Good afternoon. My name is Dan, and I will be your conference operator today. At this time, I would like to welcome everyone to the GoDaddy Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Instructions will be provided at that time. Thank you. I'll now turn the call over to VP of Investor Relations, Marta Nichols. Please go ahead.
Thanks, Dan. Good afternoon, and thank you for joining us for GoDaddy's Q3 2015 earnings call. With me today are Blake Irving, Chief Executive Officer and Scott Wagner, Chief Officer and Chief Financial Officer. Blake and Scott have some prepared remarks, which will follow with a Q and A session. On today's call, we'll be referencing both GAAP and non GAAP financial results such as total bookings, adjusted EBITDA, unlevered free cash flow, net debt and ARPU.
A discussion of why we use non GAAP financial measures and reconciliations of our non GAAP financial measures to their GAAP equivalents may be found in the presentation posted to our IR site at investors. Godaddy.net or on our Form 8 ks filed with the SEC with today's earnings release. The matters we'll be discussing include forward looking statements, which are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC. Actual results may differ materially from those contained in the forward looking statements. Any forward looking statements that we make on this call are based on assumptions as of today, November 4, 2015, and we undertake no obligation to update these statements a result of new information or future events.
With that, I'll turn the call over to Blake.
Hey, everyone. Good afternoon, and thanks for joining us today. We're pleased to report we've put up our Q3 of solid results as a public company with strong contributions from all of our major product lines. As we deliver for our customers and our shareholders each quarter, our vision remains unchanged. Radically shift the global economy towards small business by helping individuals easily start, confidently grow and successfully run their own ventures.
Organizations of all sizes trust GoDaddy in their quest to build a successful online presence. And our recent survey of global small businesses shows that our global opportunity is still significant. We found that 59% of small businesses still don't have a web presence. We offer millions of global customers a growing suite of elegant, easy to use and increasingly integrated cloud based products built on a single global technology platform and supported by outcome driven personalized customer care. These are real people that are here to talk with and help our customers every single day.
Our strategy and model have yielded a large high growth business with strong cash flow, serving a massive global market with growing needs. At the end of Q3, we've grown to serve nearly 13,600,000 customers, an increase of more than 1,000,000 customers versus a year ago. Our annual average revenue per user or ARPU rose almost 7% to $119 Q3 bookings grew 14 percent to $476,000,000 and our strong customer and ARPU growth together drove our revenue up 15% to $411,000,000 Our adjusted EBITDA jumped 22 percent to almost $88,000,000 in Q3, producing a solid margin of over 21%. And we converted 90% over 90% of adjusted EBITDA into unlevered free cash flow. I'd like to share 3 big themes in our recent progress and accomplishments in Q3 results with everyone today.
1st, we're continuing to expand our product portfolio and deliver innovative services. 2nd, we're consistently posting strong financial performance and growth. And third, our efforts to evolve and grow our brand are changing the way people think about GoDaddy. Let me spend a bit of time on each of those briefly. On my first point about expanding our product portfolio, we've been innovating in all three of our major revenue lines.
In domains, we continue to grow faster than the industry due to our expanding domain inventory, our industry leading proprietary domain search and our efforts to expand the domain aftermarket. We recently passed more than 61,000,000 domains under management and that's over 20% of the world's total domains that we manage. In hosting and presence, we're expanding our penetration of the hosting market with a unique understanding of the needs of small businesses, offering both hosting products and tools targeted at the professional, like our industry leading managed WordPress offering and simple tools that allow a business owner to build a site on their own, like our website builder and online store builder tools. We also introduced a new search engine visibility technology that allows any website using GoDaddy DNS to place higher in search results without requiring the customer to manually update their website's code. The service has been previously offered on our website builder and managed WordPress products, but now it's available for any website regardless of who hosts it.
Our innovative SEV technology has delivered a product that's simple for small business to use and most importantly, it really works and it is super effective. In business applications, we've seamlessly integrated GoDaddy email marketing or GEM as we like to call it, a Shippo Shipping Solutions and McAfee Security Solutions into our online store offering. This is enabling customers to purchase and activate these products from inside the site builder experience. And this is important, so I don't want you to miss this. We're making it possible for customers to discover and use other GoDaddy products like email that meet an immediate need while they're using other GoDaddy products, not through a separate marketing message.
This is something we call in app discovery and purchase capability is a big benefit to our customers. It allows them to find, try and use the right next product super easily and makes our full portfolio of products more valuable together than apart. For GoDaddy, for us, this is one of several growth levers that can help drive ARPU. Also in business apps, we're seeing strong renewals of our proprietary Workspace email product as well as continued growth of Office 365. And our O365 offer just keeps getting better.
We've brought our O365 provisioning to a median of 90 seconds for a customer's first mailbox purchase. And that's an awesome user experience that's improving both activation and usage. Our progress in all these area demonstrates our focus on delivering truly distinctive products on a single technology platform, all wrapped with world class customer care. And we see our differentiated combination of products, technology and care as a unique advantage for us in serving our customers. On my second point about our financial performance, we've delivered consistently strong financial results prior to and since our IPO, growing revenue across all three of our business lines, while continuing to invest in innovation and growth, all while delivering increasing cash flow and margins.
Scott's going to spend more time on this in a minute. And third, the investments we're making globally in the GoDaddy brand are showing promise and results and there's much more planned. Let me say a little bit about that. Along with all the product tech and scale work that Scott and I have talked with all of you about, we've also been taking very deliberate steps to align our brand with our global customer value proposition, our culture and our technology investments around the world. And we're doing that in several ways.
First, our global advertising is increasingly aligned with our products, our technology and our customers' increasing awareness. For instance, in India over the last 3 years, we've seen our aided brand awareness more than double to almost 80%. 2nd, we've been focusing on our employment brand with an emphasis on technology, transparency and diversity. For example, we recently published our gender diversity and salary parity research highlighting the challenges we and all tech companies face in building a gender balanced workforce from salary parity to promotion trajectory. We've also invested in a relationship with the MIT Media Lab to further the science behind bringing customers to small businesses through their community.
And 3rd, and yesterday, we announced we've engaged GoDaddy's 1st global brand agency, TBWA to help us further refine our story and bring a unified message to our increasingly global audience. Small business customers need a dedicated partner to help them start, run and grow their business online around the world and that is GloDaddy. With the help of a clear message about who we are, what we do and who we do it for, we believe our intense focus on our customers and their needs will continue to differentiate GoDaddy and produce strong financial results. Now I'm going to turn the call over to Scott to talk about the financial results in more detail. Scott?
Thanks, Blake, and thanks for me for joining us as well. As Blake said, we feel great about what we delivered in the Q3. Overall, I'd like to highlight 3 key financial points. 1st, we continue to deliver strong, consistent revenue growth with a nice balance between customer and ARPU increases. 2nd, we're consistently delivering even faster growth in free cash flow with over 22% growth in adjusted EBITDA and an increase of more than 40% in unlevered free cash flow in Q3.
Those are great gains and are 2 key profitability measures. 3rd, we're well positioned to deliver the solid combination of top and bottom line growth into 2016 and beyond. Touching on each of these three things in more detail, starting with the top line, we grew bookings 14% and revenue 15% in Q3. In terms of the drivers of revenue, customers grew 9% over last year and we ended Q3 with approximately $13,600,000 paying customers. Our annual average revenue per user or ARPU grew nearly 7% to $119 up from $112 a year ago.
Our product lines all grew at double digit rates in the quarter. Touching on our product lines briefly. Domains revenue finished the quarter at 215,000,000 dollars up 10% year over year. Our domain business continues to be fueled by 1, international growth 2, share gain in the markets in which we compete 3, successful attachment and renewals of domains driven by our proprietary search and merchandising improvement and 4, growth in the sale of advertising. Hosting and presence revenue was $151,000,000 in Q3, up about 15% year over year.
We currently reach nearly 5,000,000 aggregate customers with our hosting and presence products, including those customers who use either our easy and effective website builder products and more sophisticated audiences, those customers who build a site with open source tools and host it on our hosting infrastructure. Unlike many point solutions, we address a full range of online presence needs, serving our customers from those who want to build a site on their own to web professionals who need more capability to build sites for others. Just as important, we believe that a successful online presence requires not just a website, but tools and capabilities to extend the site's content everywhere it needs to be online. A great example of this strategy in action is our search engine visibility tool, which Blake mentioned in his introductory comments. We're also having success combining our hosting and presence tools with those in our business applications offerings such as email, productivity and email marketing.
In Q3, our business applications revenue was $45,000,000 up 47% year over year. This product category continues to be driven by strong growth in both productivity and e mail marketing. In Q3, we reached 2,000,000 paying customers for business applications products. Blake and I get asked a lot about what's next in our product roadmap for business apps. Importantly, we see plenty of growth opportunity just in our existing product categories.
We also know there's value in many adjacent product areas where our customers spend a lot of money and there's ample room for innovation, whether it be an online presence, marketing solutions or technical infrastructure. We've proven we can extend our model into other areas, but it's also very clear to us that doing a few things really well and with distinction is the winning approach. That's what we've done over the last couple of years, and it served our customers and GoDaddy well. In addition to innovating and extending our product portfolio, we're increasingly bundling our products, bringing domains, basic presence and email and productivity products together in introductory offers. We've learned that when we make it easy customers to attach and use our core products like site builder or email, they renew at very healthy rates and have attractive long term economics.
One example of this bundling and merchandising strategy is our offer of a free e mail with a website builder purchase. Attaching a domain specific e mail like blake atblakesblog.com creates a more professional appearance, and it makes a domain and website that much more valuable to our customers. Now an important point on bundling is that when we sell products at a package price, payment is allocated among the product types being sold in the bottle based on the list price of the individual product. As a result, our bundling strategy may shift revenue recognition across product lines in the short term. However, our focus is on lifetime spend of our customers in aggregate.
When you look at the growth rates of our 3 business lines, these allocations shifted a bit of growth from hosting and presence line to business applications in the Q3. We're 100% focused on maximizing the aggregate lifetime value of our customers, and we'll continue to explore pricing and bundling strategies that grow total spend and lifetime value at the customer level. We should also mention the impact of the stronger dollar on our top line growth. In recent quarters, I've said our bookings growth would have been roughly 200 basis points higher if measured in constant currency. As bookings translate into revenue over time, that currency impact shows up in our GAAP numbers.
Given the lag between bookings and revenue, we're now seeing the currency impact that affected bookings in the first half of the year show up in GAAP revenue. International revenue, which represents close to 26% of our total now, grew 17% on a reported basis in Q3, but keep in mind that the currency impact that I just mentioned in total really applies directly to this portion of the revenue base. Our underlying international business remains strong across all our key markets and we feel good about the underlying growth trajectory and health offerings. In fact, we just topped 14,000,000 excuse me, we just topped 4,000,000 international customers during the quarter and that's double the number of international customers we had just 4 years ago. Turning to my second overall point on our growing profitability.
We continue to deliver strong cash flow. Adjusted EBITDA grew over 22% in Q3 to $88,000,000 yielding a margin of over 21%, a gain of 120 basis points versus Q3 of last year. Unlevered free cash flow grew over 40% in Q3 to $80,000,000 roughly in line with our 9 month growth of 42%. So far in 2015, we've converted over 90% of our adjusted EBITDA into unlevered free cash flow at the high end of our long term target of 70% to 90% conversion. We finished Q3 with approximately $333,000,000 in cash and short term investments and net debt of 7 $53,000,000 or about 2.4 times our 2015 adjusted EBITDA outlook.
We're delivering these levels of strong bottom line performance while continuing to invest in the business. We have been and will continue to hire engineers across all our applications and are investing in marketing, care and our ongoing international expansion. Our strong cash and balance sheet position also allows us to pursue value creating acquisitions where and if buying businesses, technology or customers complement our strategy and provide distinctive return above our organic opportunities. Our performance, both in the Q3 year to date, clearly reflect the leverage in our financial aid and operating model as 1, our product innovation continues to drive better attachment of high margin products beyond domains 2, our global technology platform creates scale in our infrastructure spend and 3, we scale G and A. We feel well positioned to deliver this solid combination of top and bottom line growth into the future.
Turning to our outlook. We're raising our 2015 guidance ranges for both revenue and adjusted EBITDA. For revenue, we expect full year 2015 to be $1,603,000,000 to $1,606,000,000 implying approximately 16% growth versus 2014. This translates into Q4 revenues of $421,000,000 to $424,000,000 implying approximately 14% growth versus prior year, in line with long term revenue expectations that we've shared before even while absorbing the currency impact mentioned earlier on the call. For cash flow, we're raising our full year adjusted EBITDA range to $334,000,000 to $337,000,000 implying a Q4 range of $70,000,000 to $73,000,000 The midpoint of our full year adjusted EBITDA range implies nearly 24% growth year over year.
We also expect unlevered free cash flow in excess of $280,000,000 in 2015, implying approximately 83% to 84% conversion of adjusted EBITDA into unlevered free cash flow and year over year growth of over 46%. More importantly, looking forward, we're well positioned for continued growth at scale in 2016 and beyond. We serve a huge market of small businesses, organizations and individuals who are looking to build an online presence. We deliver a true life cycle experience to these customers that combine product, tech and care in a distinctive way. And the products and services that we offer grow with our customers over time.
This value proposition translates into a proven financial model with great customer unit economics and strong and consistent revenue and cash flow growth. For those of you who are building models, we'd like to reinforce our long term targets of low to mid teens organic top line growth coupled with 20% plus adjusted EBITDA growth and unlevered free cash flow growth in the mid-20s as we continue our growth trajectory not just in the coming quarter or 2, but through 2016 and beyond. Given our strong cash flow and balance sheet position, we're also well positioned to pursue additional growth through inorganic activity into adjacent and complementary products and geographies. So to wrap up, we feel great about Q3 and our continued execution, and we're focused on delivering for our customers and our shareholders over time. We believe GoDaddy's unique combination of products, technology and care will continue to differentiate us in the market and produce strong future financial results.
With that, let's open it up for questions.
Your first question comes from the line of Deepak Mathivanan with Deutsche Bank. Your line is now open.
Thanks guys. Congrats on a good quarter. Two questions for me. First question on international. We saw you saw launched online store in India during 3Q.
Can you elaborate on what big markets do you currently offer the site builder and business apps fully customized for local languages? How should we think about the focus for international next year with respect to entering into new market upselling in existing ones? And then I have a follow-up about bundling.
Deepak, it's Scott. So on and the international, I guess, your second question first. So first and foremost, we're going to continue to expand in the markets in which we're in, which are primarily the European and Latin American markets. And then second, we will, in 2016, enter a variety of the Asian markets. To address your first point on Online Store and Site Builder, each of those are primarily localized in Tier 1 markets now and there's a road map to get them into Tier 2 markets and the geographies I just mentioned and obviously then following in the Asian launch.
Yes. Deepak, this is Blake. Just to pile on Scott's comments. Next year, more specifically, just to drill into Asia a little bit, Q1 will enter with a core set of products, which will include website builder and not necessarily online store. Some key markets with online store because payment types are a little more tricky.
But we will enter Singapore, Hong Kong, Taiwan, Vietnam, Indonesia, Malaysia, Philippines, Thailand, South Korea and Japan and of course China as well with a core set of products that we offer domains, hosting, website builder, email productivity. So you should think of those as being the core and online store in select
That's That's helpful. And then second on product bundling, I think the integrated email marketing app being offered into the site builder and the online store, it makes a lot of sense. It requires no incremental marketing spend. But now that you've had it for say 2 quarters roughly, can you qualitatively talk about the adoption rates that you're seeing for these apps from the initiatives in the last two quarters? And then what other opportunities would you characterize are left still untapped with respect to such cross selling?
Thanks.
Yes. So this is Blake, Deepak. So qualitatively, we're seeing pretty good uptake. And the way that if you've actually used the science to determine when the appropriate time to surface that capability is. So in the case of email marketing, when we see that somebody has had 25 people sign up on a website to get feedback, we will surface email marketing for them in the time of need.
We're also doing similar things with mail. So surfacing the ability to go by mail, so when you show up in somebody's inbox, you show up with a very personalized domain name that says blakeblakeirving.comversusblake1535@gmail.com. And that matters a lot. And I'll just say, we're really early in this still. So a couple of quarters, we're learning and there's machine learning involved in this as well.
So it's both people and machine learning. And we're continuing to iterate. And if you think about the offer that we've got, we have folks that are in a life cycle. Small businesses are generally a life cycle type of business. And as they move from I get a domain to I stand up a website, now I'm actually having success.
I want to surface a capability that's going to allow me to go retain or acquire more customers or get more business. And that continuum of entering new product capability as somebody is growing with us really makes a difference to our customers. And I think we're seeing some of that lift and you're certainly seeing it in the biz apps number.
Makes sense. Thanks Blake. Congrats on a good quarter.
Thanks Deepak.
Your next question comes from the
line of Jason Helfstein with Oppenheimer.
Your line is now open. Thanks. I'm
down between 2 calls here, so I'm going to do my best. I'm not sure if you commented yet on what drove the lower CPA in the quarter. It just seems like we're seeing really good kind of marketing leverage. And then we saw clearly good margin in the quarter. You're expecting uptrend in the 4th quarter.
Can you comment on kind of initial expectations for next year as far as margin trends? Thanks.
Hey, Jason, it's Scott. To your last question first on margin trends. As we look into next year, we're well positioned for kind of 20% growth in adjusted EBITDA. And I think that's the playbook really that's been propelling us throughout this year, which is really nice growth across our product lines with faster growth in the non domain products that are carrying higher gross margins. And then we're getting real scale that's starting to show up.
You've seen it over the last quarters, but in our tech and dev, particularly in our infrastructure and G and A. That's going to continue frankly into next year with continuing an ongoing spend in marketing and care to support our growth. But the nice balance kind of creates the algorithm that you've been seeing, which is nice top line growth and even more flow through to the bottom line.
And then on the CPA in the quarter?
Yes. I think on the quarter, it's again, it's tough to sort of look at CPA 1 quarter or the other. And so the marketing spend, spend, some of it obviously does show up in the quarter, but some of it has some drag. And so I'm not sure we're going to jump up and down and take great credit for that one in the quarter necessarily. But again, we just feel good about the ongoing marketing return that we're getting and having that show up in a very consistent cohort level of spend over time.
Maybe just one follow-up. Following Endurance's announced intention to acquire Constant Contact, do you guys think that signals consolidation generally in the space and overall thoughts?
No. Jason, this is Blake. So, look, I think if you take Constant Contact, EIG's acquisition by itself, it's interesting. It's a logical move for them. The proximity of the businesses makes sense.
They're both Boston locals. We've examined the email market for a couple of years and because it's a need that customers clearly have. And we are more of an organic grower than we are an acquirer of customers or revenue and we've been growing organically. We did acquire a very small company and I'll tell you, so we did an exhaustive research around the space over the last couple of years and found on a variety of different qualitative measures and quantitative measures and found one that we loved that had incredibly high NPS and the best product experience in Mad Mimi. And we purchased a small company and frankly integrated a product called GoDaddy Email Marketing.
That's what we were just talking to Deepak about in his question. And have integrated that into our product suite in a way that has surfaced when somebody would most need it. And we think that's the key. So it's less about consolidation and more about customer need. And we think that those logical extensions that customers that are little tiny business customers or small business customers really want to do next to make their business important.
And Scott, I don't know if you've got any comments on top of that.
Yes. I think what you're seeing is online presence as a category really being created for the small businesses and organizations that are all using cloud software. And there's a variety of point solutions across a broad set of categories. And from our standpoint, having those products work very well together is real advantage for our customers and obviously for us, too. And it's a very big market that's expanding, and there's a bunch of different ways for things to happen and play out.
I think overall, the fact that you do see consolidation in certain parts of it kind of validates the value proposition that we're providing and frankly reinforces, I think, some of our unique strengths around being able to create a bunch of need states across things and time together that creates real value.
Thank you. That's helpful.
Your next question comes from the line of Mark Mahaney with RBC Capital Markets. Your line is now open.
Thank you. This is Andrew on for Mark. I just had one question on ARPU. As we think about you expanding into Asia, kind of the continued FX headwinds and the bundling. Should we think about ARPU growth is slowing down here?
Or how do we think about it in the medium short term? Thank you.
Yes. Thanks, Andrew. It's Scott. That's good. First, I think at an overall level, we are balancing the our ads and growth of customers, which certainly drives long term value and the monetization of our existing customers,
3 things happening. I mean, number 1
is really, three things happening. I mean number 1 is really now and in the second half, we're lapping a number of pretty big ARPU enhancing moves from last year, such as Managed WordPress and a big aggressive ramp on Office 365. 2nd is the FX impact, which you just brought forward, and that is going to continue. And that, as you rightly point out, is some tempering of ARPU. And then 3rd is the bundling and merchandising.
And I think if you look at our ARPU at a shade under 7% for the quarter, In the quarters ahead, you'll probably see it in that mid single digits line, again, factoring in all three of these different things.
Thank you.
Your next question comes from the line of James Kacnick with Monness Crespi and Hardt. Your line is now open.
Hi, thanks. At the end of the prepared remarks, you made some comments about potential opportunities to explore inorganic growth through adjacencies. Just hoping you could expand on that a little bit?
Yes. Hey, James, this is Blake. So I won't go into specifics about what categories we're looking at, but what I would say is that our very small business customers have needs that are adjacencies that they are spending what I would consider to be IT or tech dollars on with other providers, whether that's in marketing or communications. There are things that they are doing that are that they're not pleased with the situation that they're in today, where they either don't get the results that they want from the marketing dollars they're spending or they feel like they're not being served the same type of customer care that they get when they're dealing with us. So we think there are opportunities because we have that unique set of products, technology and care that allow us to go into adjacencies that are potentially very strong for us.
And we're exploring quite a few different areas that we think are potential interesting growth areas for us. And then Scott, I'll talk to you.
James, I'll just add 2 things quickly. The first is, look, our trajectory is one of great organic growth right now. And the second point is we throw off a lot of cash. We've got very strong cash flow position and a nice position on our balance sheet. And it's citing that we have been a great organic growth story.
And obviously, our balance sheet position gives us the flexibility to add something in organic if and so we choose and that it's additive to already what we're doing on the organic side.
Got it. Thanks. And then on the marketing side, one of the goals was to tackle the web professional market. And so with all the marketing initiatives you have in place and I guess as we look forward, can you talk about on a cohort basis the traction that you're seeing with the higher value, higher LTV type of clients? Thanks a lot.
Yes. Hey, James, it's Boi. So we are super early. We're just 2 quarters into this web professional push. We have slightly under 60,000 web pros that are now in that program.
And frankly, web professionals do spend more than small businesses because they're usually managing more than 1 small business. So on a cohort basis, we expect to see some a good trend. But now we're really early in this process and still rolling out features, in fact, rolling out features as we speak that matter to these guys and allow them to manage their small business clients in a way that they haven't been able to do at scale before. And we've rolled that out internationally. In fact, 50% of the folks that are in the Web Pro program are coming from international markets.
And cohort spend internationally is the same as it is in the So we're optimistic, but we're really early innings on this one.
Thank you.
You bet.
Your next question comes from the line of Mark May with Citi. Your line is now open. Mark May, your line is now open.
Thanks. We saw a lot of leverage in your customer care line in the period and kind of how to think about it going forward? And then in terms of the ARPU growth in the quarter, maybe sorry if I missed this, but maybe walk through a little bit some of the drivers of the ARPU growth during the quarter? And then I guess a subset of that is in terms of the international customer growth, what impact if any does that have on sort of the average ARPU metric that you provide?
Yes. Thanks, Mark. It's Scott. So first, Care. Yes, you're right.
We saw some leverage in the care line in Q3. And ongoing care, it's a balance for us between having time, energy with our customers and then getting them into products. And that's something that we continue to invest in, and we see that time is distinctive and valuable to us. But also adding whether it's technology and CRM or call routing that helps us balance our staff more effectively or adding things like chat, which is becoming much more prevalent on our site. And I think in the quarter, you're seeing customer interactions in a way that are still giving us high value touch, but are also helping us scale the cost structure.
Look, going forward, we're going to continue to manage this balance and should think about care being roughly in line with growth, possibly with a little bit of scale. But as we expand around the obviously, that may be lumpy quarter over quarter. But we feel like we're on a nice trajectory there. So I think that's 1. Number 2, on ARPU growth, I think at a very simple level, you're just seeing the faster growth in non domain products, right, in both hosting and presence and business apps in particular.
All of those products carry higher relative price points. And so as more customers adopt those and those continue to grow faster, that's going to translate into ARPU. And that's got a bunch of little sub segments to it. But at the end of the day, it's faster growth and adoption and hosting and presence and business apps. And I think the 3rd question on the international impact and how will it impact ARPU, That's part of how we've been balancing customer growth and ARPU as we're growing outside the United States.
Some of those new customers are coming in at lower ARPUs and then they spend over time. Right now, we're managing that balance, and it's showing up in our results. And if we continue to expand in other markets at the economics that exist today, then it's going to be great. And look, I think just a point to call out is the FX impact absolutely does show up in not only ARPU, but particularly the international line and international ARPU as well. And we're going to be dealing with that for the next several quarters.
Thanks.
Your next question comes from the line of Brent Hill with UBS. Your line is now open.
Hey, guys. This is actually Michael on for Brent. Thanks for taking my questions. Just on the business application segment, I know you talked about already having already lapped 365 and the growth rate there is still very strong. And you also spoke to the aggregate between hosting in that segment.
Just wondering if we could dig a bit more into the expected trajectory of that business and what you're seeing the most success with there?
This is Blake, Brent. Hey, so or Michael, sorry. The overall business we think will continue to grow at approximately the same rate you're seeing now. So that's 47% growth we feel very good about. And there'll be some as we've talked about the way that this bundling works, there'll be some fluidity between the web hosting and presence line and the business apps line.
But overall, we feel like the non domain businesses, which are higher margin businesses for us, will continue to do well and continue to pace at the pace with a pretty strong lever.
Great. And then we've talked a bit about international on the Q and A. I think that at one point I saw a goal over 60 countries in 2016. Can you just talk about, are you still on track Yes. Look, we're on track right now to
Yes. Look, we're on track right now to be very, very close to that number. And frankly, we have we'll focus on Asia. You heard me rattle off the countries. I think there's 11 of them that will roll in the Q1, which will bring our overall market count to 53.
So that's getting pretty darn close to 60 and there's a lot of a year left for some other markets. And frankly, for us, it's focusing not just on country expansion, but performance in country and making sure that the Tier 1 countries that we identify as our biggest opportunities are performing well and that we're actually making sure that we're balancing our spend in those countries. As you know, in a software product, you can go into countries with very, very little cost and it's almost all marketing. So the way that we're going to work the marketing levers over the course of 2016 will be incredibly important for us as we roll these things out. And we're by the end of 2016, we'll be in most of the markets that really make a difference for the business.
And that's if we just get away from the 60 number and think about what's really going to make a difference substantively for the business, we're going to be there, which is a really important thing. And when you think about companies that are providing a platform for very small businesses, there'll be nothing close that is targeting a very small business in that many marketplaces today.
Great. Thanks for taking my questions.
Yes. Pleasure.
Your next question comes from the line of Mitch Partlet with Craig Hallum Capital Group. Your line is now open.
Hi, guys. This is George on for Mitch. Just one question. You mentioned in your
explain that a bit further.
Yes. It is not a product, George, as much as it is a capability. So if you think about a scenario where I have a website builder product and I'm going to go in to make a quick change or a view, just viewing my website. And I've had 25 individuals sign up for to be contacted by me at some point. When we know that they've reached a critical mass critical number, we can toggle that number up or down, being on market.
We can introduce just a button that says, hey, try email marketing right now and introduce that at that incredibly important point in that small businesses' life cycle that surface the ability for them to discover and then use and then try in a free trial way, try that product out and then when they get to a certain scale, then they'll start paying for it. But it's a great way for discovery of a product to be within another product, think of it that way. And frankly, we're doing this with email, we're doing it with email marketing. And there are other places you can imagine us doing this over time that will make a lot of sense for these small business customers. Does that make sense?
Okay. Thanks.
It does. Yes. Thanks.
Okay. You bet.
Your next question comes from the line of Brian Essex with Morgan Stanley. Your line is now open.
Hi, good afternoon and thank you for taking the question. I was wondering if we could talk a little bit about hosting a presence. I think you guys have already kind of touched on tax rates, but what are you seeing in that segment? I think while business applications certainly beat our expectations, I think posting was kind of more in line ish. Just what you're seeing in terms of initiatives, performance to expectations and then how we might anticipate kind of growth going forward given the initiatives that you have in the pipeline right now?
Yes. Thanks, Brian. It's Scott. So I guess as mentioned in what we talked about, our bundling and merchandising approach, where we're increasingly bringing business applications, both e mail and e mail marketing, into our hosting products is actually moving some of the growth from hosting and presence into business apps. And so I think when you look at those 2 in totality and we look at it and think about it, the growth is really strong and healthy.
And we just we think that this bundling approach is really impactful because it's, number 1, contextual and number 2, it reduces a lot of friction. And so and what we've learned and see is that when people are using our products, they don't go anywhere. And so we continue to experiment not just with the offer, but how we can make it really easy for customers in the right contextually relevant way to sample, try, begin to use our different products at the right time in their life cycle. And what we know when they do that, it works out for them and it works for us. So punch line on hosting and presence and apps is you're just seeing a little bit of shift to the dollar growth kind of from hosting and presence go over to business apps because of some of this bundling.
Got it. That's helpful. Maybe if I could follow-up on the domain side. As we see more CC and gTLDs kind of enter the market, what kind of tools do you use to gauge your penetration of the market, maybe relative to your peers? I mean, one of the things that I like about your platform is it seems that you've almost had like a nice scaled management layer, whereas some of your peers are smaller and don't have as many registry relationships.
So with all the choice that you have, one of the questions I get, I mean, the source of this question is, investors are often asking, how do we know about who's gaining more share and who's positioned in different ways in the domain market? And curious to think curious to hear how you look at it, given the platform that you have and the visibility that you have into the market.
Hey, Brian, it's Scott. Let me try the share gain one first. So think about share, certainly within there's dotcom and the gTLDs and then there's the different ccTLDs. And obviously, zone files from VeriSign are both published and easily accessible. And we have a regular, frankly, automated dashboard.
We can swizzle.com in any country situation around the world and track and measure our share. Over the last couple of years, as we've been entering our countries in localized form, one little execution part of that has been to establish data feeds with the registries in each of those countries to also track and measure ccTLDs. So in our Tier 1 markets, we also are measuring and tracking our ccTLD share. And frankly, in all of our Tier 1 markets, it's going up. So we look at both in their individual component parts, but more importantly, overall, because I think this gets to the more interesting thing and is what you led into, which is our platform, is now in a position where in a geography or in a market, we can surface certain kinds of products.
In some markets, it may be a ccTLD, in others, it's dotcom, individually with different price points, sometimes together and have automated the frankly the infrastructure and the platform to be able to do that kind of market price product independent. And again, that's one of those things that is just starting to roll out and we think is is going to be a big help and is just one of the many ways that a platform plays out into making things very localized and relevant and good business for us.
Just to pile on, Brian. So a couple of things that I think are important to note. I think the way that we've done our proprietary search algorithm is insanely fast and it also allows us to surface any TLD that's appropriate based on the word breaking that we've done in the search query. So actually, we do very advanced word breaking across the search, can surface TLDs from any registry that are appropriate for that particular search query. And it's delivered frankly a 10% growth rate for us in an industry that's not growing at 10%.
So we continue like basically double the growth rate. So we're continuing to take share in the TLDs that we play in today, which are the big ones as well, the dotcom, the dotnets. And frankly, having 20% of the world's domains under management at 61,000,000 domains under management is important. So leadership here is incredibly important to us and we're going to continue to innovate and put great engineers on these great engineers and great UX people on these problems. And we know that when you own that domain to on ramp, it's the first thing that people do when they have an idea.
They go buy a domain and then the next thing they do is go attach something to it. And it's a key driver not just for the Domains business, but for the rest of our business as well and you'll see us continuing to work there and make really good investments.
Great, very helpful. Thank you very much.
Thank you.
And there are no further questions on the lines at this time. We'll now turn the call back to the presenters.
Hey, everyone. This is Blake. And I just wanted to thank you all for standing on the phone for not standing or sitting on the phone for the last hour here in our comments and asking questions. We've had a great Q3. We feel good about it and we look forward to talking with you next quarter.
Bye
now. This concludes today's conference call. You may now disconnect.