Bill D'AlessandroEntrepreneurship, Investing, Technology

What If Google Bought Go Daddy?

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.

Summary

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.

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3 comments
  • Bill, we began a small conversation on Buzz, but I’d like to flesh it out more here on your site.1) Incredibly insightful and well reasoned analysis that this purchase by Google would be huge for them, and potentially a strong enough move to redirect the course of the Internet. After reading your post my thoughts have turned from not even considering this move to, “how is this not going to happen?:2) I brought up the issue of anti-trust fallout being interesting and you chimed in (rightly so, I think). Saying that while there would be trust busters hawking left and right, Google would be entering a new space (for them) rather than eliminating a direct competitor (buying Mapquest/Bing/Yahoo). -They would actually be assuming more competitors.Since our brief back and forth, I did some research into previous anti-trust allegations that have been raised against Google. The basic premise is that Google is a search monopoly and it attained that status by producing the best search results on the Web, in such a capacity its ability to sift through ungodly amounts of data very quickly has earned its spot and it isn’t really a trust issue. However, Google has not stopped at Search, Google now has many hats and associated with each of those hats are ads. So, if the average user “googles” restaurants in Boston, MA, a Google Maps link is invariably in the top 3 results. The problem? Google’s search algorithms are secret and even though Google is bound to say that their other products are the best sources of Directions, Videos… whatever, and deserve to show up first, there is no way to evaluate whether other companies are being held off of the first page to stifle the competition. Give Google control and a vested interest in almost half of the Internet’s domain names? Who knows what would go on to bolster those sites’ search rankings!? Some sort of regulatory oversight would have to ensue.nnGoogle comes up with great products and bigger is better in terms of their mission. Because if you can index it, you can search it, you can analyze it, you can apply it, and you can build from it. I certainly think Google could go a lot of ways if it entered the space and it would be entertaining as heck to watch play out, but unfortunately I don’t think the move will be made due to what I see as an almost inevitable dive into lawsuits up to their ears.

    • Thanks Andy, glad you liked it. Agree that although this may initially feel like an anti-trust issue, Google doesn’t do any domain registration now, so theoretically the combined company wouldn’t have any larger market share than Go Daddy does today.nnWhat makes it a formidable combination is adding power over the domain name system to all the influence Google already wields over the rest of the internet. Not technically anti-trust (different industries/markets) but still kind of feels that way.nnYour comments about Google cross promoting its own products in search results reminds me a lot of Microsoft in the 1990s, when they used their Windows installed base to push Internet Explorer. However, I do think it’s a little different in that if you don’t like the way Google ranks their search results, you can simply head over to Yahoo or Bing in 5 seconds, for free. Microsoft had contracts with PC manufacturers, so you were forced to use Windows (it was literally your only option as a consumer operating system) and Internet Explorer.

  • Bill, very important distinction you make. Microsoft was cornering a market through contracts and technologies that posed significant barriers to entry to competition. The web is open and the barriers are low and it is a free and easy thing to switch search engines and that does make the Google situation different.nnAll of the article that I can find referencing anti-trust probes pointed in Google’s direction pertain to skewed search results. Google has quotes defending its results as being the best for its users, but how is bias illegal? I agree that the burden should rest on the user that if they aren’t happy with Google results, then they should move on to Bing, Yahoo, etc.nnPerhaps the definitions of anti-trust are still evolving in the digital landscape as lines between industries/markets are blurred as they all relate back to the ubiquitous realm of the internet rather than physical choices.

Bill D'Alessandro