Good morning, everyone. Thanks for being with us. Excited to have you guys here. Welcome to Citi's 2024 Global TMT Conference. I'm Michael Rollins, and I'm on the internet team here at Citi. Really thrilled to start our day, at least, with GoDaddy's CEO, Aman Bhutani. Thanks for being with us.
Sure.
Appreciate your time. We'll have some Q&A. We'll open it up later in the session. We'll have some mics going around. So we'll try to make it interactive at the end, but just to start, Aman, again, great to have you here. I'm gonna tee it off with, you know, last year, Mark sat here in this seat, you know, emphatically talked about the margin profile, 26% normalized EBITDA margins being the floor, expanding from there. The growth accelerating from 3% to 7%. You've clearly executed on that. Your margins are now at 29%, targeted 33% midterm. Bookings are pacing ahead of that 7% revenue target, and shares have doubled.
So a great year, great year for you guys, and if we sat here again next year and, you know, looked back and had a repeat performance, and stock doubled again, what would be the drivers of that, and what's the kind of next leg of the story for GoDaddy here?
Thanks for having me. It's great to be here with all of you. I'm glad Mark came out last year and said those things so that I could sit here today and said, "See? We did it," you know? That was fantastic. Look, it's been a great start to our three-year plan. Obviously, we put it out there earlier this year, and we've executed well on it. You know, you want to get out of the blocks fast. You want to get out strong, and that's what you're seeing. You know, in terms of the growth drivers for the company, we laid them out at the Investor Day, and we're continuing to focus on those same growth drivers. Those for the company include, for us, commerce, which is a business that we've entered and is growing nicely for us.
It includes what we call pricing and bundling, which is the combination of offering bundles to our customers and pricing them at sort of unique price points. The third one is what we call seamless experience, which is about, you know, we have a very large base of customer, 21 million paying customers, and making that experience better and better for them so that they're attaching more products, they're renewing better products, and keeping our super high retention rate of 85%. Right, those, those three initiatives are the ones that we talked about at the Investor Day and said those are the growth, growth drivers, and those are three-year initiatives. That's not an initiative that we're doing for one year. Those are initiatives that we believe are multiyear initiatives. We also, along with them, have a focus on cost.
We have an initiative called Cost Optimization, and we have an initiative called Airo, which is our new experience, which is AI-powered and brings together a truly intuitive, magical experience for our customers, where they buy a domain name, and a lot of other things happen automatically. For example, a coming soon one-page website will be built automatically for them. An email address will be configured automatically. Marketing tools will be enabled automatically for them, and that's the type of sort of magical experience we're looking for. And, you know, it. Of course, we have a large base of customers. You know, anything new we introduce is easier to introduce with new customers, so Airo's doing really well with new customers. But if we sat here next year, I hope we're talking about how well Airo did, right?
Because when we laid out our three-year plan in February, it didn't include anything for Airo in the financials. We purposefully left that aside because it was a completely new adventure. It was a completely new experience. It completely differentiates our core product, which is domains. So, you know, we didn't have a lot of sort of insight into what it would do financially, so we left it out of the numbers, but we're more and more excited about it, and we did share some numbers on it at earnings. It's, it's a very exciting place to be.
Great. We'll get into all that stuff.
Okay.
I want to start maybe at a higher level, in more of a cultural one. At university, you talked about changing the culture to be more of a software engineering one.
Mm-hmm.
That's something that, before you joined, maybe it wasn't in place as much. How is that shift... Can you talk about that cultural shift, what it's like now, and how that's enabled all these things you're talking about?
Yeah, you know, I'm a big believer, culture is a function of leadership, and I grew up writing software. You know, that I'm a self-taught software developer. It was something I was very interested in. I was very lucky to, you know, learn this skill when the internet was just going to come along, and computers came easily to me. You know, they seemed to talk to me, and I could get stuff done. So I think for now, a very long time, that's sort of been in my DNA. And coming to the company, it ended up being about two transformations over the last five years. So this year we talked about it as two transformations and an outcome.
The two transformations are about, number one, evolving GoDaddy's software platform, and what that means is that, you know, there are capabilities built into GoDaddy's platform that then get used across the company. What that does is it allows you to accelerate the pace of innovation, 'cause there's a lot of things that are built in that teams don't have to do, and they can rest something new on top. It also has meant that over the last four, five years, we've really significantly improved our capability to track data, to instrument the business so we can do experimentation, to use AI much more in a much more aggressive way, and that's even before generative AI, which we've been a leader in for over a year now.
Also sort of new monetization capabilities for the company, and all these capabilities sort of run across the company, and evolving that software platform's allowed us to accelerate the application and commerce segment, 'cause we can really focus on it and improve things very, very quickly. The second transformation, again, a little bit coming from the engineering culture, is about making decisions based on evidence, and that's very, very important in a company that's building software, because anybody can create scope in a heartbeat. But you don't know if what you did actually added value or not, and making that very, very measurable is now a core part of our culture. In fact, I think if you go back to the first earnings call I did for the company, or second one, you'll hear me talk about experimentation.
Because I just know it's so important in the DNA of an organization that people know what the outcomes are that they have achieved. And frankly, there are three possible outcomes for any initiative that we have or any test that we do, I should say. You can have a successful result, you can have a failed result, or you can have an inconclusive result. And in our culture, we celebrate winners and losers. They're great, because anything that's a loss is something we don't need to do anymore. It's the inconclusive that you're worried about, right? And what those two transformations have delivered for us together is a profitable growth model.
That's what Mark sat here and talked about last year, that, you know, we'll, we'll grow the business, we'll grow Applications and Commerce, and we'll, you know, be very judicious about our cost structure, so you'll see the margin improve. You know, we've got a great trajectory going into next year.
Great, and that's really helpful. And maybe just to translate that into actual product-
Mm-hmm.
Since the last time you spoke publicly, you guys launched an AI-powered digital marketing tools.
Mm-hmm.
And that seems to be a separate product, priced separately.
Right
on top of the website bundle. Can you talk about that, your expectations around that, attach, and how you view that product?
Yeah, taking a step back, you know, the way we think about our customers' needs is that it's, we call it the entrepreneur's wheel, and there's a set of needs around identity, presence, and commerce that we are working to fulfill. Identity can be around their domain name, it can be around their logo, it can be about their email address. Presence can be about their website, it can be about their in-store solution. And commerce is often about the transaction, but it's also about their inventory management. It's also about them being able to manage their, sort of, not just their payments, but their, customers and their inventory as well. And what we're working to do is to bring all those things together in a really seamless way. And for our customers to turn their presence into commerce, marketing becomes a very, very important solution.
What the digital marketing suite, and the reason it sort of sits separately, is because we know that that's a tremendously high-priority customer need for us, right? Our customers are the base of the pyramid. These are the folks that are selling $50,000 a year, $100,000 a year, up to $1 million a year, so they are the micro businesses, the smallest of small businesses. And what we've brought to them is a very sort of well-priced product that does a lot of automation for them. A lot of these folks, I'm sure you know many of them, they're hesitant to go on new social platforms because they don't know how... what to post. They don't know how to handle the traffic that's gonna come in back from that social media platform. So what we do is we offer both to them.
Number one, we offer them a capability where AI will write a message for them, and post it for them, and build a calendar for 30 days, right? And they just have to trigger it. They can choose voice. They can say, "I want it to be really serious," or, "I want it to be playful," or, "I want it to be sporty," and it'll change the text and post on their behalf, right? Now, the customer's always in control of it, but it's happening for them. And the second thing we have is a Conversations app that allows them to then handle incoming messages, and it doesn't matter which platform those messages come from. They all come into one app, and again, AI responds for them, which is really important for them because they, they don't have teams of people in customer support answering for them.
You know, over a third of our customers are solopreneurs. They're the only person in their business, so if they have to sit there and answer the messages all the time, they're not gonna able to do their job. So the AI actually builds a response for them. It'll show it to the customer and say, "Is it okay?" And it'll go away, right? So those are the types of tools we're bringing to market again. Our target is our customer base. It is that small micro business that needs the support that we can be a great partner for.
Got it. Okay, let's stick on the customer, just the customer in general. So you've had about 20-21 million customers since 2021.
Mm-hmm.
We get that question a lot, why there hasn't been more growth in the customer count.
Mm.
I know there's been some divestitures, and that's impacted some of it. Let's just think about with all the new products, how the customer journey is, well, for you guys, like you said, the domain has been the core part of the business, the top of the funnel. How's that evolving, and how do you think about the right kind of growth profile for your customer base?
Yeah, one of the things we've talked about is that we're going to constantly position GoDaddy to attract a customer that has a broader set of intents, and that's really important to our financial model. Because when we attract a customer that maybe wants a really low-priced domain, that customer's gonna get that, and they likely churn in the next year. But what we're attracting much more of it is a customer that has a much broader intent, and they attach more products, right? When they attach products, for the most part, they're attaching applications and commerce products. These are higher-margin products, and they result to higher LTV for GoDaddy, right? That's the customer that we want to attract. Now, that's evolved some of our long-standing merchandising practices. It's evolved some of our pricing strategies over the years that GoDaddy has had.
It's also evolved sort of how we allow or how we engage our customers and help them discover a much bigger breadth of our product. For example, I talked about Airo. When you buy a domain now and you land in the Airo experience, it builds out what we call nine cards for the customer. So the customer instantly sees the breadth of the GoDaddy product, right? That's the customer that we want to have. And definitely, you know, as we get past some of these divestitures... And what are the divestitures about? It's it's about focusing the company on the most important things.... Right? Having a clear idea of what is strategic, what is important, what do we want to hold onto the long term, and what do we think should not be part of the company? And you've seen us consistently do that.
In fact, even last quarter, we divested one of our businesses, and we've publicly said that, you know, we've shut down some products and businesses as well because we didn't feel those were strategic, given the strategy we have.
Got it. So as you're evolving here, and you know, the strategy is to drive greater attach and greater lifetime value, are you seeing any evidence so far that AI and the product set is doing that? And maybe another way to also think about it is how customers can scale on your platform, and it feels like there's more capabilities, and there's maybe a higher ceiling for the type of customer that can grow and scale with you over time versus maybe moving off to something else.
Yeah, look, at GoDaddy, we attract a lot of customers, and I wanna make sure it's clear, yes, you know, we're expanding ARPU, and ARPU has expanded. I think ARPU was 158 five years ago when I joined. It's over, you know, 200-plus today. You know, definitely we're expanding ARPU, but, you know, we get a ton of gross adds coming to us. A lot of customers come to GoDaddy, and, you know, we convert at a higher and higher and higher rate, and, you know, I would say industry-wide or from what I've seen before, at good rates. So we expect the customers to grow, but what we expect is those customers to be exposed to more products, and we measure that in a three-step process. The first is discovery, the second is engagement, and the third is monetization, right?
So we have... And we've shared some metrics. For example, for Airo last quarter, we shared that over 1 million customers discovered Airo, which means they bought a domain name, and they landed on an experience and saw something or engaged with something briefly that allowed us to say, "Okay, we know this customer saw more than just a domain name," right? The second step is engagement. Engagement means they clicked through on something and actually tried one of the other capabilities. They haven't paid yet. They've just engaged with it, and we shared over 500,000 customers engaged with one of the Airo cards, right? That's a nice big number that tells you that people are engaging with these AI capabilities, that there's a surprise and delight element for customers that, "Oh, my God, I didn't realize this was created for me," right?
And then the third step is monetization, and we're starting to see, you know, some early green shoots in monetization. Now, you know, a lot of our monetization comes at renewal, so we have to get through sort of the one-year cycle, but we have put up some new paywalls within the Airo experience, and we're seeing some really good traction on it. Again, one public data point that we shared at earnings is that we're seeing much higher free-to-paid conversion for websites. So customers starting with just a coming soon page or, you know, starting out in a manner where they haven't paid for a plan but getting exposed to AI, creating something for them, engaging with it, and then transitioning into a paid plan.
Got it. So with Airo, again, you mentioned it's on your financials. It's still early. You're starting to see some signs of conversion and on the monetization side. If we again sat back here, you know, next year, you said Airo would be one of the things you'd be looking for. So what does that conversion or monetization look like? You talked about the free to paid, but you also talked about the AI cards. Where do you think about the strategy around the monetization for Airo and more broadly?
Yeah, the biggest opportunity in front of GoDaddy is the existing customer base. It's the 21 million customers and helping them discover what Go—the breadth of what GoDaddy has to offer, getting them engaged with it, and getting back to monetization, right? Even though we do very well with new customers, and the metrics we shared are about new customers, right, the real large opportunity is the base, and we have a history of being able to go into the base and cross-sell other products. We did that very successfully with the Productivity suite. We're doing it very successfully with Commerce, which may, you know, a lot of people see as a much more complicated tool set to sell within the base, but we've done that very successfully, grown GPV very successfully.
Now we look at these new opportunities with Airo and say, "We can absolutely take this into the base as well." So that's the larger opportunity. In terms of the specifics of the monetization, it will come in the form of paywalls. It will come in the form of renewals. It will come in the form of new products, like the Websites + Marketing you talked about, too, that will lead to a certain amount of upsell.
Okay, great. So you mentioned Commerce, so let's dig into Commerce a little bit more. That's been a big initiative for you. I remember since you joined, to build out the Commerce side, and you've done a lot there. I think Commerce grew over 50% year over year in 2Q. Can you talk about the growth drivers there? You know, what's driving that up 50%, whether it's payments in GPV or new products?
Yeah. For the most part, I think in the first half of the year, we're still continuing to grow GPV at a fast pace, and that's led to the great results. But let's just take a step back, make sure we understand the core drivers there. For us, Commerce and payments is about building a solution set that works for our customer. Again, I described that customer. This is a customer that typically has ten employees or less. This is a customer that is resilient. This is a customer that has a lot of internal drive but may not be technically sophisticated, so needs tools to work in a really intuitive manner, right? What... How do we approach that customer? Typically, that customer already has a fantastic relationship with GoDaddy.
We are not going out and trying to find new folks for Commerce or payments. We are really approaching our existing customers. Again, we have a large base, and they have affinity to work with us. What we're offering them is a one-stop shop, right? The ability for them to have a very transparent experience that allows them to have a set of services that work very well for them, that are designed for them, and we offer it at a very competitive price point. That's been the very simple formula to grow the Commerce business. And the priority that we added this year is that we said, you know, it's fantastic that we're doing this, but we also want to move towards higher-margin commerce products.
And that includes a couple of the recent product launches that we did, where we have a couple, one for retail and one for services, where the customer's not just buying a payment solution or, you know, some functionality that might exist on the site to track their transactions. They're actually buying into a catalog experience. They're actually buying into an experience that does a bit more for them. It might be invoicing, it might be catalog management, and that leads to higher margin, you know, higher-margin products for GoDaddy. So while that's still very early, and we've only launched those products in the last couple of months, right? That's truly an omnicommerce solution driven designed for that customer in mind, for that very, very small customer in mind, and that's what we're excited about.
That's going to sort of continue to drive growth for us over the next couple of years.
Okay. I think one of the questions we get a lot on is on your commerce mix. I know you talked about your core customer being, you know, that kind of microbusiness.
Mm-hmm.
What's the mix between, let's say, physical commerce, services? What's the kind of broad range of the type of customer that you're servicing, particularly around the commerce point?
Yeah, you know, at the base of GoDaddy customers, we lean more towards services than we do towards product sellers as a base. But sort of the specifics of who we've sold commerce into today or payments into, it's a very small percentage of our customers. So I think segmenting that, it's a bit too early. But you can see by our product launches where, you know, we brought forward a retail product and a services product. The reason both came at the same time is because we have. We lean more towards services, and we wanna make sure, you know, services can be smaller than product sellers very often, but again, it's not a very large percentage, but it's the larger percentage of our customers.
I got it, and at the Investor Day, you showcased a lot of commerce capabilities with Airo.
Yes.
How much, how much of Airo is expected to kind of be the driver of the commerce growth?
So one, we're very excited about all of that functionality. I think we got a lot of good feedback on it. All of that is live today, so our customers are actually experiencing the things that we showed you in February, which is fantastic. In terms of Airo driving commerce growth, of course, Airo showcases commerce very early on. You buy a domain name, it automatically creates a pay link, adds a card for you on that. But in our forecasts, we're focused on our core commerce and payments motion. We're not... You know, again, Airo sort of sits separate from our financials, and again, we're very excited about it. We think it's a fantastic opportunity. I hope to talk about it, you know, for years to come. But right now, you know, Airo does a small part for commerce and others.
Got it, so it's all upside?
You know, you remember my chart, you know, about some green bars and a gray one?
Yeah.
Gray one's on the right, saying that's upside.
Got it. Okay, so all this boils down to, or most of it, I guess, boils down to the applications of commerce segment, right? We're seeing results there, went from mid double digits bookings growth to accelerated to mid-20s in 2Q. We've got some tougher comps in the back half. We'll talk about that, but within that acceleration, there are a number of components, and you-
Yeah
... talked about them, but pricing and bundling are two of those. Can we just talk about the components of the A&C segment? You also mentioned they're all growing double digits, but any more insight into that, and then I want to dig into the bundling and pricing strategy, too.
Yeah. In the applications and commerce segment, obviously, productivity, the presence solutions, and the commerce solution are the core components, right? All of those in the first half of the year grew the bookings double digits. So, you know, really happy with the progress in that segment. To give a little bit more color on the pricing and bundling, which again, I will just stress that is one program together, right? I would encourage folks to not think of it separately. The reason we put it together is that the approach to pricing here is about giving greater value to the customer. It's about bundling something for them that gives them value that gets recognized by them, and then pricing based on that value that you've delivered, right? So it's a little bit different approach.
That's why we talk about it together. So that pricing and bundling initiative is basically a set of capabilities that allows us to do the bundling and then be able to price those bundles in a different way. And when we do that, we tend to target certain sets of customers, you know, in terms of cohorts, who have certain products. And this year, our focus was on the productivity solutions, and that's one of the reasons that we see this as a multi-year initiative, because we want to take that same capability and focus it on other cohorts or customers that have other products with us.
So that's what we expect to talk about over the next year and so on, is that, you know, what the growth you're seeing today, and yes, you're right, we have some tough comps coming up in the second half of the year. Applications and commerce grew bookings 23% in the first half of the year, and the comp gets about five points harder in the second half of the year. So, you know, we definitely have a little bit tougher comps, but still, really good growth in applications and commerce. You know, really, you know, really a big contributor to our formula as a company.
Got it. So five points harder on the second half, collectively?
Yep.
Okay, got it. That's good to know, 'cause that was a... That's been a big question-
Okay
... coming out of earnings. So seeing the acceleration and the concern from investors as we get to the tougher comps, bookings could slow on that.... You're not giving guidance for the second half on bookings, but what you're saying is there's a lot of these initiatives are still really early?
Yeah, and I think the main thing is that when I hear some of the questions, I think what we're trying to communicate back is that these are not one quarter or one-year initiatives, that these are multi-year initiatives that are designed to, you know, be more than the year, basically. So-
Okay.
You know, yes, they're a bit tougher comps, but again, still very good continued growth for NC.
Got it, okay. Maybe just to dig into the pricing and bundling a little bit more. What you've talked about so far, again, it's early, but it was just on the productivity side, correct? And it was, I think you guys, you described it as email, or-
Mm-hmm
... attaching security to email. Is that really all that it's been on the bundling side, or is there more? Can you talk about what might be next, maybe on the commerce side, or anything else you could share on that?
There are two or three things that are in flight this year, but what we pointed to was the largest contributor, right? What we wanted to indicate is that, hey, a lot of, you know, what's leading the path to growth is the productivity solution and pricing and bundling initiative on productivity solutions. But it, you know, we've actually been working on other parts of the product suite and customer cohorts as well, and there's a set of, you know, exciting opportunities that we have, but I haven't talked about them yet.
Right.
We'll wait-
It's a public-
This is for next year.
It's a public forum. You could technically talk about it here.
You know, fantastic. I'm excited about the next things that are coming up.
Okay. Great, okay. Again, Airo, that's not really a contributor now, and can start to kick in over time later this year, next year on the bundling side too? Or is that mostly a conversion factor?
Airo has within it components for conversion. Airo has components that are upsell and attach, and Airo has components that hit on renewal, right? Again, the timeline, you know, of when it hits and so on, the way to understand that is that, you know, while it's fantastic to have all this engagement with new customers and expose Airo to a million customers, you know, at the core of it, new is still a smaller portion of our business, right? Our business really sings when we get things into the base and starts to do very well. So that's what we're working on. You know, we have launched Airo to our entire customer base in terms of it's available to them, they can see it.
Is that, is that global?
It's in most countries now, and it's going into another double-digit set of countries as we talk, right? It's just rolling out all through the quarter, but all major markets are English-speaking markets. Airo's already available also in other languages. It's already available. But getting it launched is the first step. You really have to work hard for the discovery and the engagement, right? We want this large base of customers to re-engage with these products, and we again have a path to doing that. We've done it before, but it takes a little bit of time to do it. Once we have line of sight to that, we will talk about it.
Okay.
Right? Once we, I think Mark likes to say, you know, "We call it as we see it," and I like that statement from him. You know, as we, as we get line of sight to it, we'll talk to you about it.
Okay. Maybe shifting on the care side and operational efficiency with GenAI.
Mm-hmm.
You guys have talked about Gabby as an assistant to your care team, and your care team has always been very critical to you. Can you talk about the efficiencies that you're driving there, and how that's helping, whether it's the margins or the top line?
Yeah, so, Gabby is a tool that is focused on making our guides, the people who answer the phone and answer the texts at GoDaddy, making them much, much better, right? Because our customer does need human interaction, and It's been part of our core competencies for a long time. It's a competitive advantage for the company, right? Folks call GoDaddy or will text GoDaddy, and GoDaddy will do a such an amazing job that we have a transactional NPS greater than 65. That, that is a great asset for the company, and what we wanted to do is we want to continue to scale it, and our simple mantra there is, we want to provide a better service at a lower cost, and Gabby helps us do that, right?
Gabby helps every guide do things faster, do them better, have the collective intelligence available to them. Some of the simple things Gabby has started with is that Gabby can do escalations for you, Gabby can do call notes for you. It can do it in 60 languages, right? Gabby can translate things quickly. But what is really happening in the background is that Gabby's learning from thousands of guides using Gabby. Gabby's learning from the transcripts of the different calls we have, and we have millions of customer touch points a year, right? That's what we're really building. Yes, you know, we expect to meet our goal, which is a better experience for the customer at a lower cost.
And if you look over the last few years, you know, even as the business has grown, right, care costs have been leveraged, right? And we're providing better and better service. Our NPS has gone up over the last four years, not down, so, and gone up appreciably.
Okay, great. We'll come back to the margins. Just on product a little bit more. Your Managed WordPress products have been maybe a little under the radar the last few quarters. We've talked so much about Airo. Can you give us an update on what's going on with Managed WordPress? Does Airo help that there too? Is the professional side benefiting from a lot of these products as well?
Yeah. Managed WordPress is again an exciting product. It's one of the things that has grown double digits booking, so you know, it's not sort of falling behind others by any stretch of the imagination. But it's a product that we've done a lot of work on to really take it to a bigger customer, right? Our managed WordPress instance, again, was like a starter SKU. You start out with GoDaddy, and then if you wanted something much more complex, you usually would go to somebody else. But today, our managed WordPress offering is sort of competitive with the best out there, and we're really, really happy with that. And the way we've signaled that or shared that externally is that we've said that our retention rates continue to improve, right?
'Cause more and more customers start with GoDaddy, staying with GoDaddy on Managed WordPress. Now, that's, that's really, really good, right? Now, where do we want to go next with it? The biggest thing Airo is bringing to Managed WordPress is, yes, you know, we have auto content generation, which we have in Websites + Marketing, too, and, and that's live. But one of the most exciting capabilities is what we call Site Optimizer. This is an Airo capability that sort of reads the customer's website and then gives them specific actions that they can do to improve their website. So it might tell a customer and say, "This is the title tag," or, "These are your heading tags across your website. You should change them to these words, and if you change it, it'll rank higher in SEO," right?
That's pretty magical for our customers to be able to get that, that insight right away. But Site Optimizer goes one step further. Site Optimizer gives them a button. If they click it, it does it for them, right? This is game-changing innovation in managed WordPress. There's no other WordPress provider that I'm aware of that is doing this. This is live with our customers today. You can go to our site and actually experience this, and that's what we're taking out to the WordCamps and other places, is to talk about this new capability that takes this amazing, amazing tool called WordPress, and one of its challenges is that it's very complicated, and it makes it simpler.
It makes it simpler so that people can more easily not just realize what they have to change, but actually the tool doing it for them, right? So give it, give it a shot. Try it out. This really is a magical experience.
On that point, does it become competitive then with your own website builder if you're making WordPress so much easier, or is that not how you look at it?
You know, when we look at the customer base, we see some overlap between captive site builders and WordPress, but there's also a massive community of designers and developers that use WordPress, right? WordPress is still the largest CMS in the world, has a massive following. Its one drawback is it's complicated. So I think doing things that save that designer-developer time, that save the customer time or effort, you know, is good, and I'm less concerned about our products being competitive and much more concerned about, is the customer getting what they need, right? 'Cause as long as the customer gets what they need, GoDaddy wins. You know, our fundamental formula in product, our fundamental formula in the execution is create value for the customer, transform it into shareholder value.
Whether that transformation comes through increase in conversion, in pricing, in renewal rates, all of those are vehicles to take value you created for the customer and turn it into shareholder value.
Got it. Okay. I think I'd be reluctant to not hit on domains a little bit more-
Sure
... given how it's, you know, legacy business and such a big part of the business overall. What's your philosophy around that? How should we think about that? Both for you guys, but in general, across the domain world, the total domain growth has been a little bit lower over the last year and a half. Still growing, but has been a little bit lower than it's been historically. How do you think about volume? And then there's been a lot of discussion around pricing and how do you think about both of those for your domain business, and as an on-ramp to the rest of the business?
Yeah, GoDaddy, still the largest domain registrar in the world, available in many, many, many markets, more TLDs than anyone else. Fantastic business. Love it, love the on-ramp it gives to GoDaddy, and we're doing so much with that on-ramp, right? You look at a lot of Airo is built around domain. It's... Yes, Airo works really well with our website solutions as well, but a lot of it is built around domains. I think the sort of pressure, or let's call it the trade-off between units and pricing, you know, these things ebb and flow, given our scale in the domains business. You know, we've continued to grow at a healthy rate, just doing so last quarter as well, and pretty happy with it, right? Very happy with the domains business overall.
I think, to say a little bit about where it's going, I think the simple statement for me is, you know, a domain's not just a domain anymore, right? People thought of domains as just something you bought, and maybe it was an address on the internet, and at GoDaddy, we're evolving the domain to be so much more. You know, over the last six months with Airo, customers buying a domain name are getting a website, right? They get a, even if it's single-page website, they actually get eight versions that they can choose from, that are all autogenerated. They can add a little bit of text or a tagline. 'Cause what the customer often wants is, you know, they want that experience, and the domain is just the starting point for them, right?
GoDaddy has the position where many, many customers start with us at that starting point. Like, when they have the idea, they come to GoDaddy. That's fantastic. You know, that makes me a huge, you know, fan of maintaining and extending our leadership in the domain space and evolving the domain to not just be a domain anymore, to, for, to be a lot more.
Got it. Great. We could open up to Q&A. There's three and a half minutes left if anyone has any questions. Otherwise, I could keep going. All right, it's still early. If anyone thinks of something, just raise your hand. And so maybe we'll shift to, in the last few minutes, margins and capital allocation. Let's start with margins.
Mm-hmm.
So again, you've, you know, last year, they were at 26%. You're targeting 33%. Can you talk about the drivers of that, maybe from here going forward? You've talked about as applications, commerce gets bigger, that's a higher margin business. We've also seen a lot of leverage around the cost base. Just how do we think about the progression of margins from here to your target?
Yeah, so we set out three-year targets, and, you know, they go to 33% in 2026. And Mark has laid it out, I think, quite well for us. This year, what we had said was in Q4 we would be at 31%, and, you know, we're well on our path to that. Feeling very good about not just 2024, but our three-year plan on margins. And I think, again, you know, of course, the past is not always a perfect determinant of the future, but if you look back over the last four, five years, we've grown margin 700 basis points. So it. You know, it's not something new to us.
I'm not sitting here saying, "Oh, we have to try this, we have to try that." You know, we have a way of being able to grow the business and grow margins and very specific initiatives against it. So feel quite comfortable where we are. In terms of the drivers of the margin, definitely applications and commerce, which are strategies to grow applications and commerce. It growing, it's a higher margin segment. It shifts the margin profile as it grows and becomes a bigger part of the whole. We also have a much more sort of global talent philosophy. We're hiring in different parts of the world. We're also using tooling and capability in other parts of the world.
Examples are things like Gabby, that allow us to be more productive with different talent pools than we might have been previously, and that gives us a tailwind in terms of leverage as well. And then just fundamentally across the infrastructure of the company, that we feel there's some continued leverage opportunity there. As we continue to grow the business in a very efficient manner, it sort of automatically leverages. So those are the three big drivers. Yes?
Just wait for the mic, yeah.
Hi, Valerie Grant with Nuveen. So, even though you're, you're B2B, what are you seeing in terms of the macroeconomic environment? Because it seems like your customer base is that, you know, the interface between a, an individual and a business, and so given necessity or, opportunity, how is entrepreneurship looking given the macroeconomic environment for you?
Yeah, we are a cross between a B2C and a B2B, and our brand is like a B2C brand for folks, and what I'll say about the macro for the first half of the year is we continue to see strength in our customer base. Even our latest survey shows that our customer is very bullish about their own business, but to your point, they have to be. They've got to put food on the table, right? But we see them, like, in the surveys, they're actually stronger and they feel stronger about the future than they did, let's say, last year. Now, there's a lot of unknown, especially in the U.S. with the election, and so you can never quite call it, so we watch it carefully, but so far, the customer, our customer has continued to be resilient, and they're...
Historically, GoDaddy's business, you know, even the years we've been public, even with the macro going up and down, it's been a more durable, stable business. 'Cause at the end of the day, you know, it's we sell a product that is very low price for the customer, but generates a lot of value for the customer, right? Like, often, the statement sometimes we'll make is that what would it take for you to let go of your domain name? That's $20-some a year, right? That's probably the last thing or your website before that, right, so really, in the grand scheme of things, our customer is partnered with us on something that's really important to them that we charge quite little for compared to the value that they get.
Great. Thanks, Aman, and that's all our time. Thanks
Thank you, everyone. Thanks for having me here.