Who's Afraid of Bob Parsons?

• By Isabel Wang on November 22, 2006

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1&1 CEO Andreas Gauger is, apparently. According to an article in the December issue of Business 2.0 Magazine (pages 126-132), Andreas says everyone fears Bob: "If he doesn't do anything wrong, nobody in the domain business can touch him." I disagree, and I'll tell you why later in this post.

Bob, who received a Purple Heart as a Marine in Vietnam, got into the domain registration in late 2000. His 4 million customers have registered almost 17 million domain names (or a new domain every 2.4 seconds), more than 2x the next largest registrar. His 2006 revenue of $240 million is 71% more than last year, and triple 2004 levels. His operating cash flow will hit $52 million this year, up 70% from 2005.

As Business 2.0 sees it, GoDaddy's two competitive advantages are its outstanding support (920 customer service reps and counting - none outsourced; all in Arizona) and Bob's exceptional talent for generating publicity. Tucows CEO Elliot Noss was quoted saying Bob played the appeal process for his racy Superbowl ads like a maestro. It took 13 tries to pass ABC's decency standards; business climbed each time he was turned back.

Bob made similar points during his recent presentation at the Web 2.0 Summit. I was disappointed with how he came across. The audience remembered him mostly for his proud association with "tasteless and slightly offensive" ads, which are now defined as "GoDaddy-esque". In other words, his approach is old school: get people's attention and sell them your products. Which is distinctly non-Web 2.0. With each new signup, Linkedin becomes more valuable to each member of its community. But there's no place for the same network effect at GoDaddy.

Back in April, I wondered whether GoDaddy should start a small business social network - mostly out of opportunism. GoDaddy was said to be worth $250 million in IPO rumors; around the same time, FaceBook banked a fresh round of VC funding at a $550 million valuation. Could a sprinkling of Web 2.0 stardust help garner investors' favorable attention?

But I was wrong. Web 2.0-ness is good for much more than just a pre-IPO publicity stunt. Richard Rosenblatt of Demand Media - who is featured in the same issue of Business 2.0 (pages 42-44) - is building a "Domains 2.0" business. He's already attracted $220 million in VC investments (based on a $500 million valuation) and hopes to attain a $2 billion market cap by mid-2008. He recently acquired BulkRegister and eNom.

Whereas Bob is monetizing customers' unused domains by plastering Google ads all over parked pages (generating $12K in daily revenue), Richard's take is:

"If you can make that much doing nothing, what if we added some user publishing tools so that people would come back (to contribute content and participate in discussions on topics related to the unoccupied domain name)? What if we built a platform where we could snap that into as many domains as we wanted? That's when the lightning bolt hit me: You'd have a company that generates its own traffic, generates its own content, and monetizes itself. It would be the perfect lazy-man's media company!"

Like Richard, Bob sees Wall Street as a near-ish future destination. He says in 4 or 5 years, "GoDaddy will be up there with Google and eBay among the leading Internet companies." But take a look at Bob's business model versus Richard's? Which is closer to Google's and eBay's success in leveraging the network effect??

I think Bob needs to heed his own advice. "Get - and stay - out of your comfort zone," he tells Business 2.0 readers. You should do that too, Bob! :)

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