By Shira Ovide And Telis Demos
A decade ago, GoDaddy Inc. ran Super Bowl ads featuring
scantily-clad celebrities to attract consumers looking to buy Web
addresses. Now, as the company launches an initial public offering
of shares, its future will depend on its ability to attract
aspiring entrepreneurs like Joymarie Parker.
Ms. Parker, a 27-year-old marketing analyst, last year started a
network for young professionals called Joblogues. She turned to
GoDaddy in December to buy Web addresses and to run Joblogues'
online presence.
While pleased with GoDaddy's customer service, she has
encountered technical problems with the service and has begun
researching alternatives.She says she is glad to have so many
options and believes it is "inevitable" she will take her business
elsewhere when her two-year GoDaddy subscription runs out.
Ms. Parker's ambivalence shows the promise and the pitfalls for
GoDaddy as it tries to navigate from Internet bad-boy to trusted
small business partner. Customers recognize GoDaddy from its risqué
TV ads, company executives acknowledge, but the firm wants to earn
their business for an unglamorous job: making small businesses more
productive.
GoDaddy's image makeover is part of the plan behind the IPO,
according to people close to the company. The skin-baring
commercials with Bar Rafaeli, Danica Patrick and others are gone.
Instead, a Super Bowl ad in February showed a business owner
working at his desk while everyone else was watching the game.
The other part is telling the world that GoDaddy doesn't just
sell Web domains. It wants to help its 13 million customers get a
website running, and then sell them additional services like
company-specific email addresses, bookkeeping software and
e-commerce tools.
It is potentially a more lucrative business, but also one with
many rivals jostling for mom-and-pop businesses like Ms. Parker's.
Whether GoDaddy can remain relevant as scores of tech firms pursue
a similar approach remains an open question.
GoDaddy became the go-to provider of Web addresses, known as
domains, thanks to the marketing strategy of Bob Parsons, who
founded the company in 1997. The company's first Super Bowl ad in
2005 featured a woman who wore barely-there clothes raising a
ruckus at a mock congressional hearing. Mr. Parsons kept a blog to
draw attention to what he said were racy versions of TV ads
rejected by the networks.
"As long as they know we're GoDaddy.com and they can type it
into their browser, that's all I'm after," Mr. Parsons told The
Wall Street Journal in 2007.
Shifting the Scottsdale, Ariz., company's brand identity now
won't be easy, said Allen Adamson, chairman of the North America
region for branding firm Landor Associates.
"It's hard to go from something edgy and trendy and outrageous
into what's necessary to succeed in a [business-to-business]
world," Mr. Adamson said. Mr. Adamson had trouble citing corporate
brands that pivoted successfully from naughty to respectable.
GoDaddy declined to make executives available for interviews,
citing regulations for companies with pending IPOs. In IPO
documents, the company said there "can be no assurance that we will
succeed in repositioning our brand, or that by doing so we will
grow our total customers, increase our revenue or maintain our
current high level of brand recognition."
Mr. Parsons in 2011 agreed to sell a majority of his firm to
three investors. He and the investment trio of KKR & Co.,
Silver Lake and Technology Crossover Ventures will continue to
control GoDaddy after the IPO. The company is seeking to sell up to
$418 million in shares. The private-equity firms aren't selling any
of their stakes.
After Mr. Parsons sold a majority stake, a new board hired Chief
Executive Blake Irving, a former Microsoft Corp. and Yahoo Inc.
executive known as a savvy overseer of technology products.
Mr. Irving's arrival signaled a new era in which GoDaddy sought
to improve what some officials saw as outdated technology. The
company hired experienced technology hands and opened offices in
Silicon Valley and the Boston area to attract high-caliber talent.
Since 2010, spending on operations has more than doubled, a faster
pace than GoDaddy's revenue growth over the same period.
Perhaps a bigger change--and the one on which GoDaddy is
hitching its fortune--is the shift from selling Web domains to
providing a more extensive range of services.
The company increasingly has pitched add-ons like website
hosting, or running the computers that keep a company's website
online. GoDaddy also sells email addresses customized to a company
name, digital security features, and versions of Microsoft Office
software tailored for tiny businesses. A GoDaddy service calls Get
Found automatically creates listings on Facebook, Yelp and other
digital spots where people look for business information.
Sales of the newer GoDaddy services have grown at least twice as
fast as domain sales and have fatter profit margins. Continued
growth in customer sign-ups plus the new services have pushed up
average annual revenue from each GoDaddy customer to $114 in 2014,
from $93 in 2012. Still, GoDaddy generates more than half its
revenue from domain sales.
While GoDaddy tries to hook small-business owners on its suite
of services, rivals are following a similar playbook. Two companies
that help small businesses design and run websites, Wix.com Ltd.
and Squarespace Inc., also advertised during the Super Bowl this
year. Their ads embraced star power, featuring former NFL
quarterback Brett Favre and actor Jeff Bridges, respectively.
Technology companies increasingly are targeting small
businesses, hoping to turn mom-and-pop operations into a foundation
for growing their own businesses. Hopefuls include payments company
Square Inc., e-commerce tools provider Shopify Inc., and
online-marketing firm Yodle Inc. Shopify and Yodle are planning
IPOs this year, The Wall Street Journal has previously
reported.
So far, public investors have embraced only tepidly the idea
that small businesses are a big opportunity. Shares of
small-business domain seller Endurance International Group Holdings
Inc. are up 58% since their first day of trading in 2013, while
shares of Wix, which went public in 2013, are up 12% since
then.
Investors are pricing these firms at lower valuations than other
Internet companies. Wix trades at about five times revenue, and
Endurance at about four times. That compares to average of eight
times revenue for companies in the Bessemer Venture Partners' Cloud
Computing Index, which mostly consists of companies that provide
Web-based services to big firms. GoDaddy is aiming to go public at
just 2 times revenue.
GoDaddy and others say the small-business market is big enough
to accommodate a wealth of entrants. "It's misunderstood," said
Endurance CEO Hari Ravichandran. "Having multiple players means the
space is growing well."
Write to Shira Ovide at shira.ovide@wsj.com and Telis Demos at
telis.demos@wsj.com
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