The world's largest web hosting and domain registrar site, GoDaddy, is planning to go public this year. The private company, that has over 45 million domains, had contemplated an IPO in 2006, but detracted due to unfavorable market conditions. Now, it faces an entirely different context. Until now, 2014 has been a strong year for IPOs. Several tech companies are going public, including cloud storage company Box, and King, developer of Candy Crush Saga. So, GoDaddy will soon interview banks to underwrite its IPO.
In regard to the company's service, it is designed to help people without technical knowledge set up online businesses. Consequently, it is aimed toward small and mid-sized businesses. Customers can pay for an economic package, which is widely regarded as a complete service. But, they can also pay for additional features as needed. GoDaddy has more than 12 million customers around the world, and has several positive reviews from authority sites. That being said, one major concern is that customers have several alternatives that offer high-quality, economic services. In other words, the market is quite competitive. So, what is ahead for GoDaddy after its IPO?
Possible outcomes of the company's rebranding
In January 2013, Blake Irving, former executive at Microsoft and chief product officer at Yahoo, stepped into GoDaddy as the new CEO. Immediately, he started working on a new plan for the business, with a strong focus on rebranding. Through the communication of his vision, he was able to hire important managers from Google, Yahoo, and Microsoft.
The company is rebranding itself as a service that allows anyone to comfortably start their own online business. In that manner, it is focusing strongly on small-sized businesses. In order to do that, it is changing its advertisements and creating a much more user-friendly service. As a result, the company can increase its user base, which leads to greater revenue. Last year, it experienced considerable customer base growth in India, and an overall yearly revenue of approximately $1.4 billion.
The capital raised in the IPO can support the company and its current plans. Moreover, GoDaddy can continue with its strategic acquisitions. Last year, it bought Locu, a start-up that lists small businesses online, and Media Temple, a web-hosting service for software developers.
A strong competitor that went public in October is Endurance International Group (NASDAQ:EIGI). The web hosting company raised $252 million in its IPO. It currently owns several popular hosts that offer a complete and economic service like HostGator, JustHost, FatCow, and iPage. The company has grown considerably over time due to the acquisition of these smaller hosts. Moreover, its stock is up by 19% of its IPO price of $12.
Endurance is a threat for GoDaddy ibecause it also targets small and mid-sized businesses with a strong focus on user growth. It is currently expanding its product portfolio, making it more accessible to people. Moreover, the company is aware of the growth potential in Brazil and India. The CEO, Hari Ravichandran, has estimated that the company's revenue will increase more than 50% in the former country and over 60% in the latter.
Another public company in the hosting market is Rackspace (NYSE:RAX), which also operates in cloud computing services. This company is currently going through difficult times. Since its CEO's retirement, its stock has decreased drastically. On a positive note, the company retains its talent, invests in differentiation strategies, and provides quality services and support. Taking those factors into consideration, hiring the right CEO can improve the situation for the company. Then, with its Fanatical Support -- a service in which experts offer help to customers -- it can move ahead in the hosting market.
Final foolish takeaway
GoDaddy has several advantages for its IPO. The company has 12 million users worldwide and 45 million domains. Through appropriate rebranding and targeting of small-sized businesses, it plans to expand its customer base and increase its revenue. Moreover, it is managed by highly skilled executives. However, there are competitors in the market that also offer quality hosting services and target small to mid-sized businesses.
The positive side is that the growth of these companies shows the high potential of this market. For example, Endurance stock has increased 19% since its IPO in October. Even though Rackspace has a strong presence in the market, it still has to recover from its CEO retirement to pose a truly dangerous threat. So, GoDaddy has favorable market conditions for its IPO, and potential for considerable growth this year.
Adrian Campos has no position in any stocks mentioned. The Motley Fool recommends Rackspace Hosting. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.