The domain registrar and web hosting company GoDaddy has been quite an acquisition tear lately. Can you really blame it? It’s a public company and it has lots of money. Its business model allows it to be the landlord of the internet because every single year, website owners have to basically pay rent on their online presence by renewing their domain name— talk about a business model with a lot of cash flow. It is no surprise then that GoDaddy has been acquiring businesses lately.
As we have mentioned in another report, it acquired hosting company Media Temple. In this report, it has acquired online bookkeeping company called Ronin. The great thing about the Ronin acquisition is that it allows GoDaddy to provide a more vertically integrated service package. Instead of getting your web hosting, domain name, online invoicing and other services from a wide range of providers, you go to one place and that’s GoDaddy to set up an online business. This can actually be the genesis of a great vertical integration strategy. It totally depends on how GoDaddy plays it out. Invoicing is a very important online task for many types of businesses especially eCommerce concerns.
The key takeaway here is that this acquisition helps only the sum of GoDaddy’s customers but that is actually what might be good for this acquisition. While this value add only impacts a small fraction of GoDaddy’s current customer base, this is one fraction that actually has a higher value because they are more willing to take on value added services. They are probably willing to pay more in terms of hosting and other additional services because these are eCommerce companies, meaning they have a higher chance of making money from their online presence compared to other traditional GoDaddy customers like bloggers and other owners of relatively flat websites.
Another thing to keep in mind about this acquisition is that this is one of the six acquisitions by GoDaddy in a span of six months. There’s a lot going on with GoDaddy and its stock might be a good buy if all these acquisitions click together to produce one lean mean revenue generating machine.