Web presence firms ramp up ad spend as demand soars
GoDaddy and Wix spend more to capture demand surge during the pandemic.
It’s been a good year for service providers that help people establish a web presence. The COVID-19 pandemic has forced businesses to shift business online in whole or in part. From yoga instructors offering online instruction to restaurants adding online take-out ordering, businesses have flocked to firms like GoDaddy (NYSE: GDDY) and Wix (NASDAQ: WIX) for help.
GoDaddy has added more net paying clients (over 1 million) during the first three quarters of this year than it ever has during three quarters in its 23-year history. Collections (sales) at Wix were up 33% in Q2 2020 compared to Q2 2019.
These added sales aren’t purely organic, though. The firms are spending heavily on advertising to capture this fresh demand.
GoDaddy’s Q3 marketing and advertising spend was up 45% year over year to $115.4M. It was up 16% to $104.4 million in Q2.
Wix doesn’t note Q3 results until later this stretch. In Q2, the firm increased its buyout marketing spend by 90% year over year to $75 million.
This is paying dividends. Wix noted that it recouped $38 million of its Q2 buyout advertising in fresh sales through the end of that quarter. It expects people who signed up in Q2 to spend $570 million over their lifetime.
Increased advertising spend comes in two buckets.
One is somewhat natural: as more people search for ways to get their business online, the firms will pay more for Google ad clicks targeting relevant terms. The firms are also likely bidding more or expanding their ad budgets across other media.
Not all firms are following this track. Web.com, the parent firm of Network Solutions and Web.com, has seen a dramatic drop in fresh registrations this year. A likely explanation is that it has stopped advertising on Google for domain name related terms. It used to advertise low first-year prices (a couple of dollars for a .com) on search ads. I suspect that the increased bid prices weren’t delivering the ROI it hoped.
