By Corrie Driebusch And Shira Ovide
Shares of GoDaddy Inc., a technology provider to small
businesses, jumped 31% in their market debut Wednesday as investors
piled into the company known nearly as much for its racy television
commercials as it is for selling Web domains.
The stock opened and closed at $26.15, 31% above its
higher-than-expected initial public offering price. During the day,
GoDaddy shares--which trade on the New York Stock Exchange under
the symbol "GDDY"--traded between $25.49 and $26.84.
The company's closing stock price values GoDaddy at nearly $4
billion.
GoDaddy has been working to make over its image, and the
company's IPO is part of that plan, according to people close to
the company. Gone are commercials with model Bar Refaeli and
race-car driver Danica Patrick.
The company also wants to promote that it does more than sell
Web domains: It also helps customers get their websites running,
grows their business, and sells them products. The company seeks to
convince its 13 million customers to buy newer services like
company-specific email addresses, bookkeeping software and
e-commerce tools.
The broader product strategy is potentially more lucrative, but
it also exposes GoDaddy to a fleet of rivals vying for
small-business owners. It is an open question whether GoDaddy can
remain relevant as scores of tech firms pursue a similar
approach.
Shifting the brand's 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," he said.
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."
GoDaddy in December 2012 hired technology-product executive
Blake Irving as chief executive, signaling a push to upgrade the
company's technology. The company opened offices in Silicon Valley
and the Boston area to attract high-caliber talent. Since 2010,
spending on technology 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 to providing a more extensive
range of services from selling Web domains.
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 called 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.
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 59% since their first day of trading in 2013, while
shares of Wix.com Ltd. are up 14% since their public debut.
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 an 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, at its high Wednesday,
had a market value about three times its revenue.
GoDaddy priced its initial public offering at $20 a share late
Tuesday, above expectations. The deal raised $460 million by
selling 23 million shares. The company had planned to sell 22
million shares between $17 and $19, according to a regulatory
filing.
The total doesn't include a so-called overallotment option,
which gives underwriters the opportunity to sell additional shares
under certain circumstances. Morgan Stanley, J.P. Morgan and
Citigroup led the deal.
Telis Demos contributed to this article.
Write to Corrie Driebusch at corrie.driebusch@wsj.com and Shira
Ovide at shira.ovide@wsj.com
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