Late Friday, came word from The Wall Street Journal that GoDaddy, the Internet registrar best known for its raunchy commercials, was for sale in an “auction that could fetch more than $1 billion.” Those “people familiar with the matter” — bankers who leaked the story — neglected to mention that GoDaddy’s business stinks.
For one thing, the barriers to entry are ridiculously low. At last count, there were more than 700 registrars of Web names, according to the Internet Corporation For Assigned Names and Numbers (ICANN). Little wonder that GoDaddy has struggled to make a profit. As I wrote for TheStreet.com in 2006, “Scottsdale, Ariz.-based Go Daddy hasn’t had a profitable year since it was founded in 1997. Last year, it had a net loss of $11.6 million.” Two months after my story appeared, GoDaddy pulled its planned IPO The company’s loquacious founder Bob Parsons was mad at the financial press for focusing too much on the company’s lack of profits which he blamed on overly conservative accounting rules and not its positive cash flow. He also blamed almost everything but the price of tea in China. Parsons laid it all out in an entertaining blog post.
This decision comes after the best quarter in the company’s history. During the 2nd quarter, The Go Daddy Group Inc. had GAAP revenue of $56,985,000, a net accounting loss of $733,000 and positive cash flow from operations of $14,240,000.
We have war and escalating hostilities throughout the Middle East, with no end in sight. Oil prices are skyrocketing. Tech stocks, in particular, are once again taking a beating on Wall Street, due in part to some investment banks cutting their ratings on the U.S. technology sector. Rising interest rates have played a key factor. Their steady rise over recent months has put adverse pressure on stocks overall.
Of course, GoDaddy was also being compared unfavorably at the time to the disastrous Vonage IPO. Parsons didn’t miss a beat though. Among his more creative promotions ideas was to hire the sexy race car driver Danica Patrick as a spokesperson. GoDaddy continued to add customers. Those pesky “people familiar with the matter” told the Journal that the company posted revenue between $750 million and $800 million in 2009. That’s really strange that the bankers — I mean people — were not able to provide a more specific number. Moreover, the story did not discuss profits at all which makes me suspect that they are nonexistent or pitifully small.
The biggest problem that GoDaddy had was that it was all sizzle and no steak. Investors have known this for years even as the media failed to look beyond the racy commercials.