GoDaddy Out to Lose Bad-Boy Image

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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