GoDaddy Acquires Neustar – Gets Into Registry Business (Updated)

GoDaddy is the largest domain name registrar in the world. The company sells domain name registrations on behalf of domain name registries such as Verisign (.com and .net), Donuts (.Ventures and .News), Google (.App and .New), Neustar (.Biz and .CO), and quite a few others. Up until today, GoDaddy has not gotten involved in the management of domain name registries, and has only sold domain names on behalf of registries.

This afternoon after the stock market closing bell, GoDaddy announced that it has reached a deal to acquire Neustar’s registry management business. Neustar is a privately held business that operates a variety of domain name extensions such as .NYC, .Biz, and .US, and the company also offers back-end management services for many other domain name extensions. According to the press release I received and published below, the Neustar Registry business includes the operation of or services to “more than 215 TLDs and approximately 12 million domains.” The new business unit will be called GoDaddy Registry.

I understand that the acquisition price for GoDaddy’s acquisition of Neustar’s registry business is not going to be publicly reported (see update below). It will be included in GoDaddy’s next quarterly report, but it will not be broken out individually. If GoDaddy makes any other acquisitions this quarter, we will likely never know the value of this deal.

There is certainly synergy between these companies. Like GoDaddy’s domain name registrar business, the registry business provides a steady revenue stream with higher profit margins than the registrar would typically provide. The company is also well positioned to bring more premium domain names in various extensions to market like it did when it acquired a portfolio of premium one word and acronym .CO domain names a couple of years ago.

GoDaddy is in an interesting position because of the potential that competing registries or registrars might express concern about competition. GoDaddy could theoretically offer special discounts to favor its own extensions. It would also be in a position to give more exposure in the registration or aftermarket purchase streams.

To that end, the company has pledged that it will not do this. According to the press release, “GoDaddy will strictly adhere to a governance model that maintains independence between the GoDaddy registry and registrar businesses.” When I spoke with company representatives today, I was told there is a four part governance model that would be adhered to, including the following mandates:

• No sharing information or data that could give away competitive information, which GoDaddy already does with its registrar relationships at Afternic
• The GoDaddy Registry can not show any preference to the GoDaddy registrar. For instance, any special offers must be made to all registrar partners.
• The business performance of the registry and registrar will be managed completely separately.
• GoDaddy will create some new functions to ensure compliance with these mandates.

It will be interesting to see how GoDaddy approaches other registry acquisitions in the future. I would imagine there are other registries that could be acquired for the right price, and now that GoDaddy is in the registry business, that could boost valuations as it competes against other funded registries like Donuts or Verisign. In light of this acquisition, I found it interesting that GoDaddy did not acquire the Uniregistry registry when it made its acquisition of Uniregistry and Name Administration.

It will also be interesting to see how GoDaddy approaches subsequent new gTLD application rounds. With a large financing capacity (as well as considerable access to capital markets), GoDaddy could pretty much apply for and compete to win new extensions as it wishes.

This is a smart strategic acquisition for GoDaddy, and it will be interesting to see how this consolidation plays out. Prior to publication of this news (at 3:30pm today), GoDaddy stock (GDDY on the NYSE) was trading up more than 12% at $58.71.

Update: On May 6th, GoDaddy reported its Q1 2020 earnings. In the quarterly report, the company revealed the acquisition price for the Neustar registry business is $218 million.

Press release is below:

GoDaddy Acquires Neustar’s Registry Business

Furthers GoDaddy’s Commitment to Investing in the Infrastructure of the Internet to Deliver
Great Customer Experiences Punctuated by Speed, Security and Reliability

SCOTTSDALE, Ariz., April 6, 2020 /PRNewswire/ – GoDaddy Inc. (NYSE: GDDY), the company that empowers everyday entrepreneurs, today announced it is acquiring Neustar Inc’s Registry business. Financial details of the transaction were not disclosed. The deal is expected to close in Q2 2020.
The Neustar Registry business features a high-performance backend registry technology platform and enhanced domain security systems that enable people and brands to seamlessly connect and transact online with speed, security and reliability.

“GoDaddy is committed to helping everyday entrepreneurs bring their ideas online with the best possible domain name choices,” said GoDaddy Chief Operating Officer Andrew Low Ah Kee. “Neustar’s registry platform enables us to accelerate that commitment and provides enhanced scalability for future growth. For more than two decades, GoDaddy has used its consumer insight to drive innovation in the domain industry and we’ll continue to do so by creating more choice and value for consumers.”

The new service will be called GoDaddy Registry and will be led by Nicolai Bezsonoff, currently Senior Vice President and General Manager of Neustar’s Registry business. As part of the transaction, GoDaddy will strictly adhere to a governance model that maintains independence between the GoDaddy registry and registrar businesses. GoDaddy has worked closely with both registrars and registries for more than 20 years to help grow a healthy and competitive domains market and it will continue to do so for the benefit of consumers and the industry.

Commenting on the acquisition, Mr. Bezsonoff said, “Our team is thrilled to join the GoDaddy family. We share a strong history of partnership and collaboration with GoDaddy that spans two decades. Additionally, we have the same values, a common culture of innovation, and a mutual vision for empowering individuals, businesses and brands to succeed online.”

The Neustar Registry business includes an extensive portfolio of top-level domains, including .biz, .co, .in, .nyc and .us, and supports more than 215 TLDs and approximately 12 million domains. This includes its Managed Registry Services business that provides end-to-end registry management for over 130 brand TLDs and 70 generic TLDs.
Debevoise & Plimpton LLP acted as legal advisor to GoDaddy.

About GoDaddy
GoDaddy is empowering everyday entrepreneurs around the world by providing all of the help and tools to succeed online. With 19 million customers worldwide, GoDaddy is the place people come to name their idea, build a professional website, attract customers and manage their work. Our mission is to give our customers the tools, insights and the people to transform their ideas and personal initiative into success. To learn more about the company visit www.GoDaddy.com.

Source: GoDaddy Inc.