A couple of days ago news broke that GoDaddy would be filing or an IPO to offer shares to the public. While this may seem like it is a move of strength, to me, it reflects the need for them to try and generate quick cash. The company has shown a loss of $854 million since the start of 2011. That’s an average of $284 million in losses per year.
How does a company so large and seemingly successful post such losses year after year? Well, much like EIG, and something I’ve harped on many times, it’s the fact that they are paying out so much money between advertising, both conventionally (tv, print, radio, etc) as well as affiliate based marketing.
A quick look on Commission Junction (where GoDaddy houses their affiliate program) shows that they pay $105 in commissions for every new hosting account as well as a 40% commission rate on any other product they offer (domains, website builders, etc). Considering that their hosting services cost $41.88 for the first year, they are taking a loss of $63.12 for every new hosting account.
It’s no secret that GoDaddy splurges on media advertising as well. We all came to know them a little bit too well with their raunchy Super Bowl ads. After all, if sex sells then why shouldn’t shock value, right? Over the past several months they have been trying to change their marketing strategy, but I can only imagine how much more money it costs to employ the likes of Jean-Claude Van Damme for commercials.
Don’t get me wrong, I’m not anti-big business. Far from it. I am, however, anti-big business trying to take advantage of customers simply because they can be the bully. Every company at one point or another was a small start up, and at that point in time they needed to focus solely on making every customer happy. Unfortunately, there seems to be a point when the importance shifts away from customer appreciation and toward bank account appreciation.