Good morning, everyone, and thank you for joining us today. Welcome to Wix's 2020 Management Update. My name is Maggie O'Donnell, and I'm the Director of Investor Relations here at Wix.
I'd like to remind you all
that during this event, we may make forward looking statements, and these statements are based on current expectations and assumptions. Please consider the risk factors included in our most recent Form 20 F that could cause our actual results to differ materially from these forward looking statements. We do not undertake any obligation to update these forward looking statements. Please refer to the Safe Harbor included in these management update slides for any further information. With that, I'd like to introduce Nir Zohar, our President and
COO. Thank you. Thank you, Maggie. Thank you, Maggie, and welcome, everyone. It's really great that you've all joined us.
We spoke a lot about how 2020 really impacted Wix, and we had a great year, and we're going to cover more of it today. But I think one of the big downsides of this year is that we had much less chance to travel and to come and meet our shareholders and our investors and to talk to you directly. So we wanted to try kind of mid December do a recap of the year and try to talk to you live here from Tel Aviv, try to cover some of the big things that happened to us this year and talk about our excitement going forward. Definitely 2020 was groundbreaking for us. We accelerated all metrics.
We were going to surpass the $1,000,000,000 of collections for the first time, surpassed by a lot. But for us, we feel as if we're just getting started. In our minds, we're building a category leader in what we perceive as a huge market. And we want to talk a little bit today about how we think about it and share our thoughts with you. So for our agenda today, we'll cover some of those topics.
I'll be joined by Adi Shai and by David Schwartz, our VP of Products and later on by Lior. And obviously, we will wrap up with the Q and A. It's clearly we've been doing so many things that it will be hard for us to go over everything. We'll cover only some of what we've been doing. We're trying to focus on the things that we feel need more clarity or can get value from us kind of tying the knot.
If you have something that you feel that we are not covering, obviously, first of all, it doesn't mean that it's not important and we'd love to answer any questions at the end at the Q and A. So with that, I would like to redirect the camera to my friend, co CEO co founder and CEO of Vishay Abrahami. Vishay? Hey, how
are you doing? I'm doing good. And you? Very good, very good. We're going to
talk about how 2020 was amazing for Wix. But this was a pretty big year for you personally.
Indeed, it was. Finally, I'm a father. So I have a 5 years a 5 months old daughter now. I'm learning the hustles of how to run a family. And from those 1st 5 months, if you need to assess what's more complex,
running a family or dealing with a 5 year 5 months old baby or dealing with the company, which one?
So, no, my baby don't tend to cry a lot. She put herself to sleep. She sleep all night. And when she does cry, it's 1 person. In weeks, it's 4,500 people that cry.
So without a question, running a company is much more complex. I think especially if you have the right money for your daughter, right, so she can solve all those issues.
I totally I'm totally on board with that. So we're at the end of 2020. It was a great year. We talked about it a lot. For you, when you think about it, when you try to summarize the year, like what was the most outstanding part of the year?
So obviously, right, it was not a standard year, right? We have the pandemic. And I think that, again, for me, it was an amazing experience to be in a place where we actually had saved millions of businesses, right? We've seen people that the business would not have survived, the way that they make their leave would drive them to make that they're able to pay in the grocery store, right, is because of a business and that business without which would not exist today. And I think that was amazing to see that influence that we have.
Another amazing thing happened that I found to be very inspiring is that a lot of governments, states, cities use Wix to coordinate a lot of what they do in order to handle the pandemic, send information, track with sync. And again, that was amazing because I think this very likely we also saved a lot helped saving lives. And that's very unique. Beyond that, it was an exciting year for weeks. Of course, because of the growth by the pandemic, but also because we released a huge amount of new things during the last part of 'nineteen and during this year.
And I think that combined together, they created this massive growth and really a completely new way of people using Wix or using the Internet.
So far, and we still have a month to go, we added more than 29,000,000 users this year, which is fantastic.
We're going to get to 30,000,000, right? Over.
We will get to 30,000,000.
And 30,000,000 in 1 year.
And that's, I think, apart from the fact that it's amazing growth, I think that it also really empowers that sense that the things that we've seen, the trend of moving online, we see it happening for many years now. But this is not really a new thing. It's just a super acceleration of something that was already Obviously,
I mean, my parents, for example, never bought anything online. Now they do all of their shopping online. And now when they get used to that, right, they'll continue to do it because it's more comfortable. And we're saying that all across board, not just with my parents, right? And that people are just so much more into doing things on the Internet, from shopping also to getting personal training, to be talking to their to their consultant, to their psychologist, a huge amount of things that before would be almost all of them offline and now online.
And probably going to stay a big part of them online past the pandemic.
So I know you have a huge amount of excitement for how this is rolls out and how this builds up for us as a business and as a product going forward. I do want to just kind of try and mention, cover some of the things we've done in the past year. So if you turn to if you guys turn to the slide here, you can see just it's a huge list, but it's actually a partial list of all of the things that happened this year. And obviously, it's a lot of enhancements and improvements we've done through the platform in order to support all of those people coming online through the pandemic, making changing to restaurants who wanted to move online and stores who wanted to move online and services that now needed to have to be much more online or in events on and etcetera, etcetera, etcetera, but also out of core enhancements to our strategic products. The release of Editorex, the improvements to the speed of the Wix websites and the performance, the advanced SEO tools that we released and many, many more.
I would say that's from my point of view also. I think that one of the biggest things that happened this year is that on the operational side, even though we had all this hardship and working from home and not meeting people and not being able to run all the regular rituals that we have and then needing to look for talent online and on board and recruit online and on board online, we still manage to gain a huge amount of growth in our headcount, in our talent, not only in care, which we mentioned a couple of times throughout the year, but also in R and D, which I think it really helps us go deeper into investing into all of those growth opportunities as we go into 2021 and beyond. So Wix, I think without a doubt, we are we've managed to really create a huge global brand, which much strength around the DIY and building websites. But I think that when people are looking at this list, for us, it's very easy to understand how everything connects together. But I think it's actually valuable to do a zoom out for a minute and try to extend to everyone how do we think about it.
So and one of the things that we build 3 editors, right? And the other question I get is that, isn't that too much? How is it all combined, right, which is what we discussed? And the thing about Wix is that all of the editors are using the same infrastructure. So in fact, if we improve caching here, right, all of the 3 of them, I enjoy that.
That. We do something security, we do things in databases. All of them are enjoying that. So in fact, we build most of the things just once and then just do a layer, which is the editor. And that is very different, right?
We have the ADI, which is for more casual user, the classic editor, which is pretty much for everybody who want to build their own website. And then Editor X, which is really aimed at super designers, agencies and professional tool. And when we build, for example, a vertical, right, we build a store, we build a booking, right, again, we do it once. And then we can plug it into Ophrey Editor. It's actually done automatically using a plug in model, which is identical in all 3 of them.
And this allow us to do a couple of things. First of all, when we launched A2X, it was not a naive product. It was not a product that is doing just that. It actually all of this incredible functionality, which is super strong infrastructure, and then all of the business application, right, that it took us many, many years to develop, right? And that's on the one side.
On the other side, it also enabled us to continue and innovate quickly, right? We're a product company. The thing that make us always grow faster and better is our ability to innovate. And most companies, when they grow beyond size, with certain size, they start to slow the innovation, which what we're saying is that it actually accelerates. And this architecture, we actually have an infrastructure and then the separate editors and then plug in architecture and then another plug in actually for web components is what enable us to continue to innovate quickly going forward and not really spend so much effort in developing each one of those 3 editors.
I think that's fantastic. And you talk about how that drives velocity and innovation and more products within the company. But what does it mean also when you think about the developer community and people out there work with Wix?
So if you think about it, right, when you when we're allowing people to build a website, right? So build a website, it's their infrastructure from now on, right? It's no longer our infrastructure. We build the infrastructure, and they're consuming it from us. And this means that you can pretty much every year, you can do more on Wix.
And you can use this incredible infrastructure that nobody else is actually giving you to be able to use. AWS and Google Cloud give you a way to have a managed server, but they don't manage your security. They don't do the caching. They don't do all of those things that you need in order to sustain a business. And we can see how many sites do we see being hacked every day.
Every day you hear about some big company that somebody just went in and stole the data and is now blackmailing them. And what we essentially do is that we give you this super strong infrastructure, allowing you to build almost anything in any way you want on top of it. And if you look 5 years from today, I believe that this will be an infrastructure where a huge part of the Internet will be built on top of it, enjoying the benefits of having something that is that you have, well, over 10 years now of engineers working on making it super safe, super fast, super, right, super stable.
That's I think that's a huge vision. Well, that's what we want
to achieve, right? We want to be able to be the place where you can build any dream that you have on the Internet, on our infrastructure with our tools. So
I think that maybe we can take one of those pieces and actually try and break it down. And how about we go and touch the
newcomer, Editor X? So why Editor X?
I think that's the original question, right?
So when we look at the market today, right, we believe that there is about 3,000,000 30,000,000 people that develop website in some capacity, right? Some of them do it for their friends and families and have a dozen websites and some are super professional agencies that do hundreds of websites, some do really high brands. But the population that we can identify today is about 30,000,000. We noticed that we have about today on Wix, we have about 270,000 of those on Wix. So there's a huge opportunity, right?
It's a huge gap. And we believe we can capture that gap. And if we look, right, at the growth of that population on weeks, and you can see that it's always accelerating, right? And that's amazing. It means that we're actually able to do more and work with this population more and actually achieve growth in that.
Now this population is very important because of a couple of reasons. First of all, they set the trends, why this is popular on the Internet, how it should look. And the other thing is, from our perspective, in terms of business side, right, it's compounded growth. Why? Because every one of those users, right, are building multiple sites.
So if you had one of them, right, you pay acquisition once, over the next couple of years, you're going to get many websites from them. And so this is the target that we set to ourselves. And there's a reason, another reason why we went there is that we kind of look at the competitive landscape, right? And if you look at the competitive landscape, you can see that on the right side, you have design tools, 10 years Squarespace and WordPress dotorg. And none of them give you the full capabilities of what you need, right?
Figma and Adobe XD are amazing tool for design, But you cannot publish from them, right? You need to have a developer take that and record it from 0. What you did is just how it should look, right? And not actually building the website. If you look at wordpress.org, then you don't have any design capabilities.
You're still in the developer, right? And it's a huge effort. And maintenance and securities are a nightmare. If you look at Squarespace, it has some basic design capabilities, not what professional designers need and very, very limited business applications. So if you want to do anything a bit more complex, you can just can't do it.
So we felt that Editor X is giving you everything. You can design the super professional tools. In fact, you can pilot design on Sigma, then copy it to Editor X and just have that design there. From there, with one click, you can publish it. You have amazing business application and really give the agency the ability to control your own fate with our developers, the whole cycle on one platform.
I think this is exciting. And we can actually see that, as you saw in the guide before, the adoption actually proves that it is exciting.
It's a new product, right? It is a new product. And we just released it. User was starting to build things with it. I know you always go and speak and want to learn what users are doing, especially with something new.
What have you seen? So from professional designer, the excitement is by far better than any that we've seen before. And it really people really are amazed that now they can do so much. And one of the and I'm going to share some stories here, if it's okay. So those are really sample stories, I think, shows some of the Kufin that I like.
So this is Piranha. It's an agency based in New York. And they join us, right, in February, right, I think, and that enabled him, right, only because of Editor X. And you can see they're building super high brands, right? It's Ferrari.
It's Saint Laurent. It's amazing brands, right? And in fact, they also build their own website now on Editor X, which just goes to show that they take it as a super professional tool that they can use. They are based in New York and really super cool project to see.
And I see all of these big brands on their website. Essentially, they're the ones who are bringing those huge brands to Wix. Yes. So now we have these big brands actually starting
to own our platform. Yes. This is exactly what is happening, right? So now you're starting to have those massive companies because they work with agencies, right? Most of them don't have their own development, house development.
So they work with agencies. And now when the agencies are using, sign to get those massive brands on Wix. Another example, right? Again, this is a company that was agency that was already on Wix, right. And but then when started to have Editor X, now they're also doing Editor X website.
They have about 16 Editor X website already on Wix. In fact, they only have now 8 Wix classic website on Wix, which means that they're actually building more on Editor X. Again, really cool story and the fact that we actually managed to take them to a bigger level. Another example, right, is here. It's another agency that is actually based in Cambridge in the U.
K. And again, you can see the company itself is a massive company, right? It's a company that does handling shipping on an enterprise level, huge company that they build the site for,
right?
The other thing here is that I like about designers and Editor X is that what we're seeing now is more global because designers have so much more time to spend and learn something, to become professional in something. So actually, Wix was always a global company. But Editor X is even seems to be for now even more global than Wix. And we can see growth in London. Then we can see another place, right?
There's another agency here in South Africa. And then we can see another one, right, in the Philippines, and then we can see more and more and more. And I think that this is kind of like something that I like about it that we can immediately see the growth from Japan, from Vietnam, from so many other countries because the designers are the one who approach Learn Wix, and they are, by nature, more versatile in English and learning tools. And then they take it to the local market. So that's amazing.
So
you kind of covered and explained how the uniqueness in the competitive landscape for Editerex and also for the Rhees Editone, right? When you look at that slide, they were both really giving values that other platforms are not giving. But there's also, I would say, the amplifier, right, kind of the secret weapon, which is COVID. We introduced COVID back in October of 2017, and I think the growth graph here is massive. I remember I was talking at the beginning, you were saying, I want to get to 50,000, 100,000.
We're north of 2,000,000 now. And I think that that ability to tie up both the design capability, the complete control of the CSS and the HTML with easy coding capabilities all under that infrastructure. As you mentioned, that's really something that's not out there.
Yes, because every time you go to a big project, right, you find that there's a lot of small things that you need to do. And those things small things are usually not something that you would have in the platform coming from within. And then you again have to get servers, you have to code server, you have to maintain service, do all of the things, cache and security, load balancing, and fail and there's like a ton of things that you have to manage. And we thought that we should be able to also streamline that process for you. So if you want to do something, just a custom code, just do that.
And we see that agencies, of course, are using that a lot more, but not just agencies. We are also seeing startups that have been built, so on Editor X and COVID.
So for that, actually, I know that the team brought a use case, which I know you really love. And I think this one is a really interesting one.
So this is the application is called BAPAY. And there's a good chance you probably met it somewhere. It was built by 2 professional baseball players. When the pandemic started, they found that they have a lot of free time. And then they decided to build the startup.
But I
thought that baseball players always have a lot of free
time. Yes. And we're not going to go here to the discussion if baseball is actually a sport, right?
No, we shouldn't because we know it's not.
Okay. It's okay. And they started to build a they decided to build a way for them to be able to go to bars where you cannot get the menu anymore because you're not allowed to hold them. So they build this application where you just go in and you upload your menu and it scans it, makes it and then people can actually order, right, in the bar from their phone and pay from their phone. It took them 2 weeks, right?
They're not professional developers. Took them 2 weeks to actually build the first version, start selling that. Today, it's doing very, very well, all built with COVID, with Wix.
But this is not a website.
No, this is a real startup, right? Well, it has a website, but in fact, you don't think about it as a consumer as a website because for the bars, restaurants, hotels, it's something that they look at as a back end where they upload the menu and they're able to get money. They don't go there for it as a website. And a customer goes to scan a barcode and he can pay and order things. So for them, it's an application.
So in fact, what they built here is not really a website. It's an application.
So they had the whole full stack of the technology on our platform.
Yes. And of course, it's scalable because of that full stack. And really, they built a complete startup from 0. And we're seeing a lot of this today. This is the amazing thing.
This is not a one time thing. We're seeing every day, we're seeing those kind of things being built on Wix. Tremendous.
So another thing that we're definitely seeing now is that with this huge growth on the DIY side, and we know that a lot of people who join us on the DIY side sometimes don't really want to do it themselves, right? So we have this massive adoption on the DIY and a huge amount of traffic of people coming in. But and on the other side, we're getting all of these 270,000 people and growing that are building websites for others and supplying services, agencies and professional designers. And I think that a big part of the ecosystem that is being built is the market
website, but not all of them. And take myself, for example, I know the technical part, easy. I know what I want. I can put it there, but I cannot design. I'm terrible at design.
And I would love to. Every time we do a website, I actually ask somebody from our studio to come and help me and design it. And this is why we have the Wix marketplace. You can find somebody to build everything for
you.
You can find somebody to do the marketing for you. You can find somebody just to do the design part for you. You can find somebody to do the search engine optimization for you. We can find somebody to do just the parts you need. And then basically, what we do is we kind of like aggregating, right, the supply, which we have on which is a huge amount of users arriving every year, right?
This year is 30,000,000, right? And then on the other side, designers that are able to come and solve those issues for those users and design as an agency. And we are getting that. And we're seeing that growing very quickly. And I think this is another key component in how we can be successful going forward.
But even more than that, how our customers and the agencies now using Wix can become more successful and grow even faster.
So going back to that slide that you explained before about how everything ties up together, I think that it's very clear how having keep on dominating the DIY hemisphere and ecosystem, knowing that everything that we develop, no matter whether it's for this crowd or the other crowd goes through all of our users. So they are all benefiting. So we keep on expanding on that, but also expanding all of those professional tools and the infrastructure having GetRx and COVID really ties up to what you mentioned before, I think.
Yes. I think that you know we are giving now more places to find help, more components, more elements in which you can build. And we're always investing in that infrastructure. I think going forward, you can see start ups that are already being built on Wix, not website, really start ups. And I think this vision of having been the operation system, which you build application for the Internet is something that is becoming more and more true every year.
So 5 years from now, the operation system
leave some for others. Okay. But I think the majority could be probably the wisest, wiser choice for most of the project in Interconnect to be built on this infrastructure. Fantastic.
Thank you very much, Avishai. I would like to switch over and talk a little bit about e commerce. For that, I want to invite David Schwartz to join me. David Schwartz, for those of you who have not met him before, is our VP of Product. He acts as the VP of Product and responsible for all of the professional methodologies that has to do with products in the company and make sure that we meet the same professional levels all across Wix.
But he's also the General Manager that is responsible for our commerce products and for our services and booking products and the international expansion of Wix. So he has a very, very busy day and a very full plate. And David, thank you for joining us today.
Hi, Nir.
I actually wanted to talk about something else today. I don't want to I actually don't want to talk about our big stores, which we mentioned many times in earnings, but I actually want to talk about how we generally widely think about e commerce. I know you refer to that as e commerce as a platform. Can you explain to us a little bit about e commerce as a platform and what's the potential there?
Sure. So basically, what e commerce platform means, I'm being asked many times how can Wix create such high quality products that give such so much benefit to our users, Wix Stores and Wix Events and Wix Restaurants and Wix Hotels and Wix Bookings and the solution like Wix Fitness. How can we do all these things with such high quality and so quickly? So the reason is that it's all being built on building blocks, like Avishia explained before. So you have the cart and the checkout and the scheduling and the tax and the order management and shipping and logistics and customer management, and they're all being functioned together to create amazing products.
So that is the way we do things. And that is how we can deliver such high quality products to our users so quickly.
But how does that what does that mean for users? Like, give me an example. How does it work?
So the interesting thing about it is that many users in their business need to use more than one product. And I think Benjie is a great example for that. So 4 years ago, Benjie is arriving to Wix to build CoreAttack Fitness. He's a beginner. He starts building his fitness business.
He thinks about it very professionally. He looks for a website and a scheduling system. He starts as a week's bookings user. Then the business evolves. Benjie sees that the content he creates, he creates videos that are amazing tutorials to do fitness.
So he needs to sell them. So as part of fitness solution, he can start selling digital goods through Wix Stores. And then his business continues to grow. He opens a studio. When he opens a studio, he brings on a few other fitness trainers.
Now the scheduling becomes more complex. He uses advanced features of booking that allow him to manage his team. Okay. And then unfortunately to all of us arrives the pandemia. And that's a huge crisis for Benjie and people like him.
Because suddenly the fitness studio is closed. So immediately he moves to virtual training done by our connectivity to Zoom. And then he also understands that this is the moment to start selling merchandise. Because if you work in a virtual training, you need to work at home. So he starts selling equipment, fitness equipment through our drop shipping.
And then he understands that his brand is becoming even more stronger through the pandemia. So he uses our print on demand, which is a feature in stores and part of the whole fitness solution to start selling branded sportswear. And it's amazing to see how he grows with us in the last 4 years he's been with us. And for me, it's really amazing.
I'm guessing I know that this is an example, but it's not unique, right? We've seen thousands many, many thousands of people like Benjie on the fitness side. But does that apply only to fitness?
Of course not. We've seen numerous of them in all e commerce platform. Just an example that pops into my head, again, resulting result of the pandemia we've been experiencing. So you have a restaurant and you're using Wix Restaurants and all is great, and suddenly we all know what happens, the restaurant shuts down. We need to give you the abilities to sustain your business and confront this challenge.
So immediately this restaurant, what they do, they start opening online lessons using the component of Wix Bookings combined with Wix Restaurants, actually enhancing the brand. So once the quarantine is removed, now the business grew up. We don't give up. We do both our old restaurant business, which came alive again, and also continue our cooking lessons online. Inspiring.
So everything you were talking about the huge value that this platform, the e commerce platform has within Wix in expanding the different reaches of different products and giving more value to our users, helping them expand their business. But going back to Avishai's previous slide about the infrastructure and the 5 year vision of also going out and allowing external developers to build those kind of extensions and expansions on their own. Are we going to open the e commerce platform as well to the external world?
We're not going to open it as it is already opened. An agency can go and use the building blocks that are the ones who create e commerce platform to build a solution of their own. As an example, I've seen an agency that went and built a real estate solution. So they use the catalog to present the real estate and they use bookings to do the scheduling with their customers of the meetings where they're showing this real estate. They even used checkout and with payments actually to get paid and paid plans.
So, of course, and they can reuse it afterwards, this agency, and position themselves as the providers of the solution for real estate built on top of Wix.
That's really I think that's really huge for their expansion of their business. So I know that you are not willing to step off the stage before you also tell us about your new baby. It's a different baby than Adichai's. It's a technological baby. You want to talk a little bit about the POS?
Wix point of sale is very, very exciting for me and for all of us actually. It's a point of sale. We have a robust point of sale. This is actually good for your brick and mortar store. And it has a mini point of sale where you can sell with your mobile phone.
And especially for today's challenges, it's a huge thing because what happens basically, you get the Wix point of sale and you put inside it your inventory and your catalog and everything. And the interesting thing is that second afterwards, you can click a button, and this inventory and catalog are going online. Simply pick a template, press a button and you have an online store. And this online store and your physical store are functioning seamlessly together with a synced inventory and synced management and synced order and synced CRM. And making the life of our users that easy to go online in these days, for me, it's a super important thing.
So I think it's great to see, and I think this is something that really is at the core, I think, of the Wix product philosophy is what is the thing that we can do that will bring the best value for users, help them be more successful and expand their business even further. I think everything you discussed in terms of the platform and obviously also the point of sale is definitely like that. I want to thank you very much for bringing this and sharing this with us today. Thanks, Steve.
That's what
me and my teams are doing. We're helping our users succeed, confront challenges and grow their business. That's basically the job description.
Great. Thank you very much, Aynsve. I will now hand it over to Lior Shemesh, our CFO, to talk more about the financial impact and our excitement towards 2021. As you all know, Lior is a one man show. So I'm going to be off I'll be back for the Q and A.
Thank you, Nir, and thank you, everyone, for joining us today. I'm truly excited mainly about 2 things. The first one is about the opportunity. I mean, you've heard everything about the products and about what we intend to do, and I will further dive into the details and what it means for us. And the other thing that I'm really excited about is that finally after a year or so, I had the opportunity to wear my jacket.
So it was a really real time for all of us. But I guess that we are going to see you soon, guys, right? So again, 2020 was a solid growth for us, outstanding growth actually by more than 30%. And I will try to go into the details why it's actually happened and it means for the future. And then I'm going to talk about 2021 and so on about the future, what we expect as a result of all the investments that we've made and as a result of all the products that we have right now in our arsenal, right?
So we actually managed to build 2 complementary businesses. The first one is the subscription model, where you can actually see also in 2020, and I will talk about it also about the 2021, but it's continued to grow. At the same time, we've created the emerging transaction model. Essentially, this is the business solution. And they're feeding each other.
So people are coming, they are using Wix to build their business, to manage their business online. At the same time, they're using all kinds of products like Wix Payments, like delivery. David mentioned the point of sale. So they can actually get the entire
services using Wix. And obviously, they are
benefiting from that. Well. So again, 2020, amazing year, more than 30% increase growth in term of collection, very similar in term of revenue. But more importantly, we are building incremental collection. We have created actually larger core that will contribute for the growth for many, many years.
Now over here, I want to spend some minutes about the behavior of our cohort. And again, you can see the cohort the 2nd quarter cohort and the fact that it was growing more than 60% on a year over year basis. And by the way, the Q3 and continue, and as we mentioned in our earnings is behaving the same way. But I would like to dive even deeper and to try to explain the behavior of the cohort. So basically, there are three reasons for the behavior of the cohort.
So the obvious one is, obviously, we are bringing more users, we are bringing more premiums, better conversion. But on top of that, it's a result of a different mix, both of product, but also the type of the users. So I'm going to spend a few minutes to try to explain what does it mean. What means the change mix of our customers as a result of all the products and everything that you've just heard from Vishal, Aneer and David. So the first thing I want to mention is the opportunity that we see of our business verticals.
And David explained exactly the offering and what those guys actually are doing. But it's very important to understand the what it means in terms of the behavior of the core. So over here in this graph, we can see the growth on a quarter over quarter of the business vertical collections versus to the overall growth of Wix. So we actually started it from the Q1 'eighteen index to the Q1 'eighteen. So it's kind of starting from the same point.
But you can clearly see how the business vertical are contributing more than 2x than the overall growth of Wix. Now this is something that is very important because there are 2 things that is very important to mention. The first one is that this is actually started before the pandemic. It's actually started when we started to introduce the all the business vertical. So what's happening is that we are talking about higher price of subscription, so we are getting more.
It's a better retention, higher adoption our business solution and obviously the monetization via the transaction volume. But it's all contribute to the fact that it's growing faster. And I do believe that this kind of mix is going to continue also in 2021 and 2022. It's even going to be more higher than that. So again, this is kind of describe you the overall opportunity that we have with the business vertical in light of all the new products and all the verticals that we already launched.
Now the second reason that involve of changing the mix between our users is about the opportunity of users building for others. So Avishai mentioned that agencies, you saw exactly, you saw the results, you saw what they're using and why they're using Wix. But think about the opportunity. We have about 270,000 users building for others on Wix to date. But we are talking about a potential of $30,000,000 I do believe that based on what we are seeing right now is that we are gaining actually more and more those type of users because actually provide us with a great opportunity, a great potential for the future.
And I would like to show you exactly how we do that. So this graph is actually using the Q1 'nineteen cohort and showing you the difference or compare between user, the building for others to all users. And you can actually see the growth. So there are 2 points over here that's important to mention that are creating this compounding effect. The first one is that the collection growing faster, 2xx2.5x since the Q1 'nineteen, meaning that if you will continue to see that throughout the coming years, it's actually going to even expand and be higher because they are building more websites for others.
They are using a higher vertical solution and they have also higher retention. So we can clearly see how it actually has a compounding effect on our cohort. And again, I do believe that this is something that is going to be much more significant in the future. On top of that, I want to explain about the growth. For example, in the Q3, we managed to increase the number of users creating websites for other by more than 3x.
And this is something that it's actually accelerating. I do believe that in the future, as a result of this behavior, I do believe that the portion of top line coming from user building for adult is going to be much, much, much more significant, and it's one of the growth engines that we have for the next coming years. So I spoke about the opportunity from the business vertical. I spoke about the opportunity from users that build websites for others. But what about the existing course?
How it's actually behaving in light of all those products and the business solution that they are using. So if you guys remember Q3 'nineteen, we actually show you that we have about $6,100,000,000 to collect based on the existing cohorts. Now it's $11,800,000 And it's even more amazing, and by the way, this is based on 10 years because we have much more history than 10 years. But even more interesting, we see that it's actually it's not flat, it's increasing. It's increasing because of the adoption of more product from Wix.
So this is very interesting and it provides us with a very solid baseline for the coming years. So the most important thing is about investing into growth. We have the opportunity. We show you before how we actually do that, how we deliver growth through investment in R and D, in support, and we certainly have the opportunity to continue to do that. And we intend to increase and continue with investment in support, infrastructure, obviously, R and D, because essentially, this is how we deliver the growth and marketing to support all of that.
Now, I would like to explain a few things about the gross margin because obviously the model has changed a bit. We have a very healthy gross margin model. And I would like to spend a minute or so to try to explain exactly how it's going to evolve. So in 2020, the gross margin of the creative subscription was 79 to 80. For the business solution, it's 29% to 30%.
Now because of the investments, the upfront investments that we are doing and we continue to do on care and infrastructure, the gross margin for creative subscription is going to be 76 to 79. It really depends also on the growth. But long term, even medium term, is going to go back to the 80 once we start to see the fruits of those investments. Now with regard to the business solution, I do believe that in 2021, we are going to see a different mix because payment is going to be much more significant. And it will take us some time actually to benefit from the scale.
So it's going to be 20% to 25%, but long term, as I mentioned many times before, it's going to be 35% to 40%, but obviously with many, many, many new products and some of it some of them we actually mentioned. With that, I want to talk about next year growth. So I'm super, super excited that we are based on those investments and the new products that we have, I feel very confident that the growth for next year is going to be 28% to 30%. And this is on top of an amazing year that we had on 2020. So thank you guys for joining us today.
I will hand it over to Maggie to some Q and A, I guess.
Great. Thank you so much, Lior. Thanks again everybody for joining us today. We're now going to begin the Q and A section of the presentation. We have all of our analysts here on the line on Zoom.
So I'm going to be going through each of them. Hopefully, we'll get to as many questions as possible. If anyone else has a question, you can feel free to email me at maggieowix.com and we will try to get to your questions as well. The first question is going to come from Ron Josey at JMP Securities. Ron, go ahead.
Great. Thanks, Maggie, and hopefully you can see me okay. Thanks, everyone. Avishai, congrats on becoming a father. You already look good with the jacket on.
I wanted to ask one on product, just one on guidance. I think the point of sale is pretty interesting, Avishai and David. Can you talk about, was this product in development prior to the pandemic? I'm just curious how you were thinking about this longer term. And maybe given the rise of e commerce, just talk a little bit about what percentage of perhaps your stores have a physical storefront or is this something that any insights on how it might be used because I think just getting catalog online is definitely interesting.
And then Lior, with your longer term guidance and giving insights on 2021, very helpful.
28% to 30% on collections, I
think is pretty interesting.
When I look at your future, future collections in the cohort charts that you give on earnings, it looks like a sustainable, call it, 30% rate going forward. Can you just talk a little bit more about 2021, 28% to 30% of the drivers underneath there?
Thank you.
So your first question was about the point of sale. And it's a new product, so we're just launching it and finished testing. And so obviously, it's going to we're going to learn more about it as we release it. But when you think about point of sale, right, traditionally, we tend to think about point of sale just for stores. And but this point of sale actually going to do other things as well.
We'll also allow you for booking and for fitness and for beauty salons and for doctors and a bunch of other things, right? So if you look at the stores, I estimate that about 20% of our stores today have a real store. I might be off here, but this is one of the things that blocks users with real stores for using Wix is the fact that we don't have a point of sale and everything integrates, right? So that now might grow up. If you look at more of the fitness, gym, psychologists, beauty, all of those people are using more booking and events.
And so obviously, hotels, they have 100% of them have a physical location, almost 100% of their physical location. And today, a lot of them are using their computer in order to set up their classes or do the actual thing on the website and then a point of sale to do the transaction. So this is a big opportunity to combine everything together. So I think that this is a product that will really help our customers be more successful and have things more streamlined for them when they use mix. We're probably going to increase our market share with physical stores.
And to your question, we did actually start working on it prior to the outbreak of the pandemic.
Very helpful. Thank you.
So with regard to the growth that I'm expecting 2021, so obviously 2020 was a great year for us. And I do believe that we spoke it also before about the new state of mind. People are going to use and continue to using Wix the way that they used before and in the same magnitude. I do believe that we'll continue with marketing and perhaps it's going to be a little bit more or a little bit less. But overall, when we think about the new cohorts that we are going to bring on 2021, I think that the fact that we are able to generate a 28% to 30% growth on top of the growth that we already had in 2020, I think that it's truly amazing.
Thank you, Ram. The next question is going to come from Naved Khan from Truist. Go ahead.
Thanks Maggie. Maybe just a question or clarification around the guidance. So the 28% to 30% top line growth for next year, What kind of assumptions are you making in terms of the pandemic, either continuing to be a tailwind or not or maybe that waning somewhere in the second half of last year sorry, next year? And then how should we be thinking about the free cash flow for next year?
Well, we assume the pandemic is going to be over very soon, right? Because vaccines are coming anyway.
I guess so. Look, with regard to the pandemic we stated before, I think that the level of growth or the number of users and obviously subscription that we are getting right now, I don't think that it's going to change a lot because it's a new state of mind. And actually, we've seen that in the Q3. Remember that the growth in the 3rd quarter was about 35%. So I do believe that it will continue.
And on top of it, obviously, we have the opportunity of new products. We see a better conversion in some of the cases, better retention. So we are going to benefit from all of that in 2021. And most importantly, I did mention the growth of the business vertical and how it's actually impact the compounded effect, but also about users that are building websites for others. So this is all going to contribute to the growth.
In terms of the free cash flow, obviously, there are many, many moving parts, and I will provide the guidance for the free cash flow on February when we are going to report the Q4. I just wanted to provide it's not a full guidance. I just wanted to provide the idea about how we can continue with a high growth also going into 2021. So that was mostly the message, but not about providing what will be the operating expenses of the free cash flow for next year.
Understood. And maybe just on the gross margin for the Creative Solutions. You call out 2 of the factors that are kind of a drag for next year. 1 is the care investment, the other is infrastructure. If I had to think which one is the bigger of the 2, just maybe give some color on that?
It's certainly the curve. I don't think that we've seen the yet the full contribution of the care. I think that Neil can mention how people convert more using the care, and we'll talk about it in a minute. But certainly, it's the care. Remember, it's a regular SaaS model.
You first spend and invest the money that you need in order to support the large demand. And obviously, very soon, we are going to see the fruits of it.
Yes. I also think when you think about this year, so the goal about care, one of the key things we saw is that when we actually interact with our users, we can garner a much higher conversion for the users who actually talk to us. In some cases, it goes up almost to 5x the regular conversion rate. So naturally, our goal is not to limit those interactions, but to them by adding more and more entry points and allow more users to find us more easily and do that kind of interaction. But a lot of the investment we put actually had to go into the huge growth of users that we saw as the pandemic hit, which again, it's a great thing because we were prepared.
But it also means that we still have more opportunity to generate growth and benefit from the investment in care as we go into 2021 and we do that expansion that we originally intended to do in 2020.
Fantastic. Thank you, guys.
Thanks, Naved. The next question is going to come from Ygal Arounian from Wedbush Securities.
We cannot hear you.
There you go. Hey, guys. Thanks so much for the time today. I just wanted to, Abhishek, follow-up on your comments, long term kind of big picture expectation that Wix is going to be the infrastructure that a huge part of the Internet is going to be built on. How you think about that over the long term?
How you attack that and how you can get from kind of where you are today and getting really being able to capture that opportunity. And then I guess the second question, maybe a little bit similar. You talk about the users that build sites for others, that grown 3 times or 3 times in 3Q and the growth you're seeing there. I'm assuming a lot of that is coming from the partner program. You didn't touch on that specifically.
So maybe you could talk about how that fits in with the partner program and some of the progress you're seeing there.
Of course. So I'll start the first part. So this is kind of like a long term vision, but you can see a lot of it happening today, right? Even today, you can see that we just saw a huge logistic company. We just saw really top end brands, websites being built on Wix.
And this shows something, right, that is and then a start up, right? So we can see that what used to be, right, 5 years ago, mostly small businesses and tiny businesses is now doing so much more. And this shift is happening because of stability of the infrastructure, right, and the ability to create more things than Wix. So there are less limits and there are a lot more benefits. And every month, it's harder actually to have a website on the Internet.
We don't use something like Wix. And the amount of hacking and downtime you see, right, just one example why it's harder. In the more we enhance our infrastructure, the more we announce EditoHEX, the more we announce COVID, by Wix Code, the value that we bring becomes so strong that you can always do it yourself, but at some point, it just doesn't make sense to do it. And if Sub Lorraine or that the Piranha, the agency, building the same website, without risk, in the same quality, in the same performance, security, ability to manage permissions would have cost probably 100 of 1,000 of dollars. And now they can just do it in one place.
And know that all the time, you're going to get more, right? You're always being upgraded and getting more and more functionality. And I think that as we move forward, that gap will continue to grow. And we've been always been a company that was very good at innovating and adding functionality and making things better. And I think that we're just getting better in that.
If you look at the rate of development in Wix, it's actually accelerating, not decelerating, which is usually what happens for a lot of software companies. So I'm very optimistic that in 5 years, you have to really have a very unique project or not fit correctly in order to build something not on the Wickes platform. I think that's where we're aiming for. That's a vision. I believe that the opportunity is huge, and we're working very hard to get there.
So that was for the first part. The second part about so the partners program is doing very well, right? Obviously, we work very closely with partners. And it has a couple of layers. So the first layer is actually managed partners, right?
So we actually work with them. We talk to them. We help them. They have an account manager. And somebody is always there with them, right?
And this is more of the classic kind of a partners program that you usually meet with a lot of the standard software models. But then we also have a community for agencies and designers, and that's doing very, very well. So it can be really one of the part of problem. You can use the second layer, which is more of a community. And a lot of the designers actually prefer, okay, only to approach us when they need something, but most of the time, just consume content and contribute content to the community.
And the combination of those is growing, as you saw, extremely fast and create also very strong brand loyalty and product I'll in terms of what they achieve and do in Wix.
Thanks. And maybe if I could just ask one quick follow-up on the partners program. So when your sales team is kind of going out and making the pitch for Wix, what are the areas that you think give you the biggest inroads, right? These agencies are often using Shopify or Magento, BigCommerce, right? And you've got a lot of with your e commerce product and Editor X you've got a lot of new features that you're trying to kind of push to this professional market.
What are the areas that you got the best feedback from the partners that maybe you feel like give you the best access to this market? And what are the areas that you get some pushback on that partners are looking for a little bit more in terms of product?
So first of all, you mentioned e commerce, just classic e commerce, right? And when we go to agencies, one of the biggest thing that we bring is that we can do a lot more. If you're a big agency, probably 5% of your projects are e commerce projects, 95% of them are not. So you cannot use Shopify for that. You cannot use Magento for that, right, because they just don't do non e commerce.
They all do e commerce. So we go after the 95%. And then we also have really good functionality for e commerce. And in some places, we assume that we replace Magento. In some replace Shopify.
But again, I don't think that our competition are necessarily those websites, right, the 5%. We're trying to go after also the 95% that nobody else is there, except maybe WordPress.org. So this is the pitch we're coming with. The design capabilities on Wix, right, are by far greater than any of our competitors, the ability for them to build what they want. For agencies and partners, it's very important to be able to do that.
So they spend a lot of energy on that. This is what they sell to their customers. We're going to make you a beautiful website, going to convert really well, right? So we're able to provide that pitch. Things that we think we should improve on is one of the, for example, our ability for our customer to easily delegate work to their customer, right?
They want to block pages and say, you cannot touch those to their customer because when the customer does touch it and break it, they have to fix it, right? They don't like that. Ability to charge money from their customers, they're looking at it and say, hey, we have to spend a lot of energy there. Can you solve this for us? So most of it will be in that level of how they can work with their customers, less about what they can do with Wix.
Of course, there's always more requirements coming as to what you can do with Wix. But this is less the bigger part of the conversation.
Great. Very helpful. Thanks guys.
Thanks Yigal. The next question is going to come from Sterling Auty from JPMorgan. Sterling, you can go ahead.
Great. Thanks. Can you hear me okay?
Yes. Yes,
we can hear you.
Nice to see you. Good to
see you. So Avishai, in your prepared remarks when you went through the competitive landscape, from your standpoint, just out of curiosity, why don't you include GoDaddy as one of the competitors?
For agencies?
No, no, no. Back when you had Squarespace.
Yes, but I would say about Editor X. GoDaddy, as far as I know, have nothing that actually address similar crowds. Unless they were part, I didn't see. I mean, they don't they have a very simple basic site builder. And they have WordPress dot org, which they hold kind of like for you, but they have nothing that does the design similar to Editor X.
It's like literally no product that I know. You can use GoDaddy if you do the design with some other tool and then import it and put it on wordpress.org hosted by GoDaddy. But that's pretty much it. So I'd say that in that place, they are not existing.
Got you. And then one follow-up. In terms of the 30,000,000 addressable market that you're penetrating the 2.70 where you're starting at 2.70. How would you characterize what portion of that is inside of agencies? What portion is inside businesses versus maybe even individuals?
Just to try to break down that $30,000,000
Well, it's very hard. I can give you my estimation. It's very hard to find really valid market visits in that. I would assume that probably about 2,000,000 to 3,000,000 are inside organization, right? So if you have Chase, right?
So Chase probably have a big department that does the website, right? And but as you've seen here, a lot of the other companies that we mentioned today don't, right, they go to agencies. So it's a I'd say that I would assume that probably about 2,000,000 to 3,000,000 are working inside enterprises and companies, then probably about 10,000,000 will be real agencies and of various sizes, and the rest will probably be private people that are just building stuff on their own.
All right. We have one question from an investor that sent me an email. So I'm just going to read their question. As more growth is generated from vertical solutions, how do you see your positioning versus specialists in areas like e commerce, restaurants or fitness?
Can you
repeat the question? Sure. Can you repeat it again?
As more growth is generated from vertical solutions, how do you see your positioning versus e commerce specialists?
Well, I think that is a when you have a I mean so if you look at the restaurant, right, a lot of what they need to do is similar to what they do in an e commerce store, but not everything, right? But if you think about the Web side, right, you need to serve the web side, you need to see the end, you need to be able to design it, you need to have media that is automatically proportionalized to fingerprints. You need to have security. You need to have rules and permissions. You need to have a huge amount of things, right?
And then there's a small layer, which does the shopping cart or does the restaurant or does other things. And I think that one of the beautiful things that we have in weeks is that because we are all of that, we're able to do each one of them very well. If you look at the one that you spoke about, obviously, with e commerce, we have a lot more competition, right? And our vision is to empower businesses to control their e commerce and then to be able to create the beautiful design around it. It's less about competing with Amazon as a company.
But I think we're doing really good on, of course, the combination of all of the e commerce elements. And I think they're all contributing to each other because if you have a place that you know we have one agency and they build a restaurant website today, an event website tomorrow and then an e commerce store today, it's very likely they're going to use the same tool. Not necessarily, but I think it's all contributing to each other and making everything better and better. Another part of it is that if you look at most of the hair saloons, right, they do have all the appointments and they want to sell that and it's important then to manage the calendar and charge for it, but they also have a store. You want all those things to talk and work with each other.
So I think as a combined offering, it's really very strong and offers something very unique to our customers.
Great. Okay. So our next question is going to come from Ken Wong from Guggenheim. Go ahead, Ken.
Great. Nice to
see you guys. Thank you guys for this event. I wanted to maybe touch a little bit on long term. We talked
a lot about products. You've got
a lot of interesting things in the queue for creative and for business solutions. But right now business solutions about 18% of collections. In your longer state model, where do you see that collections mix? Is it more evenly distributed? Is it more business solutions?
Would love your sense there. And then my follow-up just on POS, I'd love to get a sense for when you guys plan to go to market, what is the go to market strategy there? And is that something where you have to build out a sales force or can you guys kind of operate under your current environment?
Well, with regard to the first question, it's hard for me to provide you like the prediction how much it's going to be out of the revenue because it also really depends on how much the subscription is going to grow. But I think that what is important that they are growing in parallel, right? We spoke about the change of mix and how complementary it is to the subscription model that we have. I do believe that the portion of business solution, for example, next year is going to be higher than this year. And I think that it will continue like that.
Is it going to be 50%, 60% or 40%? I think that it's too soon to understand. Remember that we're also launching new products, like, for example, like the POS Facebook ads that we've launched. And so it has can have like really significant effect delivery, significant effect on the business solution. I think that at this stage, it's hard to determine how much it's going to be out of the overall top line.
Then to the POS question. So as David mentioned, we are kind of we've been piloting with some small group and we're going to extend that and start soft launching it. It's still a bit too early to determine exactly when it's going to be like a full blown VAS launch, but it's definitely going to happen sometime in 2021. At least, I think at the first stage, we don't really need sales force because we have so much opportunity. Avichai mentioned that before when he explained the potential of who can use the different kinds of point of sale that we're going to offer.
We have so many users that already are on the platform that might may benefit from it that I don't see us having to build a big, hefty sales force in order to go after that. We are going to and already are in the process of understanding the care and support methodologies that we want to pursue in order to do this right. But it's not going to be completely different to what we're already doing today.
Thanks, Ken. The next question is going to come from Brent Thill from Jefferies. Brent, go ahead.
Congrats on the new family members and new products. Leo, you mentioned the reinforcing business model between transactions and subscriptions. And I'm curious if you could give us a sense next year on the transactional side, how influential is that to the revenue? And over time, when you look at the percentage of your revenue mix from transactions from subscriptions, is there a goal that you'd like to see transactions So
I
So I'm going to start from actually from the second question because I think that it's important to understand the strategy that we have. We don't have like a target of gross margin of business solution and not either the portion out of revenue. I think that what is important is about the growth of it and that it's all incremental dollar to the free cash flow. Meaning that the way that I'm actually analyzing it, I'm looking at the free cash flow out of the creative subscription. Gross margin over there is really important.
I mentioned that it's going to be 80%. But there are so many complementary products that we can offer and already started to do that. Some of it is very low gross margin. But think about it, if you are able to bring $1,000,000,000 of top line with only 20% of profits, wouldn't you take it? So it's not about a target of how much it's going to be out of the total revenue.
Honestly, I don't know at this point of time. I do know that 2021, and this is going back to your question, is going to be higher than 2020. And I'm going to provide the guidance on February, but it's going to be higher mainly from, I think, two reasons. The first one, I think that payments, and you saw that by the gross margin that I indicated, payments are going to be much higher than 2020. I think that it's a great indication to the fact that also our customers are growing.
And the second thing is about our new offering, new products that we have just started.
All right. The next question is going to come from Nick Jones at Citi. I'm going to give him one second to join in. Nick, are you there? There you go.
Sorry.
I guess just I want to touch on Editor X a little bit. You commented on the 270,000 people building sites for other people. What are you hearing in terms of Editor X versus maybe the huge amount of themes in something like WordPress? How big of a pain point is design and being able to customize it versus going through a large library of solutions that maybe have something that doesn't really require active design work? Any color there would be great.
Thanks.
Yes. So I think that from what we notice is that you go to the agencies, they always do design. They never take something out of the box and just deploy it, right? They always go for the process of taking something and then customizing or what. And that's a huge pain.
Mostly the process would be that they use something like Adobe XD or Figma and then send that to a developer. Then the developer will try to code it. Then there is a cycle that goes like that. And then at some point, they can deploy it. And that would be on WordPress or some other platform.
And what we've seen is that by removing the cycle and this interaction and doing everything twice, we've created a huge benefit for them. So the reaction that we get, and most of the time, while we saw that Editor X is replacing WordPress, right? They were using that in the Flow Way, the WordPress platform. And we are seeing a lot of agencies that are moving, well, beginning a bit more suspiciously, right? They're moving 2 or 3 projects, and then they just very quickly are doing the majority of their projects.
And so we're seeing that again, there's another thing here, right, because when you build a WordPress site, you are never finished, right? You have a WordPress site. You put it let's say you put it on GoDaddy as Teri mentioned, right? So you build it with Figma or with one of Adobe XD. You have a developer that built it, then you took it and you host it in a hosting company.
And now what happened when one of the plug ins that you have has a security upgrade, right? And usually use like 12 of those. So every month, you have to do like 15 to 20 times, go in, upgrade it very quickly because if not, someone's going to hack into that website. Then you have to actively make sure that you delete all the garbage fuzz that's being created. Then he has to make sure that so there's always a lot of maintenance that goes into that after, which the agency has to spend a lot of effort to.
And they're responsible for the customer, They are responsible for the data, for the credit card, for the privacy. It's a lot of things to be responsible for. With Editor X, you don't have to think about any of those. It just happens. So this is the big one of the you have the flexibility of design, the no need to do this cycle, and then maintenance is super easy.
Those are the big benefits that we bring.
Thanks, Nick. I'm going to read another investor question here. When the pandemic hit in Q1, I'm sure you developed some initial points of view regarding how changes in user behavior would affect Wix's business. How have those points of view changed since Q1? And in other words, what has been most surprising to you over the past 6 months about the behavior of Wix customers?
I think that well, all of it surprised us, right? I was definitely not prepared to the pandemic. So I was surprised about all of it. I think it was the one thing we could have predicted from beginning is that e commerce will grow bigger, right? The traditional standard e commerce will just grow because people need to order products, right?
They need to order food. They need to order things. So restaurants and the e commerce was kind of like the obvious thing. But then things like online events started to grow, education becoming something that is really virtual, Fitness classes, psychologists, psychiatrists, all of those guys started to work online over Zoom, using Wix to actually manage all of their operation, some of them throwing events, right, big events, right, on Wix events. And the recovery on that was amazing because it kind of went like this.
Now it went like this, right? And then it just went up. And now it's back to where it was. But most of it is online. For me, it's amazing because I don't know how many online events you guys thought you're going to be participating in, which are not investor related stuff, right, during your life.
The list for me was very small, right, before the pandemic. You tell me how many shows of music you're going to go to see. Well, now what? And apparently, during the pandemic, we've seen that it's really, really common, right? And now it would become very common.
So for me, the innovation that people had and how to redo what they do in an online universe was just amazing and really surprising to see the power of that. And amazing to see that events is at the same place. Participation in classes is at the same place. And really, people that work with consulting, from fitness to psychologists, to business consultants, they're all we just migrated online. And for me, that's amazing.
Great. Okay. Our next question is going to come from Josh Beck from KeyBanc. Josh, go ahead.
Thank you all for doing this call. It's really helpful. Nice to take a step back and think through the milestones you've crossed this year, personally and professionally. But yes, so I wanted to maybe just unpack a little bit about how you're thinking about next year, because I think a top investor question is, we've seen this huge surge in digital acceleration, you've benefited from that, but you're really expecting that to continue into 2021. So I'm just curious, of these initiatives that you've spoken of, certainly what's happening with Editor X, what's happening with e commerce, what's happening with payments, how much of that is a factor into the guidance and the sustained strong growth as we think about next year?
Sure. So obviously, when we do the model, we take into consideration all kinds of options. Obviously, we said that after a few months now since this pandemic actually started, and we see it right now. We saw that in Q3. The way that we're actually looking at it, especially around Q3, because I think that Q2, you can say, okay, it was different, it's all started, it was booming.
But what about Q3? Many countries almost got to where they were before. I mean, people were going out and so on, and stores were open, but it still continues because the state of mind has changed. I think that and also the consumer behavior. I mean, we are ordering more online.
I don't believe that people would just stop ordering online. I think that they actually understand that it can save time for them, right? So to answer your question, I do believe that 2021 will continue, perhaps not at the same magnitude, but it will be very similar to what we are seeing in Q3. I don't think that it can actually start in Q1, boom, it will go down to where it were before. I think that we're already behind it.
Okay. Really helpful. And then just one other question on the cadence of gross margin. So payments strikes me as something that could rise through the year. And as it rises, I think you'd potentially see a commensurate pressure on the business solutions gross margin.
So is that the right way to think about maybe how to build that in through the year? And then on the Creative business, should we be thinking about gross margins maybe taking a step down because of some of the investments upfront and then maybe normalizing as we go through the year? Any color just as we build in these
I think that you described it perfectly well. I think that on the creative subscription, due to the investments that we do right now, so obviously, it has a little bit of pressure on the gross margin. Really, really fast it's going to be back because the increase in support that we need to do to train the people, we need to bring them on board, and it's also really hard right now due to the epidemic. But once they are in and start to contribute, you're going to see the gross margin going back to where it were before. The same goes for infrastructure, about security, about hosting and so on.
With regard to the payments, so yes, payments is going to be a bigger portion on 2021 out of the business solution. And this is why it has an impact on the gross margin. But we need to understand payments has kind of a cap limit in terms of the gross margin, right? Because I mentioned that many times before, about 2 thirds go to the credit card companies and 1 third go to us. But it's very important that actually you increase the gross margin based on scale.
So we are going to add more payment solution to our payment infrastructure in 2021. So we are going to be it's going to have a pressure at least at the very beginning until it's scaled up. But once we are there, it's the mathematics basically will win. So I do believe why I have a confidence why in the long term, I mean, this depends how you describe long term, but once the scale is up, we are going to be back to about 35%, even perhaps 40% of the gross margin from the business solution, unless we are going to see them a new product, but it's all good news.
All right. Our next question comes from Mark Mahaney from RBC.
Before Mark asked the question, I have a question for Mark. I remember that he promised the next time we are on the call, he's going to play us a guitar song. Yes. I remember that. Okay.
That was not guitar, but okay.
Okay. Nice to see you all 3 of you, Dheer, Akshay and Leonor. So two questions. 1, you haven't talked so much about sales and marketing. So you really leaned into sales and marketing this year and I think that's what's behind your top line collections outlook for next year.
How do you think about your sales and marketing intensity in 2021? And then secondly, I think Wix is becoming more and more crucial to a lot of individuals, enterprises, businesses, etcetera. COVID really kind of underscored, highlighted just how important digital presence and all its capabilities are. How does that make you think about pricing power any differently going into 'twenty one that you thought about it going into pre COVID? Thanks a lot.
So with regard to the sales and marketing, you're definitely not going to see the same growth in percentage that we had in 2020. But I think that the level of investments in marketing, I think, in dollars is actually going to continue just because of what I mentioned before about the new state of mind and our ability to generate the growth. Remember, we also have like many new products, which is all good stuff. And obviously, we need to invest more in marketing in order to make sure that we are can monetize on those products. Based on what I just said, I think that you should expect to see some leverage of the sales and marketing in 2021 compared to 2020.
I think the other part of your question, Mark, about the pricing. Again, I think, clearly 2020 was a year not while people are under duress and that wasn't the time to consider pricing changes. But this is definitely something that we'll keep on considering and testing in the future. We do believe that part of going and working with bigger brands, bigger clients also opens up some opportunity to think about what kind of offering these people might have. It's a little bit too early for us to share anything about that, but you can rest assured this is something we're thinking about.
I think that it's obvious. You saw some of the customers. It's obvious that we're leaving money on the table, right? That a lot of them would have paid a lot more for the website. And we need to be able to create the packaging for that.
And this is something that we're thinking about. And how to make the enterprise offering that will fit what we're doing.
Makes a lot of sense. I hope to see you all in 2021.
Yes,
please.
All
right. Unfortunately, I think that's all that we have time for today. Nir, Avishai, Lior, any last words before we part ways?
It was a crazy year and exciting and crazy. And there's a Chinese thing, right? I mean, you were in a boring time or something like that, but interesting time. And so hopefully, late next year will be a lot more boring for all of us, less pandemic, more safe and still great for business.
And we want to try and meet you face to face. We prefer the human touch rather than the remote Zoom like.
And yes, absolutely, we'll be very happy to have a chance to meet everybody in person next year. Many thanks for the trust and for being with us for so long. Thank you, guys.
Thank you.
Great. Thanks, everybody. We'll be posting a replay of this and the slides on our IR website shortly. Thanks, everyone. Have a great day.