Wix.Com Ltd (WIX) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Wix' Third Quarter 2020 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to your host, Maggie O'Donnell, Director of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Wix' Third Quarter 2020 Earnings Call. Joining me today to discuss our results are Avishai Abrahami, our CEO and Co-Founder; Nir Zohar, our President and COO; and Lior Shemesh, CFO.

During the call, we may make forward-looking statements, and these statements are based on current expectations and assumptions. Please consider the risk factors included in our press release and most recent Form 20-F that could cause our actual results to differ materially from these forward-looking statements. We do not undertake any obligation to update these forward-looking statements.

In addition, we will comment on non-GAAP financial results. You can find all reconciliations between our GAAP and non-GAAP results in our press release, presentation slides, shareholder update and our interactive analyst center on the Investor Relations section of our website, investors.wix.com. I would also like to mention that we will be holding our virtual management update in early December. So please stay tuned for more information within the next few weeks.

With that, I will now turn the call over to Avishai.

Hi, everybody, and thank you so much for joining us today. I'm sure as you can see, Q3 results are fantastic, right? Growth has continued from Q2 and with a very strong momentum. We are very happy about the quarterly results. And I want to point out a couple of things in addition to that.

So first of all, we've got a chance now to see how places that came out or almost came out, out of corona reacted. And we see that -- it seems that this trend of growth to stay even when the pandemic has slowed down, which is something that we contribute to the fact that it's probably a different way of thinking from people and different behavior that was created where people work at home for us to think about how they do things or use the Internet to order.

I know that from personal experience, my parents now order things online. They never did that before. And I think this is a trend that we're seeing is something that is very strong and growing. Beyond the phenomenal growth that we had on the general population of Wix, I want to point out also 2 specific trends that we're seeing. Our e-commerce growth rate has more than doubled the average growth on Wix, which is saying that even though we grew so much faster, e-commerce actually doubled, more than double that. The same is also true for agencies and partners that also -- the collection from them is more than top of the growth rate on Wix. We look at both of those as very important indicators and obviously, and we are very happy because we invested a lot to develop them in the last couple of years.

We can -- during the pandemic, another thing that we can mention is that we showed that our ability to release and invest in products not slowdown. Support has been doing an amazing job to be able to carry for this strong demand of our services and our products. So really, a fantastic quarter and I want to take this opportunity again to thank everybody at Wix for their incredible effort to help our customers during this time. And to say to all of our customers, amazing to see what you guys have done and how many incredible businesses are now flourishing on Wix. Thank you.

Great. Thanks, Avishai. Can we now turn to the Q&A, please?

(Operator Instructions) Our first question comes from the line of Ron Josey with JMP Securities.

Great numbers guys. Nir, Avishai, I wanted to ask a little more about the subscriber base, just seeing the accelerating growth that we're seeing, not only overall, but for higher-priced packages like stores and you talked about, Avishai, e-commerce growth and then agencies and partners. And so can you give us a little more insight on maybe the type of business that's coming to Wix? Do you think this is newer businesses, just that we're all seeing the rise in business formations here or just existing businesses that are realizing that they have to come online? And with that, knowledge of your sub base, how are you ramping marketing and really targeting continued growth on the marketing side? So if you can talk about your marketing approach as you know who's joining the business.

Well, thank you so much. So I think that we're seeing both. We're seeing a lot of brick-and-mortar businesses that are moving online. And obviously, during the pandemic, this was a crucial thing because a lot had to close their physical store. And this is a kind of a global phenomenon. But we also see a lot of businesses rebuilding their online presence. So they used to have some kind of a store and they decided that they need to do something better. So that's another very common thing that we're seeing now. And the last part is, as you said, there's an incredible number of new businesses that are being formed now, people that have to find a new way to support themselves. And so that's the last part that we're seeing.

So I would say on all fronts, we're seeing massive growth. And I think that really, I think this pandemic actually pushed people, right, to do something that they always knew that they need to do, right? We need -- I need to move online, I need to have a store, I need to do that, right? And then -- but it was always a thing that you do next month, right, or tomorrow. And now it's something that you do today. And the fact that people, at times, you see at home and play with Wix and understand how easy it is that it can do so much to their business. I think that, that was an incredible thing so -- because now they know what they can do and a lot of them are just doing that. So that's pretty much the growth.

And I in terms of marketing, I think that no, we continue to see exactly what we've been doing all the time, which is investing where we see that the marketing is efficient. And a lot of it is pretty much aligned with our current always strategy, which is measuring time to return marketing investment. And obviously, as we gained more in their subscription in the first couple of months, we can actually go to in a higher absolute number, right, because you divide the absolute cost of marketing with a subscription value. So we see that and we're very happy about it. We believe that a lot of it will continue post-pandemic again because consumers and businesses' behaviors dramatically changed.

Our next question comes from the line of Ygal Arounian with Wedbush Securities.

I wanted to dig in a little bit on what you guys called out in investor letter as elevation of brand perception among the agencies and just ask if you could expand on that a little bit more. Obviously, Editor X is rolling out. You have the e-commerce solution. Maybe just highlight what it is among the conversations you're having with agency partners that's getting you to be at that place? And how much more room you think you have to go before you're at the brand perception that you want from agency partners? And then the second question on collections. The guidance range was a little bit wider than it usually is. And you obviously had really strong conversion this quarter. You talked about negative churn, cohorts from the first and second quarter, the core value kind of accelerating. As we think about that range and some of the unknown environments though, what are the things that you see getting you to the low end versus the high end and some of the kind of the mix and what we might see over the next couple of quarters in that area?

Of course. So what we're seeing is in the conversation, and if we look at the forums or communities of agency, we can see that the conversation has changed, right? In the past, it was do-it-yourself, and now we can see a lot of them are discussing that is, Wix is today is probably the best choice also for them. And as anything that has to do with the brand. It takes time for it to completely mature. But I think the driving force behind it, there are a lot of product improvements, from SEO to performance to things that allow them to manage multiple accounts and manage teams. So this is a lot of what we've been doing there and a lot of it is working extremely well.

Editor X is starting, right? So what I'm talking about now is before even the effect of Editor X. And this is extremely important. For our future, I think, to have this amazing tool, and I'll give you 1 example. I think that one of the discussions that we're seeing a lot now is that it's about security, right? The traditional tool that the agencies would use is WordPress. And obviously, with WordPress, it's extremely hard to maintain a high level of security for your sites because most of the hacks you hear about are on WordPress, right? And I don't know if you ever even heard about 1 Wix site that was hacked, right? It's extremely hard to hack into Wix site. And we have to do nothing for that.

So usually, this is something they're spending tons of energy on doing, right? And with which they just have to do nothing in order to get a better solution. This is also true for many other things that they have. And by enabling them to be more productive and actually provide a much better product for their customers, we're seeing that the brand perception is changing and a lot of them is now using -- moving to use Wix. We also have, of course, the account management, where we work with them and help them understand the platform and what they can do. So this is another contributing factor.

Ygal. It's Nir. I'll take the second question about Q4. And I think obviously, Q4 ties up directly to what we've seen in Q3, right? Even as Avishai mentioned, even as we've seen economies going into some form of normalcy and going back to regular economic behavior, we still have seen a tremendous amount of growth in Q3, which is carrying over to Q4, which is also why we are giving a strong guidance that we believe reflects a lot of growth. That being said, regularly, Q4 has an effect of seasonality. It's really hard to say how that seasonality will behave this year since some of that seasonality is attached to consumer behavior, which is quite different this year. Some of it is attached to the fact that people are going to the vacation, which is hard to believe many people would be able to go in proper vacation this year. In light of that, we prefer to have a wider range than what you usually have at this part of the year. But obviously, it's still -- it's very -- reflects a very high level of growth, 35% year-over-year growth in Q4, which we're very happy about. And obviously it also sets up sets us up very well into 2021.

Our next question comes from the line of Mark Mahaney with RBC.

Two questions, please. You've leaned in heavily into marketing this year. Marketing intensity as a percentage of collections or revenue is up. Could you just talk about some of the learnings you've had from that? And is that something that you think is a sustainable shift? Do you want to run the business with greater marketing intensity now than you've done in the past? And then secondly, just spend some more time on e-commerce solutions that you've rolled out in the middle of this year. You announced a series of new products and features. I think that's probably one of the single biggest new growth areas from the COVID crisis, the growth of online commerce. Do you feel like your offering now is full and complete? Are there particular areas that you still want to build out? And are there particular e-commerce solutions, Wix stores that you think have really resonated really well. So just talk about how you've been able to take advantage of what's clearly been an inflection in online commerce demand.

Mark, this is Lior. I will take the first question about the marketing. As you guys probably know, we invest the marketing based on TROI and this is like the only KPI that based on that, we actually determine how much money to invest marketing. You're absolutely right. We increased marketing investments quite significantly over the last couple of quarters. I believe that it will continue in Q4. And we've talked about the new state of mind, meaning that the growth looks pretty much stable. So I feel that the marketing, as -- in terms of its investment will continue to be higher. That said, and when you look at it in terms of percentage out of revenue and collection, remember that as usual, in a subscription model, you first invest in marketing, then you see the fruits of the top line.

So I assume that once revenue and also collection will catch up with that, then we are going to be back to where we were before about the marketing as a percentage of collection. I think that's changed. But in the short term, you can see some noises around it. But it's coming from a really, really exciting and good because we actually are able to increase marketing significantly with the same efficiency, by the way, sometimes even better efficiency, and we are truly excited about it.

Mark, this is Avishai. You're asking about e-commerce. So in the last couple of years, we're heavily investigate into making our e-commerce product upgrade. And we, during the last year, we got everything like dropshipping, multichannel installment, multicurrency shipping and to (inaudible) and a bunch of other features. I think that today, we have one of the better e-commerce solutions in the world. And obviously, it's something that was highly needed in COVID, and we saw that the shopping cart business is growing fantastically well.

I want to mention that there are some places where we are unique, right, solutions for restaurants, solutions for events, solutions for booking, scheduling. We're pretty much the only platform in the world to does that. So there, we are definitely the best. And I think that the combination of all the strategies unique offerings, where we are able to go and really help so many businesses during the COVID crisis. And this, again, with all the automatic marketing and tools like Ascend have really been helpful for our customers to learn and rapidly adopt to the changes that they needed to have in order to support the business in a world that is completely different. But I do believe that we entered the COVID pandemic with a really strong e-commerce offering. And now, we're a place that it's not only grown more than doubled, right? It's faster on Wix, it's also really one of the better products in the market.

Our next question comes from the line of Jason Helfstein with Oppenheimer.

So 2 questions. One, if we look at Business Solutions, collections and revenue, it has been slowing over the past few quarters or basically coming from the first quarter while creative subscription revenue in collections has accelerated. Maybe how do we think about that? I mean, creative subscription is more top of funnel. Is that the leading indicator? If we look, Business Solutions has increased as a percent of -- if you look at like as a percent of creative subscription. So just how are you thinking about kind of, one, being the funnel for the other as the leading indicator, then we might think about what that means for the next several quarters. And then just a follow-up on Mark's question, Lior, you did say that marketing would return to a historical percent of revenues at some point, maybe be a little more specific? I mean next year, how are you thinking about kind of marketing investment versus margin growth?

Sure. So, I will start with the first question about the Business Solution. As you know, we started the business solution was not -- for last year, it was not full year, meaning that it all started in the second quarter. Basically, when you look at it on a year-over-year basis, so obviously, right now, the year-over-year basis has impact by the fact that we already had a payment solution a year ago. Remember that Business Solution is still growing higher than subscription. But sometimes, when you look at it on a year-over-year basis, it might mislead you because of the large numbers.

I do believe that if we take, for example, next quarter, I do believe the Business Solution is going to be a higher portion of the overall top line. And we will see that already next quarter, and it will continue, meaning that the same phenomenon that we've seen in the last few quarters where Business Solution is growing, will continue into 2021. And I believe that it will be slowly but surely increased portion of our total collection and revenue. But bear in mind that payments on a year-over-year basis, it was fluctuated by the fact that I need to take into consideration where we actually started that. So it's relatively a young product. And I believe that most of the growth, by the way, of next year on Business Solutions are going to be from payments. So this is with regard to that.

With regard to the sales and marketing, so Jason, it is hard to tell exactly a specific quarter where it's going to happen, and let me tell you why, because it's already happened. But when you look at collection, so you understand that it's a combination of many cohort. Certainly, the new one but also the historic one. Actually, when we start the year, about 85% of our collection are coming from historical cohort. So the impact of the new cohort is very small. If you remember last quarter, we mentioned that marketing increased by 90% on a year-over-year basis. But actually, the value of the cohort also increased by 90%, meaning that those new cohorts are going to have, as times pass, it's going to have more and more impact certainly on 2021 and 2022. And then you can start to see that marketing as a percentage of collection will be improving, obviously. But we will always, but we will always invest marketing based on TROI because the way that we look at marketing and measure marketing is not out of the overall collection, but out of the TROI for the specific cohort, and because this is like the true value of how much we're investing and how much money we are generating.

Our next question comes from the line of Ken Wong with Guggenheim.

Great. My first question, also digging into payments. I would just love to get a sense of maybe how you're seeing the behavior of your installed base react to the payments product? I know a lot of the benefits have come from the new cohorts coming in at 80% attach rate. Any benefits on the installed base, anything you guys are doing to move guys onto your product? And then second, on the customer support initiative, it seems like it's grown to be something much larger and perhaps more strategic than any of us anticipated. Maybe can you give us a sense for kind of that strategy might have evolved in the last 6 months post-COVID?

Ken, it's Nir. I'll start with the first question about payments. So you're absolutely right. I mean, the wide adoption so far has been of the new users adopting payments. And we've seen great levels of -- really great levels of attachment and adoption there. I mean more of a -- more than 30% of all of the sales transaction that's happening on the system are already under Wix Payments with, I would say, over -- if you look at the attachment of the new customers, more than 80% in the eligible countries are onboarding Wix Payments. So we see that as a great success.

I think that in terms of the existing user base, we already managed to somewhat convert some of them to be under the Wix payment route, and we're going to continue doing so in the next year to come. It's definitely another potential for growth there. And the second thing that you have to remember is that we're also seeing these stores that just joined earlier throughout the year, starting to mature. As they mature, the volume on the stores is increasing, and obviously, that contribution to Wix Payments also is increasing. So I think that definitely Wix Payments is going to be a big success story for us in the next few years. And there, we'll definitely have to share more and more about it.

In terms of support, I think this is definitely, it's been a critical year for us to invest into care. And I think we are all so thankful that we did all this investment back in 2019 and continued into 2020 because it paid off big time this year. We would not have had a chance to give proper customer care to such a huge demand, such as peak in growth had we not invested originally into the care. So I think that our strategy continues as we wanted it to be, which is giving better and better care, growing more proactively and talking more to our users, helping them convert, helping they move along the journey, build a full business, understanding that it will contribute to, first of all, satisfaction and happiness, which directly impact our brand.

It impacts the conversion to premium. It impacts adoption of higher-priced services. So it increases ARPU. And obviously, indefinitely, it reduces churn and increases loyalty over time. So we are very happy with the returns we've seen. As you see that there is a very big demand to our services and the growth continues. Obviously, we'll continue to invest into those areas of care in the next year.

Our next question comes from the line of Sterling Auty with JPMorgan.

So I'm just curious. I want to make sure I understand. There was the comment in collections talking about the partners and I don't know if it's agencies as well, but just partners are prepaying the collections or that's what's counted in collections. Can you give us an idea of what the contribution from that structure is? And when you say you count it, are you actually getting the cash upfront as well?

Sterling, this is Lior. You're probably talking about channels, not about partners. So you're right. About channels, usually, the structure of the deal is with commitments. By the way, it's not that significant yet, a few millions of dollars, I assume for this year, but it's not that significant. So basically, they -- we get a commitment for payments or for number of premiums, for example, for a year, perhaps even more than that. So this commitment is part of the deferred revenue, and therefore, it's increased collection.

Sometimes, we get the money upfront. Sometimes, we get the money as installments. It really depends on the nature of the agreement. But revenue, obviously, it's recognized over time, where they actually use the service and provide the service to their customers. I think that what is interesting about the channel is that a few years ago, those guys, like carriers, hosting company used to use a white label, not so good platform to provide to their customers. They understood that they are losing their customers because of really bad service.

Today, it started when they actually approach us, to use Wix in order to make sure that they get a better service to their customers and to keep their brands strong. This is what happened with NTT, with Vodafone and a few other examples that we already had, and they feel really, really good about it. And they actually benefit from 2 places. The first one is obviously keeping the brand strong by the fact that they are providing the best platform in the world. And second, they make sure that their businesses are more successful and obviously, they benefit in indirect way from that fact.

Our next question comes from the line of Deepak Mathivanan with Barclays.

2 quick ones. So first, can you talk about what you're seeing in the early days from Editor X monetization? How has attach rate progressed with your expectations? And who are you seeing as the early buyers of the product? Anything you can share on customer profile would be great. And then second question, Lior, can you provide some additional color on the fourth quarter guidance? What are you seeing in terms of net customer adds growth in October and November so far? Is the ROI for customer acquisition on the pay channels relatively stable? Fourth quarter, obviously, the U.S. elections is a little bit of a volatile quarter. So just curious on what you're seeing right now.

Thank you, Deepak. This is Avishai. So Editor X, well, the product is in beta, right? We are still not pushing it aggressively. But we're seeing already that it's being adopted very quickly. In fact, faster than we -- dramatically faster than I expected to place by agencies. Most of the people that use Editor X will be the more of the higher brands because they are trying to actually work a lot on a project and fine tune it to the exact level that they need. So we're seeing that it's been mostly adopted by -- it's been adopted a lot by the higher agencies, brands. And so we are very excited about it.

Of course, it's a professional tool, right? For me myself, I still struggle to finish a website with Editor X because it's not that easy. But when I do manage to do it, and I really enjoy the fact that I could do exactly what I envisioned in my mind. And the combination of code that I need to program into the platform and the databases and the CMS makes it a unique offering. Nothing else in the world as far as I know at this stage, is even close to be similar to that.

So it's a really broad offering of functionality that for now seems to be achieving exactly the thing that we hoped for, which is going up to the agencies, partners, the one who are developers that build more of the higher brand products. Really fantastic results.

With regard to the next half, during the fourth quarter, so look, obviously, we are expecting that because demand is still very high. So we expect that next half will significantly increase from a year-over-year basis. I don't see any differences of what we've experienced in the second and the third quarter. I think that it's important to understand that about like what is going to happen in the fourth quarter. For example, we can be in a situation where -- actually, people are not going to go out for vacation because of what is happening. So it can be even stronger than what we actually expect. So obviously, it's going to be a very strong fourth quarter. I think that it's also indicated as part of our guidance for the fourth quarter, on the high range of about 35% on the year-over-year basis, very similar to the third quarter, which actually has a higher growth in the second quarter. So we feel very excited about it.

With regard to the marketing, again, no matter what channel we are using, we are always do it based on TROI, no exception. The sales growth for the fourth quarter, the same growth of what we've already seen in October. It's growing very well with the same, with the same efficiency. And I feel that we are going to invest more in the fourth quarter as we've done in the second -- in the third quarter about the marketing expenses.

Our next question comes from the line of Josh Beck with KeyBanc Capital Markets.

I wanted to follow-up on partners. Certainly, it seems like you have some really good momentum. Collections have doubled there, adding new agencies. So I'm just kind of curious. With the conversation that you're having with these partners, are you benefiting because the category awareness has gone up? Because the way the world has changed in the last 6 months? Is it maybe more specifically around Wix' brand capabilities? Would love a little more color on that topic.

Of course. I think that when you look at -- if I understand the question, in fact, what happened with the product and why the niche becoming so successful. I think that -- so this is obviously not a pandemic conversation, right? Those people do what they do. They've been doing that before the pandemic and they'll continue to do it after the pandemic. So this is telling the change in how we are being perceived and how we are being used. A lot of it is coming because of functionality on Wix that have changed, right?

We build specific solution for partners to manage multiple accounts on Wix, to manage teams to work on Wix, to share feedback with the customers. We did a lot on SEO, right, which is probably the best product for search engine optimization so Google can read you. Probably, the best way to date is on Wix. We did a huge amount on performance. We did a lot in how you can customize your designs, how you can delegate that to customers. So we spent, in the last couple of years, a lot of effort, making our product really fit an agency that develops websites for other people, e-commerce solution for other people. And this is something that -- I know it takes time to realize, well, I can do all of this now on Wix.

I think that this is most of what we're seeing now. And so it's not really related so much to the epidemic. It's more related to things like our cart management toward them, our support towards them, the community that we have, the ability that we give them to do so many things and how efficient they are towards their customers, the release of a coding platform, all those things support growth that we see there. And so it's pretty much product maturity.

Really helpful. And Lior, maybe a follow-up for you. The collections growth has really outpaced the revenue growth over the last couple of quarters. Certainly, that's better than in the previous years. So I'm just wondering, as you go into 2021, is your visibility improving with this dynamic?

Of course, because at the end of the day, collection is transforming to revenue. And what we actually see when the gap between collection and revenue increases, it means that we are experiencing higher growth because usually revenue is based on the growth of the previous few quarters. So this is exactly what is happening. I think that it's great because we spoke in the past that also this quarter about the value of cohort. The value of our newest cohort has increased significantly. For example, last quarter, we indicated that the value of the cohort has increased by 90%. So think about it. This is all going to be transformed into our collection and revenue in the next few years.

The overall value of the cohorts has increased to $9.2 billion, up 43% on a year-over-year basis. This is something that provides me a really, really good understanding of what to expect from our business going forward. So this is truly exciting.

Our next question comes from the line of Naved Khan with Truist.

I got 2 questions. Maybe talk a little bit about the customer care initiative. And I think previously, you talked about a lease 3x ROI. How do we think about it now? Is it still the same or higher? And how should we think about gross margin impact for next year because of the investment that you're making today?

And then secondarily, maybe talk a little bit about the increased conversions you have seen from the last 2 cohorts you brought in. How much of an improvement is that versus what you had seen historically?

Okay. It's Nir. I'll take the customer care then can pass it back onto Lior to talk about the gross margin. So as I mentioned before about customer care, obviously, as I said before, we're very happy to make that investment. And indeed, we've seen that interacting with our customers in depth, having them on the phone, talking to them, understanding not only what is their current problem that they're calling in with but actually, helping them having the agents fully understand what is the goal of the customer, where is he trying to take his business, then handholding them and helping them along the way is something that we discovered has a big impact on conversion. Up to 3x conversion in some of the cases of the people we speak with.

So naturally, yes, we want to engage more, not less. And this is a big part and a big chunk of what we set up to do. So it's not only about having a larger force of people who can answer the phones or take on chat, but it's also about a different approach that is much more engaged with the customers.

That approach is definitely proven to be effective, very effective in the past year since we started testing it, and we will keep on ramping it up. Keep in mind that we are ramping it up while also dealing with growth of 50% to 70% of the volume, which is an amazing achievement in my mind. And I think the team there is doing a tremendous job. We're definitely going to keep on investing and it's because we see that create ROI that comes into that investment.

In terms of gross margin, Lior, do you want to take it?

Yes. With regard to the gross margin, I think that the best way to look at it is to try to understand exactly what is the contribution of support, right? And when we look at the P&L, obviously, so we increased the investments in support, and it's all recognized now while the benefit of the -- of top line has yet to be seen. I think that one of the best way to understand it, that if you look at the latest quotes, since we actually started to heavily invest in support, and you look at the gross margin of the new cohort, it's much more than 80%. Why? Because you actually see that very clearly the fact that we have managed to support and increase the value of those cohort just from the fact we have those people to make it happen because otherwise, we couldn't get -- we couldn't reach to this value of cohort without this support. So I assume that when you look at the gross margin of the overall basis, I tend to look at it as kind of short-term noises.

Yes, we invest the money right now, we are going to benefit big time in the future. I assume that on the creative subscription, I'm still going to see us about, as I mentioned before, about 80% gross margin, short, medium-term, also long-term. It might fluctuate a little bit based on where we exactly invest the money for the support team, but nothing has changed in terms of the modeling.

Naved, it's Nir again. In terms of the heightened conversion, so first of all, you're correct. We are probably at the highest conversion we had in the past 2 years. And there's a few drivers to it. First of all, if I circle back to the beginning of your question, then absolutely, good customer care is helping, and a good contribution to conversion. But there's also those many product improvements that we keep on doing. Avishai mentioned before, all the new introductions we did to Wix Stores and the improvements we've done around the support, the product functionality and support for partners but it's not only that. It's everywhere around the product. It's in our editors, it's on ADI, it's on our online scheduling product, Wix Bookings, the restaurant vertical, the musicians, the artists, the photographers, pretty much across the board. And all of these improvements, obviously, always improve conversion.

And then I would say that the last part is that new state of mind that we are actually seeing where there's much higher demand and higher intent. People are coming, and it's much clearer to them what they need to achieve. And by the way, it affects the new cohorts and the newcomers, but you also see that within the existing cohorts, okay, a much higher intent coming in and finishing a website and transitioning a business to be an online business. So I think all of these together, obviously, what are driving this amazing results in terms of conversion.

Our next question comes from the line of Brent Thill with Jefferies.

Avishai, good to see e-commerce business double. I guess if you tie economics to this, is there a sense of the average uplift you're seeing from a customer that was basic to e-com? I know there's different plans, but are you seeing a 20%, 30%, 40% uplift in pricing on those as they move to e-commerce? Can you give us a sense what you've seen so far on the economics of an e-com customer?

Yes. So obviously, the e-commerce packages are more expensive. And you kind of like touched the right numbers. But the biggest, I think, difference right is in the payment because, Wix Payments, and this is something that we are seeing that it enhanced, right, the value over time as businesses are becoming more successful. And so that's another side of it.

Of course, you also have to take to account that it's more popular to have Ascend and it's more popular to have a Facebook -- automatic Facebook marketing on top of those products, right? So those customers are probably, at least should be valued twice the average value over Wix customers, normal Wix customers. But -- and we continue to monitor because -- and to see how we develop, right? A lot of it is new and a lot of it is widespread by the epidemic, the kind of like metric, say, that we are watching. So -- but it's definitely, those add more value to customers.

Our next question comes from the line of Mark Zgutowicz with Rosenblatt Securities.

I was just hoping you could maybe comment on the uniqueness or what happened with the 3Q cohort conversion. You mentioned it was your 2-year high levels. And I'm just curious how that might be representative in 4Q and how that may carry into '21. Does that imply net add growth in '21? Or is that unlikely given the comparison?

Yes. We do believe that increasing conversion is sustainable, right? We talked a lot of time about the new state of mind, but it's got to do also with the facts which people are coming with more intent. And we have more products. Avishai mentioned all the different products, for example, that we actually launched on our e-commerce solution. So this is like -- this is the major contribution to the increase in conversion. So this is all going to stay with us. It's not going to disappear. So we obviously assume that also the fourth quarter and certainly next year, it's going to benefit from this increase in conversion. Actually, we know from the historical numbers of Wix, we always get some kind of an upside to our numbers as a result of even more increased conversion as a result of launching new products and so on. So obviously, this is something that I think that will continue also over the next few years.

But again, the conversion, as we know right now, is part of the fourth quarter guidance. If conversion will be higher, it's going to be an upside to our model.

I think we have time for just one last question.

Our last question comes from the line of Matt Pfau with William Blair.

Congrats on the strong results. I just wanted to sort of understand, if you look at the strong premium subscriber additions over the past 2 quarters, is there any significant shift from a geographic perspective that you've seen versus the several quarters prior to that? And then anything that surprised you either from a country or a geographic basis as you've seen the results come in over the past 2 quarters?

So I think we've seen -- we've definitely seen, I would say, we've seen all geographies grow, but probably a little bit more strength coming out of the U.S., which is, I think, great testament to us taking market share, which, obviously, we are very happy about. But overall, there's a lot of global strength. Our product is global. We operate in every -- 190 countries across the globe. Europe has been very, very, very strong. Latin America has been accelerating over the last few quarters. So I would say, generally, it's an overall growth. It's not only in 1 geography, with the tendency of the U.S. to be a little bit stronger than others.

We always spend a lot of time and effort and also in increasing our international expansion, whether it's adding languages or solving local solutions that are different from one market to the other. It can go into marketing, it can go into product development, all across. But we've definitely seen a huge growth globally this year.

Does the really strong business formation in the third quarter that the U.S. saw, does that factor into that acceleration that you're seeing in the U.S. as well?

What do you mean by...

Business formation.

What do you mean by business formation?

Yes. So in the third quarter, the U.S. saw really strong growth, I think, about 80% year-over-year in terms of applications for tax ideas for new businesses. And so obviously, a lot of new businesses getting started in the U.S. in the third quarter. So I was just wondering if that sort of factored into the results you saw in the third quarter at all.

I think that the answer is, A, yes, absolutely. And B, I think we all say that it's a new state of mind in thinking online as a primary and critical part of any new business.

This concludes today's question-and-answer session. I would now like to turn the call back to Maggie O'Donnell for closing remarks.

Great. Thanks, everybody, for joining us today. Have a great day. Bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.