Even if you’re a newbie to the website owner business, you’ve likely heard of GoDaddy via one of their Super Bowl or NASCAR commercials.
Perhaps you’ve even taken out a domain or two through them but you have no idea what they really do that makes them a powerhouse business. They are the world’s biggest domain registration service, but that isn’t all they have to offer.
GoDaddy Inc. filed for its IPO in June 2014 with a placeholder value of $100 million on the deal. In a recent meeting with an analyst, CFO Scott Wagner stated that the company now seeks an IPO valuation of almost $4.5 billion.
How Does GoDaddy Make Money?
If you base figures off GoDaddy’s 2014 nine-months ended unaudited financial results, the company made $1.01 billion in revenue from three sections:
- Domains – 55.5% of total revenue
- Hosting and Presence – 36.5% of total revenue
- Business Applications – 8.0% of total revenue
However, even with a total $1.01 billion in revenue, the company is still losing money at a net loss of almost $200 million in the 2013 financial year.
The biggest part of GoDaddy’s revenue consists of domain name registration and domain name renewals. Also under this category are services such as domain privacy, domain backorders, fee surcharges to ICANN, advertising revenue from parked domains and other domain related products.
The revenue GoDaddy gets from a registration can vary significantly. The company charges different prices for different types of domains. For example, at the time of writing, a new .com registration costs $8.99/year for a 2-year term. Interestingly, .net and .org domains cost the same, while .today costs $24.99/year.
During the first nine months of 2014, the domains category of services brought in a revenue of $564 million.
Hosting and Presence
The second biggest part of GoDaddy’s revenue is what they get from offering hosting and presence type products. This includes website building products, SEO, SSL certificates, SiteLock website security, private IPs and much more.
When it comes to hosting, GoDaddy offers shared, VPS and dedicated servers at rates starting at just a few dollars a month per domain. In addition, the hosting includes site building tools so that even beginners can figure out how to get a site up and running quickly.
The Hosting and Presence section of GoDaddy brought in nearly $370 million during the first nine months of 2014.
The third area of GoDaddy’s revenue involves Business Applications. This includes items such as email accounts, online bookkeeping, online data storage, email marketing and an online payment system.
Some of the specific products that integrate into Business Applications include:
- Microsoft Office 365, which starts at the price of $4.99/month per user
- Email marketing service, which starts at the price of $9.99/month for up to 1,000 subscribers. It has similar capabilities to MailChimp and GetResponse.
The Business Applications portion of GoDaddy brought in a revenue of about $81.6 million during the first nine months of 2014.
If you’ve ever gone through a fast food drive-through and ordered a sandwich, you likely heard the words, “Do you want fries with that?” This is an add-on sell. However, companies can also create upselling and cross-selling opportunities by offering upgrades or additional, related products, such as upsizing your soft drink for another 10 cents or cross-selling you dessert.
While the cheap domain name registration (it can be as little as .99 for the first year for a new domain and with coupons and specials) draws customers to the site, the add-ons increase GoDaddy’s bottom line.
GoDaddy is the king of upselling/cross-selling.
According to Santiago Ortiz, while the average cost of a domain registration is under $10, the final purchase price from a customer is almost $150. The reason for this is add-on items, such as privacy, website hosting, security certificates and other features.
From Modest Beginnings to Billion Dollar Plus Business
From the time they formed in 1997 to their approximately 12 million customers today, GoDaddy’s model is definitely one to study for insight into how to build a successful company.
What do you think? Do you like GoDaddy’s business model? Would you subscribe to the IPO?