GoDaddy Donuts Deal Still Works In Their Favor

Posted: Dec 13 2017, 11:17am CST | by , in News

 
GoDaddy Donuts Deal Still Works In Their Favor
GoDaddy Donuts Deal Still Works In Their Favor

GoDaddy Is Glad They Acquired 200,000 Domain Names in Donuts Deal

Very recently, GoDaddy entered into a lucrative deal with online portfolio Donuts, acquiring more than 200,000 domain names from their portfolio. It was a somewhat strange purchase since many of the domain names had expired, and the company poured a lot of money into the transaction. However, it’s looking like this acquisition was a smart move for the major domain registrar.

GoDaddy is known for its edgy television advertisements as well as its large newspaper advertisements, but they’re more than that. They’re a major American internet domain registrar and web hosting company that needs a continuous flow of domain names to keep up. If you want GoDaddy pricing to remain competitive for all your web design and hosting needs, they need to continue purchasing domain names.

Even if that means making a somewhat unconventional deal to get there.

According to a recent report from Domain Name Wire, GoDaddy recently paid more than $50 million for two huge portfolio acquisitions. One was the portfolio linked to Kevin Ham with more than 100,000 domain names inside. The other was for Donuts, which held more than 200,00 domains that are now the property of GoDaddy Inc.

They released the following statement regarding the transaction.

“In October 2017, we completed two domain portfolio acquisitions for aggregate cash consideration of $50.0 million, including $4.2 million payable upon expiration of the contractual holdback periods.”

There isn’t a clear breakdown of how much was paid for each portfolio, nor how much each domain was valued at. However, if you do some simple math, it comes out to about $167 per domain name.

You can also compare this amount to the acquisition of Michael Berkens’ portfolio when GoDaddy paid more than $35 million for just 70,000 domain names. It was the largest domain portfolio sale in history, and when asked about it, GoDaddy’s Senior Vice President and General Manager Mike McLaughlin responded:

"We're always looking at ways to improve what domain names our customers can register. Our plan is to make these names accessible to small businesses. Michael Berkens has assembled an incredible portfolio of names and has been such an integral part of the domain name aftermarket for so many years."

The acquisition of these two latest portfolios isn’t quite as dramatic as the Berkens deal, but it still raised a few eyebrows. It wasn’t surprising that GoDaddy made the purchase of Donuts, according to Andrew Allemann of Domain Name Wire.

“The first part of the deal didn’t surprise me much. I had predicted it, in fact. Donuts got the portfolio of 200,000 domain names when it acquired Rightside. These were mostly .com domain names, so it didn’t make sense for a new top level domain company to hold onto the domains. GoDaddy was one of only a few potential buyers for the portfolio.”

What was most surprising was the fact that many of the domains were expired, although that deal won’t start until the opening of 2018. The domain names were also mostly composed of .coms without much variation that we usually see in such acquisitions. It turns out that GoDaddy Inc. wanted the expiry stream to come with the purchase so that they could make a deal with Name.com, former owner of some of the domains owned by Donut.

The acquisition of the Kevin Ham domain names was also a huge benefit to the GoDaddy corporation. Kevin Ham was once profiled in a Business story called “The Man Who Owns the Internet" because of his huge portfolio for such a small company. It makes sense that GoDaddy, a much larger organization, would want to handle their domain names when Ham was faced with more than he could handle.

GoDaddy is surely using the leverage of these domain names in the same way they did in the previous Berkens deal. They’re constantly searching for ways to make their domain names more accessible to their customer base, and the more domain names they have, the easier it will be to do so.

The huge purchase prices was a bit of a surprise, but when you consider the value that GoDaddy gets from the deal, it makes sense. The industry of domain names and web hosting is growing more and more competitive, and the only way to stay at the front of the pack is to continuously progress.

In this business, that means constantly acquiring new domain names, even if they come at a hefty price.

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The Author

<a href="/latest_stories/all/all/68" rel="author">Larry Alton</a>
Larry is an independent business consultant specializing in tech, social media trends, business, and entrepreneurship. Follow him on Twitter and LinkedIn.

 

 

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