We’ve been chatting on LowEndTalk about how SquareSpace is buying Google’s domain names business.

Google setup shop as a domain registrar in 2014, and their product “exited Beta” in 2022.  Not sure why one of the biggest tech companies on the planet couldn’t get its product into a final form in 8 years when dozens of other tiny registrars were “production” on day one, but we’ll let that slide.

According to the press release, Google had “10 million domains hosted on Google Domains spread across millions of customers”, and SquareSpace is paying $180 million.  That’s $18 a domain.

The Math Ain’t Pretty

Here’s some basic math on domains.

Let’s use .net as an example.

Porkbun charges $11.48 per .net
NameCheap: $11.98
NameSilo: $11.79.
GoDaddy: $14.99
SquareSpace: $20.00

Total ICANN fees that the registrar pays are $10.67 per .net registration or renewal. That doesn’t include fixed fees, all the work to get setup, etc. but we’ll ignore those for the moment.

So on the face of it, SquareSpace is set to break even more or less on the first year of domain renewals for those 10 million domains, and then make bank from there out.

It may not go down like that.

First, the PR notes that SquareSpace committed to maintaining Google’s renewal pricing for the first year.  Google charges $12 for a .net as of today, so SquareSpace will make $1.33 per domain for the first year.  So right off the bat, we’ve moved payback out a bit.

Second, is SquareSpace paying cash?  Probably not.  According to their latest financials, they have about $230m on hand, but also $463 in debt and $107m in leases.  Their December 2022 report shows they lost $250m for the year.  Things have improved slightly – their TTM rate is $158m.  So I’m guessing cash is probably on the tight side, and they probably borrowed the $180m.

So then there’s interesting, which probably eliminates that first year’s $1.33 per domain, since that’s less than a 1% return on $180m.

But after that, they’re Scrooge McDuck, right?

Well…

Did SquareSpace Really Acquire New Customers?

The issue they’re going to face is that your typical SquareSpace customer isn’t your typical Google Domains customer.  People who pay $20/year for a .net at SquareSpace are doing so out of convenience or cluelessness.

Bob the small business owner needs a web site so he signs up at DreamHost, HostGator, or SquareSpace.  The domain cost is part of his package, at least in his mind.  He could DIY it together but Bob’s a landscaper, not a technology guy.  He wants an all-in-one easy solution.

I’m sure there are some Google Domains customers like that…maybe quite a few.  Those are people who want Gmail/Workspace and it’s easy to just use Google’s domain service when setting it up.

However, now SquareSpace is a third party.  If Bob has to go to a third party, maybe he’ll shop around.  Sure, there’s a lot of inertia.  Personally, I don’t switch registrars every year even if I could save 20 cents somewhere else.  But here Bob is going to have to learn a new interface and put his billing details in to a new site.  He’s also bound to notice that his renewal price has shot up from $12 to $20.

Or more.  No doubt by shelling out $180m, the bean counters are going to want a more generous payback than their current margins.  It’ll be very tempting for them to try to slip in another $1 or $2 per year.

Also, SquareSpace will be marketing all their other services (web hosting) to these new customers.  But how many will be interested?  People who signed up at Google Domains did so mainly because they’re  either Workspace customers or they picked Google as their registrar because of the name.  Either group already has web hosting (if they need it) somewhere else.  Moving a web site is a much bigger step than switching a registrar.

To Summarize

• Shelled out $18 per domain
• Locked into Google’s slimmer margin for the first year
• Paying interesting on that $180 million
• At renewal time, and just through natural decay, there will be fewer than 10 million.  Perhaps significantly fewer.
• Opportunity to cross-sell web services may be limited

SquareSpace paid a very high price to acquire these customers, but may not get the payback it’s hoping for.

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raindog308

Dread Lord of LowEnd Content at LowEndBox

I'm raindog308, techno polymath and long-time LowEndTalk community Administrator. My technical interests include all things Unix, perl, python, golang, shell scripting, vintage operating systems such as MVS, and relational database systems such as Oracle, PostgreSQL, and MySQL.

I also enjoy using LEBs! I have an empire of little guys for VPNs, larger guys for apps, and big guys for databases and storage. When I'm not in front a screen I'm into German Shepherd dogs, quality knives, target shooting, theology, tabletop roleplaying games, and forest hiking.

I enjoy writing technical articles here on LowEndBox to help people get more out of their systems. You can find me on LowEndTalk @raindog308

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