The Challenge of Classing Up Go Daddy

Every month, one standout Go Daddy employee puts on an apron and steps into the “cash machine.” The contraption looks something like a telephone booth, but its only function is to spray money at the person inside. The goal: Stuff as many flying, fluttering bills as possible into the apron pockets in 10 seconds. “Everybody gathers around to watch,” says Elizabeth Driscoll, a spokeswoman at Go Daddy, which helps businesses register domain names and run websites. “It’s pretty exciting.” When the whirlwind ends, participants usually exit with a few hundred bucks.

Wacky moments like this barely merit a mention next to the company’s long, sensational history of stunts. In the 15 years since its founding, Go Daddy has earned more than its fair share of press, much of it acid-tongued. There were the Super Bowl ads full of scantily clad women which brought charges of sexism. In 2011, video surfaced of founder Bob Parsons killing an African elephant, part of a regular series of expeditions he says help protect farmers’ crops from rampaging pachyderms. And late last year the company’s support for an antipiracy bill opposed by Google (GOOG), Twitter, and other Web giants earned the domain-name company the loathing of the Internet’s cognoscenti. Wikipedia founder Jimmy Wales called the stance “unacceptable” and switched his site to a different domain registrar.

Ross D. Franklin/AP PhotoGo Daddy founder Bob Parsons has courted controversy (elephant hunting, sexy ads) while showering his staff with perks

The litany of headline-grabbing moments made Go Daddy a household name in an industry few outside the IT sector care about. It’s been good for business, too: Sales reached $1.14 billion last year, up from $493 million five years ago. Private equity highfliers Kohlberg Kravis Roberts (KKR), Silver Lake, and Technology Crossover Ventures see the potential for even more upside. In July, they paid about $2.25 billion for a majority stake in Go Daddy, a deal that left Parsons fabulously wealthy and made millionaires of 35 employees.

The private equity types believe they can greatly increase the value of Go Daddy by expanding internationally and selling more services, such as data storage, to the companies with which Go Daddy already does business. The financiers, though, also have a reputation for axing people, hiking prices, and slashing costs. That reputation may not sit well with Go Daddy’s employees, patiently waiting for their turn in the cash machine, or its customers, who’ve come to expect high-touch service.

Change is good, says Warren Adelman, a nearly 10-year veteran of the company who took over the chief executive officer position from Parsons in December 2011. “We are synonymous with inexpensive domains and sexy girls,” Adelman says. “I think there is a different message we have to expose people to.”

In the years since Adelman joined, Go Daddy has come to play an important role in maintaining the Internet’s plumbing. More than 53 million domain names have been registered through Go Daddy, and it hosts websites for more than 5 million account holders. Despite its rogue public persona, Go Daddy has achieved a reputation for great service. Three-fifths of its 3,500 employees work in customer care, and it has won several awards for its service. Sign up for a Go Daddy account, and an actual human will call within a day to make sure everything is going smoothly. It’s the type of service you might expect from a company selling a $50,000 car rather than a $12.99 per year domain name.

None of that will change under private-equity ownership, insists Adelman. “We have resisted every attempt and suggestion from a consultant since the dawn of man to outsource customer care,” he says. “We don’t look at it as a cost center” but as a revenue generator, he adds, crediting customer-care reps with $250 million in sales last year from simply answering questions from potential customers. Go Daddy is in the midst of opening an Indian call center that will serve its customers on the subcontinent, and Adelman has a wry response for those who worry the move is a steppingstone to greater reliance on low-wage, overseas labor. “One day a year we might reroute the trunks so that the U.S. centers handle India,” Adelman says.

There will be changes, of course. The company will still air pricey ads during the Super Bowl and the Olympics, but Adelman says Go Daddy’s marketing will be less racy than in the past. “Go Daddy has been rare in its ability to attract attention,” says Adam Clammer, head of the technology group at KKR. “If we can attract attention but also layer in real content so that customers understand the whole package, then even better.”

The most ambitious projects underway at Go Daddy include increasing its international business and offering more sophisticated cloud-computing services. Go Daddy has about a dozen data centers around the globe. It wants to rent some of that storage and computing horsepower to customers. That would put it in competition with more technologically sophisticated companies like Amazon (AMZN), which leases its servers to technology titans such as Netflix (NFLX). Go Daddy sees itself becoming a hub for small to midsize businesses: They’ll buy their domain name from Go Daddy, later tack on some infrastructure services, and, one day, maybe even rent bookkeeping software or other products.

Melanie Posey, an analyst at the technology researcher IDC, credits GoDaddy with offering higher-profit services, but cautions that it’ll be tough to use customer care as a differentiator in these new markets. Cloud users tend to be very tech-savvy and are all about “automation and not really needing to leverage direct customer support,” she says.

Even under private equity’s culture of abstemiousness, the perks won’t disappear, says Adelman. For some all-star customer service reps, the company pays their mortgage for a time or sends them on trips around the world. Others go on holiday shopping sprees at Costco (COST). And yes, the cash machine will continue spitting out bills.

The bottom line: Go Daddy may become more sedate but remains committed to customer service as it focuses on growth overseas and cloud computing.

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Mark Shuttleworth, Open-Source Software's Sugar Daddy

(Expanded version of magazine story.)

Ten years ago, just ahead of a trip into space, Mark Shuttleworth took out an insurance policy on his reproductive future. “I put a couple swimmers on ice,” he says. “There was going to be a gamma ray source about a foot from my balls under my seat on the Soyuz. So I made a deposit in a secret location before I flew.”

Shuttleworth’s 10-day journey into space in 2002 on a Russian rocket, including a stay on the International Space Station, cost him $20 million. Only 28 at the time, the trip into orbit was a celebration for the South African, who had made about $600 million selling his Internet security company, Thawte, to Verisign (VRSN). Afterward he expanded his personal fortune with wise investments in Africa and generally lived, as he puts it, like a “gazillionaire bachelor astronaut” should.

He didn’t go full Tony Stark, but Shuttleworth did fly his jet to exciting locations, knock down a few drinks, and enjoy the company of women. Of late, though, he has settled down. “I’m a nerd again,” he says, while hunting for an O’Doul’s at a Giants game. (He’s gone the non-alcoholic route because he’s been feeling a bit of brain rot setting in and fears that booze will exacerbate the situation.)

In truth, Shuttleworth has been a nerd all along. He’s in the Bay Area this week to take part in a developer summit hosted by his current company, Canonical. Founded in 2004, Canonical makes Ubuntu, an operating system based on open-source Linux software. Shuttleworth’s lofty goal for Ubuntu is “to profoundly change the economics of software” and displace Microsoft’s (MSFT) Windows and Apple’s (AAPL) OS X with a free product. Fundamental software, such as operating systems, should be “like oxygen, and then you pay for those services on top of it that you engage with,” he says. Canonical follows this model, giving away its wares and making money by charging for technical support, custom engineering work, online storage, and file syncing.

Ubuntu has, in fairly short time, become the favored operating system of geekdom. Many software developers have it on their laptops, and tech companies run it on their data center servers. Google (GOOG) is the highest-profile customer, and thousands of its employees use a modified version called Goobuntu. A lot of the software’s success can be traced to Shuttleworth, who is exactly what the open-source world needs—a quixotic, wealthy guy willing to fund brutal, long-term wars against giants like Microsoft and Apple who also happens to have enough charm to interact well with non-geeks and enough technical cred to woo geeks.

Canonical strives to make Ubuntu easier to use and as pretty to look at as something that might come out of an Apple lab. The reality, though, is that Ubuntu has failed to achieve liftoff among the masses. (Next year about 18 million PCs, or 5 percent of the total market, should ship with Ubuntu preloaded, according to Shuttleworth.) And, about three years ago, Shuttleworth started putting more pressure on his staff to impress the average consumer. It was no longer good enough to assemble open-source work done by others and simply fix clunky menus. The staff at Canonical were asked to come up with innovations others had not thought of and drive Linux into new areas.

The most obvious thing to arrive from this push is the Unity interface that lets Ubuntu run as well on smartphones, TVs, and in cars as it does on PCs. “In hindsight, it may have been a fatal mistake not to go after this sooner,” admits Shuttleworth. Canonical has also devised a way to run Ubuntu on top of Android-based smartphones; plug the phone into a monitor, and up pops a fully fledged desktop operating system. Shuttleworth sees this as a big win for companies trying to manage a proliferating number of devices, since it allows a worker’s whole computing life—mobile and stationary—to be on a single machine. About 40 mobile operators have been looking at supporting the technology, he says.

The brightest spot for Canonical, though, may be in the cloud. About 70 percent of the servers running on public cloud computing systems such as Amazon.com’s (AMZN) EC2 rely on Ubuntu, according to third-party data obtained by Canonical. (Amazon declines to discuss such matters.) Ubuntu’s dominance in the cloud has placed it at the heart of the trend toward high-powered data analytics, says Shuttleworth, since such tasks require a ton of computers. He adds that many large companies have turned to Ubuntu to build their own internal cloud computing systems to keep costs down. The hope is that all of this activity translates into money for Canonical, which brought in less than $30 million in revenue in 2009, the last time Shuttleworth disclosed figures. “A company might spin up 5,000 servers to analyze a ton of data and never talk to us,” Shuttleworth says. “But eventually, an executive decides to make sure that all the servers are up to date and secure, and we get a call.”

While waiting for those calls, Shuttleworth is redecorating a pair of expensive Manhattan apartments—one for work and one for play. “It’s slow going because I am a bit fussy,” he says. “I want an indoor garden. I am at ease in a garden with things growing around me.” His main residence is on the Isle of Man, a tax haven off the coast of England, where he has plenty of rich-guy accoutrements: ducks, a stream, beehives, a nearby steam train.

Shuttleworth denies that he’s on the island just for the tax breaks. “I could have lived in Monaco,” he says. “But it’s beautiful here with the soft, rolling hills. The people are very independent. It is not a little England. It has the longest-standing democratically elected government in the world, and the people take that very seriously.”

Yet the bountiful surroundings have not persuaded Shuttleworth to crack open his stash of precious bodily fluids and start a family. “I’m not going to have kids,” says Shuttleworth, who has had a vasectomy. “I think things like the biological clock are nonsense. We make choices about what’s interesting in life. You have to pursue them out of courage and say, ‘this is interesting,’ and live with it. Most people let the dogma of life make decisions for them—things like kids and how they will devote their work hours. Most people just let those things happen to them. I take a different view.”

Shuttleworth insists that big missions—like his agenda to bring free software to the world—require total focus and unwavering commitment. “It feels a bit like climbing a mountain that no one has ever climbed and that has killed a bunch of people,” Shuttleworth says. “You are going to go through times where it feels like this thing has killed you, too. But, for better or worse, I see the mountain and need to climb it.”

The bottom line: Ubuntu will be on 5 percent of PCs this year but hasn’t caught on with consumers. In some data centers, though, it dominates.

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