Two soon-to-be public companies aren’t necessarily good comps for each other.
Demand Media is getting ready to spin off its domain name business, Rightside. Competitor GoDaddy recently filed its S-1 for an initial public offering.
It might be tempting to compare the two companies. After all, both of them are prominent in the domain name space.
But when it comes to comps, Rightside and GoDaddy don’t match up. Here are some key distinctions between the two companies.
GoDaddy is a retailer, Rightside sells through middlemen.
GoDaddy primarily sells directly to the public. Rightside, through its eNom brand, sells domain names through resellers such as hosting companies. Rightside also owns retail brand Name.com, but it’s a small percentage of its sales.
While GoDaddy counts on millions of individual customers, Rightside depends on an army of resellers. When it rolls out new products, it has to convince each of its resellers to carry them. Rightside markets to a smaller group of customers than GoDaddy. That makes its marketing costs lower, but margins are squeezed as well.
Rightside is betting directly on new TLDs.
Before everything is said and done, Rightside will probably “own” about 50 top level domain names. These domains will be sold through its own channel as well as the registrar channel. This can be a high margin business.
The company will also provide the backend for hundreds more top level domains.
GoDaddy, on the other hand, is content with being the shelf space for these domain names.
Rightside’s topline has stopped growing. It’s banking on new TLDs for growth. GoDaddy is banking on growing its customer base and selling them more stuff.
Rightside is a big domainer.
Rightside owns 300,000+ second level domain names. GoDaddy has previously played this game, but it’s a small part of its business now.
If I could summarize the difference with one thought, it’s this: GoDaddy is a marketing company. Rightside is an infrastructure company.
Doug Mehus says
I’d be a buyer of RightSide Group over GoDaddy.com for the simple fact that with GoDaddy.com, they’ve been around for close to 15 years and have yet to show even marginal profitability. What gives!? I don’t understand how such companies like GoDaddy.com and Endurance International Group, two companies that I would argue *are* the most similar, continue to post net losses year after year.
One could argue they show positive EBITDA, perhaps (I haven’t looked into the details beyond the top & bottom lines), and strong cash flows but, alas, a loss is still a loss. EIG has some 70+ (or near 70) owned brands and multiple hosting platforms. When you add in their Domain.com (looks like the Dotster names report under the Domain.com registrar now), Directi, FastDomain and Tucows reseller domain registration businesses, they’re either the #2 or #3 largest registrar in the world (either ahead of behind eNom, owned by RightSide). Similar story with United Internet, which owns 1&1, although it *is* profitable, I believe.
Basically, you’re right about RightSide being more of a domain name infrastructure company with a company-owned domain name monetization portfolio business in there. I think they really need to leverage their direct-to-consumer brand, Name.com, and go head-to-head with NameCheap, GoDaddy and Google. I nearly transferred my names to Name.com (from GoDaddy.com) but, ultimately, came down to cost. NameCheap is attractive but I don’t like their control panel and infrastructure so I’m leaning towards Uniregistry’s Uniregistrar business (they *should* brand it as Uniregistrar, in my opinion). Who would’ve thought well-known domain squatter Frank Schilling would’ve won me over!?
Back to the issue, though, I think it’s fairer to compare RightSide to VeriSign (less so to NeuStar, with its various other government contracts, some of which are out to tender right now). Tucows is also probably more like RightSide in many respects but they don’t have a domain registry business. The question is, can Tucows survive as an independent company? They’ve been collecting fees for dropping out of auctions to operate TLDs, I believe, but I don’t know if that’s sustainable. And, their direct-to-consumer brand, Hover, seems a bit like a joke to me. I may be a Canadian but hardly consider it a Canadian corporate “champion”. I’d like to see them sell their domain reselling & Hover businesses to an EIG or to a RightSide Group and then sell their owned domain portfolio to someone like a Marchex and pay out existing shareholders by way of a one-time extraordinary dividend and share consolidation/buyback.
Cheers,
Doug