One true sign of a company that’s wallowing in the big bucks of success is when you see it sponsoring professional sports. That’s exactly what GoDaddy has been doing since the early 2000s by becoming involved in more than one area, from American football to NASCAR.
So, what is it exactly that makes GoDaddy (NASDAQ: GDDY) the financial clout that lets it indulge together with the big boys?
Initially founded in 1997 as Jomax Technologies by entrepreneur Bob Parsons, the company was later re-christened as “Go Daddy” in 1999 before being finalized as GoDaddy in 2006. Along the way, it has grown both organically as well as through acquisitions.
What Does GoDaddy Do?
GoDaddy focuses in four business segments:
- Domain name services: Primary domain registration, domain name privacy, aftermarket domain name transaction.
- Web hosting: Shared, VPS, and dedicated server hosting.
- Web presence: Website builder, digital marketing, online store builder, and web security products.
- Business applications: Email hosting, email marketing, and other relevant business tools.
Growth through acquisitions
Although most of us know GoDaddy as a web hosting provider, as Jomax it was initially in the business of computer technologies. However, once ICANN accreditation opened, it quickly grew to become the largest ICANN-accredited registrar on the Internet.
Earlier I also mentioned GoDaddy growing through acquisitions and this is where other technologies came into play. Rather than acquire companies for market share, GoDaddy went the route of acquiring the technology.
As an example of this, let’s look at some of the areas it bought into;
- Purchased Afternic and SmartName in 2013 to enter the domain parking service business, along with business name generator NameFind.
- 2014 saw it buy Canary and gain a smart calendar service.
- GoDaddy bought Mad Mimi in 2014, an email marketing service.
- 2016 saw GoDaddy acquire FreedomVoice, which provided Cloud-based VoIP phone systems.
Today, GoDaddy has grown to become arguably the world’s largest cloud platform provider with a focus on the small business hosting and domain segment. It has over 19.3 million customers around the world and manages more than 77 million domain names.
Where does GoDaddy’s revenue come from?
For those of you who’ve read my article on How Facebook earns its money, GoDaddy is an entirely different breed of horse. Despite its reliance on technology, Facebook is very much a marketing company that earns almost its whole revenue from advertising.
GoDaddy on the other hand makes money from products it has, which is focused in three main segments; web hosting, domain names, and business applications. However, they have of late re-introduced focus on their revamped digital marketing suite as well.
In 2019, the company saw revenues to a tune of $2.99 billion which was a more modest year-on-year increase of 12% as compared to 19% the year before that.
This was partially caused by a lower increase in the number of customers under management. That figure only saw an increase of 800,000 across 2019 as compared to 1.3 million the year before.
In a breakdown, domain revenues took in $1.35 billion, hosting and presence $1.13 billion, and 510 million for business applications. As we can see, the lion’s share is still undertaken by its more traditional activities.
With that, let’s dig a little deeper into GoDaddy’s money earners.
1. Domain Registration and Management
As the company’s financial backbone, domain name registration, renewals and management bring in significant revenue for GoDaddy. Aside from these core services, there are also numerous associated services that also contribute to its income under this headline.
These include services such as domain privacy, backorders, fee surcharges to ICANN, advertising revenue from parked domains and other domain related products.
One of GoDaddy’s more interesting services is that of being a domain broker. This is sort of a middleman position, in which if you want to buy a domain name that’s already taken, GoDaddy will help you negotiate a purchase with the current domain holder.
While this may sound great, personally I’m not too much of a fan of this type of thing as I feel that it encourages Cybersquatting. Cybersquatting is when domain names are bought with the express intent of holding them hostage later. Not illegal, but certainly distasteful.
2. GoDaddy’s Web Hosting
Given its size, it should not be a surprise that GoDaddy has a finger into all areas of the web hosting space. From shared hosting solutions and specialized WordPress solutions all the way to dedicated servers and Cloud hosting, the company does it all.
However, in the interest of convenience it categorizes them into three areas; shared, virtual private server and dedicated.
Shared hosting plans are a mainstay of many web hosting companies and potential customers are numerous. Anyone who is even thinking of a web presence needs hosting, and these plans offer the most economical entry point to the world of websites on the Internet.
The next step up is something that’s slightly newer and offers people more power and flexibility without the significant outlay of paying for dedicated servers. Virtual Private Servers are suitable for websites that are intended to grow to larger volumes. Prices for these vary depending on the traffic that the sites get.
Lastly are the plans for large companies which not only might use web servers to handle external traffic, but who might want processor time and server bandwidth to handle other matters, such as corporate email hosting or even run business applications from.
3. Web Presence and Digital Marketing
One of the business areas that GoDaddy is looking to expand into is web presence, which includes a stable of tools plus their experience gained in digital marketing. While the latter has been around for awhile, they have rekindled it in light of current events.
Of late the business world has seen significant change in large part due to the COVID-19 pandemic. Many businesses have been forced to digitize with many not having sufficient experience to do so.
This leads us to GoDaddy’s last significant money earner – Business Applications.
4. Business Applications
From email accounts to online marketing and data storage, these things are fantastic value-added services that offer many companies convenience, especially when they’re offered under a single roof.
This has been especially true with the flood of cloud applications. For example, Microsoft’s Office business productivity suite is now available as a Cloud service, which means that for small companies that sign up for this through GoDaddy doesn’t have to worry about massive initial capital investments or even licensing.
Even better are email marketing services, which drastically reduce cost for businesses and help extend their reach exponentially.
Who Are GoDaddy's Competitors?
As you might have guessed from their financials, GoDaddy is the biggest honcho in web hosting today. Their market share in web hosting exceeds even that of Google Cloud Web Serving.
However, on a more practical level, they would be comparable to other more traditional service providers such as HostGator and Bluehost as well as others that compete along different unique selling points.
SiteGround, for example, may not have the length and girth of GoDaddy’s product line but it has shown strength in specific areas such as customer service and performance. Other competitors like HostGator try to go head to head and compete along a breadth of product lines.
Looking at GoDaddy as an Investor
Being a publicly traded company, GoDaddy has shown an upward trend for almost the entire time it’s been on the market. Share value has more than tripled since its initial public offering. So as an investor, should this stock be on your radar?
Despite its soaring share value, GoDaddy’s performance has had alarm bells ringing in many analysts’ ears for some time now. Despite increased market competition and low profitability, many experts believe that the stock price is overly optimistic.
Research Analyst David Trainer has called into question the company’s real profitability and claims that there is a disconnect in GoDaddy’s GAAP net income and the true recurring profits of the business.
This is concurrent with GoDaddy’s June 2014 filing of a $100 million initial public offering with the US Security and Exchange Commission. That filing revealed that the company has not made a profit since 2009 has since experienced a total loss of $531 million.
Combined with the inherent risk that a field as volatile as technology faces, GoDaddy has been labelled by many as a risky buy.
As a Customer, should you Worry?
Thankfully, the answer is again; probably not.
Many web companies have shown that even if they’re unable to sustain performance, they are often taken over and re-branded or revitalized. As a customer, it’s not likely that you’ll be affected by any financial problems they may encounter.
Still, despite its size and technology, GoDaddy hosting is not without it’s cons. If you’re still on the fence, look at our GoDaddy review and that might help you make up your mind.
Despite its size and scope of services, along with the technology to back it up, I find that GoDaddy suffers from one very similar shortcoming as many web technology companies do. In fact, the very one that is the foundation of their seeming success; that they are web technology companies.
Businesses are often run very differently than the facade that they present to the public, because reality is often not the same as marketing spiel. However, web tech companies often lack the business savvy to consolidate the two and as a result, the balance is not there.
Without a real strength and acumen in business and marketing, tech loses out, while on the other hand the opposite is an advantage. Take for example the case of dell, which sells massive amounts of computer hardware, but is in fact a marketing company that produces zero tech, but simply integrates it.
Can GoDaddy weather the stormy seas it faces? Only time will tell.