09 September 2016
Is GoDaddy Shifting Gears?
Published 09 September 2016
Customer lifecycle marketing provides an approach to business that can be extremely useful in understanding customer behavior, company behavior and whether or not a company and its customers are "getting along with each other." Join me as I experiment in a series of posts with lessons learned in customer lifecycle marketing and apply it to GoDaddy and their public records to see what the numbers tell us about GoDaddy, the world's largest domain name registrar.
Remember, this is an experiment, to poke and prod and "peel back the onion layers" and see what we can see using customer lifecycle marketing methods about GoDaddy's customer loyalty, revenue and business model assumptions.
Okay, here are a few reference points for your consideration:
GoDaddy has 14 million customers today (their web site says so) and had 13.8 million on December 31, 2015. On March 31, 2014 they had 12M customers and taking it back to Dec 31, 2009 they had 7M customers. That's 100% growth over a six year window of time. Not bad.
In 2013 they added 1.3M customers. In 2015 they added 1.1M customers. I am inclined to believe these are "net adds" and not gross numbers of new customers acquired during the year. Hence I would expect the growth rate to drop to a number close to 1 million customers added in 2016. If correct, that would be roughly 30% slower than three years ago.
Okay, GoDaddy has also been kind enough to publish that 700,000 customers spent "over $500" each in 2015. That tallies to $350M in annual revenue if they "average" $500 each, but they don't they spend "over $500 each." Let's use $1,000 as the "average" for this group. This tallies to $700M.
Based on the 700k customers that spend "over $500 each" the above point leads me to believe 5% of their customers generate between 18-35% of total revenue. That's (700k high value customers / 14M total customers and $350M -$700M high value customer revenue / $1.9B total revenue). Okay, so far so good.
Now the GoDaddy retention rate is at 85%...unless the customer has been with the company three year or longer, then it jumps to 90%. We're going to stick with the 85% number. On a base of 14 million customers, with 85% retention rate, GoDaddy loses over 2M customers per year. In order to achieve the net add of 1M in 2016, this suggests they need to "acquire" 3M new customers in order have a net increase of 1M.
Turning to profitability, the company has made steady progress in shrinking their annual losses. 2015 showed a small loss of $52M. Based on the last three years, it is possible that GoDaddy will achieve break-even by the end of 2016.
So, here's my early thesis or my rough observation, GoDaddy is shifting up market. 5% of the customers could be generating 35% of revenue. The profit picture is improving and the net add in customers is becoming increasingly difficult. The bigger the base, the more difficult it is to maintain rapid customer growth across the entire customer base.
GoDaddy continues to make acquisitions, as evidenced by their recent purchase of ManageWP in order to add a wider and deeper offering to their existing customers. In other words, the GoDaddy business is shifting from high customer acquisition growth to revenue and profit growth from existing customers. This is a fundamental shift in their business and will alter the way they sell to and service customers. It is likely their segmentation models will change, their customer lifecycle methods will change and their product offerings will change. There's a whole lotta change coming to GoDaddy...
But then again, this is very rough, and very early...as we peel back the layers… with a very limited number of data points. Time will tell if I'm barking up the wrong tree. After all, rumor has it there are over 1B registered domains around the globe and GoDaddy says they only have 63M under management.