Aftermarket for domains propels the Core Platform segment to higher-than-expected revenue.
Revenue from GoDaddy’s (NYSE:GDDY) Core Platform segment grew more than expected last quarter, and the company credits the secondary market with better-than-expected results.
In prepared remarks on the investor conference call yesterday, GoDaddy CFO Mark McCaffrey said:
Core platform revenue, which includes domains, hosting and security products, grew 9% year-over-year, beating our February guide, with 40% of the increase being due to the secondary market. ARR for Core Platform increased 5% year-over-year to $2.2 billion. As a reminder, the performance of the secondary market does not affect the ARR.
Secondary market sales are non-recurring and therefore do not add recurring revenue.
The secondary market has become a larger percentage of GoDaddy’s sales over time. They were a single-digit percentage of revenue in 2018 and reached 10% in 2021.
There are a few factors at play here. First, GoDaddy acquired its own domains for sale. When he sells these domains, he reserves 100% of the revenue rather than the commission from the sale of someone else’s domain. Second, it has made it easier for people to sell their domains on its secondary market platform. More inventory equals more sales. Finally, domain values have increased.
And then, of course, there are higher bidding prices on GoDaddy Auctions.
During analyst Q&A, McCaffrey noted growth in both volume and average prices. He said there was “widespread momentum” in the secondary market.
Higher sale prices could help the secondary market counter the decline in overall demand for new domains.