As tech rate is increasing, we are able to generate more margins out of transaction revenue. I believe that this is something that will continue also next year and will drive gross margin up again next year.
Andrew Boone: Thank you.
Lior Shemesh: The question was just about the gross margin or the overall profitability, for example, the operating expenses?
Andrew Boone: I was going to keep it to gross profit margin. I’ll let somebody else go and ask that off. Thank you.
Operator: Standby for our next question. Our next question comes from Chris Zhang with UBS. Chris, please go ahead with your question.
Chris Zhang: Hey, good morning. Thanks for taking our question. So I have the first question regarding the marketing expense this year. You lowered the guide for the market expense by about 200 points as a percentage of revenue. Can you maybe unpack the drivers of the reduction? How much from the more direct response channels, how much from the partner spend that you previously expect to go up. And also, can you talk about the return environment right now on the acquisition marketing as a lot of competitors mentioned leaning more into the more direct channel versus the partner spend?
Nir Zohar: Hey, Chris, it’s Nir. I think I’ll kick this off and we all can go into maybe a little more of the financial aspects if needed. But generally, already last year, we communicated our change in marketing strategies, strategy that worked extremely well for us. We leveraged the strength of our brand against buying traffic, understanding that we can get better our lives simply because the brand is compensating because it’s strengthened so much throughout the last few years. Throughout this year, we communicated continuing this strategy, but also basically deploying a lot of marketing dollars towards the release and the launch of Wix Studio. Now, we explained and we put most of that spend in the second half of the year.
But if you remember, when we shared the, kind of, the cadence of the release of Wix Studio, Q3 was about, mainly about an internal launch. So we were launching to our existing partners and therefore we didn’t need to spend and to use most of the marketing budget. So the plan was always to put more of it to use in Q4. Even Q3, by the way, within the plan of the internal plan, we managed to create some savings, which was great. But the goal was to put more of it towards Q4. That being said, looking at the first few weeks of the launch of Studio, the adoption is fantastic. It’s higher than we even expected. So we believe that the actual deployment of the marketing dollars will be done more gradually between Q4 and heading into 2024.
Chris Zhang: That’s super helpful. I guess if you can also comment on the return environment, and I think that’s also kind of related to the self-creators, the grocery adaptory and how you’re thinking about probably just putting some dollars in or incremental dollars in the acquisition marketing?
Nir Zohar: So, with regard to the self-creators, there is not much of a change from the last quarter. The thing that we showed that the changes that we’ve made is consistent and stable. We managed to generate, obviously, the same amount of collection with less investments in marketing. And I think that it’s great to see that these strategies are actually working due to the fact that the brand becomes much, much stronger. Right now, the return obviously has changed dramatically when compared to the beginning of last year, [with strength] (ph) at less than one quarter. I believe that when we see the strength of our brand, we believe that this is something that can continue and sustain also over the next couple of years. So we do not see any significant change over there for self-creatives.
Chris Zhang: Thank you very much.
Operator: Standby for our next question. Our next question comes from Bernie McTernan of Needham and Company. Bernie, please go ahead with your question.
Bernie McTernan: Great, thanks for taking the questions. And just reiterating, thoughts and prayers with you guys and the Wix team. Maybe just on self-creator, talking about getting back to double-digit growth, how much of that can you control versus waiting on the macro? Anything that you can call it technology or maybe even just marketing wise to — that you control to get that growth back to double digits?
Nir Zohar: Hey Bernie, it’s Nir. So I think on the self-creators, obviously macro environment is something we cannot control and we don’t anticipate to control. But we do believe that a lot of our product innovation is towards generating that growth in any environment. And obviously, if there’s a recovery, that can be even a plus to that growth. From what we’ve seen already, first and foremost, I think that the AI innovation that we are aiming for, and I wish I just explained how does the AI drive convergence and yet this is the first milestone or a first part of a much deeper and wide product around AI and the creation for self-creators that we plan. Obviously, that improvement in conversion can be a big driver for growth. And marketing is something that follows products.
So if the conversion improves, then obviously we can consider what more we want to do in terms of the marketing towards self-creators. But from that standpoint alone, we think there’s a significant potential for growth. The other side of it is the business solution. The business solution, although they’re growing much faster on the partner side, they are also growing significantly on the self-creator side. And we’ve seen that both on the side of GPV and growth and adoption of selling and e-commerce platforms, whether it’s stores or scheduling or restaurants or hotels or events and we have a very wide variety which is part of — big part of our strength. So the GPV growth is definitely a driver there as well as other solutions that are more business solutions, email marketing, Google advertising, et cetera.
So our belief is yes, we can drive it. That’s in our control, and hopefully recovery will come on top of it.
Bernie McTernan: Understood. And then just to follow up on Wix Studios, I know it’s really early days, but adoption higher than expected. Anything you can comment just in terms of like tangibly what you’re seeing, whether it’s the partners being more efficient or you think you’re taking share of their workload? Would love just to get some more tangibles in terms of just like exactly what’s happening as the adoption occurs of Wix Studios.
Avishai Abrahami: Well, I think that there is a variety. There are many different kinds of partners that are using Wix Studio. And I think that when you look at more of the freelancers or the people that do it part-time, then it is just a more familiar user interface. It is very similar to a lot of design software. So traditional design software, you see how to use that, it’s very easy for you to adapt to Wix Studio. And then because of the power of the AI tools, you can create very strong, very professional websites because the AI will continue and finish for you the thing that would normally require you to specialize in different variations of web designs. In the case of the more professional companies, what we’re seeing is that the way we built it is that it enables you to finish things very quickly in kind of a sketch mode and then take that sketch mode and make it into a real live website, while having the ability to go really below the hood into the CSS, into the code and change it to the exact specification that you want.
What it means is that overall in terms of operation, you save a tremendous amount of time, you can do things that before that would require to hire very expensive people to do the specific things. And then, so the overall thing, right, is the increased efficiency while even going into making better projects. So we’re seeing different values, different kinds of partners, of course.
Operator: Stand by for our next question. Our next question comes from Ken Wong with Oppenheimer & Company. Ken, go ahead with your question.
Ken Wong: Thank you for taking my question. Avishai, I wanted to touch on the Intuit Mailchimp agreement. I think the earlier press releases seemed to lean largely towards utilizing their CRM, their marketing tools. You mentioned it’s a bilateral agreement. Can you help us understand kind of how much of a commitment there is to potentially using the Wix website builder. And then just following up on the shift to kind of shorter duration B2B deal, I mean, should we assume the same level of exclusivity with these partners going forward? Any comments on those two would be great.
Nir Zohar: Hey, Ken, it’s Nir. I’ll tackle the first Intuit question and then hand it over to Lior. So I think in terms of what we intend to do together on the Mailchimp side and maybe other functions on the Intuit portfolio, first, I think what’s very interesting for us is from the conversations we’ve had with their fantastic team over the last few quarters, it’s very clear that there’s a lot of overlap in terms of the profile of the Wix users and the Intuits users, but very little overlap in terms of the offering, meaning that we are complementing each other in many ways in many different places. The idea for us is to map these places and start hooking up the user flow in a way that will be as seamless as possible for the end customer but will be able to deliver the core values of Wix and the core value of Intuit, of Mailchimp to the best possible way and the best possible experience for the end customer.
