Web.com Group Earns 'Net' Income
A dozen years ago, the owners of a website-services company summoned David Brown out of retirement to shut down the firm. Brown had other ideas.
Acquisitions have left Web.com with nearly $100 million in debt, but analysts say David Brown and his team are generating plenty of cash flow and are managing the growth effectively. [Photo: Jon M. Fletcher]
Since the merger, Brown has continued to drive growth through acquisitions, most significantly with last year's purchase of Register.com for $135 million. Register, one of the earliest domain-name companies, bumped Web.com's revenue up about 80% and quadrupled the customer count, pushing the firm near its million-subscriber milestone.
The acquisition also left Web.com carrying close to $100 million in debt; the company posted a loss in 2010. Sameet Sinha, a senior analyst specializing in internet companies at the San Francisco offices of B. Riley & Co., says that doesn't worry him because Web.com generates such significant cash flow. In Silicon Valley, David Brown and his team are viewed as "the conservative, button-down guys in an industry full of young guys who tend to blow hard," Sinha says. "They have managed growth, and they are paying off debt at an accelerated pace."
Sinha thinks Web.com is among the firms in its field best positioned to grab the internet's next gold ring — local advertising sales for small and medium-sized companies.
Trends bode well for Web.com, as America's 29 million small businesses watch their customers turn to the internet to decide where to eat dinner or which plumber to call. An American Express survey of small businesses this spring found 86% have a website and 36% plan to create or add to their site this year. Forty-four percent already use social media such as Facebook and Twitter; a third plan to add social media marketing in 2011.
Web.com is now focused on such networking and mobile apps. Its fastest-growing service is Facebook-site building to help companies with highly local social marketing. Keys to cash flow are monthly web-service subscription fees — the basic service runs $95 — and add-ons such as the Facebook product, which costs another $40 a month.
The past 12 years have taught Brown and Web.com's leaders that the internet is highly unpredictable — that today's platform may not be tomorrow's. With market share established, the challenge now is to make Web.com the go-to company for restaurateurs, plumbers and others who want to keep up with their customers' internet habits — even when those habits change.
The company's strategy is reflected in its hires; Web.com's sprawling, four-story office building on the south side of Jacksonville is filled not with techies, but liberal arts grads. "This is an art rather than a science," says Brown. "We hire people for character and for whether they can write well, and then it's very easy to train them on the technology side."
The company's offices are reminiscent of a newsroom. Former English majors and philosophy grads interview business owners by phone about what's most important on their website, then tap their keyboards to create snappy internet copy.
Sinha says that level of service helps give Web.com a particularly low churn rate — the percentage of customers who drop subscriptions is just 2%. "Our company is not about one brilliant idea — we didn't invent Facebook," says Brown, who majored in Persian studies, then ended up in a banking and technology career.
"Everything we do has to be built on the back of hard work and customer service."