In the rapidly evolving landscape of artificial intelligence (AI), businesses are witnessing both transformative opportunities and unprecedented challenges.
Amidst this revolution, Wix.com (WIX -0.30%) is positioning itself to thrive over the long term. Here's how Wix.com is leveraging artificial intelligence to its advantage and reshaping itself in an AI-driven world.
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Using AI to deliver a better user experience
In the early days of the internet, it was tough for entrepreneurs to launch businesses thanks to the complexity of building websites. Wix entered the scene in 2006 to help anyone build a website with little to no coding or design skills needed.
Over time, the company evolved and added new tools, including e-commerce solutions, payments, logo designs, and more, to help businesses succeed online. The rise of AI technologies has given Wix another opportunity to deepen its relationship with customers.
As a start, Wix plans to incorporate AI -- proprietary and external -- into its products to reduce friction for customers to launch and scale online businesses. With the help of AI, customers can build and customize websites faster, improve search engine optimization (SEO), speed up workflows, and more.
For example, Wix has been providing an AI-enabled website creation platform (Wix ADI) since 2016. With Wix ADI, users give a series of prompts, and the AI will recommend pages, images, and texts for the project. Another example is Wix's recent introduction of Wix AI text creator -- which leverages Open AI's GPT-3 -- to help businesses create content.
The idea here is simple: Incorporating AI into its products can help users achieve their goals more effectively. Consequently, user satisfaction will improve, leading to higher conversion and retention. Ultimately, AI can help Wix grow its business in the long run.
Using AI to improve operational efficiency
There is enormous (and growing) complexity in running a software company like Wix. It not only has to move fast to launch innovative tools to serve customers, but it also has to deal with increasingly complex internal workflows and processes.
Fortunately, AI can help here too. For example, with the help of generative AI -- like ChatGPT -- Wix can deliver software updates faster and cheaper. Also, with AI automation, the tech company can streamline its business processes, cutting out repetitive tasks and their associated costs.
In short, AI should help Wix do more with less, which is vital as it strives to improve its cost structure and grow its free cash flow. To this end, Wix is committed to achieving the "Rule of 40" by 2025. This rule suggests that a healthy software company should have a combined percentage of revenue growth and profitability margin of at least 40%.
In the first quarter of 2023, Wix reduced its headcount by 18% year over year while growing its top line by 10%. Its adjusted free-cash-flow (FCF) margin also improved to 12%. So given management's "Rule of 40" aspirations, the tech company has improved its combined revenue growth and FCF margin from 9% and 21% in the third and fourth quarters of 2022, respectively, to 22% last quarter -- a clear upward trajectory.
While we cannot pinpoint the impact of AI on these improvements precisely, I would bet it's playing a growing role in helping the company deliver these results.
Wix is positioning itself to win in an AI-driven world
AI is shaping up to be one of the most disruptive forces in our time. As the AI revolution reshapes industries, Wix.com is strategically positioning itself to benefit from this trend.
By incorporating AI into its products, such as the AI-enabled website creation platform and AI text creator, Wix enhances user experiences, helping them achieve more with less.
Besides, with AI automation and pursuing the Rule of 40, Wix may be able to streamline its internal operations to achieve sustainable, profitable growth.
