This is part IV in our series on SMB website builders. See the whole series here.
As the latest move in the SMB website wars, WordPress-centric Automattic last week raised a $300 million in funding from Salesforce’s strategic venture arm, Salesforce Ventures. This gives Automattic a post-money valuation of $3 billion and brings lots of implications for its continued expansion.
Before we get into that, it’s worth first level-setting on what the Automattic is, as this often causes confusion. The WordPress platform (WordPress.org) is the most prevalent publishing and content management software on the web, running a whopping 30 percent of all websites.
At its core is a simple website builder and publishing tool, but it’s infinitely expandable as a content management system with tens of thousands of plugins. This has enabled it to reach the above penetration figures, as it’s broadly applicable to different businesses — everything from roofers to Recode.
Meanwhile, Automattic sits at the center of the WordPress universe. As an open platform, WordPress.org has no owner, but Automattic runs WordPress.com, the biggest onboarding source for WordPress website creation and hosting. It also influences the WordPress “core” as part of the WordPress Foundation.
With that definitional backdrop, what does Automattic’s hefty cash infusion mean? First, it positions the company to gain financial leverage on its recent Tumblr and ZBS acquisitions, and future ones. These moves align with a trend we’re tracking around “one-stop-shop” feature expansion for website builders.
It’s all about working towards more revenue per user (ARPU) as well as greater lock-in effect, which is pursuant to another key metric: lifetime value (LTV). As we examine recently for GoDaddy and Constant Contact, having a broader range of services creates more tentacles into SMB operations.
Further supporting the move to a broader range of services, SMBs prefer one-stop-shop vendors over a patchwork of features that they separately procure. LSA’s Modern Commerce Monitor indicates that 79 percent of SMBs want one uber-vendor, while 38 percent actually do. That gap signals opportunity.
Most of the above is speculation in terms of how Automattic’s continued expansion is tied to this cash infusion. But it’s likely that some of the money is earmarked for paying down debt from recent acquisitions or elbow room for more. As we wrote recently, analytics and SEO could be its next acquisition target.
Beyond funding past and future acquisitions, it’s also about scaling up to current operational levels. In 2014, Automattic had between 200 and 300 employees according to TechCrunch. Fast-forwarding to the present, it will have 1,200 employees by the time the Tumblr acquisition closes. That’s a lot of paychecks.
What’s the Best SMB Website Builder? Part III: Go Daddy Expands
Another key implication is in the source of funding. Salesforce Ventures is a strategic venture arm, meaning its intentions go beyond just financial. As we examine in an upcoming report, Salesforce could be a sleeping giant in SMB SaaS, and continues to add functionality for a comprehensive operational bundle.
Salesforce is also famously acquisitive, but its purchase range is generally in the tens or hundreds of $millions (Tableau and Mulesoft notwithstanding). Automattic’s valuation is, again, around $3 billion. Either way, the investment outcome could be more website building/hosting integration into Salesforce’s suite.
Speaking of dollar amounts, it’s worth noting that this is a rare round for Automattic. In its 15-year history, it’s largest round was a $160 million Series C which was more than five years ago. This uncharacteristic move signals us that a growth spurt — including more acquisitions as hinted above — could be imminent.
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