10 October 2017
Is it time for GoDaddy to Turn Off the Super Bowl Ads?
Published 10 October 2017
Previously published on LinkedIn - Oct 4, 2016
Brand marketing is fun, sexy and very expensive – at least in the case of SuperBowl ads. But do they move they needle for the bean counters? We'll come back to that one later, but in the mean time…
Something about my last two posts bothered me. They were too rosy, too upbeat on results. Something didn't' quit feel right. But then again, as I mentioned, we're peeling back the onion layer, by layer – and we're working from the outside in with assumptions.
I was going to move onto householding, deferred revenue as it relates to acquisition costs, etc, but those will have to wait for another day…
From what I can tell, GoDaddy is losing money on new customer acquisitions. This feels contrary to my previous two posts…you know, average customer revenue is $137 per year. Cost per acquisition is just $67. It looks good when considering only those two points.
Yep, until you pull back the numbers a bit more. The illustration below, shows what happens when we remove all that juicy, easy renewal revenue and leave Customer Acquisitions standing in the harsh light of the bean counters.
If it's not immediately obvious the mix is 36.84% from the Top 5% customers, 60.84% of all other Renewals and roughly 2.32% from New Customers. Admittedly, I've assumed the top 5% is all renewal revenue, but how often do you see a new customer land in the top 5% of customers, especially with a customer base of 13 million? Not often. Which is why I counted the Top 5% as renewal revenue and then backed into the New Customer number. Here's the detail, just in case anyone wants to see it.
So, why do we care? Well, in the words of… we have an elephant in the room: GoDaddy is losing money during acquisition. This isn't really uncommon for companies, so it's a little elephant, but it may be one of the reasons why the GoDaddy growth rate in total customers is slowing. It is very likely one of the reasons why the company is shifting their customer lifecycle focus to renewals and larger companies. It can also be seen as a red herring in the GoDaddy story to "radically shift the global economy to small businesses". It makes for a good story, but the cost to acquire all those small companies and "passionate individuals" is expensive. At least through current methods at their current size… hence my poke at the Super Bowl ads.