Earlier this month, Blake Irving, the chief executive of GoDaddy, published an open letter to Tom Wheeler, chairman of the Federal Communications Commision. In the letter, Irving urged the commision to strike down a proposal that would allow for the individual bargaining of internet speeds, arguing that the dissolution of net neutrality laws “would hurt American small businesses and cause immutable damage to the U.S. economy.”
Irving’s support of net neutrality isn’t exceptional. The Microsoft and Yahoo veteran has spent two decades in a technology industry that overwhelmingly favors the policy, and he has criticized GoDaddy for its support of SOPA, another much-maligned act that inflamed the internet community in 2011. (Under Warren Adelman, the former chief executive, the company was forced to withdraw its support for the legislation after a widespread boycott of its domain and hosting service.)
But his ardent concern about the impact of the commission’s activities on small businesses goes beyond the tech party line. It offers some insight into the executive’s ambitious plan to turn GoDaddy into a much larger, and more profitable, company. The strategy begins with the company’s 12 million domain customers and ends with a constellation of concentric services intended to serve an increasingly entrepreneurial, and distributed, global economy.
“The biggest concern I have about net neutrality is that it takes away that level playing field required to give small businesses an opportunity to compete. You take that away and it becomes very, very troublesome,” Irving told me in a long-ranging interview earlier this month. “With the right technology, I believe that very small businesses will grow at a rate that’s faster than the rest of the GDP.”
In theory, the distributed structure of the web should reduce some of the advantages of scale that led, in part, to the emergence of large corporations in the 20th century. Two decades later, and data from the U.S. census still suggests that the portion of small businesses have shrunk — particularly the smallest businesses to which Irving referred.
To Irving, the census data misses the point. He argues that a new type of very small, often-nascent businesses, that have emerged with the web often go unaccounted for in traditional research. He believes that there are 10-12 million more nascent or emergent business in addition the 25 million established and traditionally recognized small businesses.
The democratization argument is widely accepted in the tech industry: the lower capital costs associated with starting to sell on the web allows for entrepreneurs to test and run a business concept in a limited capacity without fully identifying as a business. It’s in these very small businesses, that Irving sees an underserved market, and a vision for GoDaddy’s future
Building a cloud beyond the website
GoDaddy may be an internet business, but the bulk of its customers sell locally. Some run stores and sell goods, but the overwhelming majority — around 80% — provide a service. They are acupuncturists and accountants, contractors and dry cleaners, caterers and carpet cleaners. Some have an office or location; others operate nomadically, running their business out of their car or home.
For these businesses, the Internet has often played a supporting role. The website — the product that helped catapult companies such as GoDaddy into international brands— has more or less served as an alternative to the yellow pages where they spent a few thousand dollars each year. Even today, a majority of businesses — somewhere between 50-60% — still do not have a website. And some argue that the growth of Facebook, Yelp and even Google’s knowledge box eliminates the need to have an owned and operated site.
Irving believes that’s changing. To an extent, consumer adoption of the smartphone has accelerated the frequency with which consumers can access local information, turning a digital presence from an added advantage to a pillar of operating a local business. “That device, and its ability to help you find something locally, is one of the most widely taken for granted innovations when we understand technology today. It’s window into the local market for most people,” he argued.
But inside GoDaddy, the mobile revolution has come in the form of the cloud. Irving and his team have spent the past 20-plus months turning the network of small business websites which it hosts on its servers into a massive cloud capable of running their point-of-sale, payroll, accounting services for business across the world. Where previously GoDaddy only touched parts of digital marketing and some ecommerce markets, it now can start to play in the much larger pool of money spent in the the local, or offline, marketplace.
“From the technology perspective, we’re building the infrastructure [at GoDaddy] that actually allows us to follow small business owners on the journey that they’re having and help them make it to the next step,” Irving said. “They’ll be able to look at how they’re doing in their business and how others in their category are doing and be able to help improve their business and get more traction with what they’re trying to do.”
To put that infrastructure to use, the company has gone on acquisition tear over the past 24 months. It bought a presence management system in Locu, bookkeeping software in Ronin, a mobile site developer in M.Dot; this summer, it bought Canary, the maker of scheduling software for service businesses, in July and then email marketing firm MadMimi a month later.
For Irving, the move to consolidate these technologies extends beyond the logic of an upsell. He believes it’s a question of product as well.
“I think there’s a preponderance of technology that have to be combined in a way that make them feel like one, to push people like her over the edge,” he said, speaking about why some small business owners have remain reticent about the web. “I don’t believe you can position [these products] as inventory management, booking keeping or logistics, You have to position it as ‘run your business — we’ll help you do the things that you don’t want to do.’”
Irving is picking up on a wider convergence within the small business technology market. With a cloud computing environment, it’s much easier for a software company such as GoDaddy to share data between two pieces of software. With less redundancy and more automation, the cost of adding additional software — say, a scheduling system in addition to a booking app — is dramatically less than before, allowing a small businesses to use more software than was previously possible.
What’s more, the company could also draw from the collective knowledge of its customers to offer insights for each individual small business. Irving remained tight-lipped about the company’s plans, but said that the company’s platform could eventually allow it aggregate information from its products to help offer performance benchmarks and other insights to customers.
Today, the results of the turnaround remain most cosmetic. The company ditched a decade-long marketing strategy that often focused on simply driving a reaction — the crown jewel of which was a yearly Superbowl spot that did little more than parade models across the screen. The new ads, which started to play nationally earlier this month, offer a more family-friendly, but still off-beat, small business testimonial.
The seeds of the future have started to bloom — albeit in a difficult environment. The company filed paperwork to go public in June, revealing a complex ownership structure involving its three private equity investors as well as considerable long-term debt to the tune of $1.4 billion
According to a prospectus filed in August, the company’s newest offerings — its web hosting and small business products — outpaced its existing domain business, which has seen renewed competition from Google, Microsoft and other more recent entrants. The business application segment, which includes products such as email and bookkeeping as well as a reselling partnership with Microsoft, grew 33% from a year earlier, nearly twice the rate of growth of the company’s core domain business.
From a strategic standpoint, Irving and his team face the obstacles endemic to any company that wants to rechart its course. It needs to lay the foundation for its future growth without jeopardizing the productivity its current revenue. That means building a new technology stack, capable of supporting the much more robust needs of operations software, without breaking the existing one.
Steven Jacobs is Street Fight’s deputy editor.