Go Daddy Group, the high-profile web hosting company that has advertised in the two years on the Super Bowl, has filed to go public through an initial public offering that illustrates the Internet's recovery from its dot-com craze is in full swing. 

 

Go Daddy stepped into the public spotlight in January 2005 when it became the first dot-com to advertise in the Super Bowl since the bubble burst four years earlier. The company derives its revenue primarily from domain name registration, Web site hosting and other on-demand services. In an SEC filing made late Friday, it claimed it is the world’s largest domain name registrar with approximately 13.6 million domain names under management as of April 30, and North America’s largest shared website hosting provider.

 

But unlike other high-flying companies waiting in the IPO wing like Vonage (News - Alert) Holdings, Go Daddy is exercising a bit more restraint than you might think. Based on management’s discussion of operations, Go Daddy only spent a nominal amount on marketing costs prior to 2005 related primarily to online search engine advertising. The company’s marketing spending skyrocketed 225 percent to $15.2 million in 2005 – the first year that it decided to use the Super Bowl as an advertising vehicle. But that still represents only 11 percent of its total revenue. In contrast, Vonage’s marketing expenditures totaled a whopping 90 percent of its total revenue.

 

In the first quarter of 2005 alone--when Go Daddy’s marketing costs were the highest due to its Super Bowl campaign--the $5.5 million that was spent still only represented 21 percent of the company's total revenue base, well below the 136 percent (yes, that’s more than it generated) in total revenue spent by Vonage in the same time period.

 

To be sure, Vonage officials (currently in the midst of their “road-show” to sell the IPO), are likely to argue that marketing/advertising dollars are well spent as VoIP providers race for market share in lieu of profits. Indeed, Go Daddy’s revenue is growing at a double-digit rate, compared with Vonage’s triple-digit compound annual growth rate. As a matter of standard policy, the company has repeatedly declined to comment on its IPO.

 

Go Daddy was founded by its Chairman and CEO, Bob Parsons, who was the sole stockholder prior to the offering. No word yet on how much control Parsons will retain after the offering but the company is adopting a dual-class structure to its equity: Class A shares, which are being offered to the public; and Class B shares, which will be held entirely by Parsons and will have two votes per share and will be convertible into one share of Class A common stock at any time. For filing purposes, the offering amount was estimated at $200 million.

 

Two members of senior management will also be selling shares (obtained through the exercising of options) and the company won’t receive any proceeds from the sale. As for the proceeds that will be generated by the company, Go Daddy said it will use the funds to repay a small amount of debt but mainly for “general corporate purposes, including expansion of our customer care and support and research and development organizations, further development and expansion of our service offerings, capital expenditures, including those relating to further build-out of our data center, and possible acquisitions of complementary businesses, technologies or other assets.”