Web presence companies ramp up ad spend as demand soars

GoDaddy and Wix spend more to capture demand surge during the pandemic.

It’s been a good year for service providers that help people establish a web presence. The COVID-19 pandemic has forced businesses to shift business online in whole or in part. From yoga instructors offering online instruction to restaurants adding online take-out ordering, businesses have flocked to companies like GoDaddy (NYSE: GDDY) and Wix (NASDAQ: WIX) for help.

GoDaddy has added more net paying customers (over 1 million) during the first three quarters of this year than it ever has during three quarters in its 23-year history. Collections (sales) at Wix were up 33% in Q2 2020 compared to Q2 2019.

These added sales aren’t purely organic, though. The companies are spending heavily on advertising to capture this new demand.

GoDaddy’s Q3 marketing and advertising spend was up 45% year over year to $115.4M. It was up 16% to $104.4 million in Q2.

Wix doesn’t report Q3 results until later this week. In Q2, the company increased its acquisition marketing spend by 90% year over year to $75 million.

This is paying dividends. Wix reported that it recouped $38 million of its Q2 acquisition advertising in new sales through the end of that quarter. It expects people who signed up in Q2 to spend $570 million over their lifetime.

Increased advertising spend comes in two buckets.

One is somewhat natural: as more people search for ways to get their business online, the companies will pay more for Google ad clicks targeting relevant terms. The companies are also likely bidding more or expanding their ad budgets across other media.

Not all companies are following this track. Web.com, the parent company of Network Solutions and Web.com, has seen a dramatic drop in new registrations this year. A likely explanation is that it has stopped advertising on Google for domain name related terms. It used to advertise low first-year prices (a couple of dollars for a .com) on search ads. I suspect that the increased bid prices weren’t delivering the ROI it hoped.