Yesterday, Shopify, the e-commerce website building platform, filed for an IPO.
A couple of months ago we covered the website platform industry and saw that it was growing fast, but some of the Shopify numbers were still shocking.
In particular, Shopify revealed that they spent nearly $46 million dollars on marketing in 2014. That's about equal to their entire revenue in 2013!
I decided to take a closer look at the marketing budgets of these website services.
Here's Techcrunch on Shopify's revenues last year:
"The company has full-year, 2014 revenue of $105.01 million, on which it lost $22.31 million."
Let's compare their revenues to their marketing budget. On page 10 of their IPO filing you'll see they spent $45,929,000 on marketing. So, Shopify budgeted 43% of their revenues for marketing in 2014.
Squarespace actually boasted about their marketing budget in press releases from 2014:
"Our marketing budget for the year is $40 million"
A large chunk of that budget went on SuperBowl ads which were $4.5 million each.
Their revenues are private, but a couple of years ago they only had revenues of $17 million. They raised $40 million from outside investments and spent almost everything on marketing.
Oh, and their plan for 2015 is to spend $60 million on marketing. Hiring Jeff Bridges as their pitchman certainly wasn't cheap.
According to their public filings, Wix spent $53,776,000 on "Selling and marketing" in 2013.
That sounds like a lot, but Wix say they increased the marketing budget by 80% in 2014, which would take them close to $100 million.
They may see another major increase in 2015 because they ran their first SuperBowl ads, featuring Brett Favre.
The 3 companies listed here are on course to spend well over $200 million on marketing in 2015.
In total, the 3 companies had revenues $141 million (Wix), $105 million (Shopify) and perhaps around $100 million (Squarespace), although they don't disclose their numbers.
These 3 companies, making about $350 million, are spending far over 50% of their budgets on marketing this year. In comparison, according to Gartner, the average company spend only 10.2% of their budget on marketing.
And, we haven't even started to total the spending by GoDaddy, Web.com, Weebly and others in this space.
Websites platforms are becoming a very competitive market.