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IT Services, Survey

Cloud Servers and GoDaddy

September 28, 2016

GoDaddy is far more well known among the general population than other domain registration and web hosting companies, and many may say it’s simply due to their controversial advertising campaigns. The company prominently built up its name with NASCAR partnerships and widely-seen Super Bowl commercials.

Data backs up GoDaddy’s supremacy. A recent survey by IT ratings and reviews site Clutch shows that GoDaddy overwhelmingly is the most popular option for web hosting among small- to medium-sized businesses (SMBs). 26 percent of SMBs use GoDaddy, which is a full 14 percentage points higher than the second most used provider, CloudSigma.

Top SMB web hosting provider

What accounts for GoDaddy’s popularity? How does its popularity showcase SMBs’ specific hosting needs?

This article examines trends in small business web hosting, using GoDaddy’s history and business model as a framework. The report specifically highlights cloud hosting, which our data results indicate is the way of the future – 95 percent of SMBs either already use cloud hosting or plan to transition to it. Given GoDaddy’s recent launch of their cloud server products, we believe now is an opportune moment to analyze how this hosting giant will move forward in a transforming industry.

Data comes from Clutch’s 2016 Cloud Hosting Survey, and the first part can be found here.

 

History

Bob Parsons launched GoDaddy, then named Jomax Technologies, in 1997. Two years later, the company re-branded, and by April 2005, GoDaddy became the largest ICANN-accredited (Internet Corporation for Assigned Names and Numbers) registrar on the Internet.

If you’ve been paying attention to hosting news over the past year, you’d know that GoDaddy seemingly began to offer cloud servers and applications beginning in March. The company partnered with Bitnami, a library for open source server application deployments, on its cloud applications. This release followed a cloud server beta test period that began in April 2015.

In fact, however, this offering is GoDaddy’s second attempt at cutting into the cloud hosting market. In the spring of 2012, GoDaddy introduced cloud servers. At the time, former GoDaddy CEO Warren Adelman told CloudTimes, “Cloud Servers are a natural progression [from] offering shared hosting with ‘cloudy’ attributes like elasticity, offering virtual servers and dedicated servers. Our new product is the next piece in the hosting landscape – offering Infrastructure-as-a-Service with Cloud Servers that include load balancing, network configuration and easy spinning up and down of environments.”

However, just five months later, GoDaddy quietly abandoned the service. The only explanation for why came from a leaked internal memo, in which an anonymous employee said that their cloud server business was not gaining traction among small- to medium-sized businesses as well as they’d hoped.

When GoDaddy re-launched their cloud servers this year, they specifically mentioned that they were for “small developers” – developers building websites and applications for small business clients.

GoDaddy’s move back to cloud hosting is well-timed. As mentioned earlier, Clutch’s recent survey found that 95 percent of small- to medium-sized businesses (SMBs) either already use cloud hosting services or plan to transition to them.

SMBs Cloud Hosting

Furthermore, 86 percent of respondents said that their web hosting provider offers cloud hosting services.

Thus, providing cloud hosting services may soon be non-negotiable for web hosting companies that wish to stay competitive. However, is GoDaddy able to keep its server products relevant in a market filled with cloud hosting competitors that have been offering their services for far longer? For example, second-place provider and Swiss import CloudSigma has been offering pure cloud hosting since its founding in 2009.

We spoke about our data with several experts in the hosting sphere. They offered insight into why GoDaddy has remained popular for hosting among SMBs. Top reasons cited include:

  1. Cost
  2. Available Features
  3. Brand Awareness

This article explores these reasons in the context of GoDaddy’s cloud hosting services. Through this case study, we seek to further understand the future of cloud hosting and the small business web hosting industry as a whole. Will GoDaddy’s old tricks continue to prove effective?

Cost

GoDaddy offers steep discounts for its services that may be difficult to find from other providers.

“I think they offer unbelievably inexpensive service, which will always garner a lot of attention,” said Rachel Bair, Director of Hosting & Client Services at Unleashed Technologies. “It’s the same reason Walmart does exceptionally well when grocery stores and Target and lots of ‘mom and pop’ shops offer the same product. You will buy it where where it’s the least expensive.”

For an SMB with basic website needs, the allure of pennies saved can sometimes be all it takes to sign up. In fact, our survey results found that SMBs often switch web hosting providers to find a better value elsewhere.

Switching Hosting Providers

Cloud servers may be leveling the playing field, however. Cloud hosting costs less than many traditional forms of web hosting because its basic premise involves dispersed hardware, connected to work as one.

In fact, our survey found that the main reason for cloud hosting adoption among SMBs is cost savings.

Reasons to use cloud hosting

It can be difficult to draw comparisons between the prices of hosting competitors because the number of variables to control for varies greatly. Upon first glance, GoDaddy’s prices seem to be the cheapest. They offer a 20GB plan with 512MB RAM and 1 core processor, at $0.0074/hour, for a max of $5/month.

Bluehost and HostGator are two more hosting providers that heavily target SMB audiences. While their starter package prices are higher than GoDaddy's, they can still be cheaper than a comparable GoDaddy plan for certain customers.

A Bluehost plan with 100 GB of SSD storage space, 2GB RAM and two available core processors normally prices at a $9.99/month flat fee, when overlooking promotional discounts. Meanwhile, a GoDaddy plan with similar features, albeit only 40GB of SSD storage space, comes in at $0.0298/hour, for a max of $20/month.

Furthermore, HostGator offers 2GB RAM, two core processors, and unmetered storage space (within the limits of their Terms of Service) on their starter cloud hosting plan for a non-promotional fee of $12.95/month.

For small businesses that need a more robust cloud server package and receive more traffic to their website, GoDaddy’s options can fall short of their competitors. Yet, given their incredibly inexpensive starter package, they still win with the “hobbyist” audience – developers who are looking for the cheapest, most basic package for simple websites and applications.

Thus, while cloud hosting continues to cut prices down in an already competitive market, GoDaddy should flaunt more than just its low prices if it seeks to grow their target audience.

Available Features

Nowadays, it’s widely accepted that hosting packages come with more than just bare-bones server usage.

“The web hosting landscape is not like five years ago,” Osman Seyrek, COO of Renovatio Cloud Solutions, told us. “There are way more competitors right now. ... So all the participants are trying to provide extra services in order to get the upper hand.”

Our survey found that SMBs use a variety of additional features offered by their hosting provider.

These services can be vital to the day-to-day functionality of a website. For example, site backup is a popular service offered by hosting companies, and 40 percent of SMBs choose to back up their websites and applications solely with their web hosting provider.

GoDaddy is known for their full-service features – if you choose to host with GoDaddy, you can also get a domain, email hosting, website designer, and site backup, among other options.

“They propose a lot of different simple services, like email hosting, creation of your website, and so on,” said Alexander Lipanov, CEO of Softarex Technologies. “This adds more value, since many businesses don’t have the ability to host their own email accounts or the like. ... This gives small businesses a good opportunity for a fast start.”

GoDaddy targets developers with small business clients for their cloud servers, even though the touted features are more technical – backups, API controls and a permanent IP address, among others. Furthermore, GoDaddy provides integration with a wide variety of apps, including WordPress, Drupal, Joomla, Magento, Ruby on Rails, and more. Costs of business-facing features, such as email, are not discussed.

GoDaddy’s niche approach – targeting developers but in a small business context – stands out in the cloud hosting sphere and may help them develop an edge.

However, small business owners seeking to branch into hosting on their own may find it easier to select a company that offers the price of additional features, such as email and domains, up front.

Brand Awareness

The biggest driving factor of GoDaddy’s popularity is its marketing. It seems out-of-place to sell web hosting and domain registration with scantily-clad women and NASCAR. However, GoDaddy did just that – and it worked. Despite incurring repeated controversy, the company persisted, and the GoDaddy name spread.

“You can’t beat having Danica Patrick all over the TV interviews with GoDaddy,” said Raul Ramirez, CEO of Renovatio Cloud Solutions. “It goes back to marketing and how they position themselves. They did a great job early one and that’s what differentiated them.”

Once GoDaddy achieved widespread popularity, it was easy to stay on top.

“Most people will Google the types of hosting platforms or services they require and more often than not they’re going to go with the top three or four results that they get,” said Bair of Unleashed Technologies. “GoDaddy is almost always… in those top three results.”

GoDaddy’s marketing appealed to small business owners’ hosting needs simply because it wasn’t primarily about hosting. This isn’t to say that the sometimes sleazy ads pleased everyone, but by keeping their company name in the general lexicon, the non-technologically-oriented knew a name to research in an otherwise complex industry.

In 2013, Blake Irving took over as CEO of GoDaddy. At the time, GoDaddy had been running their eye-catching and often sexist advertising campaigns for almost eight years. However, Irving vowed to change that.

“The advertising shift is not new. When Blake came into the company, he made the decision to create advertising that isn’t just successful at driving results but also reflective of the company you see when you walk our hallways and also reflective of the people who are our customers.

We serve small and mid-sized businesses, mom-and-pop businesses. Fifty-eight percent of them are female-owned. It was really just a logical decision to shift our marketing to better reflect the market we are serving.”

Phil Bienert, Chief Marketing Officer, GoDaddy

The company dropped its previous marketing strategy but still managed to face controversy, this time from animal rights activists for their 2015 Super Bowl commercial.

Now, GoDaddy is shifting its marketing to focus on more family-friendly advertisements highlighting small business owners. Their latest campaign, titled “Go You,” showcases small business owners whose wacky ideas are propelled forward by a GoDaddy.com domain or website. The company chose not to air an advertisement during the 2016 Super Bowl.

Given the drastic change in GoDaddy's marketing, it remains to be seen whether they can use the new tactics to drive forward their cloud hosting services.

While GoDaddy is mainly propelled by their domain registration, their hosting products increasingly are a larger part of the business. In fact, while the company’s web domain services brought in $218.9 million in the first quarter of 2016, its hosting services pulled in a strong $160.4 million.

“Over time, there’s no question that domains are going to become a smaller part of our revenue mix,” Irving told Fortune this past May.

GoDaddy may need to rely on its hosting revenue more and more in the future. The company went public in April 2015, despite the fact that the company remains unprofitable and has acquired large amounts of debt. While their revenue has increased over 2016, they’ve yet to start generating profit.

Their presence in the small business hosting sphere remains dominant but may change as cloud hosting continues to shake up the industry. Given the company’s complicated history and bold marketing choices, it will be interesting to watch how this behemoth moves forward.

About the Survey

Clutch surveyed 300 small and medium-sized businesses with 2-1,000 employees. 68 percent of the companies consisted of 200 employees or less. Over 95 percent of respondents worked at a manager level or above.


Questions? Comments? Contact [email protected].