In a good or bad economy, small-business owners have a place
to turn to for their Web and marketing needs atWeb.com (
The Jacksonville, Fla.-based firm helps small businesses
establish, maintain, promote and optimize their Web presence at
an affordable price.
It does so by providing bundled "do-it-for-me" services, such
as eWorks! XL and Gorilla Marketing, as well as stand-alone and
It holds the small business owner's hand from its initial
interview, through the design and creation of the website, and
all the way to promoting the site and giving continued support on
"It's both a new business opportunity, and it's also a
low-cost advertising solution," Web.com Chairman, President and
CEO David Brown said.
"So in bad economic times, people either gravitate to it
because of the lower-cost solution, or they gravitate to it
because they may have been laid off, or they may be looking for
ways to supplement their income. So we're benefiting in (all) of
those areas," he noted.
Web.com has 3 million subscribers and 99% of its revenue comes
from subscription services. It also counts 9 million domains
The company is positioned to benefit from the mass-adoption of
the Internet and from several fast-growing multibillion-dollar
Those include mobile advertising, social media, online
advertising, hosting and domain registration with projected
annual growth rates of 43%, 32%, 13%, 10% and 18%, respectively,
according to various sources.
"We're at the very early stage of mass-adoption," said Brown.
"What we see today is very low penetration of Internet products
amongst small businesses, other than websites."
A little less than half of the small-business market has a
website. Analysts estimate that the addressable target market
includes 19 million businesses with fewer than 20 employees in
the U.S., a sweet spot for Web.com.
"If you go beyond the website and you look at things like
online marketing campaigns or search engine optimization or
e-commerce orFacebook (
) or mobile or video, those are all in the single-digit
penetration levels and we're seeing very fast growth in those
categories," Brown said.
Web.com has grown organically as well as via acquisitions. In
2010, it bought Register.com, which added a complementary
business opportunity with 2.5 million domain names under
Last year, it acquired Network Solutions, adding 2 million
subscribers to Web.com. While the average revenue per user, or
ARPU, is lower in the companies acquired, it gives Web.com a
tremendous opportunity to cross-sell its products and services
through its deep purchase funnel.
"When they bought Network Solutions, they acquired 2 million
subs," said David Hilal, director of research at FBR Capital
Markets & Co. "So they now have this huge ocean to go fishing
and to bring the fish into the net by selling them higher-ARPU
services. So the opportunity now is as big as it's ever been
because of that transformative acquisition they've made."
In addition, its annual average monthly churn, or the amount
of subscribers dropping out, has dropped to 1.5% in 2011, from
2.2% in 2010 and 3.6% in 2009.
What does Web.com's competition look like and what are the
"There's competition for small businesses to build a website,
but they (Web.com) stand out because they have a very affordable,
turnkey solution for small businesses," said Hilal.
"Today, a small business, if they want to get online, they've
got a few options," he added. "The biggest competition out there
is a lot of the do-it-yourself tools.
"The complication out there, it's not enough nowadays just to
create a website. You have to get found. You need to know how to
do search-engine optimization. So DIY tools don't allow you to do
it as robustly as their service does."
The other option for businesses is to go to agencies that can
build and optimize a website. But that can be pretty costly,
usually in the thousands of dollars.
Web.com's eWorks! XL bundle only costs $95 a month and
includes everything from the website design to professional
copywriting to domain name registration and hosting to marketing
and search engine optimization (SEO).
Another differentiating factor is the breadth of the product
offering at Web.com. This makes it a one-stop-shop for a customer
instead of paying for separate services at different
"We're the broadest product suite of anybody in the industry,"
Prior to the acquisitions, Register.com and Network Solutions
were losing 20,000 and 15,000 subscribers per quarter,
But the trends have reversed and in the first quarter, Web.com
grew its subscriber base by 1,600 for all combined entities. It
has also been experiencing continuous ARPU growth in the past
year and a half.
"Our average price (per subscriber) today is in the midteens,
but growing," said Brown. "Every quarter we've seen, for the last
six or seven quarters, strong, sequential ARPU growth in the 2%
to 4%. You will see our ARPU continue to grow as customers buy
more products from us."
Web.com is also increasing its marketing efforts. It's
expanding its branding program on major TV channels and recently
became the official sponsor of the PGA Tour.
Its total debt stood at $650 million last quarter. This was
primarily used for acquisitions. But the company already paid off
$30 million thanks to the healthy cash flow it generates. It
plans to continue with its deleveraging efforts.
The strong cash flow also gives it flexibility to make other
"You should expect to see us do more mergers and
acquisitions," said Brown. "I can't predict when, but I can tell
you that it's in our corporate DNA."