I’ve read the transcript of the WIX Q4 conference call, and wanted to highlight the last question that was asked, which I will edit for brevity:
Lloyd Walmsley – Deutsche Bank – Analyst
And then taking a step back, I guess, why shouldn’t we be concerned that the pivot to focus on higher value plans is essentially an indication that the market opportunity is just smaller than we thought on the low end? Why can’t you attack the higher-value customers without continuing to offer some of the lower-price plans and kind of attack both?
Avishai Abrahami – Chief Executive Officer and Co-Founder
So why – the question was, why we can’t get more advanced user while keeping with lower pricing point? So the thing is that it’s all about – the way we look at it is about branding, right. The base of the lower pricing point was adding the banners [ie, ads] on our users’ websites. And in this kind of branding, having websites of Wix with banners on top of them that make them looks a lot less stunning, right, just didn’t fit.
In short, WIX prefers a good visual with no branding/ads over a larger customer base, and is eliminating the lowest price tier altogether. Here are a few random thoughts and findings as to why that might not be a good idea:
- From a Digital Advertising Alliance (DAA) survey, people prefer ads when it lowers the price…
The vast majority of respondents (85 percent) said they would prefer to have today’s ad-supported Internet where most content is free, rather than a paid Internet where everything costs money because there is no advertising (15 percent).
“This survey shines a spotlight on the critical role that ad-supported content and services play, and it underscores the importance in providing meaningful, accountable consumer choice for interest-based advertising to help fund that ecosystem”? said?Lou Mastria, Executive Director of the DAA.
(https://medium.com/thoughts-on-media/would-you-rather-have-a…)
- Hulu admits this too:
Starting next month, the streaming service is reducing the monthly price for its basic, limited-commercial plan by $2, to $5.99 a month. The ad-free plan will remain $11.99 a month, which means it will now cost double the price of Hulu’s basic plan to watch its content without commercials. When Hulu has tried $5.99 promotions in the past, the company has seen higher engagement and retention among subscribers at that price point.
https://www.adweek.com/tv-video/hulu-drops-its-limited-ads-m…
- The Atlanta Falcons famously LOWERED concession prices in 2017, and saw an INCREASE in overall customer spend:
Steve Cannon, CEO of the AMB Group, Blank’s holding company, told ESPN that although food and beverage prices were 50 percent lower [than] the previous year, fans spent 16 percent more. Because fans weren’t deterred by the concession prices, Cannon said that, on average, 6,000 more fans walked through the gates two hours before the game, which meant more time to sell food and drink…merchandise sales were also up 88 percent.
“There’s a huge value in delighting your fan base, to make them as happy as they could possibly be,” Cannon said. “We started with one of the biggest pain points and it paid off.”
http://www.espn.com/nfl/story/_/id/22212592/atlanta-falcons-…
- When I was a teenager, I worked at McDonalds. Every Sunday was 39 cent cheeseburger day. Perhaps some of you remember that advertising campaign? Monday through Saturday, we hardly sold any cheeseburgers and traffic was only heavy during meal times. Come Sunday however, the line was out the door from lunch time to close. Sure the company didn’t make much money on 39 cent cheeseburgers, but it brought a wave of customers to the store who now had the opportunity to purchase anything else off the regular priced menu that otherwise might not have gone to McDonalds at all that day.
In summary of all this, its not surprising to see 2019 revenue growth being guided lower.
Brandon