My thoughts on Squarespace’s buyout of Google Domains

It could be a win for more than just Squarespace.

Squarespace made a surprise notice yesterday that it was buying Google Domains, Google’s domain name registrar, for $180 million.

Google Domains right now has regarding 10 million domains under management. Over half of those are .com domains, making Google the #5 registrar by .com domains under management.

Why is Squarespace making this move? And why did Google sell? We have limited information, but I’ll opine on these and other considerations.

What we know

Squarespace CEO Anthony Casalena was tight-lipped on an investor conference call yesterday evening. He declined to reveal the metrics that made Squarespace think this was a good deal.

But he stated the business by itself is a good one, and it was particularly attractive since of the opportunity to cross-sell website packages to existing Google Domains clients. He didn’t give any idea of how many clients he thinks will convert into Squarespace clients.

Another bonus is that Squarespace will be the exclusive registrar for domains purchased with Google Workspace subscriptions for the next three years when those subscriptions are purchased directly from Google.

Registrar comparison and cross-sell opportunity

Squarespace is by now a registrar. Casalena stated the firm manages millions of domains through its own accreditation and through reseller platforms.

As of three months ago (the latest available public data), Squarespace had regarding 850,000 .com domains under management.

Many of these domain clients bought a domain for their site package. All paid plans include a free domain for the first year, and these domains renew at regular prices following that.

Google Domains is a very different registrar. I’d argue it attracts three buckets of clients:

1. Techies
2. People who trust the Google name and are looking to register names. Google is the #1 search result for “domain names” on Google. As a Google employee told me once, “Of course we’re growing quickly. When people want to register a domain, Google is going to be a name they trust more than a domain registrar they’ve never heard of.”
3. People who buy Workspace packages and get a domain with it

The first group is the least likely to want to stick around with Squarespace. Squarespace caters to low-tech clients who can’t create a WordPress site or otherwise get online.

The second group gives Squarespace some upside potential. Their first introduction to Squarespace might be this migration. And when Google states, “Hey, we trust Squarespace,” many of these clients will likely stick around.

Of these groups, the third one is most similar to Squarespace’s typical client. They’re looking for an online presence and need to get a domain with their service package. I have to assume that people who have professional email addresses by now have a website, but maybe not.

There’s another big thing to consider when looking at how many clients will go along to Squarespace: Squarespace is an expensive domain registrar. It charges $20 per year minimum counting .com, much higher than Google’s $12 for most domains. Squarespace stated it will honor Google’s domain renewal prices for the next year. But it might have trouble retaining clients (especially those in group #1 above) if it increases fees from $12 to $20 a year.

I ought to note that Casalena acknowledged some clients will move their domains elsewhere.

Surprisingly, none of the analysts on the call yesterday asked how many unique clients are included, which is critical for analyzing Squarespace’s upside potential. One analyst stated that if 2.5% of Google Domains clients convert to paid subscribers at the $209 ARPU, then Squarespace will get $50M in added recurring revenue. This is false; a lot fewer than 10 million clients are holding those 10 million domains.

Why Google exited

Google has remained mum regarding its decision to sell the domains business, besides saying it’s streamlining its business.

Frankly, I was shocked when Google entered the business in 2014. At the time, Google wasn’t known for providing end user client support for products and services. And domain registrants are needy clients.

But since then, Google has added other paid services requiring support.

So why get rid of Google Domains now?

I’m not entirely sure. But I do know that managing a domain registrar is tricky. Commenting on Twitter yesterday, Namecheap CEO Richard Kirkendall noted that the domain business is hard:

The domain business is intricately hard. There are so many things you need to be on top of that require a lot of human resources counting support, dns abuse, trademark abuse, fraud etc etc. It was never going to make sense for them in the long run.

— Richard Kirkendall (@NamecheapCEO) June 15, 2023

Indeed, I wonder if making decisions around content and suspending domains put Google in a precarious position. Or, perhaps it was hoping for tangential benefits to being a domain registrar, and these didn’t materialize to the level it expected.

It’s also unclear how many firms Google shopped the business to. Namecheap is a top 5 registrar and wasn’t invited to the table.

Squarespace was by now a Google partner. Google referred people to its site builder, and Squarespace sold Google Workspace. Perhaps Google only pitched the deal to existing partners.

Other registrars must be thrilled

The stock market thinks Squarespace is a winner in this deal. Shares are up regarding 7% this morning.

But other domain registrars are also winners. For the past nine years, they’ve had to deal with a name-brand competitor plucking off a sizable number of potential clients. With Google out of the way, competitors can rejoice.