Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Business
Speaker 1: Weekdaily with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2: Carol, you've talked about this a lot. Small and medium
Speaker 2: sized businesses just helping to power this economy. According to
Speaker 2: the US Chamber of Commerce, small businesses in the US
Speaker 2: are responsible for providing employment for about half of the
Speaker 2: American workforce, and they represent more than forty three percent
Speaker 2: of the GDP of the US. So understanding small businesses
Speaker 2: gives us a good idea of how the economy is doing.
Speaker 3: We love, love, love talking to this space. Mark McCaffrey
Speaker 3: has a great read on all of this. He's the
Speaker 3: CFO of go Daddy, which provides a broad range of
Speaker 3: online services for small and mid sized businesses think internet domains,
Speaker 3: website hosting, and so much more. The company, by the way,
Speaker 3: has a market cap of close to twenty five billion dollars,
Speaker 3: so it sees a lot of small businesses and it
Speaker 3: serves more than twenty million customers around the world. Mark
Speaker 3: nice enough to join us in our Bloomberg interaction.
Speaker 2: You're not wearing any goggins goggles?
Speaker 1: What is going on?
Speaker 4: You saw a little promo today.
Speaker 2: Oh I saw yeah, I saw it.
Speaker 4: Walton, he's he's a big fan of ours, right, obviously
Speaker 4: got us back into the super Bowl and everything. But
Speaker 4: but you know he's an entrepreneur. You know he is
Speaker 4: an entrepreneur.
Speaker 2: Does he really make these classes?
Speaker 4: Well, he has many ventures that he has gotten into
Speaker 4: through his life. And when he came up with this
Speaker 4: idea for the goggles, we just thought it was the
Speaker 4: perfect match for us. Here. You have a great actor
Speaker 4: who is passionate about small businesses, wants to launch this
Speaker 4: goggle idea, and you know, we breadcrumbed it out through
Speaker 4: the whole fall. We started, well, he started with announcing
Speaker 4: it on social media, got a little buzz. We started
Speaker 4: with announcing that we're going back to the super Bowl.
Speaker 4: Got a little buzz, and then we tried to drive
Speaker 4: everybody to connect that he was going to be our
Speaker 4: new spokesperson. And he is fantastic.
Speaker 2: So what's the ROI on that?
Speaker 4: The the ro o I? I? You know, we cost money?
Speaker 2: Oh, super Bowl ad costs money. I saw he was
Speaker 2: at the New York Stock Exchange today. He's not doing
Speaker 2: that for free.
Speaker 4: He is standing up there ringing our bell this today
Speaker 4: because it was our tenth anniversary of being a public company.
Speaker 4: But when you think about where GoDaddy was as a
Speaker 4: domain company and where we are now is a one
Speaker 4: stop shop for entrepreneurs. We need to get that message
Speaker 4: out like we have such useful tools for the mom
Speaker 4: and pop shops to now do business not only on
Speaker 4: the corner but in social media. They want to do
Speaker 4: professional emails, they would want to do marketing campaigns. We
Speaker 4: can handle it all for them. And we did that
Speaker 4: with Walton, like we handled all his platform for him,
Speaker 4: so we can get out there and sell this. So
Speaker 4: so you know, hey, we've been around for a while.
Speaker 4: This is a long term play. We're not going anywhere.
Speaker 4: We have a great company that grows. We're profitable, we
Speaker 4: generate a lot of free cash flow, and it's because
Speaker 4: we have such good retention with our customers. You look
Speaker 4: at our urpoo it's just over two hundred dollars for
Speaker 4: an entrepreneur micro business. That's a good deal. We prought
Speaker 4: a lot of value and that's why they keep coming back.
Speaker 3: So remind our audience. So in terms of churn and stuff,
Speaker 3: are that once you get a customer, how long do
Speaker 3: they typically stay with you.
Speaker 4: So they'll stay with us if we if we get
Speaker 4: them to a second product, our retention almost goes through
Speaker 4: the roof with them. If we get them to a
Speaker 4: third product, we have a customer for life, and that's
Speaker 4: why we have this compounding element of cash flow. People
Speaker 4: just keep renewing, so we say our average is around
Speaker 4: eighty five percent. But if they the longer they stay
Speaker 4: and the more they use our tools, or if they
Speaker 4: engage with our care guides. You can actually talk to
Speaker 4: a live person with us in our care organization still
Speaker 4: and when they engage with our guides, that lifetime value
Speaker 4: just goes up. So we always use the statistics when
Speaker 4: we're out there talking. If you assume a domain is
Speaker 4: one X. If we can get someone from a domain
Speaker 4: to an email, to a website and then to transacting,
Speaker 4: it's eighty three x LTV for us on our customers.
Speaker 4: And we do that because we focus on our customers
Speaker 4: like this is the place we go to, like we
Speaker 4: know this.
Speaker 2: Customer, let's talk AI. Because you guys have your AI
Speaker 2: platform go downy arrow, when are we going to see
Speaker 2: it start to make an impact on our poo.
Speaker 4: So we're starting to see the beginning stages of the monetization.
Speaker 4: And again, we are a long road. We're not in
Speaker 4: a rush here to get to a certain place in
Speaker 4: a short period of time. We're taking our customers from
Speaker 4: discovery to engagement and ultimately to monetization, and that starts
Speaker 4: to show up in our renewal rates. Now we just
Speaker 4: launched this recently, but when you think about it, twenty
Speaker 4: million customers you know we have out there. This is
Speaker 4: our platform, it's consolidated, and we're starting to see our
Speaker 4: average quarter size goes up. We're starting to see our
Speaker 4: over now for us, remember it starts with bookings and
Speaker 4: then over time it becomes revenue. And that's the point
Speaker 4: that it starts to hit our arts. Okay, so it
Speaker 4: takes a little time to get in there, but what
Speaker 4: I always say is, hey, this is about the long
Speaker 4: term play supporting micro businesses because we want them to
Speaker 4: continue to be successful. If they thrive. You gave some
Speaker 4: great data out there. If they thrive, we do great.
Speaker 2: Are they thriving right now?
Speaker 4: Well? So this is a very durable, optimistic group. They
Speaker 4: always feel good about what they're doing. And you know
Speaker 4: what's amazing about this group too, is even if they
Speaker 4: do hit a failure point.
Speaker 3: They generally they felt good during the pandemic.
Speaker 4: They felt good on ring the panet.
Speaker 3: They were optimistic a financial crisis.
Speaker 4: They we actually see some of our numbers go more
Speaker 4: into entrepreneurialism. When when you know you're you're trying to
Speaker 4: do a side hustle or a side gig, or you
Speaker 4: want to start selling. I always joke. My joke is
Speaker 4: I want to sell my baseball cards all of a
Speaker 4: sudden to make a side business out of it. You know,
Speaker 4: I have to do that somehow. So this is a
Speaker 4: group that is just very optimistic. Doesn't mean they're always
Speaker 4: confident in the economy, right, but they are optimistic in
Speaker 4: their chances to be successful in doing what they love.
Speaker 3: So they're willing to at least make that first yes
Speaker 3: to get their business going.
Speaker 1: Yes.
Speaker 3: I mean, so, what insight do you have, especially among
Speaker 3: your customers who are repeat customers, stay with you, expand
Speaker 3: their services with you. I mean, that's a better indicator perhaps,
Speaker 3: right in terms of what they are seeing about the economy.
Speaker 3: What are you seeing from them? What are you hearing
Speaker 3: from them?
Speaker 4: We are hearing that they want more help reaching different channels, audiences, themselves.
Speaker 4: So you think about it, right, you're maybe selling in
Speaker 4: your local town. Well, now social media becomes a platform.
Speaker 4: But if you're you know, I ran into a customer
Speaker 4: and choose panicking because her daughter was going off to
Speaker 4: college in a month, and her daughter did all her
Speaker 4: social media campaigns. So we have a tool that literally
Speaker 4: takes all the inbound emails coming in from all the platforms,
Speaker 4: creates an outbound marketing campaign for you, and it'll do
Speaker 4: it based on you know, whatever you're These are the
Speaker 4: type of tools we provide, and this is why this
Speaker 4: is what they need. They need it all to work,
Speaker 4: you know, because you're not talking about a sophisticated customer
Speaker 4: group or.
Speaker 3: Right, but that is more of like my daughter is
Speaker 3: going to college and I just now I need to
Speaker 3: do it. But are you seeing any signs of stress?
Speaker 3: Because you know, as Tim said, mark coming into it,
Speaker 3: small business, medium sized business, but small business the backbone
Speaker 3: of what we do. And so when there's some stress,
Speaker 3: and we've seen it in business sentiment surveys, cutting back
Speaker 3: on CAPEX consumer sentiment as well another side. But I mean,
Speaker 3: I'm just curious, are you seeing any signs of stress
Speaker 3: or holding back a little bit.
Speaker 4: We haven't seen any signs of that coming out of
Speaker 4: twenty twenty four. Now, I will say in.
Speaker 3: The last couple of weeks.
Speaker 4: Yeah, so you know, I we'll get out there with
Speaker 4: this current year when we have a chance to get
Speaker 4: out there. But you know, you remember, we are actually
Speaker 4: engaging a lot of these entrepreneurs before they actually become
Speaker 4: a small business. That's why we use the term micro business,
Speaker 4: and that micro business is still trying to get out
Speaker 4: there and do more. Right now that you know, what
Speaker 4: we saw coming out of twenty twenty four is the
Speaker 4: demand at the top of the funnel. And remember a
Speaker 4: lot of people just come to us for a domain.
Speaker 3: Yeah.
Speaker 4: Name rights still healthy, it's it's still very very much healthy.
Speaker 3: And that's the book of your business.
Speaker 4: It's a lot of our business. Yeah, but that attach
Speaker 4: you know, is going up for us, which means they're
Speaker 4: coming in with intent. And if you come in with
Speaker 4: to get a domain name and you have an intent
Speaker 4: to do something, that is a great sign for us.
Speaker 2: But I'm curious about how you grow from here because
Speaker 2: the customer account has seemed to plateau a little bit,
Speaker 2: and this market is only so big. What do you
Speaker 2: do do you go up market.
Speaker 4: Now, listen, we have a right to win where we
Speaker 4: are in the micro business and we will continue to fin.
Speaker 2: So this is like fewer than ten employees micro business.
Speaker 4: Yeah, micro business could be around ten maybe a million
Speaker 4: dollars a year type of business. This is this is
Speaker 4: where we have a right to win. This is the
Speaker 4: customer we know. I say in technology two things you
Speaker 4: always have to be able to do innovate and know
Speaker 4: your customer. And we have the ability to do it
Speaker 4: in this market. And listen, we generate a lot of
Speaker 4: free cash flow and we have a strong balance sheet.
Speaker 4: We just hit ten years of public company. We are
Speaker 4: so excited about the next ten years and our ability
Speaker 4: to keep this compounding on it. Why this group needs
Speaker 4: these tools to be successful. They need to know how
Speaker 4: to use technology and they can't be dealing with eight
Speaker 4: applications at night trying to figure out which one isn't
Speaker 4: working or working. They just deal with us.
Speaker 3: So you're about twenty one million customers, right, Yeah, how
Speaker 3: do you kind of grow beyond that or what are
Speaker 3: your expectations because it does seems like it seem like
Speaker 3: you've plateaued a little bit.
Speaker 4: We get some of the research we have focused on.
Speaker 4: You know, hey, we call it profitable growth and so
Speaker 4: making sure that we are continuing to drive profitability and
Speaker 4: grow at a steady rate.
Speaker 3: So you would rather keep that base and make each
Speaker 3: of those customers more profitable for you?
Speaker 4: Yes, right, right? And you think about it. We for
Speaker 4: our customers, there's three levels of it. There's the new
Speaker 4: customers just coming in which we have the ability to
Speaker 4: sell them products, and then attach we have our existing customers.
Speaker 4: We have a lot of existing customers and our ability
Speaker 4: to get them to even attach currently is a great
Speaker 4: opportunity for us. And you think we launch commerce a
Speaker 4: couple of years ago and our ability to convert our
Speaker 4: existing base over to our commerce platform has been able,
Speaker 4: allowing us to drive GPV within our model again because
Speaker 4: we know this customer.
Speaker 2: How do you look at the relationship between you, the
Speaker 2: websites that you host that you have and also social
Speaker 2: platforms as they increasingly get into commerce. Is a website
Speaker 2: still going to be the primary digital platform in the
Speaker 2: age of social and in the age of AIA.
Speaker 4: So for the entrepreneur, for the micro business, their ability
Speaker 4: to go across multiple platforms is just needed by them.
Speaker 4: They can't focus on just one platform.
Speaker 2: So you're saying, yeah, they might have the TikTok shop
Speaker 2: or the Instagram, whatever it is, but they're also going
Speaker 2: to have their landing page that's hosted by you.
Speaker 4: They're going to need their landing page because they're going
Speaker 4: to have to go to more platforms. And by the way,
Speaker 4: when they have their own website landing page, they can
Speaker 4: use that data to determine where they want to go next,
Speaker 4: what is more profitable. Every social media platform is going
Speaker 4: to have their own metrics of how they sell. There's
Speaker 4: nobody out there on a platform that actually just gives
Speaker 4: them the data that they need in order to be successful.
Speaker 4: And that's what we do and that's why we service
Speaker 4: this market.
Speaker 3: Last question, what worries you when you look at the
Speaker 3: environment right now?
Speaker 4: Yeah, so there's a lot of unpredictability out there. Now
Speaker 4: we have felt really good. We've been around for a while.
Speaker 4: We've been around for almost thirty years. We've gone through
Speaker 4: and cycles. Everyone is a little different, and we've been
Speaker 4: able to watch as entrepreneurs. Have you managed through this?
Speaker 4: We saw the financial crisis, We saw a lot of
Speaker 4: new business formations during the financial crisis of two thousand
Speaker 4: and eight, we saw unemployment go up at the same time.
Speaker 4: This time, as we went through we didn't see unemployment
Speaker 4: go up as high. You know, you didn't see the
Speaker 4: same reaction. In the entrepreneurial business. Everything went fine, but
Speaker 4: everything has a reactionary difference as we go through different markets.
Speaker 4: And what worries me is making sure that we're watching
Speaker 4: all the signals to see how they may have a
Speaker 4: downstream impact and not just trying to focus on one
Speaker 4: of the signals. And when you watch all of them,
Speaker 4: then you can start to pick up a little bit
Speaker 4: of Okay, how is this going to you know, hit
Speaker 4: that mom and pop shop down the block. They may
Speaker 4: you know, they may be able to hire somebody like
Speaker 4: they wanted to. Well maybe we can provide them a
Speaker 4: tool now that allows us to do that. So we
Speaker 4: feel we have to constantly be out there watching that market,
Speaker 4: feeling them, meeting the customers, seeing what's working for them,
Speaker 4: and hearing them. So again, coming back to that, that
Speaker 4: relationship with that customer group becomes just very very important
Speaker 4: to us.
Speaker 3: Yeah, that sounds certainly, especially with so much coming at
Speaker 3: business owners right now. It's a lot.
Speaker 4: This was fun. Thank you, Thank you. This is great.
Speaker 4: Thank you for having me.
Speaker 3: Yeah, thank you. Congratulations ten years company. Mark McCaffrey, all right,
Speaker 3: CFO of Go Daddy, joining us right here in studio.
Speaker 2: Hey, let's get an update on everything happening after hours
Speaker 2: and how the market's closed. Here he is, Charlie Pellett.