We have this massive opportunity ahead with about a $380 billion market opportunity when you just focus on our core geographies and where we operate today, which means we are significantly underpenetrated. And in particular, on the product expansion side, localization of products matters. Commercial initiatives matter. That means working with partners, working with app developers, working with large SIs on the ground in these places. That really matters. But I think we will continue to focus on the success we’re seeing in Europe. And there’s no reason for that to be slowing down. And then obviously, APAC and LatAm also provide some really incredible opportunities there. Let me also talk quickly about Audiences because I think it’s important.
Obviously, we’ve been talking about advertising generally on Shopify, but Audiences in particular is one that we’re especially proud of. Look, this thing launched in 2022, May. It’s now helping merchants get better results from the digital ads. The algorithms that this thing is getting better at every day helps with finding high-intent customers. And in some cases, we are leading — we are seeing this lead up to 50% CAC improvements. So it is really important. It’s also a key reason why merchants used to upgrade to plus. We’re now experimenting more. We just launched a free 45-day trial in April. Some merchants who are not in Shopify Plus can actually experiment with it. Of course, the goal to get them the upgrade, but also get them to start using it.
And then just in January, in the winter edition, we talked about stronger retargeting and benchmarks for ads, retarget twice as many potential buyers with much better customer targeting boost list, new benchmarks for measuring ad performance. The Audiences product is something that we’re really proud of. And I think you’ll see us continue to double down on it. But advertising in general, I think what differentiates Shopify is our ability to interpret data, experiment and then lean into where we see these opportunities. And everything I referenced in my prepared remarks speaks, I think, to a desire to be world class in every aspect of our business, including marketing for ourselves and helping our merchants with marketing. And Audiences is a great example of that.
The other one, of course, is Shop Campaigns, which previously known as Shop Cash Offers. Very early stage of experimenting, but we’re already seeing merchants and credible brands use it and find increased revenue through much higher visibility, much better conversions. And again, the great part about things like Audiences and Shop Campaigns is if you want to leverage these things as a brand or retailer merchant, you have to be on Shopify.
Carrie Gillard: Thanks, Mark. Our next question will come from Andrew Boone at JMP Securities.
Andrew Boone: Thanks so much for taking my question. Jeff, can you talk about the reaction to Plus price increases? And you laid out 2Q pretty clearly, but how do we think about that flowing through the P&L in the back half of the year? Thanks so much.
Jeff Hoffmeister: Yeah. Thanks, Andrew. A couple of things I mentioned on the call and then a couple of additional points. I did mention on the prepared remarks earlier that we — we’ve had a majority of the Plus merchants commit to three-year contracts, which for us is really a testimony to them looking at all the value we provide and saying this is something that I want to — this is a platform, this is a set of tools I want to continue to work with and commit to for a multiyear period, which is — which obviously is a great testimony to what we’ve been doing. As you know, similar to what we saw in the Standard pricing changes, it’s going hit MRR first, right? So we’ll hit MRR in Q2 because today is essentially — today, this very day, in fact, is the first day of the billing cycle.
And so it will hit MRR in Q2. It really won’t hit revenue and obviously, therefore, margins really until mostly in Q3. So this will be a little bit more of a back half phenomenon than anything else. And it will track pretty similar just in terms of timing because we implemented both of these changes, the Standard and the Plus, at pretty much the same time of the year. So it will track in a similar manner. But again, just given the fact that the majority of the Plus merchants have opted into three-year contracts, I don’t think it will have as big of an impact as Standard did for us last year.
Carrie Gillard: Okay. Thank you for your question. Our next question comes from Mark Mahaney at Evercore ISI.
Ian Peterson: Ian Peterson. Hi, this is Ian Peterson on for Mark. Can you help us unpack the Q2 guide a little bit more and the puts and takes in your high teens year-over-year revenue guide? How big is the FX headwind embedded in the guide? And how should we think about the balance between subscription versus Merchant Solutions in the quarter, given the price increases flowing through more enterprise customers coming online? Thanks.
Jeff Hoffmeister: Yeah. I’ll go ahead and start on that one. Thanks, Ian. So a reminder that — and I want to go back to this as the largest impact. I mentioned this in my comments earlier. The largest impact in the comparison between Q1 and Q2 growth rates is this dynamic of the pricing changes. And you really have Q2 this quarter, where effectively the year-over-year lift of the standard plan pricing changes is waning before you really get the ramp in terms of what we’re seeing on the plus pricing and before that’s really kicked in. That is the biggest driver. The other — and really, when you take that in isolation, don’t forget, obviously, all the great things that we’re doing in terms of what we’re seeing, Harley alluding to this in terms of the strength of all of our other products.
The merchant additions are strong across all of Standard, Plus and point-of-sale, as I talked about as it relates to MRR numbers. Payments, enterprise plus, point-of-sale B2B, they’re all going really, really well. So those are the key takeaways. I did, obviously, as it relates to some of the broader economic factors that I mentioned in my comments earlier, there is some impact from the strengthening of the US dollar. There is also actually when you look at the Q1 growth rate, that had a year-over-year impact from leap year, which is roughly — just think about the number of days in the quarter is roughly 100 basis points tailwind to the growth rate. So if you want to normalize Q1 growth rates, that’s something to keep in mind. And then Europe and most specifically the UK, where we are seeing some economic slowdown, as I mentioned earlier, but please do, Ian, keep this in perspective that — and as you go back to our annual report last year, you noted that we mentioned for 2023, EMEA as a whole was 18% of revenues for the year.
And the UK is just one piece of that. And we’ve obviously and Harley mentioned just a few moments ago, we’ve obviously been talking in the past few quarters about the growth rates in the high 30s for EMEA. So we have been doing exceptionally well there, and we expect to continue to outgrow the market, not only in Europe, but also more importantly, North America. So it is this pricing change impact, which is the biggest factor for Q2. And again, I think our merchant acquisition engine and our product suite are performing really well. So we feel good about the strength of the business right now.
Carrie Gillard: Thank you for your question. Our next question will come from Michael Morton at MoffettNathanson.
Michael Morton: Good morning. Thank you for the question. The number one question we get from investors is the impact that the growth in enterprise will have on the attach rate. It’s just really tricky to try to forecast it from the outside and probably not growing as quickly as some people might expect at the moment. Would just love to hear some more about the moving parts behind this as you see success in the enterprise and how investors should think about the attach rate going forward? Thank you.
Harley Finkelstein: Hey, Michael, I’ll take that question. So first and foremost, enterprise is really continuing to gain some traction here. The way that we think about it is that there are a bunch of different ways that very large enterprises can use Shopify. And not every one of them wants — [someone headless] (ph) they can use Hydrogen and also Remix. Someone plus, there’s one size fits all out of the box. And those that don’t want out of the box, we have CSS as well. But we’re now offering something for every enterprise level brand that takes all the value of plus and wraps into the needs of very complex high-volume brands. I mentioned Everlane previously. I mentioned COACH on the call today. We’re seeing more of these brands that historically didn’t necessarily look to Shopify, come to us now to take one component.
