Each year, the number of people connected to the internet via desktop and mobile devices has increased, leading to more time and money spent online. To take advantage of this global trend, businesses and independent creators rapidly evolve how they engage with consumers.
Trends such as the rising importance of online presence for businesses, deeper adoption of online commerce, enhanced focus on direct-to-customer relationships, and preference for DIY solutions have made it necessary for companies to have a solid online presence.
Prioritizing ease of use and convenience with a consistent and high-quality experience across online channels, digitally-native businesses are growing nearly three times as fast as the average e-commerce retailer, according to Digital Commerce 360.
Squarespace, started in 2004 by Anthony Casalena, is on a mission to enable millions to build a brand and transact with their customers in an impactful and beautiful online presence.
Squarespace went public in May’21 at a valuation of $6.6bn. In this story, we will focus on how Squarespace works and makes money, along with diving deep into its business model.
What is Squarespace? How does Squarespace work?
Consumer behavior continues to evolve rapidly with changes in the internet and technology, and the amount of time and money consumers spend online is accelerating.
Businesses and independent creators need a way to quickly and cost-effectively develop an impactful, professional-quality presence that enables them to transact directly with their customer base.
Squarespace, Inc. is an American website building and hosting company based in New York City, USA. It provides software as a service for website building and hosting and allows users to use pre-built website templates and drag-and-drop elements to create and modify webpages.
Squarespace works by offering websites, domains, e-commerce tools for managing a social media presence, marketing tools, and scheduling capabilities to empower brands to differentiate themselves with a beautiful and effective online presence.
The Squarespace platform brings together three primary pillars of functionality to create a unified, all-in-one platform to help customers grow:
Presence: Squarespace’s intuitive design tools create a professional-quality, mobile and desktop-friendly website, acquire a domain, and have a differentiated social media presence.
Commerce: Through its comprehensive commerce solutions, Squarespace provides its customers with everything they need to sell physical products, subscriptions, content, or services online, eliminating the need for third-party tools.
Marketing: Squarespace provides brands with robust, integrated marketing solutions, such as Email Campaigns, customer relationship management functionality, SEO, and analytics tools to help them better understand and target their audiences while driving traffic, sales and conversion.
The way Squarespace works demonstrates that it is an engineering and design-led SaaS company that features modern architecture, scalable delivery platforms, and secure solutions.
The Squarespace platform works for customers just getting started and large brands that need scale, flexibility, and reliability. Squarespace customers span various industries and use cases, from SMBs and independent creators, such as restaurants, photographers, wedding planners, artists, musicians, and bloggers, to iconic brands.
As of December 31, 2021, Squarespace had 4.1 million individual subscriptions to its platform.
How does Squarespace make money? What is Squarespace’s business model?
Squarespace has become a go-to premium offering for online presence and commerce with its comprehensive, integrated platform that provides a unified experience to its customers. The fundamental tenets of its platform and its three critical value propositions are:
Beautiful Design, Consistent Everywhere: Squarespace’s beautifully-designed templates enable customers to look professional from the start while also providing deep levels of customization. This empowers customers to stand out and express their story and brand in a beautiful, engaging, and consistent way across digital channels, including websites, social media, and Email Campaigns.
Sell Anything: Squarespace’s commerce solution supports a diverse set of business models, allowing customers to sell physical products, subscriptions, content, and services within the same platform.
All-in-One Platform: Squarespace’s platform offers businesses and independent creators everything they need to build and manage their online presence and commerce across devices and social media.
Squarespace’s fully-integrated SaaS-based content management solution combines a website builder, a commerce solution, a social company and blogging infrastructure, a hosting service, a domain name registrar, marketing tools, and differentiated analytics across digital channels.
This comprehensive approach enables customers to analyze data across solutions to understand their audience and drive higher traffic, sales and conversion through a single interface.
Platform and Products
Squarespace’s platform combines a comprehensive set of solutions across presence, commerce, and marketing for businesses and independent creators to build a beautiful online presence, grow their brands, and manage their businesses across customer touchpoints. Let’s understand how each product of Squarespace works.
1st Offering: Presence
- Websites: We offer a comprehensive set of award-winning website templates created by our world-class designers. Our simple and intuitive drag-and-drop solutions enable our customers to build flexible, relevant, and easy-to-customize pages with sections designed to help bring their ideas to life quickly and beautifully.
- Domains: Squarespace offers domains, including the latest top-level domains. Our domain management tools allow customers to do everything from editing their DNS records to forwarding their URLs.
- Social (Unfold): With elevated design collections and intuitive photo and video editing, Unfold helps users create expert-looking stories for social media. Unfold also enables businesses to create and manage brand assets on social platforms from a single place and allows stories to be shared on the web.
2nd Offering: Commerce
- Commerce: Squarespace offers deep e-commerce functionality in our integrated platform without needing third-party tools or integrations. Our commerce functionality includes inventory management, product merchandising, customer relationship management, customized purchase confirmation emails, product promotions, gift cards, selling on Instagram, and more.
- Scheduling: Squarespace Scheduling enables businesses to share availability and take bookings for appointments and classes. Scheduling integrates with the most popular calendars and video conference tools and includes customizable communications for appointment confirmations, reminders, follow-ups, and intake forms. Consumers can pay online or reschedule appointments with a click, all in one place.
- Member Areas: Our customers can create exclusive members-only content and fully control how to charge for access. Member Areas enable many additional commerce use cases, including virtual classes, private podcasts, and paid newsletters as an add-on subscription.
3rd Offering: Marketing
- Email Campaigns: Customers can amplify their message and make personal connections with their customers through our Email Campaigns product. Customers can seamlessly use and manage contact lists and drop content and products from their sites into Email Campaigns, giving them quick access to content and keeping their brand consistent between the web and email.
- SEO: Every Squarespace website and online store is optimized to be indexed and found online, with integrated features and guides that help maximize prominence among search results. Squarespace was the first website builder to integrate directly with Google Search Console, giving our customers a view into how they are being seen and found on Google.
- Analytics: Squarespace provides its users with a custom analytics solution that incorporates data from the website, commerce, and email solutions into a single view for its customers, eliminating the need for multiple third-party tools.
Squarespace employs a complete life cycle marketing plan that utilizes a mix of channels to highlight the power of an all-in-one platform and increase awareness of its unique values. These channels include:
Brand: Squarespace’s marketing efforts are designed to target core customers at every potential entry point to its platform, from domains to social presence, online stores, and enterprise. Squarespace showcases its brand creatively and memorably through strategic partnerships that increase customer affinity.
Direct Response: Squarespace’s in-house programmatic buying team actively seeks out high-growth channels such as Instagram and Pinterest to garner extensive reach of potential customers who value design and aesthetics when building their online presence. Squarespace also works closely with numerous Podcast hosts and YouTube creators to authentically share its product and brand story.
CRM and Content: Any marketing efforts are useless until they convert users to paid users. Squarespace’s strategy is to support its customers as they grow their businesses and inform existing customers of the latest features and platform updates to drive the adoption of solutions they may not be already subscribed to.
Squarespace achieves this through webinars, video tutorials, and customer Q&As with tips and tricks for customers to be successful entrepreneurs and get the most out of their Squarespace subscriptions by sharing its full platform capabilities.
Revenue Model: How does Squarespace make money?
Squarespace primarily makes money from monthly and annual subscriptions. Revenue is also derived from non-subscription services, including fixed fees earned on revenue share arrangements with third parties and fixed transaction fees on sales made through our customers’ websites.
Squarespace made $784 Mn of revenue through two product segments: Presence and Commerce. Let’s see how Squarespace makes money through each product stream.
Presence: Presence revenue primarily consists of fixed-fee subscriptions to the Company’s plans that offer core platform functionalities, currently branded “Personal” and “Business” plans. The presence segment contributed to ~70% of the money Squarespace made in 2021.
Presence revenue also consists of fixed-fee subscriptions related to additional entry points for starting online such as domain-managed services and social media stories. Additionally, presence revenue is derived from third-party solutions related to email services and access to third-party content to enhance online presence.
Commerce: Commerce revenue primarily consists of fixed-fee subscriptions to the Company’s plans that offer all the features of presence plans and additional features that support end-to-end commerce transactions, currently branded “Basic” and “Advanced” plans.
Commerce revenue also includes fixed-fee subscriptions to several other tools that support running an online business, such as marketing, member areas, scheduling, and hospitality tools.
Non-subscription revenue is derived from fixed fees earned on revenue share arrangements with commerce partners and fixed transaction fees made on GMV processed through Business plan sites and specific hospitality offerings.
Commerce revenue also includes payment processing fees for the Company’s hospitality services. The commerce segment contributed to ~30% of the money Squarespace made in 2021.
Squarespace believes there is a meaningful opportunity to empower individuals and businesses to succeed by providing several offerings, including web presence, commerce, and marketing. Based on data from Intuit, as of 2020, there are an estimated 800 million SMBs and self-employed ventures worldwide.
According to Barclays research, the global web tools total addressable market is approximately $350 billion based on the addressable markets of traditional web tools plus inventory management, pick-pack-ship and third-party logistics, Point of Sale devices and integration, accounting, tax, human resources, information technology ticketing, and other software solutions.
With such a vast opportunity and a solid brand name at disposal, the sky is the limit for Squarespace.