When AI Makes You Irrelevant Overnight...The Collapse Of Wix

It felt like a Wix ad was on every YouTube video. Wix was one of the biggest website builders. So big, they've run many Super Bowl ads. But now, it's dying. Their value is down 90%. From 19 billion to about 2 billion. And now, they're being investigated for potentially misleading investors. What happened to Wix? Wix has a pretty typical founder story. Developers Abhishek Abrahami, his brother Nadev, and Giora Kaplan were actually working on a different business. When they noticed how annoying and difficult it was to build a website. But where there's problems or frustrations, there's often opportunity if you provide a solution. This sounds good, but it needs a tiny bit of context. Wix wasn't first to website building. Not by a mile. There was already Squarespace and WordPress. While Geocities and Adobe Dreamweaver had been around since the 90s. Weebly also launched about the same time as Wix. Though, Wix did have something going for it. Specifically, three things. For one, it was very customizable. Which goes back to the founder's frustration. Squarespace had better templates, but Wix gave you more freedom since it was drag and drop. If you had an idea in your head, you could create it. This made Wix pretty unique. Even if some other platforms didn't need coding, it was still the easiest to jump into and start building. If we give people the ability to generate their vision and to make it as beautiful as they want, then we have a winner. And that was pretty much the key, I think, from day one. But ironically, this freedom came with a very big downside. It was built using Adobe Flash. Not HTML like Dreamweaver or PHP like WordPress. This allowed for more freedom. But boy, did Flash have downsides. The cheapest plan is $13 a month. And even with that $13 plan, you're pretty limited. You only get a couple gigs of space. And to really have a fully functioning, really usable website, you've got to upgrade to their second tier plan. Flash had a lot of security vulnerabilities. It had notably bad SEO. On mobile, it drained battery, had no touch support, and was unreliable. It was so bad that Steve Jobs refused to let Flash websites run on the iPhone. He even published an open letter criticizing it. Flash has been such a problem because the way it hooks into systems. It's been a virus nightmare on Windows, even on the Mac. And when we got it running on iOS, the performance was just abysmal and embarrassing. And it could never get to something which would be customer value add. From 2012, Wix adopted HTML5, but still had to support Flash for years because of pre-existing users. Though their drag and drop model was definitely a hit. Squarespace followed suit in 2014, adding their own drag and drop system. But it sure wasn't with Flash. Wix was very much catered to your small business owners or individuals who just wanted a website quickly. No coding background and little interest in it. The drag and drop naturally seems quite appealing. Wix was freemium, so they preferred having lots and lots of free users with limited features, who might upgrade to all the premium features. E-commerce, custom domains, a business email, booking, more storage. Wix was also pretty early to this trend, and they were very concerned with wowing customers. Wix catered to those who wanted something quick, easy, and most importantly, cheap. It feels like the best LLM to use changes every month. But even just a few AI plans can add up very quickly, especially with tokens. So why not have them all for one $10 subscription? This is Mammoth, which gives you access to most of the latest cutting-edge AI models, all for $10 a month. Mammoth is based in Paris, with their servers hosted in Germany, which means they are fully GDPR compliant. They keep absolutely no training data. But Mammoth is also the best way to use LLMs. Their reprompting feature lets you compare models' responses in one click. 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Click the URL in the description and try Mammoth today. Thank you to Mammoth for sponsoring our videos. My significant other is a freelance web design slash build person. The types of clients she loses to Wix or Squarespace are the worst clients. They want her to do a site for $200 or for the exposure. I'll let you put your name on it. They are the least profitable and the most fussy. Then she's got clients like the local high-end interior decorator, who's totally fine paying $5,000 for a really nice customized site, and then paying hourly for upkeep and updates. For now though, Wix was growing fast. In early 2010, they had 3.5 million users. By around the same time in 2011, they had jumped to 8.5 million. And with that came funding. 10 million in 2010. 40 million in 2011. An IPO in 2013, raising another $127 million. This website builder now had a lot of cash. And that meant a lot of money for ads. Though some were much weirder than others. I don't know what I should do next. Do what everybody else does. Start a business. Build yourself a website. Welcome to T.O.'s Humble Pie. With Wix.com. We make it easy to create your own all-pro website. All by yourself. This was Wix's ad for the 2015 Super Bowl. But they weren't the only website brand there. Each of these ads, 30 second spots, cost $4.5 million. These website builders were becoming more than just SaaS tools. They were becoming huge brands with huge marketing budgets. We want people to understand who we are as a household name and as a major brand. Squarespace had the same idea. The same year, we want people to have heard of us. And weirdly, a bit of an arms race began between these two. Wix did the same again in 2016. And even partnered with the DreamWorks. Oh, a commercial is great. But it all starts with a stunning website from Wix.com. Whoa, you used the power of Wix! Wix makes stunning easy. Go to Wix.com. Create your stunning website today. I can't imagine how much this would have cost. Then they did another in 2017. This one over a minute, featuring Jason Statham. It was working though. This company was everywhere. It felt like it was advertised on every YouTube video. But not all of their marketing campaigns were hits. Some were huge misses and got them into a lot of drama. But first, we need some context. Around this time, Wix ran into a bit of a problem. In October 2016, Matt Mullenweg, co-founder of the open source software WordPress, publishes an open letter to Wix. Wix copied WordPress without attribution, credit, or following the license. The custom icons, the class names, even the bugs. You can see the forked repositories on GitHub, complete with original comments from Alex and Maxim, to developers on Automattic's mobile team. This blatant ripoff and code theft is beyond anything I've seen before from a competitor. Wix's CEO, Abrahami, responds. Wow, dude. I did not even know we were fighting. He argues the code isn't stolen. Here is a list of 224 projects on our public GitHub page. And as you can see, they are all dated before your post. Yes, we did use the WordPress open source library for a minor part of the application. That is the concept of open source, right? And everything we improved there or modified, we submitted back as open source. But Mullenweg wasn't satisfied. Releasing other open source projects doesn't mean that you can violate the license of the editor code you distributed in your mobile apps. Ultimately, these two resolved this in private, in person. So why does this matter? Because what makes this especially weird is that this wouldn't be the last feud Wix would have with WordPress. In late 2020, Wix sent out a bunch of Bose headphones to notable WordPress users. But inside was a QR code signed from WordPress, which linked to a video. Unfortunately, I can't find the video. But it essentially had a top-secret video featuring a caricature of WordPress and potentially Mullenweg acting like a toxic, over-possessive ex. Yeah, this didn't go down well. Not only was it in bad taste, but it was also confusing. Some people thought it was actually from WordPress. Developers started to make fun of Wix. Wix is flushing money down the drain with that Bose campaign. Such a waste of money. They'll make a nice re-gift though. And some even made fun of their broken web design on the video page. Then Mullenweg got on board. And oh boy, did it get so much worse when he pointed out Wix's other problems like Wix's login. They're like a roach motel where you can check in, but never check out. Once you buy into their proprietary stack, you're locked in, which even their support documentation admits. So if we're comparing website builders to abusive relationships, Wix is one that locks you in the basement and doesn't let you leave. I'm surprised consumer protection agencies haven't gone after them. He is right too. Wix very much wanted you to use only Wix even if they didn't have what you needed. Another example, let's say you're on Wix currently and your business doubles in size. Let's say you grow to a point and you need to implement some new custom features in your shopping checkout process. I don't know, just for example. Let's say Wix doesn't support that new feature that you need. You're out of luck. There's nothing you can do. You'll have to move to another platform. But it was about to get a whole lot worse. If you've watched this far, consider subscribing. You probably enjoy our stuff and it helps the channel too. Thank you. Around this time, something else was happening. The pandemic. From January 2020 to August 2021, Wixshare shot up 144%, peaking on February 19th, 2021 at a $20 billion valuation. But you can probably guess what's coming. The surge of pandemic growth eventually evaporated. Q2 2021 was a $37.6 million profit. But Q2 2022 was a $111.2 million net loss. But it gets worse. Remember Wix's premium model? They had a lot of users. 222 million users using their tools. But only 6 million were premium customers. A conversion rate of 2.7%. Wix's stock was collapsing. In late 2022, it was down 79% from peak and down 54% that year alone. So they laid out a plan. 25% free cash flow margin by 2025. To do so, they announced $150 million a year in cost cutting. It was around this time that activist investors had moved in. But surprisingly, this turnaround did work. Wix was soon profitable. By 2024, the stock had recovered. And a lot at that. Though not quite to pandemic peaks. Their free cash flow margin in 2024 was 28%. Nearly double in 2024 compared to previous year. Earlier than expected and above the original goal. Q4 revenue was $460 million, up 14% as well. This was great. But soon after, the stock began to crash again. Why? Well, Wix had a new problem. Perhaps the biggest they had ever faced. AI. AI was and still is rapidly changing the website industry. Why pay for Wix to build a website when you can do it with the many AI tools and do it faster with more customization? The already saturated website maker market got a whole lot more competitive. Wix needed to respond. They bought Base44, a 6-month-old web coding platform for $80 million. Wix also promised some transformative products. From spring and early fall 2025. Wixel, an AI design platform to compete with Canva and Adobe Express. But more importantly, Wix Harmony, an AI website builder. But Harmony was delayed. And when it finally did release, customers found it was slow and was missing features. Product updates were also delayed. The Wix Harmony ad in the Super Bowl wasn't really landing well either. But not because it dealt with AI. This ad feels like it arrived a year late, maybe two. The idea that AI can help you build a website faster, easier, and with fewer technical skills was compelling in 2024, still serviceable in 2025. But in 2026, it feels like table stakes. Especially bad since Squarespace also had a Super Bowl ad, which was basically a cinematic horror short film starring Emma Stone. A very creative ad. Wix felt like it was falling behind on the race it had bet on. Then came the 2025 financial results, which were a bit concerning. Their earnings and revenue were also below expectations. And operating margins had declined. Operating expenses had jumped 46%. They also said, expect free cash flow margin in the low to mid 20% range in 2026. A decent step down. Wix's stock dropped another 27%. And shortly after came the investigations. BFA is investigating whether Wix made false and misleading statements to investors regarding demand for professional designers, AI competition, and its ability to deliver new products and innovation to sustain growth. There had been delays in delivering product updates and innovation to professional developer customers. And as a result, the company had fallen behind the workflow and the needs of professional developers. Wix then announced major layoffs. 20% of their total workforce. Over 1,000 people. Abrahami said this was due to fast evolution of AI capabilities. But I'm not so sure about that. I think the company is struggling, trying to cut back costs, and is hiding it under AI to make it seem as if they're putting more money towards AI like other companies are. Either way, the future looks rough for Wix. Their market cap is down about 90%. Their business model is crumbling. And to top it off, they also have a ton of debt. Wix isn't the only one feeling this pressure. Another SaaS company that was all over YouTube and is now struggling is Monday.com. And like Wix, they may have hidden the problems from investors. Click here to learn the rest of that story. But until then, I'm Hari, and I'll see you guys on the next one.