M&A activity in the website world continues to pick up. The latest is Wix’s quiet but notable acquisition of Websplanet. Though unannounced thus far, we’re hearing industry chatter and seeing telling title changes on LinkedIn, suggesting it’s a done deal.
Without announcement details to work with, we’ll make a few speculations under the banner of analyst license. Through that lens, this is a logical move in that Websplanet’s flagship Cosmos platform empowers SMB-focused digital service providers to bundle and deliver several products in one dashboard.
This can be a survival imperative for selling to SMBs as simplicity and intuitive UX are critical. More integration of several features also makes sense when a software provider’s suite continues to expand. And that’s certainly the case with Wix, as it is throughout the website-builder sector.
As we’ve examined, the sector is seeing lots of M&A and feature expansion to broaden SMB offerings. That includes Automattic’s new content monetization tools and GoDaddy going deeper on marketing and social tools. There’s also movement in the other direction with Constant Contact launching websites.
The thought is that a larger bundle boosts revenue per user, retention and lifetime value. It’s all about having more tentacles that reach into business operations, thus anchoring a given vendor in SMB marketing support. That can engender a lock-in effect, pursuant to the all-important recurring revenue.
Back to Websplanet, its software gains value with the above trends in that it integrates and unifies diverse and expanding software bundles. So if the website world is indeed moving towards a broader bundle, tools like Websplanet can provide an organizational layer to simplify things for SMBs.
The news also aligns with our prediction that we’ll continue to see lots of M&A activity in the SMB website sector. As we wrote in December:
Website Builders Continue to Broaden Functionality: As the website sector in general matures, there’s less growth so competition intensifies for market share. The result is a spate of moves in the past six months to beef up their bundle of services with more functionality to attract customers and reduce churn. This has ratcheted up as website builders like GoDaddy, Automattic and others are rapidly expanding (though building and buying) to offer marketing and promotion, in addition to the core “presence” functionality of websites. That will continue into 2020, with feature expansion that most prominently includes email marketing, SEO and CRM.
We expect more M&A in the website builder space later in the year, though activity could be tempered to some degree in the near term by shaken investor confidence in the current uncertain state of the world. We’ll report back more as we hear more about Wix’s investment drivers and other strategic takeaways.