Earlier this week, the Wall Street Journal reported that Go Daddy Group has hired investment bank Qatalyst Partners to facilitate a sale of the company. According to the always anonymous “sources familiar with the matter,” Go Daddy’s 2009 revenues were approximately $800 million, and the company is expected to fetch over $1 billion at auction. So the immediate follow up question becomes – who’s the buyer?
In addition to their 43 million domains under management, Go Daddy also has a very large shared hosting business. Accordingly, they may attract bids from some of the large shared hosting companies – The Planet, HostGator, 1and1, and others. Yahoo may bid as well, given that they already have a significant shared hosting and domain registration presence. I don’t expect much interest from the likes of RackSpace, Equinix, or Savvis due to their concentration on enterprise customers. Besides the obvious interest Go Daddy will receive from private equity firms (perhaps in partnership with any of the above), I want to propose an alternate, dark horse scenario – what would it look like if Google bought Go Daddy? I think it breaks down like this:
Google Immediately Controls Nearly 50% of Domains on the Internet
As mentioned above, Go Daddy currently has 43 million domains under management. There are only about 100 million domains on the internet in total, meaning that Go Daddy controls nearly 50% of the entire market. If Google acquired Go Daddy, the combined company would wield significant power and control over the domain name system, in addition to the considerable influence Google already has over the internet in general. This would allow Google to exert control over the direction of the internet infrastructure as it evolves, which could be interesting as far as inserting contextual ads into error pages, guiding the creation of new top level domains, and generally steering the evolution of the internet to be more search-focused overall.
Google’s Search Algorithm Gets a Lot Smarter by Leveraging Go Daddy Domain Ownership Data
Go Daddy already owns a patent describing “a method for presenting search engine results based on domain name related reputation data”. Imagine a spammer that owns a ring of 1,000 domains that all link to each other and distribute spam emails. Google is now able to recognize the common ownership and modify their search algorithm accordingly – search rankings for spam sites drop like rocks. Similarly, Google is able to examine domain billing data from Go Daddy and allow domains registered to legitimate businesses to rise to the top. Powerful stuff.
Google Gains a Killer “Business in a Box” Product Set
The combination of Go Daddy’s hosting and domain registration businesses with Google’s core search and SaaS products (GMail, Google Docs, etc) raises some interesting possibilities. Suppose Google offered a bundle that included a domain, basic shared hosting, Google Apps for Your Domain (GMail, Calendar, Docs, etc), a Google Voice phone number, and Google Checkout e-commerce. This is a step beyond their existing Google Sites product in that it offers a fully capable hosting environment with applications, rather than just basic WYSIWYG web design. It’s a business in a box, run entirely on Google’s infrastructure.
Google Leverages the Google Apps Suite to Create a New Paradigm – Applications as a Service
Now let’s take it one step farther. Imagine that Google exposed a robust Google Apps API to all of their hosted customers. So from your company’s hosting account, you could have a mailing list that is sent out through GMail, release a presentation for download through Google Docs, and expose a video for streaming on YouTube – all programmatically. You could do all of this without running any kind of mail server, file server, or video streaming server in your own environment. Everything would all be handled via API on an “as a service” basis, with capacity spun up and down as requested. This is similar to the scalable “cloud” hosting model that becoming so prevalent today (see VMWare, Amazon EC2, etc) – except that the scaling occurs at the application level (GMail) rather than the infrastructure level (the hosting account). Call it the next evolution after software as a service (SaaS) — applications as a service (AaaS). A customer’s hosting infrastructure hosts only the “brain”, everything else is run, scaled, and maintained as a separate application.
So suddenly, by coupling cheap/free hosting with its robust and scalable Apps universe, Google has created shared hosting on steroids. Each hosting account needs only to be powerful enough to serve pages, not run applications. It’s scalable, cloud-enabled IT infrastructure in a box, with all the heavy lifting abstracted away – a killer product. If the platform were easy to deploy and seamlessly scalable, it would send shock waves through the hosting and IT industries.
Go Daddy’s Parked Domains Are an Excellent Platform for AdSense
People often forget that at the end of the day, Google is an advertising company. Almost 90% of Google’s revenue comes from CPC ads on Google.com and AdSense partner sites across the web. Many of Go Daddy’s millions of parked domains are currently monetized through their CashParking program, though Google does offer AdSense for Domains. There may be opportunities for Google to increase revenue by consolidating the two programs and making AdSense installation a one-click process for parked domains.
Of course all of the above are no cakewalk to pull off, and there are 101 other reasons that Go Daddy is a tough pill for Google to swallow. However, if Google does come out of left field to snatch up Go Daddy, I think there are some extremely interesting ways to productize domains and basic web hosting in combination with Google Apps. I believe there’s a lot of power in offering the entire internet “stack” (domain, DNS, infrastructure, software, applications) in a neat package tied with a bow. Go Daddy would also further increase Google’s already broad influence over the structure and direction of the internet in general. Combined with increased reach for AdSense and the enhancements domain ownership data could bring to the search algorithm, Go Daddy starts to look like a very strategic acquisition for Google. I’m not saying it’s likely or even probable, but you read it here first.
Note: All of the views and opinion in this post are entirely my own and in no way reflect the views of my employer Hosting.com, our investors at Pamlico Capital, or any inside information of any kind. The above is purely speculation. Hat tips to Scott Taylor, Erik Vanthilt, Mike MacMillan, Andrew Forrest, and Will Nathan for batting this idea around with me.