Shares of GoDaddy Inc., a technology provider to small
businesses, opened at $26.15 in their market debut, 31% above their
initial public offering price Wednesday.
The stock recently traded at $25.76 on the New York Stock
Exchange under the symbol "GDDY."
GoDaddy, which is perhaps known nearly as much for its racy
television commercials as it is for selling Web domains, has been
working to make over its image. It also wants to promote that it
does more than sell Web domains, including helping customers get
their websites running, growing their business, and selling them
products.
GoDaddy priced its initial public offering at $20 a share late
Tuesday, above expectations. The deal raised $460 million by
selling 23 million shares. The company had planned to sell 22
million shares in the range of $17 to $19, according to a
regulatory filing.
The total doesn't include a so-called overallotment option,
which gives underwriters the opportunity to sell additional shares
under certain circumstances. Morgan Stanley, J.P. Morgan and
Citigroup led the deal.
Customers recognize GoDaddy from its risqué TV ads, company
executives acknowledge, but the firm wants to earn their business
for an unglamorous new strategy: making small businesses more
productive.
GoDaddy's image makeover is part of the plan behind the IPO,
according to people close to the company. Commercials with model
Bar Refaeli and race-car driver Danica Patrick are gone. A Super
Bowl ad in February showed a business owner skipping the big game
to work at his desk.
GoDaddy also wants to tell the world it is more than Web
addresses. The company seeks to convince its 13 million customers
to buy newer services like company-specific email addresses,
bookkeeping software and e-commerce tools.
The broader product strategy is potentially more lucrative, but
it also exposes GoDaddy to a fleet of rivals vying for
small-business owners. It is an open question whether GoDaddy can
remain relevant as scores of tech firms pursue a similar
approach.
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 with a low-cut top raising a ruckus at a mock
congressional hearing. Mr. Parsons kept a blog to stir attention
about what he said were racy ads rejected by TV 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 brand's 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," he said.
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."
GoDaddy priced its IPO late Tuesday at $20 a share, topping its
projected range of between $17 and $19 a share. It also sold 23
million shares, a million more than it originally planned on the
back of strong demand.
The new owners hired technology-product executive Blake Irving
as chief executive, signaling a push to upgrade the company's
technology. The company opened offices in Silicon Valley and the
Boston area to attract high-caliber talent. Since 2010, spending on
technology 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 to providing a more extensive
range of services from selling Web domains.
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.
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.
While GoDaddy tries to hook small-business owners on its suite
of services, its rivals are following a similar playbook. Two
companies that help small businesses design and run websites,
Wix.com Ltd. and Squarespace Inc., also help small businesses
design and run websites, and each advertised during this year's
Super Bowl broadcast with ads that embraced star power, featuring
former NFL quarterback Brett Favre and actor Jeff Bridges,
respectively.
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 59% since their first day of trading in 2013, while
shares of Wix are up 14% since their public debut.
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
with a market value double its revenue.
GoDaddy and others say the small-business market is big enough
to accommodate a wealth of entrants. "Having multiple players means
the space is growing well," said Endurance CEO Hari
Ravichandran.
Telis Demos contributed to this article.
Write to Corrie Driebusch at corrie.driebusch@wsj.com and Shira
Ovide at shira.ovide@wsj.com
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