How does Squarespace make money?

The majority of the company's revenue comes from selling monthly and annual subscriptions

When it was founded back in 2004, Squarespace was built on the idea of providing a simple and easy way for businesses to build their websites. Of course, the internet has changed quite a bit in the last 17 years, and now the company does much more than that, allowing businesses to grow their brands, and manage their businesses, across the entire internet.

Squarespace's platform offers websites, domains, e-commerce, and tools for managing a social media presence, marketing tools and scheduling capabilities. Its tools and features  include template designs, custom domains, social integrations, SEO management, analytics, hosting, Dropbox integration, podcast support, pricing tools, and the ability to add a store to their site.

“We believe design is not a luxury. Our beautifully-designed, award-winning templates enable our customers to look professional from the start, while also providing deep levels of customization so that no two websites look alike. This empowers our customers to stand out and express their story and brand in a beautiful, engaging and consistent way across digital channels, including websites, social media and Email Campaigns, among others," the company wrote in its S-1 filing with the SEC.

Squarespace makes the majority of its revenue subscriptions from monthly and annual subscriptions, which accounted for $585.7 million, or 94.3% of the $621 million in total revenue the company saw in 2020.

Subscription revenue is broken down into two categories: presence and commerce.

Presence revenue consists of subscriptions to the company’s plans that offer core platform functionalities. Presence revenue also includes subscriptions to third-party software solutions, subscriptions to social media stories, and domain managed services.

"Our intuitive design tools make it possible to quickly and easily create a professional-quality, mobile and desktop friendly website, acquire a domain and have a differentiated social media presence. Since our founding, we have aggressively invested in our design and creative teams in an effort to create innovative, forward-thinking website designs that ensure our customers’ websites are seen as among the most sophisticated on the web," the company wrote.

Presence revenue totaled $477.8 million in 2020, or 76.9% of all revenue.

Commerce revenue are subscriptions that offer all the features of presence plans, plus additional marketing and commerce transaction tools, as well subscriptions to the company’s scheduling services.

"Through our comprehensive commerce solutions, we provide our customers everything they need to sell physical products, subscriptions, content or services online. Our commerce functionality is fully integrated with our presence products, eliminating the need for third-party tools," it says in the company's S-1.

This revenue stream totaled $111 million, or 17.9% of all revenue.

The company also makes a small amount of money from non-subscription revenue as well, which is made up mostly of commerce transaction fees received through revenue sharing arrangements with payment processors that handle Squarespace's customers’ commerce transactions. It also includes revenue from third-party services that provide additional functionality to Squarespace customers.

Non-subscription revenue totaled $32 million in 2020, or 5.1% of all revenue.

Squarespace went public on May 19 through a direct listing, opening at $48 a share, and closing at $43.70 a share, down 9 percent. As of the end of trading on Thursday, the company was at $54.93 a share, up 14.4% from its opening price.

Prior to going public, Squarespace had raised $578.5 million in funding from investors that included General Atlantic, Index Ventures, and Accel. 

(Image source: sec.gov)