HostGator is one of the most popular web hosting companies on the planet. How did it get so big and popular so fast? As you can well imagine, this is a fair question to ask because HostGator was founded by a college student in his dorm. In the span of only a few years, HostGator has managed to amass huge chunk of the lucrative global web hosting company. Web hosting is one of the most lucrative businesses to go online because the initial cost of the data network is spread among hundreds of thousands of customers who pay every month. It’s kind of like being the landlord of the internet so to speak. HostGator was able to do this because of its aggressive affiliate marketing system.
HostGator was one of the biggest promoters of hosting coupons. People who are looking to save money on their hosting fees would look for these coupons but little did they know the people distributing these hosting coupons actually get an affiliate commission with HostGator. HostGator was able to do this because the actual cost of providing the hosting is very miniscule; it was a win win situation. No wonder the company just exploded in a short period of time. Well, a lot of people were quite shocked when they found out that HostGator sold out to a little known company called Endurance International Group. The only information people had about this acquiring company beforehand are the owners of this group who had interests in other countries, primarily in the infrastructure industry.
The Endurance International Group has gone IPO and it has raised $215M last October. The most interesting about this IPO is first of all, it’s a roll up. What Endurance did is it bought out companies within an industrial and business segment and gift wrap them so they can go public on Wall Street. This is a fairly common strategy for companies that want to borrow a lot of money, acquire a company and then pursue an exit strategy quickly because this is a quick turnover for the company. They spend some cash buying all these smaller companies like Bluehost, HostGator, Fatcow, Domain.com and iPage. They got a quick exit by going public— very smart move. Usually, you see this kind of move in industrial businesses and more traditional brick and mortar enterprises.
Another thing to note about this IPO is that Endurance actually got less than anticipated. It was kind of hoping that it would raise $400M. In the end, it only raised $215 from the IPO. Since this is an internet infrastructure play, it would definitely be interesting how this plays out. The problem is that this side of tech stocks tends to be perceived as less sexy than social media like Facebook, Twitter, app companies and cloud computing companies. It’s definitely worth keeping an eye because this may either be the start of something huge like a vertically integrated top global hosting company or it could just be an exit play.