Metric Wix Squarespace
Revenue $989 million $621 million
Revenue growth 30% 28%
Operating cash flow $148 million $150 million
Total subscriptions 5.5 million 3.7 million

FY= fiscal year. Sources: Company reports and filings with the SEC.

Though both companies saw a similar boost from the pandemic, it appears Wix began to pull ahead this year. Not only did Wix grow revenue faster on a percentage basis, but it also came from a higher starting base. Wix also added 300,000 more subscriptions than Squarespace this year, which helped cement its lead as the top no-code platform globally. 

Despite Wix showing stronger growth, Squarespace seems to be the more profitable business right now. Squarespace had an operating cash flow margin of 24% in 2020, versus Wix with only 15%. While this might look like a win for Squarespace, much of the decrease in profitability for Wix is attributable to temporary increased staffing costs to support the influx of new customers. Over time, this cost should shrink as a percentage of revenue as customers become more acquainted with the platform and the need for support diminishes. 

Who will win the market?

While the overall shift toward no-code solutions should be a tailwind for both companies, Wix is beginning to see benefits from scale. Since Wix has access to more use cases, it also gets access to more data. This helps Wix identify pain points early on so that it can iterate on its platform and build the solutions needed to meet any business's needs. This lead has also helped Wix create more than 800 different templates compared to Squarespace, which offers a little more than 100.

Though it's hard to say which company is the better investment right now since Squarespace hasn't officially hit the public markets (it will list on the New York Stock Exchange under the ticker symbol SQSP), Wix seems to be reaping the benefits as the category leader. If I had to choose only one company I'd pick Wix, but both businesses are demonstrating strong growth and look poised for a bright future. 

Ryan Henderson owns shares of The Motley Fool owns shares of and recommends The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned Stock Quote
$69.46 (-4.63%) $-3.37

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.