Wix.Com Ltd (WIX) 2013 Q4 法說會逐字稿

Greetings and welcome to the Wix.com Ltd. fourth-quarter and full-year financial results conference call. A copy of management's prepared remarks have been posted to the Company's investor relations website. At this time all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded.

It is now my pleasure to introduce your host Miss Maya Hagoel, Director of Investor Relations for Wix.com. Thank you Miss, you may now begin.

Good morning, I'd like to welcome everyone to today's call to discuss Wix's fourth-quarter and full-year financial results. Joining us from management are Avishai Abrahami, cofounder, CEO and Chairman; Nir Zohar, President and COO; and Lior Shemesh, CFO. After management's prepared remarks we'll open the call up to questions.

Before we begin, I would like to remind everyone that during the course of this conference call management may make forward-looking statements which are subject to various risks and uncertainties that could cause actual results to differ materially from our current expectations. A detailed discussion of such risks and uncertainties is contained in our financial perspectives related to our initial public offering filed with the Securities and Exchange Commission on November 7, 2013. Forward-looking statements made during this conference call speak only as of today's date and the Company undertakes no obligation to update them to reflect subsequent events or circumstances.

I would like to remind you that during the course of this conference call we will discuss some non-GAAP measures in talking about the Company's performance. Reconciliations to the most comparable GAAP financial measures are provided in the tables in our press release. Unless noted otherwise, all comparisons are versus the prior-year period.

This conference call is also being broadcast on the Internet and is available through the investor relations section of Wix's website. Additionally we have posted to our investors relations site a supplemental data sheet containing additional financial information for comparison purposes to prior periods, along with a slide presentation reviewing fourth-quarter and full-year results.

So with these formalities out of the way, I'd like to turn the call over to cofounder, CEO and Chairman, Avishai Abrahami.

Thanks, Maya, and thanks everyone for joining us today to discuss our 2013 fourth-quarter and full-year result. 2013 was a tremendous year for Wix as our investment in leading-edge technology and products continued to generate growth in collection, revenues, subscription and users. We also continue our investment in marketing to build a greater awareness of Wix and accelerate our R&D hiring plan to position Wix for sustained long-term growth.

We capped off 2013 with a fourth-quarter performance that was our strongest quarter to date. Collection in the fourth quarter grew 82% to $30.6 million from the same period last year and improved 17% over the third quarter of 2013. Revenues in the fourth quarter grew 88% to $24.9 million from the same period last year and increased 16% from the third quarter of 2013.

The number of premium subscriptions increased 68% from previous year to 790,000 and was approximately 12% from the third quarter 2013.

Overall registered users increased 49% to 42 million, up from 28 million at the end of 2012 and grew 9% from the third quarter of 2013, as we continue to accelerate our marketing spend and build strong pipeline for future subscriptions.

This outstanding growth demonstrates the strength of our technology and product as more and more users choose Wix to build and maintain their online presence. I would like to highlight two positive changes that we [entered 2013].

First, following our successful IPO we were able to accelerate the hiring of engineers and developers faster than we projected. Hiring high-caliber R&D talent is a major challenge faced by all software companies, and we are now a quarter ahead of our clients.

Second, because of increased brand exposure following our IPO and improvements to our products, we see significant opportunity to increase our marketing effort and acquire users and subscription in the same efficiency as we have in recent quarters. Both of these changes will allow us to increase our long-term growth and Nir and Lior will discuss impact to our P&L later in the call as we provide guidance for 2014.

As this is our first call as a public company, I'd like to start by talking about who we are and the unique value proposition we are providing our user as we enable them to create professional online presence. I will also discuss our strategic priorities for 2014. After that, Nir, our President and COO, will talk about our freemium business model and the execution of our growth strategies. Lastly, Lior, our CFO, will review our financial results and outlook for 2014.

Wix is a market leader in web development and management, and the platform of choice for over 42 million users in 190 countries around the world. Our user rates continue to grow by 1 million users per month. As more and more businesses, organizations, professionals and individuals start to create, build, manage and fully integrate and dynamic content, online presence.

We founded Wix to simplify the web creation process for everyone. Our cloud-based solution enables anyone from complete beginners to professional designers to create and maintain a beautiful and professional online presence at an affordable price. We've since developed our product portfolio beyond website creation into an all-inclusive platform that lets anyone run their entire business online and on mobile, also on the Wix cloud.

Our software is used by individuals, organizations, small businesses and large enterprises. In almost any business vertical of any size from musicians, designers, and the local pizza parlor or nail salon, all the way to Fortune 500 companies. We help them all run their business online while maintaining the unique branding and vision they desired.

At the core, Wix is a drag-and-drop software for editing HTML 5 and creating website in a professional and fully customized way. Wix takes care of the backend such as CMS, CDN, SCO solutions, so our users can focus on taking their own unique vision and build it into the Internet without having to hustle with all the complex technology behind it.

Because we are a software technology company, developers represent 50% of our total headcount. This is unique in comparison to other players in the market with employee bases largely made of salespeople. This approach has allowed us to innovate faster, develop better products and deploy them faster than anyone in the market.

In October, we released our new mobile solution which is also based on HTML 5. Wix Mobile automatically converts all of the website designs and content into a mobile-optimized version designed to suit numerous screen sizes and devices. Users can customize and fine tune their mobile site while leaving the full-size desktop version of their website unchanged.

Since the October launch, Wix users have created over 780,000 mobile sites, for a total of over 1.6 million sites created for the Wix platform to date. Based on publicly available information and as far as we know, Wix is by far the fastest global mobile site builder in the world.

To let our customers fully manage their business to work for on Wix, we created the Wix app market. For the Wix app market, user can seamlessly integrate apps such as social feeds, scheduling capability, CRM, marketing obligations and more into their site with just one click.

Our apps are carefully selected and developed to meet our users' needs regardless of the type of business. Apps are developed in-house and by our partners, which includes small individual developers and all the way up to large companies like Google. Users can currently choose from over 170 free and paid apps today and we have dozens more in the pipeline to further enhance our users' online presence.

We'll continue to drive increased adoption of apps by users since the app market launch in 2012. We have had nearly 8 million app installations and over 90,000 apps purchases. This offering provides significant strategic value, since we provide Wix users with constantly growing set of advanced capability and functionality to create and manage their business online in their own unique way.

As we enter 2014, we could not be more excited about our momentum and opportunities ahead of us. Let me quickly discuss the areas where we plan to focus.

First, we will continue to invest dollars in marketing and our products and our brand on a global basis to grow our user base and premium subscription. This investment will include online marketing as well as new off-line channels such as TV and radio.

While we have users in nearly every country worldwide today, we see the opportunity to take a large share of the online population. We will increase marketing to expand our reach into new geographies such as Latin America, parts of Europe and Russia.

Second, the hiring of new developers for running the IPO, we plan to further accelerate our core products offering by improving design capabilities, developing new templates, and adding new languages. We're also working on a couple of really amazing things for mobile that you will see in the near future.

Finally, we are going to continue building the Wix app market including the addition of many more new applications mostly for partners. But even more this year we will continue to develop the technology behind the app market to create an even better integration of business processes and workflow management.

We're very proud of our growth over the last 12 months, and we will continue to push forward in 2014 growing our users' base, expanding our global presence and improving the Wix platform with more cutting edge technology and advanced features and innovative products.

And now I'd like to turn the call over to Nir. Nir?

Thank you, Avishai, and let me add my welcome to all of you on today's call. I will briefly walk you through our business model, discuss our market opportunity and then close with discussing how we will execute our strategies to capture this opportunity.

Our business is based on a freemium model, allowing users to create and maintain a digital presence for as long as they want for free. Whenever they are ready, users can upgrade to one of our annual or monthly premium subscription packages and benefit from additional features, such as the use of their own domain, the removal of Wix branding, access to e-commerce solutions and premium support and more.

While many users upgrade to premium subscriptions the weeks and months following their initial registration, others stay with our free product for some time while building their business or brand and later upgrade to a premium subscription as their needs evolve. These needs will benefit from a large and growing pipeline of free users that is virtually converted to paid subscriptions over time.

The tail of this pipeline is very long. In fact, we're still seeing users that initially registered with us as far back as 2008 convert to premium subscriptions today.

Further, even though new cohorts are larger today than in the past, we see that the cohort behavior is consistent. The number of users that convert to a paid subscription in each cohort has also been consistent over time. This predictable behavior provides us with a great deal of visibility into our performance, which is a significant benefit of our model.

Now I would like to spend a few minutes discussing our market opportunity and how we plan to execute on our growth strategies moving forward. As Avishai noted, we appeal to a broad range of users including individuals, professionals, organizations and businesses. This presents us with a significant market opportunity that is still in its early stages of development.

In looking just at the SMB market for example, 75% of SMBs globally don't have an online presence today. As SMBs increasingly recognize the importance of establishing and maintaining a compelling online presence, both on desktop and mobile devices as well as their ability to manage their workflow online, this creates a large opportunity for Wix.

Now, let me discuss how we'll capture this opportunity. First, marketing. We continue to employ zero salespeople and benefit from very strong viral marketing effect.

Subscriptions purchased by users that found Wix through free sources of traffic, such as word-of-mouth referrals, remain at just under 60% of total. While free sources are meaningful, we also utilize paid channels to acquire users and drive awareness of Wix. We expect to increase our spend on these marketing channels next year in addition to increasing our spend on branding initiatives globally.

Second, we are taking steps to build our user base in new geographies by offering our platform in additional languages. Users around the globe are building websites with Wix, and the platform is fully supported in six languages today. Five additional languages are currently in testing with our latest edition being Turkish.

Our localization strategy of translation and implementing payment capabilities has proven effective for us in Brazil and parts of Europe, and we will continue this strategy as we enter new geographies over time.

Third is R&D. One of the largest challenges of any software company is being able to recruit great developers. Our strong and growing number of engineers, representing 50% of our total headcount, lets us continue to scale in sampling our technical advantage and further differentiate Wix in this market. Lior will later elaborate on our initiatives here.

Our primary day-to-day focus continues to be developing compelling, easy-to-use and affordable products, so that our users can take their dreams online, move their business into the cloud, and at the same time, create the look and feel that best fits their needs. In doing this, we expect to drive strong users and subscription growth and increase the awareness of our brand worldwide.

With that I'd like to turn the call over to Lior to review financials in more detail. Lior?

Thank you, Nir. Hello everyone and thank you for joining us on our first earning call as a public company. Today, I will cover three topics: an overview of our key metrics, a review for our fourth-quarter and full-year results and guidance for the first quarter and full year 2014.

We'll focus on three primary metrics to measure our topline growth; registered users, premium subscriptions and collections. Registered users create the background of premium subscriptions, which generates collections and then revenues.

As Avishai mentioned, registered users as of year-end 2013 increased 49% to 42.1 million from 28.2 million at the end of 2012. This was an increase of 8% sequentially from 38.8 million at the end of the third quarter of 2013. In the fourth quarter, premium subscriptions increased 68% to approximately 790,000 from approximately 470,000 in the prior-year period and was up 12% from approximately 707,000 in the third quarter of 2013.

These subscriptions drove record collections, which is the true measure of cash coming into the business. Fourth-quarter collections grew 82% to $30.6 million from $16.8 million in the prior year period. On a quarter-over-quarter basis, collections increased 17% versus the third quarter of 2013. Full year 2013 collections grew 88% to $98.7 million from $52.5 million in the prior year.

This growth was driven not only by increasing premium subscriptions, but also by the increasing shift in annual packages versus monthly packages and the slight increase in average collections per subscription. We experienced this outstanding growth in these key metrics in the quarter which led to record revenue, while maintaining the efficiency of our marketing spend.

We measure the efficiency of our marketing by observing the number of months it takes us to return marketing dollars to collections. We will call this time to return overall investment, or TROI.

I'm happy to report that in the fourth quarter our TROI was equal to the prior quarter despite the fact that we increased our marketing spend on a sequential basis. This efficiency is encouraging, as it validates the strength of our product and the satisfaction of our users.

Having covered our key metrics, I will now turn to our fourth-quarter and full-year results of our P&L. Please note that all of these figures are non-GAAP and exclude stock-based compensation expenses unless I note otherwise.

Fourth-quarter revenues increased 88% to $24.9 million from $13.3 million the prior-year period. On a sequential basis, revenues increased 60% versus the third quarter of 2013. Full-year revenues for 2013 increased 84% to $80.5 million from $43.7 million in the prior year.

Gross margin for the fourth quarter was 82%, representing an increase from the prior-year gross margin of 79%. The margin improvement from the prior-year reflects increased average revenue per premium subscription, benefits of scale, and to a lesser extent, our upmarket revenues. We recognized 100% of the margin over the total net value. Gross margin for the full year was 82% as well.

Research and development expense for the fourth quarter were $8.8 million or 35% of revenue versus $4.5 million or 34% of revenue in the prior-year period. Research and development expense grew to an increased headcount to support our development plans and increase in product offerings. During the fourth quarter, we were able to accelerate our R&D plans to recruit and attract top talent, due largely in part to increased awareness of Wix resulting from our IPO in the period.

As of December 31, 2013 we had a total of 584 employees, up from 366 at the end of 2012. And of those 584 employees, 302 were in R&D, an increase from 176 at the end of 2012. R&D expense was $26.5 million for the full year or 33% of revenue.

Selling and marketing expenses for the fourth quarter were $15.9 million or 64% of revenue, compared to $8.5 million or 64% of revenue in the prior-year period. For the full year of 2013, selling and marketing was $52.6 million or 65% of revenue.

What is of particular interest is the fact that while we are bringing in more users and subscriptions, partly as a result of our increased marketing spend, we have been able to maintain the same time to return on our marketing investment.

G&A expenses for the fourth quarter came in at $1.9 million or 8% of revenue versus $0.9 million or 7% of revenue in the prior-year period. Higher G&A spending reflects primarily the build out of our accounting and legal team and the infrastructure needed to manage the increased scale and complexity of a rapidly expanding company, and costs related to our IPO and status as a public company. G&A expense was $6.1 million for the full year or 8% of revenue.

Adjusted EBITDA was negative $5.8 million in the fourth quarter of 2013 versus negative $3.2 million in the prior-year period. For the full year, adjusted EBITDA was negative $18.2 million compared to negative $13.1 million in the prior year.

Net loss in the quarter was $7 million, translating to non-GAAP loss per share of $0.29. For the year, net loss was $21 million or non-GAAP loss per share of $2.64.

Let me now walk through cash flow items. CapEx investment for the quarter was $1.4 million versus $0.3 million in the prior-year period. During the year, we incurred costs related to the current renovation of our Tel Aviv offices as well as our New York lounge.

In the fourth quarter, we also signed a new lease on office space in San Francisco, which we hope to move into the second half of 2014. The renovations for the office are already underway. CapEx investments for the full year of 2013 was $3.1 million.

Free cash flow in the fourth quarter was $1 million compared to $0.5 million in the prior-year period. For the full year, free cash flow was $1.2 million. While we were cash flow positive, in the most recent quarter and in the full year we do not anticipate to be in 2014, as we increase our investment in marketing and R&D. More on that in a moment.

Now let's turn to our outlook for the full year of 2014 and first quarter. Going forward, we expect our growth to come from three areas: new subscribers additions and renewals; increased collection in revenue per subscriber; and increased penetration in existing markets and expansion into new ones.

For full year of 2014 we expect collection in the range of $145 million to $150 million and revenues of $127 million to $130 million. Adjusted EBITDA in 2014 is expected in a range of loss of $38 million to $42 million and reflects additional spending in R&D and marketing that I will speak about shortly.

For the first quarter of 2014, we expect collection in the range of $33 million to $34 million, and revenues in the range of $26 million to $27 million. Adjusted EBITDA for the first quarter is expected to be a loss of $13 million to $14 million.

As Avishai noted, we intend to be aggressive with accelerating growth as we increase our investments in R&D and marketing in 2014. On R&D expense, as a result of our success in bringing on additional talent in Q4 ahead of plan, we would take an additional $9 million in cost related to salaries, benefits and expenses for these new hires above what we previously planned.

On selling and marketing expense, we are accelerating spend ahead of our previous plans as a result of the very strong returns we continue to achieve. For 2014, we anticipate that selling and marketing expense will be higher by roughly 5% as a percent of the total collections than the prior year, and will be more frontloaded toward the first half of the year.

Our increased marketing expense will generate additional losses to EBITDA but will experience faster growth in collections in the near term. Longer-term we will realize revenue growth as our registered user cohorts grow in size and we recognize deferred revenue from annual subscriptions.

A few additional modeling considerations. We expect CapEx in 2014 to be approximately $1 million to $1.5 million higher than 2013 as we build out our infrastructure to support our growth in headcount. We expect our stock-based compensation expense to be approximately $3.3 million to $3.4 million in the first quarter of 2014 and approximately $15 million to $17 million for the full year.

Our basic share count in Q1 2014 will be approximately 37.6 million shares. For the full year we expect our basic share count to be approximately 41 million shares.

And with that, I will turn it back to Avishai.

To sum up, we made tremendous progress in 2013 as we invested in products, technology and people as well as in growing awareness of Wix across multiple touch points and in an increasing number of markets around the world. We are building on this momentum in 2014 by further investing in R&D and marketing to extend our technological lead and to strengthen the Wix brand.

In the coming year, we will continue to develop amazing products that both anticipate and respond to our users' needs. Our mission remains the same - help millions of people worldwide create and manage their business and brands online just the way they imagined it.

Thank you.

(Operator Instructions) Sterling Auty, JPMorgan.

(technical difficulty)

Ladies and gentlemen please stand by. (technical difficulty) The conference will begin momentarily, please stand by.

The premium subscribers came in much better than we anticipated in the quarter. Can you give us a sense of how much the premium subscribers were first-time registered users versus how much came from the tail in the quarter?

Yes, we can. Sterling, this is Nir. So, we say about 60% of those came from previous quarters with about 40% that came from the core Q4 itself.

Okay and can you give us a sense in terms of the multichannel approach that you've got driving those premium subscribers, where were you seeing the biggest upside relative to your own expectations? I know a number of them are relatively new, whether it's satellite, radio, etc. So where were you seeing the biggest upside surprise from your perspective, in terms of the customer acquisition channel?

This is Avishai. If you look at the fourth quarter, while [receiving] that (inaudible) (technical difficulty) direction. So there's no one specific area which we can (technical difficulty) was the driver for everything.

Another important fact is that at least from a past year, we are relatively high in this one and only did promotion that we did in (inaudible) before. And we did notice that the good results from the digital spend and TV ads. But I would credit the major factor was overall improvement and conversion on all channels.

Okay, and then can you give us a sense as to -- you gave us some statistics on the paid app purchases. But any just qualitative commentary in terms of what you're seeing on the uptake of paid applications and which ones in particular are gaining the most traction with your user base?

So, first of all, this is Lior, in terms of our paid apps, we actually doubled the number of paid apps in the fourth quarter compared to the entire period before. Obviously, there is not much -- it's not the huge contribution in terms of the ARPU, because it's still relatively small numbers. But I think if it was a very encouraging looking at the coming quarter and the coming year, so it was really a good result for us.

Last question and I'll turn it over. As you look at where you kind of (technical difficulty) geographically in terms of (technical difficulty) in terms of building out your payment gateways and internationally, where do you think you've got the biggest penetration opportunity over the next -- well, basically 2014? Is it Latin America, is it parts of Europe, is it Russia? Where do you think the biggest new growth opportunity based on where you built out your payment gate?

This is Nir again. I think we see great opportunity in Latin America, whether it's Central or South America. We actually more than doubled the collections there in Q4. And we definitely see a lot of potential in Russia, and further potential in Europe and in Turkey where we just started.

Great, thank you guys.

Nat Schindler, Bank of America.

Hi guys, thank you very much for taking my call. And congratulations on a great first quarter.

Wanted to go a little bit more deeply into one of the questions I think Sterling touched on. You've seen increasing penetration of your free base as a freemium -- premium subscribers as a percentage of free. That has been ticking up for the last 18 months or so every quarter, and this quarter made a substantial move up.

Are there any new strategies you are taking to get people to convert to paying subscribers faster? Or is this just general trends in the industry?

I think this is just mostly the drivers -- being driven from product improvements. And that we -- and so -- because I don't think we changed anything that is material to that, or not in the flow or not in the -- so I think the main number one key driver for that is the product improvements.

And I think in the last quarter what happened is that the gap between us to competitors has just grown much farther. And the reflection of that is immediately improvement in conversion and retention. That's why I think that is the key driver.

In fact, if you think about it, we actually penetrated to other places where conversion -- geographies of conversion would've been -- should have been lower and we don't see that. So I would say product improvements.

Great. And also on the product improvements, can you give us a little bit more detail on your app store results? I know it's still early in the rollout, but specifically can you talk a little bit about the attachment rates of apps on your premium subscribers, and/or -- new and old, as well ARPU that you're generating from the system?

So, in terms of the ARPU, we experienced in the fourth quarter increase in the ARPU. Some of that came from the upmarket as I mentioned before, because we kind of doubled the revenue from the apps but, Nat, it's still not significant revenue coming from the app market. We do expect it to increase over time obviously.

Okay, and any particular apps, other than Google Docs and Google Apps, which I know have been one of your major products, but any new apps that are gaining significant traction?

Well, there is a bunch of them. One of the most surprising I think we prefer not to mention by name, but we can see that a lot of the social stuff is doing fantastically well. And so, a lot of things that -- and mostly aggregate social things and a lot of people propagating information back into the social universe, we can see them as growing really well.

Great. Thank you.

Mark Mahaney, RBC Capital Markets.

Thank you. You mentioned some statistics on the mobile launch and the number of websites. Could you talk about the overall level of adoption by your users and your premium subscribers of the mobile solution? And then, any thoughts what that does to the financial model?

I think our assumption would be that that would increase the attractiveness of the offerings, and therefore that would probably lead to a slightly marginally higher conversion of users in the subscriptions. But is that the case? Is there anything to back up that assumption? Thank you very much.

So, Mark, first of all, I mean you're asking about a couple of things, but I want to start with the last one. And you asked about the [dual sheet] conversion improvements because of the mobile, and the answer to that is yes. Absolutely, yes. We actually measured that when we uploaded the product by testing, [the beta] testing and we could see a difference.

And this is just another example. You know that every time we improve the product, we get better results.

The other question you asked is about the adoption of the mobile. So we see a really large number -- in round numbers. And I want to disclose to you that to date, the rate. That's in 30,000 new mobile sites built every day, which is why we think about it as fantastic results.

And we see that happening mostly in our premium users, but also in some of the free users. So, for us, it's really an encouragement that what we do with mobile is the right thing and it's the right approach. And we intend to continue to innovate on that during this year.

Thank you, Avishai.

Kerry Rice, Needham & Company.

Thank you. One kind of a near-term question and one may be a larger scope question, but can you talk a little bit about the pricing power you might have? Do you have the ability, do you feel, to raise prices? Or do you think the dynamics may be between annual and monthly subscriptions? Because I think most -- you're working hard to push people towards annual packages.

And then second question is broader on the competitive landscape. Can you talk about -- maybe a little bit about your differences between maybe some of your private competitors in some of your public competitors and what makes you unique to those? Thank you.

Hey, I will kick off with the first question, which is regarding the pricing. So as we told you through the IPO roadshow, as we told you to the IPO roadshow, we do a lot of testing over where [composite asset] value actually to the annual packages in order to push our users to use and buy more the annual.

We see greater growth there as over time more and more users go towards the annual. In fact, the overall user base annuals paid in Q4 was 66%. This is the 64% that we disclosed in the IPO. And that continues to be a main focus for us in terms of how we describe the product.

In terms of general pricing, I wouldn't say that we will keep on testing various ways around it. But as we said before, the key focus of the Company is growth. So, in any test that we do, even if we get better results in revenues or collections on a b-test, whereas a slightly lower conversion rate -- meaning that there is less growth -- we will go back to the original version stay with a high-growth and find a different way to deliver whatever it is that we were trying to achieve. So growth would be the key driver.

Kerry this is Avishai again. I'm going to try and answer the competitive difference. The key differences that we're seeing is, again, mostly about the products, right, which is a software product development company.

And when you look at our competitors, if you look at companies like Endurance, Go Daddy you find that most of them are sales companies. Meaning you go to their offices you're going to find thousands of sales people. If you go to Wix you're going to find engineers. And there are no salespeople, right? We don't have even one.

That's the first, I think, key differentiator. It means that our focus is on building better products. And when it comes to our product, to be much higher functionality. It can really bring your vision, design your site, manage your business on the Wix platform.

In every other place you are confined to a template and you can only change little bit of that. You can't really control design. You can't -- you don't have the app stores, you can't scale up your business.

There's no databases behind it because HTML 5 is not a key differentiator. A fully integrated mobile solution where you can really edit and control the layout of your site is a major advantage, which we can see coming into play this last quarter. So I think those will be the key differentiators.

But really the essence of that is we're a software company. We're not a sales company. And we're focusing on continuously increasing the quality of our product, where most of our competitors are mostly focused on increasing the number of salespeople.

Okay, thank you very much.

(Operator Instructions) Jason Helfstein, Oppenheimer.

Two questions, the first around just the app market. I know you said the number of apps doubled. But is there a way to think about what percent of either registered or premium subscribers are using apps and kind of how that's changed, so we can understand just the acceleration around adoption of apps, even though we understand it will take time to until it's meaningful for revenue?

And then secondly can you just talk a bit more about cost of customer acquisition, why you don't give out a specific metric? Can you talk about how the quarter came in versus your expectation? And then as you're thinking about the 2014 guidance, are you planning to spend kind of the same per addition or less? Thank you.

So let me see if -- so you asked about the app market. And [we talked about] the statistics, right, which is we have about 8 million installations of applications. And if you find that the majority of our premium users will install in some kind of an app, and a lot of them would install more than one.

And some of them will be installing a paid app. Some of them will install a free app. But from our perspective as a Company, the major -- the number one focus that we have in the app market is not just revenue. It's beyond that. It's customer satisfaction.

And that's why we focus so much on adding great social solutions. So that's why we have a LinkedIn or Facebook app, or think that allow you to just make a better product given that we don't necessarily charge for them.

And we can say that also a big percentage of the free sites will install apps and use them, mostly the free apps and not the paid apps. And this number is always growing, so I hope that answers the first question. I want to turn to Lior about answering the second part of your question, which is cost of acquisition.

So, in terms of cost of acquisition, we don't really see a major difference from previous quarters. But I think it's important to mention that in terms of TROI, we always refer to TROI, we will -- although we increased the marketing in Q4, we were as efficient as we were before.

And I think it's very important because it also enables us, with the same budget, to increase the traffic, to increase number of premiums. And basically this drove most of the growth this quarter.

Okay, thank you.

Thank you. This does conclude today's question-and-answer session. We would like to thank everyone for their participation on today's teleconference. You may disconnect your lines at this time and have a wonderful day.