In 1997 Bob Parsons founded a software development company to
build websites for customers. Twelve years later, Go Daddy.com had
established itself as a market leader - both in providing its core
services of internet domain registration and web hosting, but also
for its own risqué advertising strategies.
You don't have to be a NASCAR fan to know that Danica Patrick
plays a prominent role in the company's television ads. And reality
show junkies no doubt recognized "The Biggest Loser" host Jillian
Michaels when she began appearing in Go Daddy's commercials in
Go Daddy.com is an example of an internet business that enjoyed
tremendous growth over the past decade because of massive growth in
But investors can't buy this stock because it's not a public
company. It filed for an IPO in 2006, but subsequently canceled it.
Late 2010 reports, like this one from the
Wall Street Journal
, state the company might be worth upwards of $1.5 billion.
All is not lost however for small cap investors who want
exposure to growth in web development.
Two years after Mr. Parsons started his company, in 1999 Darian
Brannan started the website design company Website Pros, and began
offering services to companies looking to build and maintain a
presence online. The company grew quickly as a leader in its core
A $65 million investment from a venture consortium and a 2005
IPO and the company was off to the races. In 2007 it became
Web.com Group (Nasdaq: WWWW)
and currently has more than 275,000 subscribers. The company really
began drawing attention in 2010 when it made a key acquisition. At
the time the stock was trading around $3 when it announced the
purchase of Register.com - the largest privately held domain
registration and website design company - for $135 million.
Suddenly, investors noticed that the company was growing rapidly
- even without a race car driver like Danica Patrick out front
Now, the company is trading around $15.50 and has a market cap
of $407 million. It will report its first quarter results today
after the close.
Jim Cramer, of CNBC's Mad Money, was
asked about the stock on his show last
- he said he didn't know of it and would do some research to answer
the caller's question. If the company beats earnings this
afternoon, which are expected to come in around $0.21, I'll bet
he'll be getting a lot more calls on the stock.
Web.com Group's strength is servicing small businesses looking
to establish a Web presence. Bringing Register.com aboard broaden
ed its portfolio of services which now include domain name
registration, website design and publishing, i nternet marketing
and advertising, search engine optimization, logo design and even
call center services.
Many small businesses, which may have previously resisted
spending to develop a presence on the internet, are suddenly waking
up to this 21st century necessity. The meteoric rise of Groupon and
similar online deal delivery sites has encouraged many small
business owners to dish up their own offers to potential
This trend should help Web.com Group grow its business too.
Despite posting a loss in fiscal year 2010, Web.com Group
reported a strong fourth quarter with revenue increasing 43 percent
year-over-year. It's been profitable in some quarters, most
recently the fourth quarter of 2009 and the third quarter of 2010,
but has not yet linked together consistent profitable quarters.
The company's guidance calls for earnings in 2011 of around $1
per share. Naturally, this would be a big improvement over the
$0.26 per share loss 2010, and a full year of profitability would
most likely keep the stock's price trading higher.
Based on this forward guidance, the stock isn't expensive, with
shares trading around 14-times 2011 expected earnings.
It should be an interesting earnings release and conference call
this afternoon, even if it will (most likely) lack the
entertainment value of competitor Go Daddy.com's publicity