Domain aftermarket propels Core Platform segment to better-than-expected revenue.
Revenue in GoDaddy’s (NYSE: GDDY) “Core Platform” segment grew ahead of expectations last quarter, and the company credits the aftermarket for the better-than-expected results.
In prepared remarks during the investor conference call yesterday, Mark McCaffrey, GoDaddy CFO, stated:
Core platform revenue, which includes domains, hosting and security products, grew 9 percent year-over-year, delivering above our February guide with 40% of the increase driven by aftermarket. ARR for Core Platform grew 5 percent year-over year to $2.2 billion. As a reminder, aftermarket performance does not impact ARR.
Aftermarket sales aren’t recurring, hence not adding to recurring revenue.
The aftermarket has become a bigger percentage of GoDaddy’s sales over time. They were mid-single digits percentage of revenue in 2018 and grew to 10% in 2021.
There are a few factors at play here. First, GoDaddy acquired its own domains to sell. When it sells these domains, it books 100% of the revenue rather than just the commission from selling someone else’s domain. Second, it made it easier for people to sell their domains on its aftermarket platform. More inventory equals more sales. Finally, domain values have been increasing.
And then, of course, there are higher auction prices on GoDaddy Auctions.
During the analyst Q&A, McCaffrey noted growth in both volume and average prices. He said there is “broad-based momentum” in the aftermarket.
Higher sale prices could help the aftermarket counteract reduced demand for new domains overall.