Hello, and welcome to the Spotify Analyst Day. Oh, I'm kidding. Welcome everybody. Thank you so much to all of you for making the trip out to Arizona. I know it's a real chore when it's gorgeous outside.
So we really appreciate all of you being here. I'm Marta Nichols. I lead the Investor Relations effort here along with my colleagues, Christy Masoner and Denise Ludlow, who I think is hiding, and the rest of our leadership team. We have brought out several leaders, including the folks that you'll see on the stage today. So our hope is that both during the break and after the session today that you make sure to spend some time, ask questions of them.
We also have some demos around the room of our Domains business and GoCentral. So please do make sure that you spend some time with those demos. The obligatory forward looking statement, there it is. So this is a little bit of an agenda for the day. You're obviously going to hear from our CEO and CFO.
You're also going to hear from the leaders in our customer experience group, our products organization, our revenue leader and our technology organization. And as I said, others of the leaders of the company are in the room as well. We want to make sure that you spend both time listening to them, but as I said, engaging with them and asking questions of them. And I think with that, I will turn it over to a video. When we think about what it means for us to really be a relentless advocate for our customers, this is what we mean.
To those with the will
to live under their own initiative,
to all those with that little voice inside.
The one that says, do what you love. Do better by yourself. Do better by the world.
Make something real.
You know the voice. It's time to
start listening. It's time to renounce those cubicle walls. It's time to take your band out of the garage. And those baby quilts you've been making? Sell them.
It's time to turn up the dial on your side hustle.
It's time to take the next
110%. We're here to help you kick ass. We're here to help you kick ass.
We are here to help you
kick ass. We've been championing millions of folks like you for 20 years. From surf shops on the Carolina coast to fashion bloggers in Croatia.
Turning ideas into reality. And helping you succeed as you define it.
It's what we care about the most in this world. We know you've got a ton on your plate and a million other things to do.
But if you're ready to take the first step or the next step to the future you want to build.
We are here to help every step of the way.
And we've got thousands of engineers and advisors hell bent on making it happen.
We'll give you the tools
to do it yourself and the services
that scale with you as you grow.
And if you need a little extra help,
we truly love getting your call.
It's your life. It's time to take it by the horns.
If you know what we mean, I think you do. You'll never be more ready. Make your own. Make your own way.
Make your own way. Make your own way.
You've been waiting for this. Make your own way.
Well, smiles, a few nods from people. Hey, even a round of applause. So how many of you think that we made that for you? Please don't raise your hand. We did.
So that's our manifesto. The manifesto is shown at town halls.
All of
our new employees, we start the day and welcome them with manifesto. Those were our people. You heard of somebody from CARE. One of the individuals is a world class MIT AI engineer. Our lead of India was in that video.
And what you heard and saw was passion for our customers and for what we do. It showed on the screen, and I hope even as you talk to people around today, you're going to get that same feel and passion for who we serve and for what we do. So welcome. Thanks, everybody, for being here live. Those of you who are joining us remotely, thanks, welcome.
When we announced that we were having an Investor Day, our first ever, immediately, people asked MARTA, what's happening? What's going on? What are you going to do? And we said, well, it is almost 3 years to the day since we went public. And we have had a hell of a lot of success against what we laid out when we kind of came out and talked to you 3 years ago.
And our senior team over the last several months has looked out into the world into where we are and our, frankly, successes and now what the next stage of our evolution is and put together a strategy that I think is going to carry us for the next 5 years. And so our goal for today isn't to unveil anything enormous, but rather create a road map for you all to look and think about our evolution over the next 5 years. So enjoy the day and enjoy your time together with all of us. And I hope, throughout the course of the day, that everybody leaves with kind of these four things at the top or in front of your minds. The first is that our customers are truly at the center of every single thing we do.
Products we build, how we interact, it's all about value to our customers. And the opportunity for us is enormous, both size of audience and engaging with the existing customers that we have. And we, as GoDaddy, have a hell of a lot of things that allow us to serve our audience in a distinctive way, probably in a way that's even more powerful today than when we first talked to you 3 years ago. Last but not least and probably most important, you had the chance and you're going to see our team, not just people on stage, but around the room, talk to them, ask questions of them. This is a deep and experienced team with a proven ability to execute.
So do me a favor and think about those four things. And hopefully, you'll walk out with those, top of mind. We are starting the day very intentionally with our customers. I still get asked, hey, what does GoDaddy do? GoDaddy helps ideas start, grow and thrive online.
That's what we do. We do it at, frankly, a pretty massive scale around the world, but we're about ideas starting, growing, thriving online. And if you think about it, ideas, small businesses, organizations, nonprofits, the single most important thing you can do with an idea now is to have it look great online, right? Whether it's just serving your audience, whether it's attracting new customers, whether it's just being being online is the single most important thing you can do. And you know what?
As a company, that's an awesome place to be, which is what we do really matters for our customers. And honestly, that's the foundation of a great company and a great business is to serve customers with something that they really, really care about. It's an honor and a privilege. And that's at the center of our vision and our mission, which is to help our customers not only get online but succeed. Today, we're one of the largest subscription businesses in the world.
We have 17,000,000 customers all around the world. Our aspiration is to serve this audience, tens of millions of customers all around the world, but every single one of them distinctly. And you're going to see throughout the course of the day not only ways to grow and to grow our audience, but also each and every customer having an awesome engagement experience at GoDaddy. The individual is equally as important as the tens of millions of customers. And if you think about us and where we're going, there's 4 big trends that are happening in our market today.
First, the definition of what it means to have an idea online is changing. The Internet for 20 years has basically existed where a DNS query resolved to a website and it got searched and found with Google. And that world isn't changing. But in a social and mobile world, there are the rise and proliferation of social media platforms that if you're a small business in an organization, your content, your information has to exist in more places, right? Online presence is expanding, and that's an and and not an or.
You're going to hear today, both in our product section and in our demos, how GoDaddy positioned to win and to help our customers thrive in the expanded view of online presence. The two middle sections, artificial intelligence, machine learning, kind of the proliferation of voice, what's happening is we, as individuals and consumers of technology, the game has been raised in how people interact and what our expectations are. And again, if you think about the audience that we serve, a company like ours that can frankly take technology and make it usable for people on a massive scale is actually an incredible opportunity. Last but not least, infrastructure changing, all right, public cloud. Well, we just announced that we're signing a partnership with Amazon this morning.
That's coincidental, not purposeful, by the way. And we did that for a couple of reasons. First, most importantly, is people come to GoDaddy and they work with us because of our products and our experience, not because we rent a server, compute and storage. Awesome place to be. Amazon absolutely is the largest global platform and it's going to allow us to continue to accelerate on our products and our experiences all around the world.
And, and this is a big and, our products are going to live more and more within the Amazon ecosystem. Charles Bednarla, our CTO and Stephen Aldridge, our Chief Product Officer, can talk to that a little bit more today. But this is more than just a cloud deal. It's actually an opportunity for us to deliver on our product promise. So with that as backdrop, think about evolving our strategy, where we are now and where we're going.
It's special need for me to stand here because, gosh, 5.5 years ago, I got to sit and spend 2 days in a GoDaddy Care Center listening to customers interacting with GoDaddy way back when in my old job as a private equity exec thinking about GoDaddy as an investment. And for 2 days listening to customers interact with our care center, I saw some things even then that were really special about this company. First is that domain names are incredibly important. A domain name is an online brand. It's digital real estate.
It is the single thing that the minute that you have an idea, gosh, it has a unique place online. Putting people around technology, not just for our stuff, but for other people's, I joke with the head of AppleCare that I'm actually his best care service, is a powerful way not just for GoDaddy's things, but to help customers use technology and certainly having a brand that people knew was an asset. 5.5 years ago, though, it was more what we could be that was interesting to me. It was kind of a, at the time, more of a vision in a mind's eye, which was what if we expanded our product portfolio and innovated around domain names? What if we took this business that was predominantly in the U.
S. And took it global? What if our brand extended in a way that everybody thought about GoDaddy as the place to get that idea online. Last but not least, we were able to take an idea and not just have it start, but actually take it through the full life cycle of its existence. Four big things that you could actually just kind of see out there, but they were all promised.
It's neat to actually look back and think over the last 5 years, the amount of progress we've made. Innovated in names. People had a chance to go interact with the top on over in the corner, you see real innovation in naming. Connecting naming to productivity, huge win. Going global, 2,000,000 customers in 2012, now 7, with a platform to truly operate and scale globally.
A foundation around our technology that again delivers around the world, innovation and presence and our brand, hell of a lot of good work. And I think we're standing here today really on the cusp of the next wave or era for GoDaddy, which is really helping our customers thrive. And that's going to build on some of the successes that we've had and add some new moves, both in how customers engage with us and how we talk to them and what we do in our product portfolio. And you see 5 things here. We're going to go into them in more detail through each of the presenters.
Here's some numbers to reflect on those areas of start, grow and thrive. When I was sitting here and at the end of 20 12, just listening and thinking on, boy, what could be, GoDaddy had 10,000,000 customers, less than $1,000,000,000 of revenue. We helped our customers start. All those successes over the last 5 years by the end of 2017 propelled us to 17,000,000 customers, 7,000,000 of which are outside the U. S.
And over $2,000,000,000 of revenue. And the number is not on here, but it was a shade under $500,000,000 of unlevered free cash flow, too. As we look ahead towards Thrive and thinking about what you're going to hear today from a strategy, our trajectory can really carry us. And they can carry us at all those levels. Revenue, dollars 5,000,000,000 customers growing to 25,000,000 dollars And literally, I'm looking at some of you and thinking, all right, give me a year.
When is it? Think about the trajectory. Mark's like, yes, what is it? What do you got? Come back at the end of the day and draw your own judgment and think about the trajectory.
But I can promise you that what you're going to hear spot. And there's a new metric on this page that's active ideas, an active idea with GoDaddy. It's not just a piece, right? It's not just a name. It's not just a site, but it's how we're starting to run engagement at the company, which is an active idea, something where we have a name, we have content that we're working with you on a daily basis and are an integral part of your operation.
In the words of investors, that's more products, more ARPU, but it's active ideas all with GoDaddy. That $50,000,000 number is probably the most aspirational thing on the page, but you're going to hear everything today that will help us get there. How do I stand here and talk about doubling business, 50,000,000 active ideas with confidence? 1st and foremost, the market that we serve, it's huge, really. Left hand side of the slide is our addressable audience on a customer count basis.
Today, 17,000,000 customers. There are over 500,000,000 independent ventures in the world. What's an independent venture? Small businesses, organizations, nonprofits, right? We are about more than small businesses.
For our purposes, an active nonprofit has the same need as a small business. You got to look great. You got to serve your audience. You got to do it with the same tools as being online. That's a global TAM of over 500,000,000 customers.
And here's something that I'd love for everybody to file away and think about as we go through the day. We and other people who you would say kind of do what we do have always run after and competed on new ideas. We've always tried to get the new thing. And in a world where what it means to be online is changing and applications are getting more and more connected, And we at GoDaddy do things in a special way. We're uniquely positioned to take ideas that may have gotten built online 5 years ago and make them over into the new world, which would afford a new way to acquire customers and to serve them that's probably different and deeper than any of the point solution people around.
Think about it. Right hand side, engagement. The average customer spends $160 with us, but the average small business spends over $1,000 to $2,000 not just on products, but a variety of services that if you ask them are kind of usually poorly delivered. Huge opportunity to do more with our existing customers, have that translate into ARPU, deepen engagement. And we as a company do a number of things uniquely well.
These are the same things we talked to you about 3 years ago, and they've gotten more and more important over time. Brand, global scale, the connectivity of our products, platform and care working together, They're the same things, but in some ways, they're even stronger standing here today than 3 years ago. And here's the proof. Somebody, George, I think from William Blair and I were talking earlier, and I was getting quizzed on our unit economics. And remember, this is the proof of do we matter to people in the world and do we do things distinctively well.
These are the numbers as of 2012. Average lifetime value of $700 relative to a cost of acquisition of $70, 10x marginal return on acquiring customers. A couple other things because we intentionally put 2012 to 'seventeen here. You can see our strategy in action over this bridge. Product improvement, ARPU going up, margin going up, value of our customers going up, expanding around the world with our customer retention and churn numbers exactly the same and still a best in class cost per acquisition metric.
Several people, when we went public, honed in on cost of acquisition and said, well, how are you going to keep this ratio? And the answer was we're going to do things differently. We're going to add value to existing customers, and it's going to allow us to go reach new customers in new ways. It's not about doing the same thing the same way. It's about doing stuff differently.
And the last point on this is that this is also permission. It's permission to do more. It's permission to deepen your relationship with the customers you have. And it's also permission to find new audiences and grow. And that is pretty much the definition of a strategy.
And you see 5 different blocks of this strategy, each one of them powerful. And you're going to hear from people throughout the course of the day on the depth here. But together, these really wrap together to find something meaty. Customer experience, what is this? This is really the how.
Think about GoDaddy with our products as what we do for our customers and our marketing channels as externally how we talk to them. This new block is different. It's how. When the average customer stays for 7 years, when many in our base are here for a decade, when your ideas grow over time, how you interact with people in many ways is even more important than any individual would. You're going to hear from Mike McLaughlin and talk about how we're creating a new team of product and engineers to create unique ways that we engage with customers.
Verticals, subscriptions, new ways to interact with care, value to their idea over time. Our product portfolio, both the products that we have today, a lot of headroom for growth. Winning in the new definition of online presence, Stephen is going to talk and more importantly, show you what that can look like, both in demos and on stage. And we've got a number of seeds planted that again extend our product portfolio that we're excited about. Go to market, continuing our international growth engine, expanding our brand for the full need state of an idea coming to life online and here's a new move, conversational marketing, which are ways that we can talk to our existing customers at the right moment in time, right?
All of our marketing for really the history of the company has been spent on new, right? And with 10x unit economics, that's a smart move. Each marginal customer is incredibly valuable. Now with a better product portfolio and an engagement system, we can actually talk to our existing customers and spend more marketing dollars at a high return in an incremental way. Andrew Loake is going to come up and talk about that.
All of these things are underpinned by our platform and by our technology. Charles Biedenal, our CTO and James Carroll, who's our Head of Platform, are here. And we're going to reference during the course of the discussion on how our engineering actually enables these things because it's distinctive and it's an advantage. And please, if you have the
opportunity, you're going to want to talk to both people because
it's part of the powerful, going to want to talk to both people because it's part of the powerful distinctive things that we can do. All right. Here's our scorecard and handicap on where we are across these 5 blocks of the strategy and our team and culture. Read this as how we intended, which is opportunity. Many will ask, hey, what inning are you in XYZ business XYZ, business applications, international rollout?
And the point is, we got a lot of room to roam. And just think about where we're starting from. So customer experience. GoDaddy was recently voted the best customer support organization in technology. It's an award called the Stevie Awards.
We've been a winner and finalist for 7 years. We were named the best for whatever that means this year. Here's the point. We're starting from something unique and powerful, and we're adding technology on top of that around verticals and subscriptions that can really combine with already what's a great asset and make it much, much more. Our product portfolio, evolving in the world of online presence, a hell of a lot of room to roam.
And on our go to market system, we're proven in terms of international growth, our brand continues to extend And this new idea, boy, how can we talk to our base in relevant ways, is an enormous opportunity. And I mentioned our team at the bottom. This is a deep team. It's one that cares about what we do. And in many ways, that is the enabler and the most important thing to getting and succeeding across the 5.
For those of you who have known us for a while, how we run the business, it's something we don't really talk about. But we thought it might be helpful to mention just given we've got everybody's attention for a couple of hours. The first theme is balance. You see on the left hand part of the slide, customers, employees and financial results. We intentionally run the business across those three ways.
When we talk to the company, we'd literally show this and say we're talking about our customer experience. We're talking about our employee experience. Here's how it translates into numbers. Great companies do it all together. We talk about these.
It's a flywheel, and we run the business based on this balance. And that's how we're able to deliver top and bottom line growth. It's how we make investments and we take pragmatic risks and also execute like hell underneath it. There's a balance across everything that we do and we're quite proud of it. We are a team and a business that thinks for long term.
What you're going to see in here today is not going to drive the next quarter. It's probably not going to drive Q3, but it's about setting up GoDaddy as a special business, not even for the next year or 2, but for the next 5 plus years and decades beyond. But we're disciplined. We're highly analytic. We measure that hell out of everything that matters and we love pace, right?
Pace matters. Over the long term, you don't just wake up one day and you're in a different spot. You make progress each and every day. And again, you're going to see that pace in action through each of the presenters, which is you get better each and every day. And if you do and you think long term and you take risks, you end up in a good spot, all with an aspiration to be best in class, right, at what we do and our experiences weighing to a customer, good enough, that's fine for some people, but it's not good enough for us.
You have a best in class aspiration for customers that kind of ripples through the DNA of this company. Now a way to think about our strategy from a brand perspective
is to
think about this evolution as GoDaddy from an incredibly useful utility to a total customer experience, great engagement company. And as investors, you guys obviously sit and think about, hey, what are your comps? Well, if you think about a brand as an experience and the promise of an experience, what does GoDaddy stand for as a brand? Here are 4 analogs, not comps, but analogs to think about this journey and maybe what we stand for. Disney, okay, intentionally not a tech company.
Magical consistency. Every time you touch a part of Disney, it has the same reaction. We're going to be the same way. Sonos. I'm sure a lot of people here have Sonos.
Think about connecting speakers together one click of a button, music available and able to move it around. Think about each product application for our customers with that level of simplicity and interconnectivity. Simplicity. Amazon, again, this isn't a head nod. They didn't force us to put this in here as part of our deal.
But man, Amazon, customer oriented and they are ruthless in making decisions around the customer. It is part of the reason that we're able to have a partnership with them, not as a vendor, but as a deepening partner. Last but not least, Adobe. Adobe sold, as many of you know, packaged software for a long, long time, and they have done an awesome job putting those independent pieces together into a solution. What you're going to see and hear today from both Mike and Stephen is solutions coming out of GoDaddy based on people's idea or vertical, not just individual products.
So magical consistency, simplicity, discipline and solutions, new themes that hopefully are what the GoDaddy brand lives and stands for. Now from aspirational brand to maybe an investment thesis. So what do you get as an investor sitting here with GoDaddy? Well, you get a company that's serving a huge audience at a global scale, a company that has a value proposition that matters to our customers. And modestly, there are a number of things that we do distinctively well.
And a growth strategy that can carry us not just for the next year or 2, but frankly, for the next 5 and a proven ability to execute. And when you operate this way, you see the growth trajectory of our company over the last several years, our end customer, ARPU, top and bottom line. And by doing the right thing in the marketplace, doing it in a distinctive way, you get these kinds of results. And I think we're standing here today with the same opportunities and in some ways are even better positioned now than we were 3 years ago to carry the business forward. For the day, you're going to hear about the 3 blocks of our strategy that kind of directly tie to the P and L.
Customer experience, again, the how people interact with GoDaddy product excellence, the what and our go to market, which is kind of the where. Underpinned by technology and, God, it's important. And so we're going to weave and invite our CTO and our Head of Platform into the discussions at certain moments, not as a presentation, but to articulate kind of how we enable all these things with technology. So enjoy. I think you're going to actually love digging into these more.
And with that, I'm going to invite my colleague, Mike McLaughlin, up. Mike's been with GoDaddy for a little over 5 years. And all of our success in domain names, when everybody's been asking, gosh, how do you keep growing so much faster in the industry? You give the credit to Mike and Charles Biednall, our CTO. Mike is a phenomenal product guy.
He's incredibly strategic and also highly operationally disciplined. He's got awesome judgment. And as we think about creating new ways for customers to interact with GoDaddy, he's the perfect person to frankly lead and staff a whole team of product people and engineers to go make this happen. So Mike, come on up, and you're going to enjoy watching and listening and hearing what Mike's working on.
Great. Thanks, Scott. And hey, everybody. I'm super excited to be here with you guys to talk about the experience of being a GoDaddy customer. And I'll talk about 3 things.
First, the customer today and their need state and how we engage with them. Number 2, we're going to show you a bit of a vision, a multi year vision of what we think the experience can be for a customer of GoDaddy's over time. And we'll link it to what we think the outcomes can be both for the customer as well as for us as a business. And so we start with the customer. So who are our customers?
Scott gave the broad intro, right? These are dreamers. These are entrepreneurs. These are people who are trying to take an idea and bring it to life in the world, right? They're passionate.
And so to explain the need state, it's useful and instructive to talk about a customer as an example for the whole. So let me introduce you to Gerald. Gerald's on the screen. Gerald and his partner Coe are chefs. They run Bistro Mire, which is a French bistro on the outskirts of London.
Gerald and Co. Met each other because they shared a passion, a passion for food. And along the way, they hit on a concept after some trial and error, not surprising given their background. Gerald is, Gerald's French, Ko is Japanese. They found a French bistro with a Japanese fusion idea actually worked.
This was their concept and their idea that they then wanted to bring to life in the world. And so they went about doing that and they opened in January. And they're a customer of ours and they built their online presence on top of GoCentral. Now, the need state of Gerald and Co. So first, they're scrappy and they have to do everything themselves.
This is a 4 employee company, Gerald, Co, 2 other folks cooking, cleaning, waiting tables, right? So as a result, Gerald and Co are not only chefs now, but they're also the legal, the accounting and the finance teams. They're the operations team that has to figure out how to fix the kitchen equipment when it breaks, right? They're the guys who have to do the marketing, digital and otherwise. So they're every day on Instagram posting photos or calling up concierges of local hotels trying to make it happen and get butts in the seats in their restaurant.
And then also the tech team. By their own admission, Gerald, not at all tech savvy. Koh, savvy enough that he came to GoDaddy and was able to do his own DIY website with GoCentral and get a great website out in the world. So they do it all. And as a result, they're time crunched, right?
They're running around every day trying to make it all happen. And part of the need state then is, I need time to do the things that I really love to do, which is cooking, not doing the books for my business. And they also they're starting anew, right? Every one of our customers feels that they're starting anew. They've come to this business.
They've never run a restaurant before. This is their first time. And so they're looking for guidance. They're looking for help. The core need state is these guys wake up harried every morning and think, good lord, what do I have to do today?
What do I have to do to grow my business? Right? That's the core need state and where the opportunity lies, is that not only can we build the idea to reality toolkit, given the tooling and the need that what they need to do to get online and start growing their business, We give them the support, the care they need along the way. And over time, what you're what we're going to talk about is how we can be a trusted partner in that venture. So not only so that we can actually bring the insights that we have from 17,000,000 customers over 20 years to Gerald and Co.
And Gerald and Co are very, very representative of our 17,000,000 customers, 10,000,000 in the U. S, 7,000,000 around the rest of the world in the international markets. We add about 1,000,000 net new customers every year. More than well, more than half of those now are coming from international. So we are quickly becoming a more and more global business.
Most of the customers are small businesses like Gerald and Co, but some have grown with us over time and are now mid sized enterprises. And we also have web pros. Now web pros are our term for web designers. They're the folks that build roughly half of the sites in the world and they do it on behalf of the end user, typically, again, small businesses. And from our standpoint, they're the influencers and the channel by which we reach many of these small businesses.
And they'll use some of our more advanced tools, our hosting products and our security products to build for others. And Stephen, in his product section, will tell you a little bit more about how we're approaching Web Pros, especially through WordPress. Now, over time now, we've now have roughly 1,000,000 customers that over the years have grown with us and are now spending $500 or more, with us every year. Now how do we engage with these folks? So Scott hit it a little bit at the open here.
So first, typically, you first hear about us from a brand perspective, right? We enjoy high brand awareness and increasingly that brand both in the U. S. And around the world is consonant with what we're doing every day in the business and for our customers, right? When and Andrew will take you deeper into what we're doing in his section around the brand, right?
Then typically you land on the site, you're typically going to go, you may go and find a domain to upon over in that back corner has been demoing kind of some of our technology that you'll run into kind of when you're on the site and you're getting started. And then once you become a customer, right, you interact with 3 primarily in 3 ways with us. One, through our products, which are built and connected together on top of our global platform. Again, another point of distinction, something we've done uniquely well taking these products and tying them together on a global platform. When you hear from us, you're going to hear from us primarily through e mail.
Anybody a customer and gotten an email from GoDaddy? Yeah, you probably get quite a few. This, to be self aware is an opportunity to be better, right, in terms of how we actually communicate with our customers and we'll talk about that. And then finally, if you run into a problem, right, you can pick up the phone and call us around the world. And this is again a point of distinction that we are incredibly proud of, right?
This is built into the core DNA of the company that we will pick up the phone, we'll help you with your problem, right? It's related to the core need state that I just described with these customers, which is they're not tech savvy, they're running around harried in their day, they need help and they need a place to turn and we're that place. And so we have 5,500 care agents around the world in 18 centers. We take 1,700,000 inbound interactions per month. You're standing in one of our 18 global centers.
This is our Tempe facility. I know many of you have been here and taken the tour and actually seen how we operate care. If you haven't, a bit of a commercial for the break. I August Goldman, who's in the back there, raise your hand, August, will be giving tours of the facility. August runs our care teams around the world.
And so, I'd highly encourage you, go take a tour, see how we do this in practice, and see how we actually run our care centers and and why they are distinctive. So these are the things that we do well. Where can we be better? Just to be self aware and just passionate about it. There's a few things that we see where we're now in the next cycle going to be better.
So one is, if you look back at the history of the company, we built the company basically product by product and marketing touch point by marketing touch point. And now it shows up in the experience as we have expanded our product portfolio, grown around the world, often our customer experiences now don't hang together all the way through end to end, right? And sometimes when we're talking to our customers through different channels, when you pick up the phone in care versus what you're seeing in email or on the site, they're not always hanging together. And we're aware of this. And so what we have now is the opportunity to really drive to build end to end experiences that start with that core idea that we're talking about.
For every one of our customers, we can understand their idea, understand who they are in their need state, then we can rebuild and reimagine journeys that really match that need state very specifically and carry it all the way through the journey. So for the last several years, like Scott said, I was running domains. We did a lot of work on this around thinking about how do you take a domain and then attach it into the rest of the product portfolio, in particular, obviously presence and e mail, the 2 fundamental things you go do to put a domain to use, right? Again, Tipan is demoing a lot of that work over on that side. So again, take a look at that, but now take that and say, how do we do that across the entire company and across the entire journey and tie each point in the interaction together.
And so a couple of new things that we're going to be doing along the way, highlighted in blue. 1, subscriptions. So now obviously you're sitting here, we're a subscription business. But when we talk subscriptions, what we're talking about, think Adobe, right? Think about understanding the need state and building a set of a solution, a bundled set of products and services to specifically match a need state for a given customer and then carrying that all the way through the experience.
Once you subscribe to us, we'll invest a lot in welcome and activation. To the point of disconnected journeys, this is not something we do well today and we'll get good at it, which is right now, you come to GoDaddy, you buy a couple of products from us and we kind of leave you to your own devices a little bit in the product experience itself to figure out how to connect the domain and presence and e mail and some other services, right, through our control panels, right? If we know your subscription and we know your idea and what you're doing, we can build journeys that take you all the way through and take you all the way through to success. As I'll show you in a moment, if we know that we know that if we can get you to the points of success, these critical moments in the journey, then there is tons of value on locked, both for the customer and for us. So that's number 1, elegant end to end journeys.
The second point is engagement. So when we talk about engagement, how measured as how many times do our customers come back to us and visit the site every year? Across our 17,000,000 base on average, customer comes back 3.5 times a year. That's okay, not bad, better than some, could be a hell of a lot better, Right? And what we're thinking about is, ah, back to the need state of the customer.
They wake up every morning and they're thinking, God, what do I got to do today? What's the most important thing for me to do? And what we're going to imagine is ways that we can be deeper in the daily running of the venture and have a deeper engagement with our customers such that we're not just a useful utility, but we're a partner in the venture. And I'll show you what we're thinking there in a minute. And finally, number 3, we're going to lean even harder into care.
We do 2 fundamental things in care and we do them really, really well. One is we pick up the phone and we solve your problem and we do it in a consultative way such that we uncover your need state and not only do we solve well but that we turn that into selling moments, right, where we uncover the need state and again, understand, Ah, you're ready for the next thing in your journey, which happens to be a GoDaddy product, which accrues to ARPU. That's number 1 in the care center. And the number 2 thing we do in the care center is we actually proactively call our customers in an outbound motion. We're going to have new motions.
There are many more things we can do with the power of our care team to improve the journey and improve the outcomes for both us and customers. And why are we talking about this? Why does it matter from an economics perspective? So if you look at just the numbers of the business, right, and back to where do you create value, we know well in all of our data that if you take a customer who started with a domain and then as Scott said, they're running an active venture with us, right? They've got they're up on our productivity suite, they're up on our presence products, right?
We see the lifetime value of that customer explode roughly 15x. And as importantly, what we see in our retention curves now, we have great customer retention, right? It's sub-fifteen percent across the entire base on an annual basis. But what you see is that if we can get a customer through the first couple renewal cycles into the 3rd, 4th and end renewal cycle, they're actually their churn rates drop dramatically well into the single digits, right, which basically is another way of saying, if a customer gets through this start up and gets to the point of success with us as up and running venture on top of our stuff, they're here with us for a long, long time, a decade or more, right? So just there's a mandate here to say, we have to do more, we have it, we can do more to get our customers to the point of success.
And oh, by the way, if we do that well, there is a clear line between that customer success and our outcomes. So let me show you as I've been using words, let me show you some pictures of what we imagine the experience could look like in a couple of vignettes. So please do not take this as our 2018 roadmap. Do not think about this as moving the next couple of quarters. Don't ask Scott and Ray how the stuff that Mike showed is showing up in ARPU in the May earnings call because it won't, okay?
This is a multi year vision that we want to give you some idea of like where we're going, right, of how that customer needs state starts to show up in real life in the experience. Okay. So let's say that we're starting to band, okay? And so we're starting to band. And as I mentioned band.
And as I mentioned, now, if we understand who you are, that you're just at
the point of getting started and that you're in the music business, all right, then at the
very top of the experience, our merchandising can go from generic to much more specific to experience, our merchandising can go from generic to much more specific, to talking in the language that you understand, right? And as we uncover your need state, then we can be putting together a subscription, a package of service and product that actually meets that need state And that, okay, carried through the experience. Carried through the experience. As I said, once you subscribe, great, now we know who you are, we know about your idea, what vertical you're in, we know what product set and solution set you're in and we can build journeys that perfectly match against that and get you up to success. And we can do that in the product itself.
And we can also do it through our comms. So again, many of you, I'm sure, are customers and you've bought stuff from us and the next communication from us is, hey, you buy more stuff from us. And really, back to the slide I just showed, the highest value thing that we can probably do with you after you've subscribed to a set of services with us is get you up and running into the point of success. And to that, through our entire welcome journey through all of our communication touch points, we can then leverage into that. And in this example, hey, you had Office 365 in your subscription, you know, we noticed that you haven't yet got up and running on it, right?
Our job now is to get you up and running. And in our communication streams, we can either say, hey, go do it yourself or again, leveraging the power of what we have in our care teams, Hey, make an appointment. Talk to a consultant. We can help you through this, right? And we can actually deploy real humans, right, in the purpose of helping a customer get up and to success.
Once you're up and running, now you're in our products. And so in this case, okay, now we're building on top of GoCentral. We're building our site for our band. And you'll notice, obviously, the iconography, the pictures, the words, right, start to reflect who you are, what you're trying to do, right? The applications that we're building will now reflect what you need in your specific vertical.
So here, we're a band, so we need a SoundCloud integration to make sure folks can listen to our music on our site. This is live. So this screenshot came directly from our live site. It's in production today. You can go to any one of the GoCentral demo sites and actually see this live.
Stephen Hill will take you deeper into this experience in his section and I encourage you to watch the demos flip through GoCentral. But we are very, very quickly with Velocity being are able to create vertical experiences that work for not a couple of verticals, but hundreds of verticals, right, roughly 1500 verticals that we now cover, like micro verticals. So more about that as we go. And then let's imagine now we're up and running and but we're still at Gerald and Co, we're still waking up every day going, God, what do I need to do today? What's important?
What do I need to know? What do I got to go do in my job to do my, you know, to get my venture going? So imagine we have a GoDaddy app in the pocket of every customer, right? And so now because you're running your venture on top of our services, our productivity services, you've got our digital marketing suite, you've got our presence, you've got presence. We can start telling you, hey, here's how you're doing, here's what's going on in your venture on a daily basis, right?
So metrics of success, how many visitors are showing up? How many online appointments have you made? How many sales did you make in your e commerce store, right? What's going on in the world around you? Like what social posts might you need to respond to?
That e mail marketing campaign that you put out yesterday, what are the responses? What's coming back on that, right? So we can move from just being a 3.5 times a year utility to a partner in the venture on a daily basis. And that's all underpinned by having products that work together on top of a platform such that we can take all that information that we're learning about that venture as it's running on top of our stuff, put it together and put it in a digestible format in front of a customer. And now you take that to its logical conclusion and we can actually be able to provide proactive insights to that venture.
So, again, we see that, we see how your content is showing up across the web. We can scan your security profile to see if you have any vulnerabilities. In this instance, we can look and see how you're showing up on Google. And we can notice as we scan that, ah, your Google rankings are dropping. You have an SEO problem, right?
We can now be proactive about that. We can reach out to you, a notification on your phone saying, hey, you might have a problem here, something that you might have not have noticed as you're running around, Gerald and Co. Were running the restaurant. They might not have noticed this for weeks, right? And we can reach out to you and say, hey, here's what we're seeing in the data, make it digestible.
And then again, either, hey, here's the tools to solve it yourself or again, do you need help? Pick up the phone, call us, talk to an expert, talk to a consultant. We're here to help. Again, we can infuse care, humans combined with technology in unique ways. We think if we can do this well, this will be distinctive and unique in the world.
We have 17,000,000 customers running their ventures on our stuff. We've got care, which we believe is really distinctive. Marry those two things, put them together in front of a customer, it can be really distinctive. Now I mentioned care. Now what's happening on the other side of that interaction?
We just went out to a customer and said, hey, you have an SEO problem. So now let's imagine we're sitting here in Tempe and we're one of our care reps. What are you seeing as the care rep? So again, infusing technology to help the human, right, on our side is we can tell our rep exactly what customer and venture info we know about this person, right? We can describe obviously what they're subscribed to.
We can show the interaction history and show, hey, when did they interact with the app, with the site, where they've been banging around, when was the last time they called us, what was their issue. And very importantly, because we know the context really, really well, they're calling in because they need SEO help. And so we cannot help our rep provide the recommendations both to solve well and to sell well and bring customers along in their journey. And so to extend care and extend our distinction in care, there's a bunch of new things that we're going
to be doing
over time. So the first thing is we're just going to be raising the bar on ourselves. So internally, we have what we call our Wow score, which is fundamentally the bar we're setting for ourselves internally for what every interaction around the world, 1,700,000 times a month needs to be and it needs to be great. We're good at this. We're going to become ever more distinctive against on this and we're going to distance ourselves from everybody else in our space.
Number 2, we're going to be investing in digital self help, so customers can help themselves when they need to, but again, tying that seamlessly back to live care when a customer gets stuck. We're going to be extending selling and support mechanisms. And there's a bunch of different things we can do here. Just to give you a flavor, a different ideas. I showed one which is not just sell, but also help through the journey and help drive to customer success when we notice moments in the journey where customers are getting stuck.
Number 2, as an example, account management. So once you're up and successful, leaning more into account management. We do some of this today across the company and we can do more. And a third motion that we can consider is we have DIY products, we have a suite of do it for me services, right, at a certain price point. And there's a middle ground there of do it with me where we can help along the way where you don't need a full somebody to do everything for you, but you need some help, right?
And so there's a spectrum there, right? That's not binary. It's a spectrum who can do a lot more within kind of the bounds of that spectrum. So those are just examples of kind of motions we can create. And one more just to note.
There's millions and millions of customers with competitive services with sites that are 5, 10 years old, aging, don't look particularly modern, might not be mobile friendly, you might be on an e mail system that's not best in breed. There are a lot of customers out there who are ready for the next thing. And migrations, to bring them where we would love to bring them in as a customer, Migrations are hard. What we've learned that we've built tools to make migrations easier to bring presence over to bring e mail over. But yet what we've learned is that actually having human touch and bringing a customer across, like having that human touch is critical.
And so we're going to be leaning into migrations as a way to kind of just grow for go after all the customers who are already out there who haven't who aren't just starting, but are already up and running. And of course, just to close on that, this is going to be delivered globally around the world with a local touch. So I just covered a bunch of ground of things that we could do in the experience. Notice the word could, right? This stuff isn't all live, some of it is.
This is my disclaimer again, right? That this is not for short term financial outcome. This, back to what Scott was saying, is we're playing the long game. And what we're showing here is where we could go, right, over a multiyear swing. Nonetheless, all right, how do we think about the connection to outcomes?
So first oops. First, we will we are putting together a metric stack for customer experience, which in and of itself is how we measure whether customers are doing well or not, right? And then they tie to financial outcomes. So first, attach if we get deeper into the products that turns into ARPU, that one's obvious. If you become active, you've started using our products, then obviously, as I just described, your retention curves get become great, right?
If you start using our products, again, ARPU falls out as you grow with our products. A couple of examples. As you use our hosting services and your
enterprise grows, you may
grow out of your existing hosting plan, you upgrade into the enterprise grows, you may grow out of your existing hosting plan, you upgrade into the next hosting plan. Or if you're on our e mail and you're adding employees as your enterprise is growing, as your venture is growing, then you're growing with us in terms of more seats. So there's natural ARPU drivers under many of the products in our business. And then as we talk about with engagement, engagement gives you more at bats, right, more chances to talk to the customer and with those more chances to find their need state and find the next contextual sale, again, leading ARPU. And obviously, customer success, if customers are having great success measured by more traffic, more sales, more appointments, then obviously like the lifetime value of that customer will follow.
And also, right, we'll end up getting the word-of-mouth, the advocacy that comes from being one of the world's great customer experience companies, right? The Sonos' of the world, the Amazons' of the world, right, that the Disney's of the world, right, that enjoy that type of word-of-mouth and gives us permission to go after millions of more customers, right? So the reason we show this and the reason we talk about it is because we have confidence and we want to instill some confidence in you too that we have, in our experience, plenty of levers to drive ARPU with consistent growth year over year, right? There's a long runway for ARPU. Now we believe we can be driving ARPU and kind of in the mid single digit growth rates for years to come.
So we started and we're going to end with our customers. So the Geralds and Co's of the world that again, if we do our jobs, if we understand their need state really, really well and build experiences that help them turn their ideas into reality, then we're going to be great. We're going to be great. And so a big part of how we do that runs directly through our products. And so to move on then, what I want to do is I want to bring invite Steven Aldrich to come up, our Chief Product Officer.
So Steven, before he became Chief Product Officer, ran our business applications business line. When Steven showed up in 2012, that was about a $50,000,000 business. In 2017, that was doing well over $300,000,000 Stephen was the architect of that outcome. So fantastic outcome for the company. And now as CPO, Stephen is both expanding our product set and doing a great job taking those products and on top of our platform, building them together into connected experiences.
So and Stephen, he's an entrepreneur himself, multiple times over. He came to us from Outright, which we bought in 2012, which is how he came to us. And he's a fantastic customer centric product exec. So Steven, please.
So, what's pretty amazing is those 6 years have gone by incredibly fast. The team has built a wonderful culture around product and marketing that fuses what GoDaddy had been with incredible passion for the customer with our future around how we're moving to help customers around the world. Mike and Scott have talked about that eloquently. We are all here for the customer. So this is a picture of Gerald from Bistro Mireille.
And I want his idea to succeed. In fact, I want 100 of millions of people like Gerald to succeed around the world. And that's why I'm here at GoDaddy to make that happen. To walk through that today, we're going to talk through 4 different components and what's happening in our product world. First, we're going to talk through the headroom for growth in our core categories.
Then we're going to talk through some of the online presence evolution, what's happening from a customer perspective that's causing us to invest our products and build new experiences for customers around the world. Then we're going to talk about progress in our key areas and finally touch on some future opportunities for growth as we think about expanding our product set. So when I think about our current products, I'm delighted with the product portfolio that we have today. It fits well together. We've got components that play a specific role in how we bring our products to market, in particular, the on ramps and the anchors.
We think about folks coming into the portfolio in multiple ways and then joining our portfolio either through the broad set of online presence, helping businesses get online and a nascent category that we'll talk more about later in this presentation into customer communications, get them a business phone number. Then we have a series of add ons that all stack literally across all these components, email, productivity and security. I'll talk through each of those in a little bit more. But the piece that I like about this is, we're looking to make each product by itself win, but I'm not trying to win a feature war. We're trying to start from the view of what the customers are asking us for and then make the products work better together to deliver on that eventual customer outcome.
How much headroom do we have left in our current products? I get that asked question I get that question quite a bit. So when I take products and I map it to core categories out there in the world, we have huge headroom continuing to execute on what we do today. There's about $45,000,000,000 in average annual spend across these three categories. And you can see GoDaddy's current market position relative to that total category spend.
And we are the leader in domains, and we have a little less than a quarter of the revenue. We are incredibly underpenetrated in hosting and presence and business applications. So when I think about where are we going in the future, I want to make sure we win this opportunity as well as think to what we can do on top. So if I start with our most mature business, the one where we can claim leadership and have been the leader for many, many years, domains, what does the future hold? Well, if you look back over the last 5 years, there have been 80,000,000 new domains brought into the world, from 252,000,000 domains in 2012 to 332,000,000 domains in 2017.
80,000,000, GoDaddy won 20,000,000 of those domains. When we look forward and we think about how Internet penetration is going to drive additional demand for domains, so these businesses can get online, we see growth rates again where we're going to get 60,000,000 to 70,000,000 new domains into the world, and we're going to win our fair share. In fact, I think we'll win more than our fair share of those domains as they come online. We're going to do that and we're going to drive revenue faster than the growth rate of the market because we have a couple of really exceptional capabilities inside of our Domains platform and our Domains customer experience. You start with search and find.
And when a customer comes to GoDaddy to look for a domain, they have an idea in mind. What they're trying to do with that idea is find the right name for their business. So we have developed through tens of millions of searches every month an incredible array of proprietary data for what names work and get people to buy versus what names don't work. And so when we think about what are we doing with technology and AI and machine learning, a huge application given the amount of data that we have, the proprietary nature of that data, it's building unique models for different customer life styles and segments and for different customer geographies around the world. Those models are incredibly important to us in getting the right name in front of a customer, so they find a name that's right for their business, their nonprofit, their organization or even for themselves, and then they purchase that name.
We then think about how do we enhance that name. So it's not just about getting a particular domain, whether it's a ccTLD, country code top level domain, a generic top level domain or the old diehards of dotcom, dotnet, dotco and dotorg. It's getting them those right names and then enhancing those names by bringing to them privacy and security and protection of those domains over time. The ability for us to bring to a customer a set of services either as they grow and they want their domains to work as they scale or ensuring that the domains that are incredibly valued to their business, that's their brand, that those brands are protected and that we help them protect that over time. There's more we can do in that space for sure as we look ahead.
Activating the domains in the same way that Mike talked about the importance of using along the journey the assets that we give to the customer. When we see people activate that domain, we see them stay longer, we see them be happier. And we know if we have a chance to activate that domain, we can sell them additional services from GoDaddy. So I think about activation, we're doing that at the initial purchase. We're doing that inside of the customers' everyday interactions with us.
And we're doing that through customer care. We want customer to use the products that we bring to them. Activation is critically important and will continue to be part of our journey going forward. And finally, aftermarket. So when we think about this opportunity that we have to build additional services for customers, either to find a primary name or perhaps to buy a name that's already been sold to someone else, how do we make that a very vibrant, high velocity market?
So let me talk about the concept behind the aftermarket and what we're trying to do here. When we think about demand, tens of millions of searches a month, as those results come up in front of the customer, we can provide a first time domain, a primary domain that's never been sold before and embed right within it secondary market domains. In fact, we're doing that today and we're starting to see that really pay off in helping people find the right name for them. Those results are personalized. We're bringing in our own names and third party names through our Afternic service, so that you've got, as a customer, the broadest set of names possible.
So we've got that demand. They're seeing that. The supply is coming through not only again primary names, but the 75,000,000 names we already have under management here at GoDaddy. Those are assets that we want to be able to have the individuals who own them show up in front of other customers in case maybe there's someone who would be a better owner of that name over time. Maybe I'm not using that name directly today and want to unlock that passive inventory and expand the secondary market.
The key question that we've been wondering for a while is how do we increase the velocity of the market? How do we reduce that friction if someone wants a name, but isn't quite sure if they should buy it? We recently introduced a valuation tool, again, based on machine learning. When we look at all of the transactions that have occurred out there in the secondary market, we can now value a name very, very precisely. That reduces the bid ask spread for customers.
I have a couple of stories recently, we can tell you them at the break of a customer who is interested in a name, wasn't certain why the price was what it was, looked at our valuation tool. The name was very close to what the product had been offered for and it made them comfortable that they should buy. I think we'll see that accelerate the velocity in the aftermarket over time and that will bring more demand and more supply and so on. So again, this is an area where we think there's opportunity to grow faster than the overall market. As we move from domains and how domains are being used today to online presence, really the new paradigm that Scott mentioned earlier is one that's being driven by our customers' need.
So customers in the past were delighted with just having a site that created awareness for them. In today's day and age, the concept of awareness is only one step along the journey to building a full fledged identity, not just my website, but how is my digital presence showing up on mobile devices? How is my digital presence showing up on social networks? How is my digital presence showing up in business listings and in review sites? That broad set of awareness is now what constitutes the expectation of small business owners want to be found everywhere their prospects might be.
We've then seen a change. Again, this is driven by both the individual customers and their own experience in social media, it's not enough to just have a site with limited updates. They're expecting engagement, engagement, again, across multiple platforms, content that is continuously updated. And that content from a small business owner's perspective, like Gerald, as Mike talked about, Gerald from Mirae, they don't have time to build that content for every single platform. How can we help that customer create content once and spread it across multiple platforms on social and the open web.
It also goes beyond just content on websites and interactive content that I'm pushing to you. It could be voice and chat and messaging. So it becomes a whole ecosystem by which the owners of these businesses and nonprofits and local organizations are interacting with customers and prospects over time. And then finally, the funnel. So if you thought about a traditional marketplace and a website, you would have a website and a phone number, please call me, maybe an e mail contact us form.
In today's day and age, we can do so much more and become an incredibly valuable part of how a business acquires customers, brings customers back over time and generates real revenue, real business results, which is what we believe the outcome of online presence should be going forward. So that last piece around commerce, service commerce, appointments, product commerce, product sales. And again, 80% or so of the businesses in the world are service based businesses, so appointments become critical to deliver on this last piece of the value proposition. Okay. So if we think about that as the new definition of online presence, we have to start with how do we get there from a customer's perspective?
What do they need to bring? And what do we need to learn from them to deliver a compelling online presence that works for the business? So first, we need to learn about the customer. What can they tell us? 2nd, we need to take that content and information and spread it across multiple sites, multiple locations on the web, make it work in every form factor that customers might be looking for them.
And then finally, deliver real value. How can we go from just a beautiful site to a beautiful site that works for that business? So what I'm going to do is take you through a demo that I recorded earlier. The website for Bistro Mireille, that is the site that Mike talked about earlier. It's a restaurant in London.
And just to get his context, restaurant in London, new restaurant, Japanese French cuisine and it's a bistro. So I'm on the GoDaddy site. I begin to start for free and I'm co, one of the owners here of Bistro Mire. So I type in Bistro and instantly the site starts to show me different content, different images for bistros. Well, let me look and see.
I'm a French restaurant. So let me see what the French restaurants look like. And I instantly see a change both in the layout of the site, the images of the site and the look and feel of the site to French restaurant. But you know what, I think I'm more of a bistro guy, so I'm going to switch back to bistro. Let me then put up the name, Bistro Mireille, Bistro Mire.
The look and feel that's going to match how I want my site to show up. That's a beautiful typeface. It looks a lot like the menus we just created. And my favorite color for the restaurant is this deep blue. So let me make sure that shows up everywhere on the site without me having to do work.
I'm a restaurant. I want to let folks know that I have specials on Sunday. So I'm going to create a promotional banner across the top of my website. Hey, I've got Sunday lunch specials. I trade out meals in my restaurant with a local professional photographer who takes beautiful pictures of my food.
So I'm going to upload a picture of my steak tartare, which I love, make sure everyone can see that. I get hungry looking at that. Maybe I should go back to the kitchen. And I'm going to make sure my logo, which I also traded some food for, gets uploaded to my site. So I've got my entire brand now, the look, the feel, my logo, the imagery, the pictures, I want that to be my beautiful site.
But that's not enough. I want my site to work for me. So I want to make sure that it shows up on the social networks where people are looking at pictures of food. Well, that's Instagram. That's Facebook.
And I'm going to make sure I get my Facebook page up and running. That's going to be Twitter as people talk about the great meal they had here. And of course, in the restaurant space, I need to make sure I'm connected to my Yelp and Yelp reviews. So now I've got my social presence up and running. And as a restaurant, you can see a few things start there.
Well, I need reservations. How am I going to get reservations? I'm going to add the OpenTable widget. One click, I now have the ability to take reservations online and push promotions directly through OpenTable to bring new customers into my restaurant. I'm a new restaurant.
I need folks to show up. I want that to happen. And of course, as a restauranteur, I want repeat customers. I want to tell people about specials that I have running in the restaurant. So I'm going to create a subscribe widget.
And this subscribe widget is connected directly to e mail marketing. So I'm going to pop open, hey, let's create that first e mail campaign. I've got an event coming up in 2 weeks. It's a wine dinner at the restaurant. I want to make sure that folks know that I've got this a wine dinner and there's an event invitation right there upfront, easy to get started.
And in fact, if you look here, you'll see the same images that I uploaded from my website are available here inside of my email marketing campaign. So I'm going to say, spring wine dinner, pull over the logo, I'm going to pull over the image from that dinner and get people excited to come into my restaurant for that upcoming wine dinner. And you'll notice all this is in the same interface, didn't have to go anywhere, didn't have to log in again, didn't have to copy and paste images. It all just happens. So I'm back on my website.
And I think I'm ready to take a look at the site. I want to see how it looks both on the desktop version. I'm scrolling up and down. It looks beautiful. Yes, that's the image I want.
I've got my menu on this site. I'm very excited by the imagery. Fantastic. And wow, look at that, I can also see directly how it looks on a mobile site. I don't need to go to another screen.
I don't need to go log in and log back out. In fact, I didn't have to do any work at all to make the site look spectacular and be functional on any mobile device. That capability as a business owner just saved me countless amounts of time and makes it sure that when I get ready to hit publish, which I'm going to do in one second, that the site is spectacular and creates visitors and appointments for me no matter what device customers use. And now that I publish, I can attach my domain to it with one click. That was about 4 minutes.
I went from nothing to a spectacular site. I went from nothing to a site plus the ability to have reservations across my social network, an email marketing campaign. And this isn't just for restaurants. We now have this capability across 1,000 of sub verticals. In fact, when customers come to GoDaddy today to build a GoCentral website, 80% of them when they type in the type of business they are get an exact match.
We're using machine learning to make that better every single day. We have specific vertical photos across 1500 different industries. So when I type in that particular industry that I'm in, I get these beautiful vertical photos and all of those recommended widgets like appointment scheduling depending upon my business. Those apps are integrated. There's no marketplace to fuss with.
I immediately go in and I pick out the application that I need best of breed. It's optimized across devices. And then, of course, it's all preconfigured based on who I am. So I'm super excited by what the GoCentral team has done. We've got folks doing demos here.
I'll point them out at the end of this so you can go try it for yourself. If you haven't tried it in the last couple of weeks, and I'll talk about why you should go back every couple of weeks, please do. What you just saw is an incredible leap forward from what we had just a year ago. We launched GoCentral GA in January 2017. Lauren Antonoff, who's sitting here in the front, has been driving that team.
In the back, Antonio, Antonio, you want to wave? Antonio is engineering leader. They have built a team and a system that is averaging 10 significant features per month. We're at a stage now. We're in just this year since we are in March, we've launched significant numbers of new functionality.
I'll point out 2 things here. 1, blogs. So we have been getting tremendous amount of feedback from customers that we were missing the ability to create a blog on GoCentral. That feature gap has now been closed. We're not trying to replace Blogger or other platforms like that.
We're trying to create an easy to use blog that a business owner would want on his or her site. Another industry specific feature we've been getting requests for is MLS type listings as a real estate agent. How do I get my listings on my website? That's now delivered through IDX broker. The team is averaging just a little less than one feature shipped per day and we're pushing a tremendous amount of code.
So the team is at velocity. This product will continue to get better and better and better. As we think to the future, though, it's not just about the product. We had just recently acquired a company called Main Street Hub. For those who aren't familiar with Main Street Hub, they're a do it for me social presence and social media monitoring service.
What excites me about this, and this is using that same company, the same restaurant in London, Bistro Mire, is that they get all of the data from these small business owners and they turn it into what the folks at Man Street Hub affectionately call the brand kit. This brand kit allows us to understand who the customer is, what their goals are, what their brand image is, what their voice is. And then we can use that either in DIY tools all the way through do it for me tools. So we have this fantastic entity bringing with them people who know how to work with do it for me systems at scale the set of technology that we plan on bringing into our products over time. We'll close this transaction in Q2 and then we'll be working towards this road map over the next couple of years.
So to close this section on the online presence, I want to be super clear. So we are the leader in customer centric online presence. GoDaddy has a better product. We have a better platform. You've got better people.
And we have the ability for customers to get real business results from working with us. The apps themselves that I showed are deeply embedded, easy to use and drive customer success. The services that we provide, Mike talked about this. We have the ability to give how do I questions answered for do it yourself customers simply and easily with our awesome customer care. We can do a little bit of work, a do it with me type context, where we might build the site initially and turn it back over to that business owner to run over time.
We can take on do it for me capabilities where we run the entire thing for that customer and we can get you to a web pro should you want to find someone local to build that site for you. Our reach and what you saw here is unique. Our ability to take a customer and show them on both a mobile and a desktop site the same thing, do all of the work they need completely on their mobile device is unique in this space. We also have uniqueness in that by building this online presence with us, you get your content spread everywhere. And then finally, you have a choice of Editor.
You can use our proprietary GoCentral service or you could use the industry leading WordPress product in the open source community. Is that pretty clear? Okay. Happy to take questions on that later in the day. So let me pick up on WordPress for a second.
This may be a well known secret, not about WordPress being an important part of the web and the ecosystem and now over 30% of CMSs in the world, but the fact that GoDaddy actually has millions and millions of WordPress sites running on our infrastructure today. We'd like to get more of that share as we see WordPress continue to grow at the expense of custom HTML and smaller platforms. We are doing massive investments in the product. We're bringing out managed WordPress and making our underlying platform itself be better for WordPress in our unmanaged environments. And we're bringing a set of tools for web pros to make their lives better, simpler and easier for their small businesses too.
Our care team has upped its game in providing WordPress specific support as we brought in some experts to help us build that capability inside of GoDaddy. And then finally, we're building education and programs to help these pros grow their businesses. To give an example of how this works, we acquired a company called ManagedWP a few years ago. ManagedWP has this amazing ability to help dramatically reduce the time it takes for a Web Pro to run their business. Nicole is one of our customers.
She has almost 100 different customers for whom she manages websites. It used to take your 15 minutes per web per WordPress site to update the plug ins, the underlying WordPress container itself and the themes. That was taking her over 20 hours a week. She couldn't build new clients. She couldn't go do new work.
She couldn't prospect. When she started using our Pro Sites product, that now takes her 15 minutes every Monday. So we've just given her 20 hours back of billable hours every week and she can still bill for maintenance for her existing clients, Tremendous productivity enhancer for the Pro marketplace. And we provide these tools for free when you come and sign up for GoDaddy hosting with WordPress. To move from WordPress and online presence and hosting into business applications, the business that I led initially and is led by Iran Alasti, also here in the front row, who's doing a spectacular job for the last year.
That growth rate has been fantastic. We have a long, long road of growth ahead of us. Why? Well, we're only 15% penetrated with paid e mail today into the GoDaddy base. When we sell the products, we're finding incredible activation rates.
So not only are we building a product that people want and we're seeing a nice acceleration in how they're buying and using the product, but the activation rate says they stick. So a few years ago, when we partnered with Microsoft to bring Office 365 to our customer base, it took 48 hours, many, many steps to go from I want domain based e mail to actually be able to use the product. We shrunk that down to less than 90 seconds and really one step once you get a domain. And that's what's led to this activation rate to be holding at this 90% for when we sell domain based email to our customers. So it's super sticky and we have a long way to go.
When I think about how far up is up, I think about this business in a very simple way. Let's acquire more customers. As those customers grow and add employees, let's make sure they add those seats to the GoDaddy platform. And as they think about doing things beyond basic e mail, let's make sure we give them that capability so we help their business and we raise our ARPU. When you add those and multiply those things together, you get growth.
So when I step through those blocks of growth, first, I think about attach. Again, on the last slide, I talked about 15% paid email penetration today. Well, about 90% of small businesses use email for business and roughly 50% of those are using domain based email. So I think we have a ways to go on attach. And when I think about that 50% that are using paid domain based email, many of them, in fact, over 20,000,000 seats of them are being hosted at other email providers across the web.
Now I want to migrate those customers to GoDaddy. So we're going to win on attach. We're going to migrate this customer over customers over to build our base of customers in email and productivity. And what we're seeing is about a third of customers are adding 1 or more seats every year. So we have a built in growth rate.
As we continue to grow our customer base, we see continued growth in seats inside of our own base. As we start from the bottom here, how do we get more ARPU, more capability? Well, one of the things that's really spectacular in one sense from an opportunity world is that we only have 20% of our customers doing anything more than our basic email. So 80% of our current customers are on our entry level tier for email. So as they grow, they need more storage.
As they grow and depending upon their industry, they need additional capability for security and privacy. And those are things that show up in enhanced email. And then finally, productivity apps, not just Office, but as we think about collaboration and communication and running the business tools, we expect to add those over time as well. That's all made possible by the platforms that we've been building over the past couple of years. So I'd love to invite Charles up on the stage.
Charles Irons is our CTO. He spent many years leading both engineering at Yahoo! And at VeriSign. And he's been the architect of the domains, platform and success we've seen to date. And over the past year, he's really helped lift the game across engineering as a whole.
Thank you. Great. Well, to deliver on the road map for our products and as well as our customer experience, we've built an engineering team that can scale. So first, we went out and we brought in a lot of experts from industry, whether it be building search engines, distributed systems, years of experience. And we've got those now inside the company.
This talent is enabled by an agile development methodology that we've migrated to over the past couple of years. And we are now delivering at velocity. And I think Stephen mentioned it, but using GoCentral as an example, delivering 10 times a day, delivering 1,000 features per year, that's a significant amount of output that allows us to deliver against those roadmaps. We're also not afraid of delivering against what I would call the pragmatic leading edge. So I'm going to throw a big word out there, But we're using recurrent neural networks for machine learning to deliver the domain name valuations that you can see over here.
And again, that provides price transparency for our customers, which increases our sales in the aftermarket. And that's something as a technology that is used for self driving cars. It's used for computer vision. So it's not exactly just simple technology to implement. And we've got a bench that's able to deliver that.
Looking forward, I think we're obviously making a big decision today to move to Amazon as a public cloud provider. That gets us global scale relatively quickly and efficiently. We're also going to be integrating a lot of the user experience components across our products to make that a more seamless and navigatable interface. And we're also going to increase the level of quality, especially as we move to the public cloud, but we're doing it in general, just focusing on core metrics, availability, performance, stuff that our customers globally really expect. And ultimately, all of this is underpinned by a platform, commerce and data that allows us to bundle our offerings together and make that a seamless user experience.
I'm going to spend a second here talking about the public cloud decision that we made with Amazon. We obviously don't look at Amazon as just a pure vendor situation. I think Scott highlighted it a bit. If you look at it from a technology perspective, they have the breadth and the depth that we need to get our products out to market faster. And that is by far the largest criteria that we use to make a decision, how can we build better products faster.
We think that they deliver against that. But in addition, they are partnering with us. They're going to be selling our domain names. They're going to be using our search technology. They're going to be using us for many aspects of their domains experience.
And so it's a trade off effectively. We are going to be leveraging them for their infrastructure. They're going to be leveraging us for some of our services. In addition, they're going to be using and selling reselling our Managed WordPress offering as well as Pro Tools. So you heard a little bit about that.
But these are managed services that they don't really want to provide. They're trying to sell single push button install a VM, develop an app on top of it. And we are managing those experiences on top. So I think that's a clear adjacency where we can leverage them and they can leverage us. And so obviously, all of this is important.
And I think as a strategic partner, it complements the existing relationships that we already have with Google and Microsoft. So with that, I'm going to hand it back to Stephen to talk about how this fits into the road map.
Thanks, Charles. Thanks. All right. To wrap up the section, I'm going to take a couple of minutes and talk about where do we go next. So I just talked about the tremendous opportunity we have in our current portfolio.
I'm super excited about that. And I'm excited to think about what else can we do to make customers successful. So we start with the concept of what's the customer asking us to do, what's the customer job to be done. If they're going to buy a service from us, are they going to keep buying that service from us, are they going to fire us if we don't deliver. So we think about this in 3 big chunks.
How do these businesses get started? How do they grow? And how do they thrive? There are a bunch of different sub jobs on this page. The ones in green are ones that we are already in today.
Many of these areas, as I talked a couple of minutes ago, is we'll continue to drive growth and innovation in each of these areas. But all those areas that are in black are areas of opportunity for us. When I think about how we've been running our innovation efforts, how we've been running our decisions on where to expand to next, we start with a couple of very simple criteria. We think about is this an adjacent product or service, meaning can we take data and workflows from our current customers and make their lives easier? Can I connect the current product or service they have today through data or workflow to one of these new products to make it easier and a unique value proposition?
The second one ties to that, but it's slightly different, which is what is the unmet need of the customer today? Can we come up with a way to take what we understand to be the customer's need, look at the alternatives, including non consumption, which is what many of the customers who we are selling to are dealing with and turn that into something where we believe we have a differentiated opportunity to create a new product or service. And that leads to the 3rd piece, which is how do we think we can sell this product. If we can come up with something that's unique and differentiated, it makes the marketing team's job easier, how will we distribute it? Which of our channels will be used?
Is it an on ramp? Is it an attach? Is it an anchor? So we use those three components and then we think about build, buy and partner. Over the past couple of years, we've done all three of those and I'll walk through if you apply that concept to the broader small business ecosystem in which we play, how does it look?
So we think about GoDaddy being at the center of productivity, naming and presence. There are many, many different areas we can go from here that tie directly into what we already do and what we do well. I'll take a few examples of partnerships. So in productivity, when we talk to small business owners, they wanted great domain based email and they wanted the ability to get work done. They wanted Microsoft Office.
So we partnered with Microsoft. When we think about connecting our customers through our e commerce solution to payments, we want to go and find the best payments companies. So we partner with PayPal and Square and Stripe. When we think about bringing our customers who want to get found out to the web, well, we went and worked with Google. So we pushed data out to Google My Business.
When they wanted to get found in social, we pushed data out to Facebook. So we're aware of the landscape within which we play and we look at ways to partner to bring services where we don't think we can bring unique advantage, but we can connect to those products and services. As I look at this broad landscape, I'm excited about where we might go next. The opportunities to use both our balance sheet and our ability to integrate and bring some new capabilities over the next few years into GoDaddy. We're certainly going to be thoughtful about how we do that using those concepts around adjacency, ability to create unique value and the ability to create channels through which we can sell at scale.
So that's a macro view of what we're thinking about. Obviously, lots and lots of opportunity for tuck ins, lots of opportunity to go into new spaces and lots of opportunity to bring you up to speed on what's happening in SmartLine. Let me give you two examples of recent activity that we have done to bring you up to speed on what's happening in SmartLine. So SmartLine came to us through the acquisition of FreedomVoice a little less than 2 years ago. I was actually talking to someone in the audience today and he was saying, yes, I was building a website and I put my phone number out there and a friend asked, how can you put your phone number on your website?
He said, well, I didn't put my phone number out there, I put my SmartLine number out there. And so that's a great example of the value proposition behind SmartLine. The idea that I can have a single phone, physical phone and 2 phone numbers to separate my personal identity from my professional identity. And that phone number can be used not just for voice communications, but text, messaging and MMS. So it's still early.
We're building the capabilities to create great mobile apps. That's a new skill here at GoDaddy. But I'm excited today as much as I was almost 2 years ago when we have made that acquisition. So that's an early seed for future growth and a new on ramp for us. A business that's a bit further along, we built organically and inorganically, which is security.
When we go out and talk to small businesses today, they're aware of the threats that are approaching them, especially when they are running their own hosting environment or they're sending email or they're making purchases and letting others build and buy on their site. They don't have the experts in house to solve that problem. They're turning to companies like GoDaddy to do so. So we've built a nice SSL business that protects the data in transit between a website and a customer coming. And we're seeing trends that say that's going to continue to grow as more and more of the browser.
So you have to have SSL on your site if you want to be seen as trusted by visitors. Then about a year ago, we acquired a company called Sucuri. Securi was a leader in providing security to the WordPress community. It creates both the ability to protect the WordPress website by moving the threat vector off of the site itself out to the edge of the network. They had a web application firewall combined with a CDN that protects the underlying core of the hosting site.
And they had the ability if you had a problem to go in and clean your site and get you back up and running. So it's a very nice blend of technology and people, which is what GoDaddy does very nicely today. So the Sucuri business continues to run as Sucuri, but we brought that in house as GoDaddy website security. And we've done a nice job of bringing that to our hosting customers as another value added service on top of their underlying product that they bought from GoDaddy. And I see these two areas as opportunities for growth over time as we continue to invest both organically and look for opportunities to accelerate both of these areas through partnerships and potential M and A down the road.
So to sum all of this section up, plenty of growth left in our core markets, right, dollars 45,000,000,000 of spend, we have less than 10% of that today. That's exciting. We've got a new way to think about leadership and online presence, this concept of customer centric online presence. We've got platform, people, product and reach that is unmatched by any other competitor or alternative in the market today. All of our businesses are making nice progress and we have the opportunity through build, buy and partner to expand into additional customer needs.
With that, we are at our 1st break. A couple of ideas for what you might do. We've got folks around the room. We've got Greg and Melissa in the corner over there who can demo one scenario around GoCentral. We have Justin on this side who can demo GoCentral.
And we have Dipan who can show you some of the tools around websites and sorry, around valuation and our domains tools. Then we have a few folks, Christine from our customer care team, who runs our CDT, which is our outbound sales organization and August Goldman in the pink shirt complementing my green one. They can take you on a tour of our customer care center. If you haven't been to see the energy and what our team does every day with our customers, I'd encourage you to take that tour and then come back down and see the demos later on in the day. And then finally, if you have not used GoCentral recently, again, literally in the last 2 weeks, you've already missed almost 10 new features.
I encourage you to go try it out. Thank you very much and please be back here at 3:15.
Ladies and gentlemen, our program will begin in 10 minutes. Ladies and gentlemen, please take your seats. Our program is about to begin.
Stage managing, bring it back in. Come on, thanks. Glad everybody's taking advantage of the break, but come on back. Please. Good.
Thank you. All right. As everybody filters in, again, thanks. And hopefully, thinking about Mike's section, which again was how our customers interact with GoDaddy, right? The how and the way where the average customer stays for 7.5 years.
But as you all were taking pictures of the retention curve, remember, we got customers that are staying for a decade plus. How is a new move that can add great value? Stephen, on the what, which are what jobs we can do for our customers and how we do it in an elegant way with a lot of upside. And it's my privilege now to go from how to what to where, which is our go to market work, both geography and how we use marketing. And I'm going to introduce my colleague, Andrew Lowacki.
Andrew has been with the company 3.5 closing in on 4 years. Andrew, along with James Carroll, James raise your hand in the back. So you can think about Andrew and James being a tag team around our international expansion. So when we stand up here in Flipply and kind of take pride in, we went from 2,000,000 customers to 7,000,000 and did it in a totally seamless way. You have Andrew and James to give credit to as the architects of that, both from a go to market and a technology standpoint.
And again, in HEG, Andrew is really the true conductor of how we bring in other businesses around the world and actually create real value with it. And as you think about marketing as a system, both art and science for how we talk to new customers and what a brand stands for and how you build a totally rhythmic system to talk to existing customers. You're going to see and hear from one of the frankly more intelligent, more dexterous, more hardworking people that our colleagues would credit him. And so enjoy Andrew kind of talking about where we're going geographically, how our brand expands and how we can talk to existing customers. Andrew?
Scott, it's great to
be here with all of you today. Thanks for taking the time to be with us. While I don't know many of you in the room, I'm going to go out on a limb and guess that all of you know who this is, right? Yes. All right.
Some nodding heads. All of you know who Danica is because together, over the last 2 decades, GoDaddy has built a brand that's unrivaled in our category. 8 out of 10 people know the GoDaddy name. No one else in our space even comes close. But it's not Danica the race car driver that's the topic of interest today.
It's Danica the entrepreneur Danica the small businesswoman Danica the person with an idea that we're helping make real that I want to call your attention to. After a 2 year hiatus, Danica is back in our U. S. Ads. She's back because she caught the entrepreneurial bug.
She's taking her side hustles, her book, her clothing line, her Vineyard and making them into full time gigs. We're going way beyond a name. GoDaddy is helping make Danica's idea a reality. And the evolution of our relationship with Danica is representative of the evolution our go to market strategy needs to take over the years to come. Our opportunity in the years ahead is to take the amazing customer and product experience that Stephen and Mike showed you earlier today and introduce them, introduce them to the tens of millions of customers in the GoDaddy base and the hundreds of millions of prospects around the world.
So how are we going to do that? We have 3 priorities to drive growth in the years to come. 1st, we're going to continue our international expansion. International has been a core driver of our growth for the last several years, and it's going to continue to be. 2nd, we're going to broaden our brand appeal.
We're going to ensure that our customers give us the permission to help them turn their passions into reality. And third, we're going to build a conversational marketing muscle. It's an engine that's about delivering hyper relevant, hyper contextual conversations, help not sales, to our customers at just the right moment. And yes, with a 10x LTV to CAC that you heard Scott talk about earlier, all three of these are actually about how we go spend more money. So let's dive in.
Over the last 5 years, GoDaddy has gone from a U. S.-centric business to a truly global one. We've gone from 2,000,000 customers to 7. We've quadrupled the size of the business
to an
$800,000,000 run rate. Personally, I've logged more miles than I thought were humanly possible, but it's been a real joy to see how GoDaddy can impact people's lives around the world, from Europe to India to Asia to Australia. At the core of our international success has been the strong organic trajectory that we've got. We have customers in over 100 countries around the world today. In every market where we've leaned in, we've grown significantly faster than the market.
And we've done it in a disciplined way. You heard Scott talk about our unit economics earlier. And when it comes to international expansion, unit economics, LTV to CAC, isn't an abstract concept. We have a set of expectations on LTV to CAC and frankly, a battery of other measures of how we expect a market to evolve as we enter and then scale up our spend. We look at those expectations, and we accelerate or decelerate based on what we see.
Frankly, right now, what we see is we should step on the gas. We've complemented our strong organic trajectory with strategic M and A. Everyone here is familiar with the HGG transaction we did last year. In the blink of an eye, overnight, we accelerated our business in Europe 5 years into the future. We added 1,600,000 customers who can take advantage of the product and technology investments that we're making.
And just as importantly, we added 1,000 employees who are dedicated to making our customers' passion successful. It happened overnight. We did all of that while more than delivering on the financial commitments we made to all of you at the time of the deal. As we look back over 5 years of international growth and expansion at GoDaddy, the most exciting part is the best is yet to come. Looking ahead, there are more than 500,000,000 independent ventures around the world.
90% of them are outside the United States. So how are we going to go introduce the customer experiences and the products to those 100 of millions of people? First, we're going to keep running the playbook that we've run repeatedly and successfully in markets around the world. That playbook has 3 parts. It starts by making sure our product experience is dialed in for the market.
We leveraged the localization product experience so that it's just right for customers in a given market. And we've done that in 50 markets around the world today. And then we make sure the customer experience, specifically customer care, which is that special secret sauce that GoDaddy has, is just right for people and markets around the world. We've got over 2,000 people working on customer care for our customers outside the United States today. And third, we light up the marketing engine.
And that marketing engine begins with digital marketing. Why digital? Because it's easy to test and learn. The investment size are bite sized. We can iterate.
We can see how different target segments are performing. We can test our funnels. We can see where it works, where it doesn't. Oftentimes, we find we got to go back and do a little bit more work on the experience. But once we see that those funnels working and the performance behind our marketing is there, we light up the brand.
And when we go to market and we lean in on the brand, you really get to see GoDaddy go. At the end of 2017, our footprint looked like this. We're excited about this footprint because it gives us the ability to attack the large market that exists across EMEA today, but also to capitalize on the secular growth trends in APAC and Latin America, where increasing Internet penetration more. Beyond the organic opportunity, we continue to believe there's significant opportunity for strategic M and A to accelerate our growth. We have a long list of targets.
No, I'm not going to tell you who they are. And yes, they are at reasonable valuations. It's enough to keep us busy for a while because they're in every geography around the world. And we're excited. They mostly are smaller than HEG, but there's a few bigger names in there as well.
To capitalize on both the organic and inorganic opportunities in front of us, we're scaling up our regional teams Because if we're going to do something, we're going to do it exceptionally well. The governor on our growth is not financial capacity. It's operational. HEG was an eye opener for us. When we acquired HEG last April, we had 6 people on the ground in EMEA driving go to market.
6. When we added 1,000 people across marketing, care, product, operations, M and A, and we applied them to the GoDaddy footprint across Europe, we saw growth accelerate, and we're excited about that. So we're scaling up our investment in our teams in both EMEA and APAC so that we can go after the opportunity in front of us, so that we can go spend more money. As we've scaled around the world, we've proven that brand building is a core capability of GoDaddy's. The chart on the left hand side of this slide is a new data point for all of you.
It's our unaided awareness in markets around the world. You can see the U. S. It's the line at an industry leading level in hot pink. Hot pink.
You can also see a series of other markets around the world. In some of the markets we've been in for longer, we now have higher awareness than we do even here in the U. S. In some of the markets we've entered more recently, we're seeing that same trajectory, and we're seeing it on an accelerated basis. GoDaddy's brand awareness that's so strong here in the U.
S. Isn't a fluke. It's not an accident. There's a repeatable set of brand constructs that we're leveraging around the world, from Danica to Norman Powell on the piano, a Toronto Raptor in Canada, to Ray Meager and his flaming hot sauce in Australia. If you didn't get a chance during the break, at the end of the day, I'd encourage you to go back to the brand booth at the back, check out the commercials we're running.
You can take a look at our brand book, which is how we present ourselves to the market. Over the last 5 years, we've spent nearly $1,000,000,000 building an unrivaled level of awareness in the GoDaddy name. However, name awareness is just the beginning. While 8 out of 10 people in the U. S.
Know our name, only a third of those people know the breadth and scope of what GoDaddy can do for them. Ultimately, just name awareness isn't enough. We need people to understand the purpose and passion that we at GoDaddy have, relentless advocates for them to stand on their own, that we are the Internet's most relentless guide to helping make their idea real and that we will go to the end of the earth to help our customers' success. As people realize that this is our passion, they're going to set their default for everything they need to start, grow and run to GoDaddy. We know this because our best customers do this today.
The 1,000,000 people that Mike mentioned earlier who spend more than $500 a year with us have set their default to GoDaddy. So this isn't something about something new. This is about amplifying something we do already. How do we amplify? It starts by being explicit that a brand is not a TV commercial.
Jeff Bezos has a great quote: A brand is what people say about you when you're not in a room. When you think about a brand through that lens, it drives your culture. It's why the work Mike and Steven are doing is so critical to the expansion of our brand. It's why all the employees that you'll you come across today here in Tempe are stewards of our brand. It's why every decision we make, good or bad, is a reflection of our brand.
Does that hold us to a higher standard? Yes, it does. It's that Wow Me score that Mike talked about. It's above and beyond. But that authenticity, the passion we have for our customers' success is fundamentally what we want to go share with the world because our customers and our prospective customers will see through us if we don't.
Now how do we tell that story? How do we share that passion? GoDaddy historically has been a big TV advertiser. We've used traditional media extremely effectively. We'll continue to do so.
We get great returns on our ad spend, we know. However, TV is a one way medium. Us to everyone else, not a great recipe to really engage with a brand or a business. And so we're adding new methods to go engage with our customers and future customers, things like verticals on the far left. Gerald and Co, that Stephen and Mike mentioned, they're restauranteurs before they're small business people.
That's their passion. We're engaging with influencers like Andrea Anne, a French Canadian influencer who has about 100,000 followers. She's got a bunch of side gigs, and she's publishing a series of video vignettes. When she tells her story, she's really telling our story. And finally, we're going to engage in social and online video platforms, which is where people are spending time today.
And they provide a foundation to actually engage more deeply and richly with a brand because that's the unifying element of all three of these examples. They're not shout casting. They're opportunities to engage with us. And as we evolve our brand, as our customers give us permission to help turn their passion into a reality, our opportunity building up more capacity to introduce our 17,000,000 customers around the world to our ever broader product portfolio. How do we do that?
Fundamentally, we want to take the sales motion that we've honed in customer care where it's about helping, not about selling. And we want to apply that everywhere our customers are. So what does conversational marketing actually look like? Well, shockingly, conversational marketing starts with having conversation starters. What's a conversation starter?
Up on the screen is an example. We saw when we looked within our customer base, there were a set of people who had published a site, who was active, but the traffic to that site was low, And we had signal that they were interested in growth. So we put together a blog post,
just a blog post.
We looked at the conversion metrics. We saw made sure it was working. And we put it out there. That's a conversation starter. Get more traffic.
This isn't a hard pitch on our products. It's not a hard sell. If you go through and you read it, there's a series of things. Most of them don't involve products that we sell. But we knew that this mattered to people.
We knew because we have a data advantage, and our scale gives us that advantage, and no one else in our space can have that same ability. 17,000,000 customers, 75,000,000 domains under management, 1,700,000 care interactions a month. That's fodder for us to create hundreds of conversation starters. And we have a long list. This is just one.
Once we have that conversation starter, we want to go bring it to where people are because we knew with that audience that we found for our Get Traffic we The 3.5x per year that Mike mentioned, these customers were lower than that. They weren't going to find us. We had to find them. So we found them. We matched them across a range of platforms, found 1,000,000 of them, and we put some spend behind it.
And what happened when we helped versus sold? We got a pretty decent return if you consider 15 times LTV to CAC a decent return. So why don't we do more? A reasonable question. The short version is, it's really, really hard to measure incremental marginal returns on spend against your existing customers.
You have to know predicted behavior beforehand. You have to understand how the treatment changes that. You have to be able to do it at scale across multiple platforms. It's not easy. We've made enormous investments in analytics to be able to do that kind of analysis.
And what it's letting us do is spend more money. And yes, at the end of the day, we do want to spend more money. We want 100, if not 1,000 of these campaigns running. And we will, for the record, take much less than a 15x LTV CAC. The ability to simultaneously hold 100, if not 1,000, of conversations with millions of customers around the world isn't just a marketing problem.
It's a technology and operations one. And that's why James is such an important guy. And if you haven't spent time with him, please do. James and his team are building a platform that's unlike anything else in our industry. Our customer centric customer marketing platform puts the customer right in the middle of everything we do.
Increasingly, it lets us deliver a consistent message at every touch point that a customer interacts with, whether it's a paid channel, an earned channel, an owned channel, it's all overlaid with analytics and experimentation so that we're able to deliver just that right message at just the right time where we can help, not sell. This isn't just some future state vision. We're actually using the foundations of this platform to run our business today. And in the years to come, we're going to continue to evolve it, and there's feature releases quarter after quarter after quarter. But as we've started to consume this new platform, what we realized was we needed to change the way we worked.
When you want to run 100, if not 1,000, of little conversational campaigns, it doesn't work if you got to go from one function to another function to another So over the last 6 months, we've restructured the way our marketing, product, tech and operations teams work. We've created small cross functional pods that have a very clear mandate, a clear remit and can run-in a pretty decentralized way to go put these conversations into the market. It's pretty exciting because velocity is the currency of conversational marketing. Any one of these campaigns alone is not worth that much. But the aggregate of them is worth an awful lot.
And so the speed with which we can execute is actually critical. And the early returns on the restructure that we've done are great. We've seen our execution velocity increase by as much as 20 times. So we're excited. And we believe that this conversational marketing approach is going to be one of the core ways that we go spend more money in the years to come.
Now that level of complexity may seem daunting, but it's also the reason you need to have a disciplined operating system in place. These two charts are an example of what that looks like. You can see screen grabs. The first one is our intraday web sales report, minute by minute, hour by hour. And the second one in the back shows our return on ad spend cohort by cohort by cohort.
Now as a caveat, these are for an unnamed market a long, long time ago. I promise you it is impossible to extrapolate anything from these charts. Legal still asked me to blur them out. But what's not blurred out is my name, because these are live reports in our production analytics environment where any business leader across the organization can go and see how their business is performing for just their grain of the business. This is the lingua franca that lets us tell and understand how our business is performing, whether we're winning day by day, each week, each quarter, in each of the products that we offer, in each of the markets around the world, on each of the touch points that we engage our customers with.
This is how we know. It's the foundation of the disciplined operating system that Scott referenced at the beginning. Now in my past life, I used to go help companies build systems like this. When I got to GoDaddy about 6 years ago for the first time, I'd say the company had in place a system that was more rigorous than 80% of the businesses out there. It's part of what drew me in.
This stuff is fun if you're a numbers geek, which I am. However, today, I'd say we're in the top percentile of companies our size. The only people who are better at this are an order of magnitude larger. And we're aspiring to be like them because at GoDaddy, we view execution as a strategy. So to close, our TAM.
Scott shared it with you. Our growth formula is pretty simple when you break it down: more customers, more ARPU. We've talked about 3 different things: International expansion and the brand evolution are going to help us grow against this very, very, very large number of potential customers out there. And our brand evolution and the conversational marketing motion that we talked about is about driving ARPU. And we're excited because we're seeing early wins today.
These aren't new things that we are untested in our theories. These are things we're actually doing that we're looking to scale up and put more dollars and more investment behind. And to tell you what that turns into from a numeric perspective, am going to turn it over to Ray, who can walk you through how the numbers all come together. Thanks.
Good afternoon. So I'm sure there's at least one person out there who's going, oh, thank God, there's finally some numbers coming up, and all these pretty graphics and logos. I appreciate it, Andrew, for coming up, but you can all put your phones down. You don't have to take pictures of these slides. We're actually going to post them up momentarily, so you'll have them afterwards.
I see everybody trying to capture this stuff all throughout the day. So I thought I'd let you know that before we get started. So I know you've been sitting in a chair for hours watching presentations, we're almost home. I'm going to close out the day on the prepared remarks, go a little bit through the leverage and scale in the operating model, touch on the public cloud and how we're thinking about that, GoDaddy's tax structure, which I'm sure a lot of people are keenly interested in, and then finish up with the capital structure and then how we think about capital allocation given the cash we're throwing off. So we've had balanced growth in customers and ARPU over the last 5 years.
This led to 20% annual growth rates in revenue more than doubling it over that 5 year period and more than tripling unlevered free cash flow. In 2017, we grew revenue nearly $400,000,000 more than the total revenue for a lot of the competitors in what's a very fragmented space. Executing this strategy over the last 5 years has led to remarkably consistent growth at scale. But we're not done yet. The opportunity is vast for us.
You've heard this over and over today, 17,000,000 customers when the addressable market is over $500,000,000 $160 a year in spend when the opportunity is 1,000. We are well positioned to win in this market and we're excited about it. You've heard about our competitive advantages all day long. When you think about it from a financial perspective, it's about scale and unit economics. Andrew and Scott have stolen the thunder all day on those.
We'll get to them again in a minute. So 90% of our revenue in any given year is coming from the base. As Andrew was just showing you, we track our cohorts on a monthly basis by market. We've got data going back 20 years, so we know how they behave. And they behave very consistently.
That's how you're getting this. Our customer churn rate on annual basis is 15%, but the revenue still comes in because what we found is that when you stick with us, you spend more. You're either buying new products or you're upgrading your existing ones. But all the more, it is a very consistent performance. And I've illustrated that on this graph as you can look.
This is going back with single year cohorts to back to 2013. Now here's your punch line. 17,000,000 customers at the end of 2017 are going to generate annualized revenue of $2,400,000,000 That's roughly $12,000,000,000 over the next 5 years. And not coincidentally, it is less than what our current market cap is. Unit economics.
Scott talked about this a little earlier. Andrew I'm not going to drain the slide, but these unit economics are exceptional. Even more so when you think about the target market that we serve, it's really hard to get to at these type of economics. But even more so when you think about the fact we've doubled this business over the last 5 years and we've launched into dozens of international markets. Those are unheard of being able to balance that kind of 10x ratio and sustain it over that period of time with this type of customer base.
So what makes GoDaddy special? So great unit economics translate into growth at scale. So as we've grown around the world, added new products to the portfolio and solution, we've gained operating scale over time. You can see back in 2013, our gross margins were in the high 50s. In 2017, they were 65% as we've migrated more and more to higher margin based higher margin applications based revenue streams.
We've invested significantly in both product innovation and platform. You heard James, you heard Andrew talking about how much we've invested over the last 5 years in that. And we've gained scale and infrastructure at the same time. So we've proven that we can invest for future growth while at the same time deliver margin accretion. And within that construct, guys, we're managing the business to optimize that balance.
Scott said it early on, we run it for the long term and we are really balanced when we think about things. Same thing here. We run this based off of a metric that's the combined top line revenue growth plus the unlevered free cash flow margin. So for 2017, that metric was 34%, roughly 12% organic growth on the top line and a 22% unlevered free cash flow margin. We're going to push that number up into the right over time, but we're going to do it in a balanced way.
It's not going to be linear. When we're pushing the gas for revenue, we're going to have that going, but we're always going to be mindful of delivering on the margin accretion. A sight to behold for a CFO or an investor. This is a great chart. This is my money chart, literally and figuratively.
The top line is being grown pushed by net base I showed you plus new cohorts combined with the operating leverage that I just showed you for over the last 5 years has led to exceptional unlevered free cash flow growth. Since we've gone public, we've got a 34% CAGR in unlevered free cash flow. We ended 2017 with nearly $500,000,000 and a lever for free cash flow. That quantum of cash really changes the equation when you start thinking about our balance sheet and how we can use that as a lever for growth. So Scott mentioned how thrilled we are about the new relationship we announced this morning with AWS, not only from the cloud deal, but this is not a vendor relationship.
This is a new partnership. And Charles articulated why it's good for us, particularly on the engineering side, velocity, performance and getting market products to market quicker. From a financial standpoint, infrastructure has been and will be a point of leverage for us. I said it to a few people at lunch today, I'd be thrilled if we were able to get the same type of leverage in our infrastructure going forward as we have looking back. Obviously, I want it to be better than that, but that's not what this deal was all about.
Generically speaking, when you are doing a transition to the cloud, you're going to see a cost bubble. That's because you're running on 2 environments for a period of time. What we're going to use our time for as we're transitioning is optimizing our existing product set. And for the new products, they're going to be built from the ground up for cloud readiness. And then what you'll see then is a gradual increase in the amount of workload that's going from our data centers onto the AWS web.
Some of these services will go quickly because they're lighter workloads. Some are heavier workloads that are going to take longer. So what we're looking at is a 5 to 7 years to completely, move through this transition. And what we're going to do in that period of time is align all of our co location exit dates. We're going to optimize on our data center consolidations.
We'll go through and rationalize our on premise support models. And lastly, and I hope you want the CFO saying this, right, we're going to maximize the embedded base of assets. We're not going to do anything crazy from a financial standpoint to get into the cloud. We've got a lot of assets around the world that are supporting hosting products. And until that makes sense to move in there, whether it's a new product generation that comes out or whether the economics work, we'll continue to run those in our data centers.
We've got a great track record for performance. If you look at how disciplined we've been from an investment standpoint over time, that should give you some comfort. And the way we're looking at moving to the cloud is just like any other significant investment we've made over the last 5 years. We're going to manage that within all of our expenses. So we're going to balance, right, back to that word, right?
We manage this business through balance. The cash flow guidance we gave you for 2018 and the one I'll give you a little later on our forward trajectory includes the incremental cost from transitioning to the cloud. We will manage that and we will still grow our unlevered free cash flow. Look back at the history of the way we've done it before, we're going to do it again because this is all just part of managing the business. Moving on to taxes.
Who understands our structure? Show of hands. Christie back there. I'm not even going to raise mine. Just kidding.
So GoDaddy is structured as an upsea. And what that really means is that the historical GoDaddy operating company is a partnership that sits downstream from the public company with GDGY. So from a that gives us a lot of unique tax structure and tax benefits for us and for our shareholders. When you think about what that means from a practical standpoint, when a pre IPO holder sells, they have to convert their partnership units because that's where their ownership is into A Shares, then they can sell them in the public market. When that transaction takes place, it creates a tax basis step up for tax purposes.
That step up in basis that you get, we can then amortize that over roughly 15 years and it's going to lower our taxable income over that period of time. Simple as that. So this is a very tax advantaged structure for GoDaddy. With the Up C agreement, we also entered into what's called a tax receivable agreement. You'll hear it called TRA a lot.
What the TRA does is requires us to share some of those savings I was just talking about with those pre IPO holders. Net net, what else this means, guys, is that from a cash flow perspective, the checks that we'll write over time for our tax related payments that you'll see on the right side of the slide are going to be lower than they would have been if we were a C Corp. Makes sense? Separately, on tax reform. The largest piece of the tax legislation that came through for GoDaddy was the lowering of the corporate tax rate.
Bringing that rate down to 21% is going to lower our tax liability as well as the payments that we expect to make over the future years with respect to the Up C and the TRA payment. So again, in a nutshell, it's going to be good for us, not as good as it might have been if we were a C Corp, but it's because our rate was already lower. If you really want to get deep on this stuff, we're going to put some appendix slides to this presentation. So that'll be up on our IR website after today's meetings. And Marta and Christy will be glad to answer questions as well.
So again, we know this is complex. So if you've got questions and you're curious, feel free to reach out to us. Promise, last slide on TRA. But we do get this question a lot, so I wanted to put it out here. A common question is, hey, when those guys do a secondary and sell, how does that affect the TRA liability?
And the punch line, guys, is when they sell, so like I told you a while ago with the partnership unit conversions, when they sell, TRA liability goes up. It's only when we realize those tax savings over time over that 15 year period that you actually start making TRA payments. And that doesn't matter if you own shares or not at that time. That's a permanent asset on their side, liability on our side. Based off our current projections of taxable income, we don't expect to make any TRA payments until at least 2021.
Okay. So we intend to generate a lot of cash over the next 3 years. And so I want to talk to you a little bit about what we've done, what we plan to do from a capital allocation perspective. And let me start with just a little bit of a historical perspective. The build by partner framework has worked incredibly well for this company over time.
When you look at how we've grown the business, we've built core capabilities. GoCentral, you've seen it sitting in the demos. We've made strategic acquisitions like the recently announced Main Street Hub. And we've partnered to bring world class products to our customer base. Think O365.
It's worked really well for us. Over the last 5 years, we've invested over $1,700,000,000 into organic growth. We've put shoulder against product innovation as well as infrastructure platform and expanding around the world. We've hired thousands of energy engineers over that period of time to put up against these applications and make them work better. And we've also completed a series of acquisitions And they've mostly been smaller product tuck ins as we built the muscle that would enable us to integrate larger businesses.
And we did our largest acquisition today, HEG, about a year ago now. As Andrew noted, we learned a lot from that. And we've got the capacity now to do more. I think the way I'd finish up this slide for you is we've been very disciplined over time in the sequencing and the fit and the valuation for these acquisitions. You should expect us to be disciplined in the future as we apply this excess cash flow.
A little bit about our capital structure. Given the consistency of the cash flow in this model, it lends itself to being able to carry some leverage. Our target leverage over time is a 2x to 4x on a trailing 12 basis. We've been at both ends of that spectrum, but we've proven we can delever quickly. We went from 4 turns to 3 turns over 9 months last year after the HEG acquisition.
Our term loans provide us a flexible source of capital at an attractive rate and we've locked in that rate on almost half of that debt to insulate us from increasing interest rates over time. And then lastly, you can see we ended the year with almost $600,000,000 in cash and investments on the balance sheet. You can expect us to continue to build cash there to maintain the flexibility to take advantage of opportunities as they arise. Or said a different way, if you look at the maturity profile and the attractive rates, we're going to leave those term loans outstanding for the foreseeable future. Okay, let me put some numbers to the cash generative nature of this business.
Over the next 3 years, we can generate more than $2,000,000,000 in unlevered free cash flow. You heard Andrew talk about the capabilities that we've built that is going to allow us to execute acquisitions outside of the U. S. You heard Stephen talk about the opportunities we've got from filling out the product portfolio. If you look to the right side of that slide, over the next 3 years, we'll have sufficient capacity from a financial standpoint to continue to do product tuck ins where it sense, consolidate within a very fragmented market around the world and do transformative M and A.
So our first priority is going to be strategic growth, whether that's organic or inorganic. Our second priority is going to be share repurchases. Last year, we bought back $275,000,000 in shares alongside a secondary where we were able to eliminate overhang without affecting the public float. We can also use share repurchases to offset the impact of dilution from employee equity issuances, which are running net 2% a year today. I think your takeaway on this slide is the fact that beyond scale and unit economics as being our competitive advantages, our ever growing balance sheet is really turning into one of our key competitive advantages in this market.
So to our multiyear trajectory. In 2017, we posted revenue growth of 21%. Organically, that was about 12%. Our guide in 2018 is for 16% at the midpoint and that's north of 12% on an organic basis. We're confident we can continue to deliver double digit growth on the top line and faster growth in unlevered free cash flow.
The 2 primary drivers of revenue, both customers and ARPU, we expect those to be balanced over time just like they have been, growing in that mid single digits range. And on product lines, we continue to look at it based off of a multiple customer growth as you can see on the slide. And then finally, when I look at what we think we can do on unlevered free cash flow margins over the long term, we think this business is capable of 30%. So hopefully, you enjoyed today the day today, kind of got a some insights into how we think about the business, how we run the business, some of the opportunities that we see, and the opportunities are huge. When we think about the size of the addressable market, we think about our competitive advantages, we think about the team that's been proven and executes and we think about our ever expanding balance sheet, We're excited about where this strategy that you're seeing on here will take us over the next 5 years.
And it's what gives us confidence in delivering those numbers we just put up. So with that, I think we're going to break to Q and A. Thank you.
Yes, sure, I guess. All right. What was, I guess, nice throughout the day is, boy, there were a lot of questions being fired at the whole GoDaddy team. But give people a shot to ask things in a public forum and we'll both, from a presenter standpoint talk about them and made kind of syndicate it out to the group here too. So what do you got?
Mark? Thank you.
That margin or that revenue growth and
tweak it up at all?
Is it material for you on the revenue side?
Mark, I wouldn't think about from the perspective of Sorry, Mark's asking about the revenue guides, trajectory for multiyear and unlevered free cash flow, whether the partnership, the more strategic nature of it, where we're distributing our products through Amazon affects that guide. I would think about that in context of shorter term, no, this is not going to be something that's going to massively scale in a short period of time. Over the longer term, we're really excited about that new partnership and what it can do for these products and actually getting in front of new customers through that distribution channel. I'm just Scott, if you'd add anything? No.
I was going
to say we've got a couple of different components in there. And maybe Charles can talk about the domains element. But the pieces that are speculative but exciting are our ability to take things like GoCentral, put it in front of marketplace customers, right? Lots of small businesses sell at Amazon. So we'd like to see, hey, did those folks need an online presence?
We're excited about taking the Managed WordPress capabilities and put it into some of their other distribution points like, again, Lightsail and Marketplace. Then the Domains piece, we do that already for a couple of bigger players. So I don't know, Charles, you obviously know that space really well. Yes.
I mean, certainly, we already do Domains for Azure. We do it for Office 365. We're going to be doing it for Amazon as well. We actually do it for G Suite today. So I mean that's all kind of core capabilities that we have to bring to bear.
I have a 7 part question. Andrew, just on international. I think last quarter you mentioned it was growing low double digits, but the core organic business is low double digits. So I think many investors are asking when is international going to effectively come online the stronger way and growing from a smaller base should be growing a lot faster. So what are the inhibitors right now that are in your way that you can clear out over the next year?
And I had a quick follow-up for Scott.
Sure. So I think the first thing I'd point out is our international business is at scale, right? It's an $800,000,000 run rate business today, and we have been growing it. I think some of the numbers in the Q4, there was a little bit of noise there where some of the business shifted back and forth between the
U. S. And our
international business, specifically in the aftermarket. And so I think the growth rate there that you saw was in the mid teens relative to a high teens level on a more normalized basis. And so we feel good about the growth predictable and consistent growth rate we're seeking to deliver in a super disciplined way.
Yes, those were mainly tough comps. And to Andrew's point, for 6, 7 solid quarters, taking that noise out, it's mid teens. And on that size base, we've been very happy with that growth rate.
All right.
What do you got for me?
And just as it relates to a follow-up on Mark's question on Amazon, I mean, this is a little different where it's not necessarily white labeling you. You're going to get some branding by Amazon. So can you just talk through the go to market and what you think that looks like?
Well, Stephen articulated which products of GoDaddy's are going to get incorporated into different parts of the Amazon ecosystem, whether it's light sale or marketplace, and that will carry a GoDaddy brand in some form. And I'd encourage everybody to think about Amazon. Somebody said, hey, what is that as a channel? How big? Like, think about what you heard today around engaging with our customers, broader suite of portfolio, kind of where and how we're operating in the world.
And those are sort of big, meaty quantums of opportunity for us. I'd look at Amazon and really for where we are now and what we're going to do as going faster, better, stronger around the world. And as a proof point of product quality and engagement in our broader ecosystem. Almost that first trend that I started with around presence being a connector across different areas, maybe take it as a nice proof point that our experiences at applications are valued in the world beyond GoDaddy and as a real connector into other ecosystems, of which the largest one in the world happens to be Amazon.
Great. Thanks for taking the questions. I guess the first was just on Main Street Hub. So I think a lot of people, when they looked at that acquisition, something that stuck out to them was the high price point product, whereas GoDaddy typically kind of has a very competitive price point. Can you just talk about your intent going forward about the structure of that company?
If you think there are ways to bring down that price point and really what your target demographic looks like there? And then the second question was with the transition over to AWS, when you think about your engineering resources, how much of that today is really dedicated to infrastructure? And how much do you want that to shift over to kind of product deployment roles?
In the Main Street? Sure.
I was looking for Lauren.
She actually just stepped out.
I was talking to her
in the background talking to the Main Street team. So Okay. Good. I pulled
her in. So Lauren Antonoff, who heads up our presence in Commerce Business, is the main driver of that, but I'll step in and answer on her behalf. So there are customers who buy a do it for me service and pay price points in the range that Main Street Hub is currently selling. We think that, that's a good business. We also think that we can take the capability that they have and provide a little more technology and a little less people and bring a much more efficient distribution channel to bear.
So Main Street Hub, primarily today for a distribution channel, is doing outbound cold calling to small businesses. So when you have that as your core customer acquisition channel, you have to charge a high price point just to justify your cost structure. So we have, as we've mentioned, I think, 10,000 times today, we have a lot of customers. And within that customer base, we have people that we think are very targeted for the types of people the types of businesses who want local service commerce or sorry, local service media local service social media. I say that quickly several times.
They want social media for the local business, and we can bring that to a couple of 1,000,000 of our customers here in U. S. So again, to summarize that very lengthy answer, at a high price point, a lot of people are willing to pay that. We think that we can bring it down because we have a more efficient distribution system. And as we bring our people and technology mix together, we'll probably be able to chunk that up into pieces and get it to more folks.
So on the infrastructure question, obviously, the number of folks that we have running our infrastructure is smaller than what we have building our products. It's going to be a taper across a number of years. I think one interesting facet is that we can move about 80% of our products by moving about 20% of our infrastructure, like with the workload itself. So I think that that's a good place to be. I think the remainder of the 80% of the workload, we can move kind of as when the financial scenario makes sense.
I mean, when the bathtub curve and availability of that hardware starts to get hit, we'll move it. Until then, we'll take advantage of that asset.
Yes. And just let me layer one thing on top of the first part of that question, right, just think about how the world's operated between a whole bunch of DIY software products and then this long, long list of, call it, service providers that charge 100 of dollars a month for discrete services. But I think the marketplace, like the actual market just in the United States for that activity is somewhere between $10,000,000,000 $20,000,000,000 And though the amount of that spend indicates a big need in the market, those services are lousy, right? They really are. Like and I realize that that's a super aggressive statement, and I'll stand behind it.
Part of what we're doing and what Stephen was articulating is a way to productize workflow and add it around technology that adds real value. So the themes that you're hearing about today, and I think Main Street Hub is a big one, which is we're not doing the same stuff in small incremental ways. The belief behind it is that we can productize workflow and deliver a whole bunch of capability in the marketplace at a lower price point, better quality and a good business to us. And so that's going to take some work, but that's what we're after with it. Yes.
Thanks. Yes, Ron?
Great. Thanks. I just wanted to ask I think I saw earlier in the slides about 1,000,000 customers are paying about $500 in ARPU. Andrew, I don't know if that's 1,000,000 that you talked about with the 15x CAC. But can you give us some insight on who are those 1,000,000?
Is that possible for all 17,000,000 getting to that? Or is it special larger businesses or something that really want to spend that or can spend that?
Yes. So a couple of pieces to that. We have 1,000,000 customers who spend more than $500 a year with us today. Those are our best customers. Those are the people who have chosen to just go to GoDaddy for everything they need to start grow and have their venture thrive online.
They've said that to us. It's like Jimmy Fallon talking to Mitt Romney on TV and saying, Just go to GoDaddy, right? That's what those people have done. That's different than the 1,000,000 who I was talking about with this conversational marketing campaign, actually quite different. Million, that was a group of people who weren't as likely as the average to come visit our site.
They were actually less likely to come engage with us. And so our ability through this conversational marketing engine and this muscle is actually about going and finding those people where they are and delivering the message, hey, you have an idea, we can help. And so it was actually a different group. But at its core, conversational marketing is really about ARPU, right? It's about our ability to use our data advantage, to look into our base, find ways that we can help.
Wait a second. You're running a Magento site on a host somewhere else. You don't have SSL installed. You're exposing all your customers' PKI. Would you like us to help?
Right? Who's saying no? Right? Those sorts of conversations are the types of things we want to go engage people with so that we can drive ARPU into the future.
And one just add on to your 1,000,000 customers who spend $500 or more. There are millions of customers who spend $100 a year with the exact same characteristics for what they do online as those who spend $500 So back to the opportunity for us, it's not like those customers have different characteristics that make them different. It actually is all white space. If we kind of had our product portfolio and engagement system that we have today and we're able to just snap our fingers and have every single one of our 17,000,000 customers come here. And if we could get 20 minutes with us, we're probably doubling the size of the business in that 20 minutes.
Now marketing wise, we could take a
Yes. I wanted to actually follow-up with Andrew on the conversational marketing. Can you and some of the just new digital marketing you're doing, how meaningful can this be in your marketing mix? Is this something and is it something you're doing just within the base or are you also using conversational approach to bring in new in new subscribers? And what are the unit economics
of these folks look like?
Yes. Look, so we think it has the potential to be meaningful. That's why both myself and James are spending so much of our time and energy putting in place the operating mechanisms, the technology, the platform, the analytics that you need to actually go do this at scale around the world. And we think when we look at aspirational companies, Netflix, Bookings, These are companies that do this extraordinarily well. And so we think it has the potential to be really, really meaningful.
Now, boy, what was the second part of that question?
Just if you can give us share how you think of the unit economics of this stuff versus what you've done in the past. Is it more just a new channel with good economics or better economics? Any color would
be great. Yes. So I think what's interesting is these are actually initially engagements into our base,
right?
Because the reality is if we can't take one of these conversations and have a really good, really conversation with our customer base, our probability that we're going to be able to do it with someone that's not our customer, that we have a less of a data advantage with is much lower, right? So it starts out with our customer base, and we're looking at the return and the unit economics, in that case, truly at a basket level, right, because we already have a customer, and so we're evaluating it through a different lens. Do we think that over time, we're going to be able to say, wait, this is a material conversation, and we can go find those people who may not be customers? Absolutely. But again, that's going to be a journey because the technology, the data, the analytics of this is hard, and it's why we have a lot of people working on it.
Just maybe to follow on the thought around acquiring new customers in the same way. When you think about, again, if you start with an idea and if we can uncover, even before you become a customer, if we can uncover signal about your intent with your venture, right, what vertical are you in? Are you just starting out? Or are you already 20 years deep in running your venture, but you're just starting to come online? Those are signals and data points where over time we'll be able to start then targeting conversations, right?
Whether it's very specific Google Ads dropping a specific landing page with specific messaging into a specific flow, right, where we're uncovering intent along the way, that's the promise, right, like in the future.
Deepak?
Yes. In one of the slides that Steven had, you showed what are the different areas from a product standpoint that can be attacked. Is there a framework that you use to kind of rank and prioritize what opportunities are next? What should we expect in the near term on that road map?
Yes. So
I think I'd articulated this, but I'll try again and see if this answers the question. So we start with what's adjacent to what we're doing today. So can we create value by connecting data and workflow from an existing product to one of the adjacent products? 2nd, is there a customer need that's unmet today? So can we think of a value proposition that's different and better from what already exists in the market or non consumption?
In many of these cases, we're looking at customers who don't currently use an application or a service today in many of these areas. And then 3rd, can we find a way to sell it? Do we think we can find a way to generate demand? So those are the three things that we look at. And we look at it the business is now big enough with enough talent that each of our different business units is thinking that way.
What's close in on security? What's close in on presence in commerce? What's close in on productivity? And we think about domains. And so there's not a specific, here's what we're going to go do next, but we're looking and probing in all those areas at the moment.
And we've talked in the past about marketing services being interesting to us. That's why we went out and did Main Street Hub. We're continuing to be interested in that area. We're interested in productivity and building that portfolio. So we continue to look in that space.
I think about productivity, that's where we have opportunities to grow and build on top of what we've already done. And same thing in presence and commerce, same thing in domains and security. So all those areas are open to us. And if you add one other lens, which I think, Andrew, you mentioned earlier, is internationally, how do we consolidate and bring additional heft into our international markets.
Thanks, guys. I had a quick question on GoCentral. When you guys think about building out that platform and adding more features to that, It seems like a lot of the additions are coming from your own internal development team. Are you guys thinking about making a marketplace for that? Or has there been any like thoughts about that?
And as you think about what features still need to come to market, what are the most important and kind of how many are still left there?
Yes. I see a couple of folks in the audience that can shed light on this. Justin, do you want to step in? So Justin is Head of Product, and then Antonio sits behind him as Head of Engineering for our presence in Commerce teams.
Yes. So for our core customer base who are non tech savvy, we found that the marketplace approach tends to give a pretty unsatisfying experience. And so as a part of that, we've built out several of our own capabilities, but we do partner with the best in specific vertical industries. So for example, if you think about real estate agents, they need access to MLS listings. So therefore, we partner with the best vendor in that area, and then we create a compelling offer for our customers as they go in there as well.
And so I think as we extend further and further out, we're starting to see verticals need more end to end solutions beyond just basic presence. So going to adjacencies, thinking about their ARPU overall and what they spend on and thinking about how they accomplish the job to be done that they have, which is attracting new customers. And so I think you're going to start seeing, as we identify our priority verticals, how do we go after those and look at the end to end business in the box type solutions there, Right? So I think there's a lot there. And separately, if you start thinking about like presence and commerce, it doesn't just happen on a website.
And how do we expand presence everywhere, commerce everywhere? So social media listings, relevant platforms, both in international markets and domestic, How do we expand all these capabilities out there?
Yes. And let me try to connect Justin's answer to the last two questions, which started as where are you going on your product road map and then how does the platform evolve to then what Justin's answer was, those are all interconnected, right? Like that's what you heard today, which is when we have a vertical experience, now we're going faster, right? We have the points of connection where you can slot specific applications into an environment with that Sonos like click to add them. So are you a real estate agent?
Are you a lawyer? Are you doing transactions? Well, you know what, you probably need DocuSign, not as a drop down in our menu, but actually as an add on widget into the experience. Like that's actually what you saw today and is kind of the connective issue between everything Mike was talking about on how we go verticals back into solutions in our product road map, like that's how these things connect. And what you're seeing and hearing in Justin's answer is our ability to kind of go fast and like faster than just having a broad base of products.
We're putting it in exactly the right place for vertical ideas.
Yes. One of the challenges, maybe, Scott, to take that and explain why what Justin's answer and all these pieces come together. In the past, vertical software, vertical SaaS, software had super high customer acquisition rates and very high price points and long implementation times, and it was super complicated. We think that we can take the horizontal platform that we've built and begin to create just those critical elements in the end to end workflow, use our low cost of acquisition and our great care, make it self serve with dial up or dial down your service along the way to get the outcome you want and be a disruptive force in some of those verticals. So you can start to see that happening in a few of the workflows we showed today at these various demos.
Yes.
So just wanted to marry a couple of the concepts that we've been talking about today. So with the partnership with AWS, obviously, you can take advantage of some of the technology there that they offer with the machine learning and the neural networks to help price domains in the secondary market. Now marrying that to the go to market that we've talked about with these conversational initiatives, Are you leveraging your internal data lake to inform some of those strategies and identifying the people that are going to have a higher propensity to add on specific products or renew at a higher rate?
Yes. I
mean, we're talking about platform.
Data is the platform. I mean, collecting all the different data sources that we have, using, you know, whether it be analytics or machine learning on top of that to inform both the marketing efforts as well as our internal customer experience one, yes, that's exactly what we're focused on building.
Yes. And if you think about just from going to spend more money with high conviction that it's got return behind it, right, you actually need a prediction about what would have happened in future. And our ability to make those predictions is better than anyone else because of our data lake, right, because of that analytical repository we have. We can predict what the outcome would have been and so that we can understand what the impact of a conversation or a campaign or a treatment looks like. And we can look at actually the relative incremental return so that we can actually really understand.
Okay. And then just following up then. Then, in your early learnings here, obviously, we're still very early innings, but what's the delta there between some of these initiatives versus some of the historical initiatives that you've run? And what do you think the uplift could be with all of this behind it?
I think these are new moves, but they're not enormous step out moves. They're just they're building from where we are. And so everything you hear about, all right, how can we take a broader portfolio of products, merchandise with different how triggers and more relevance in the conversation, okay, we haven't really tried that before. Like, we've done elements of it. We've sent you an e mail.
We've called you at some point in time, but we can add step change elegance and relevance to that. Boy, look at the need state of our customers and hopefully certainly get, let's say, comfort with the growth profile that we've been operating under. And like everything we do, we're pretty honest and transparent with you guys about what's working, what's not and the rate of pace. And we'll continue to be transparent about that and hopefully have comfort at the rate and trajectory that we're operating under. And we're pretty good if we see something that works, we pour gas on it.
So with the kind of improvements we've seen in the GoCentral product as well as web presence, How are you thinking about maybe putting the as you said, the fuel and the gas in the fuel, fuel and the gas
for the web presence
product. I mean, we have some comparison to the freemium offering. How are you thinking about getting more people to the top of the funnel to at least try it out more?
Yes, I think I can go first, and then you can go. So I think there's 2 pieces. In the traditional brand work that we've done, which we do really effectively, you're now seeing GoCentral as the primary featured product in those. It's not about a product per se. It's actually about GoDaddy's ability to help make people's idea real.
And then we're showing the product in that context. If you look at some of the creatives we're running, we're using a construct that we're pretty familiar with, which involves celebrity with an idea, having fun and GoDaddy helping them on their path and their journey. So that's one part of it. I think the second part is you heard a lot about verticals. And that's because customers associate really strongly with their vertical.
Gerald and Co, restaurateurs, right? And people tend to associate with that passion above kind of a lot of other dimensions that you could try and skew them by. And so we're looking and seeking to be in those places where the verticals exist. And that actually opens up new audience, new media that we historically haven't been able to tap into for us to actually start to go have a conversation. Because if you show up in a restaurant blog with something generic, it doesn't really work, right?
But as the vertical and the experience comes along, it opens up more audience for us. And so we're going into those spaces.
Yes. I was going to say, Melissa Schneider in the back there, who heads up product marketing for the Presidents Ecommerce team, she's doing a lot of the work to connect the product and the reasons to believe in that proof point to the work that Andrew's team is doing on the channel. So I don't know if you have anything to add to that.
Yes. I mean, the verticals are going to be the vertical integration is going to be key. I think the other point is just going back to reasons to believe in the story is starting to differentiate by telling a story of how we hit presence across a number of different platforms. So it's not just about a site and it's not just about social. It's about bringing all of these things together so that our customers can have more frequent conversations with their customers and deliver real value back to their business.
Okay. That's good.
So if you look at the 2 big web presence companies that are publicly traded, GoDaddy, Wix. There's a very clear difference in business model. Even though if you look at the quantum of paying subscribers, net added per year, it's almost the same, right? You guys are doing $1,000,000 They're doing about $75,000,000 But the business model is very different. You guys are very customer care heavy, very human heavy.
Theirs is very human light. Why is your business model the right one given they're both adding about the same number of subscribers? And if it's the type of market where, look, there can be multiple players, are you guys seeing different types of customers going to you guys versus Wix? And therefore, that's a more attractive customer to go after?
Well, let's see. 1st, I actually don't think you characterized the business models correctly with respect at all. I think what you're seeing with us is a proven on ramp around the world with a platform that will allow somebody to go end to end with applications around an idea. And around people, look, we have an asset that, frankly, no other company at our size could do today because of the economics of providing care. So gosh, why wouldn't you want to put a helping hand against a pretty disconnected experience?
But it's not a business model fundamental. It's like sprinkles and a cherry on a sundae. So I think hopefully what you heard today is you got a combination of us of products and technology that has global reach and scale with an engagement way model that's different. I think that's truly distinctive. I think the nice thing for everybody as investors is you look at the fragmented world in which we operate.
Stephen's first slide of the different elements of online presence and what our relative share is. And by the way, we're bigger than everybody else by kind of quantum still. Look at that space. So I think from an investor standpoint, if you look at the world in which we operate in, it's super fragmented. There are all sorts of companies around that sort of provide little point solutions of what you're talking about online presence.
What that means is that there's a lot of room for people to succeed if you're doing something distinctive. We think we're doing something distinctive. There's a couple other companies that are doing clever stuff as well. There's room for them to grow and succeed. And I think the nice thing, frankly, for maybe you guys is, gosh, that isn't necessarily a zero sum game and probably won't be that way for a long time.
Thank you very much. Taking data from a couple of slides that you put up, one was ARPU of 160 potential of 1,000 to 2,000 and the other slide where you showed the product roadmap potentially could get into. Now obviously, kind of indicating that M and A would be a good part of that strategy with the $3,500,000,000 availability over the next few years. You did a great job with the HGG. What was it that you learned there to give us assurance that if you make big acquisitions, if you make big international acquisitions, that you'll be would not repeat certain mistakes that you made?
Yes. Thanks. Do you want to take that one?
You want to enter?
It was definitely a learning experience, right? And the interesting thing about HGG is we took a look that business 3 years earlier, and we decided we weren't ready. And so we passed. We've laid a lot of foundation around our systems and our processes. And fast forward to 2017, I mean, we felt like we were ready.
I think what we learned was we learned, hey, there are functions where, boy, you got to harden that system a little bit more. And as we went through the process, something as easy as, hey, how do you get your security software installed on a laptop in Romania, right? Like those are new challenges you got to think about and you got to solve. But we didn't solve it for the one time. We solved it for the future because we know that we're going to want to do things, both in the U.
S. And abroad over time. And so it's about building a system and layering it over time so that it becomes more and more resilient versus solving it once just in the most expedient way. And I think we've laid a lot of foundation, particularly in our finance org, which Ray can talk to, in our HR processes and tools and systems, in our IT organization, around how we do this. And we've got a playbook now.
Yes. I think to Andrew's point, layered on top of that, it is building those processes. We had some in place, obviously, because we had built that out. But we learned things. We tripped, we stubbed our toe, and we fixed those processes as we go into the next one.
I'd say probably the other thing, I'm surprised Andrew didn't bring this up, which is brands, right? We're learning how to manage multiple brands. Obviously, in EMEA, GoDaddy is the primary, but there are other well positioned brands that we're utilizing through that acquisition. That's going to help us in the next one we do as well.
One quick follow-up, Ray. You and I were talking about how in the beginning of the presentation, you're talking about hardening the organization, agile, adoption of agile just over the last few quarters, talking about platform and now moving into AWS, and we're talking about flywheel benefits and becoming a real network here. If you make these acquisitions that generally tend to trip up these flywheel benefits, how would you characterize that movement forward, obviously, since you're increasing the velocity of change in the organization?
Let me try that. And so again, think about acquisitions in 2 ways. 1 is product oriented. So the vast majority of things that we've done have been to take a product take an individual product and think about Stephen's jobs to be done graphics that he put up as something that should be integrated into the whole experience of a customer getting an idea started growing and thriving. And so the nice thing for us is, gosh, there are all sorts of products that are trying so hard to reach this audience, and they're never going to turn into businesses because the cost of acquisition is too high or they have to sell their product, and therefore, they have to price it too high, and they can't ever develop a business.
And we add real value, right, like real economic value and customer value by taking a product that our customer want and just putting it into the GoDaddy ecosystem. So the concept of an acquisition as it expands our product portfolio actually isn't a hindrance. It contributes to network effect. It's not a that's just another tactic by which we expand our product portfolio. Geographically, Andrew's comments around being tempered about it was were right.
To make that kind of thing work, you have to actually be able to take a customer base and not create different underlying platforms, but you got to actually take them and move them, right? You got to have the same infrastructure. You got to have the same authentication, API layer, data layer or else you do create barnacles on your system. And when Andrew says we weren't ready, we weren't ready. But we were with HEG, and we've used that to hone that system.
And if and as you see us do more of that, it actually will be to drive network effect because the way you characterized it is right. Like, if you just add things that are actually creating different systems underlying it, then we're actually not creating network effect. But boy, both geography and product, we've architected our whole system to be able to create that flywheel benefit because we could have bought financially out in the world like we could have been buying all sorts of stuff for the last 5 years. But what we're really trying to do is build this capability where if we do something, we're creating advantage for years years years to come.
And what that means is you got to go do the hard work to actually consolidate platform, consolidate product portfolios. If you let them splinter and fragment over time, it absolutely does become crippling. But platform becomes an And what gets you better at doing that is reps, right? And what gets you better at doing that is reps, right? And we're doing reps now.
And we've got something, and we're building muscle.
Thanks for the question. One more, and then we're not kick like we'll mill around, but just by way of kind of getting everybody out of their seats and moving around. Anybody have anything else? Or Fantastic. All right.
So what you're not kicked out. We're going to hang around we're going to be around still for time, answer questions for everybody. Thank you. Thanks, everybody, for taking the time to come. Thanks for interacting with our teams.
Thanks for, frankly, spending the time with us. These sessions are really valuable. We do pride ourselves on being straightforward, authentic people in company. And part of that is telling you where we're going and then loving the fact that you got to go deliver. And your questions in this level of dialogue is it's helpful to us.
And so thank you for the time today, and more importantly, thanks for everything in years to come. Appreciate it.