In a surprise move, GoDaddy is acquiring FreedomVoice of Greater San Diego, a former client and employer, for $42M plus $5M more for milestones. The CEO and his wife have been building it to sell since 2012. GoDaddy is getting a cloud phone product much like Grasshopper or Google Voice to upsell to its small business customers.
The cloud phone service is a good fit for selling domains, hosting and email to VSB (very small business with 1-5 employees).
This line in the press release cracks me up: "GoDaddy has 14 million customers and many of them have struggled to find affordable and simple telephony solutions," said Steven Aldrich, Chief Product Officer, GoDaddy. Really? There are approximately 2000 Hosted VoIP providers in the US. You can't get away from the adds from 8x8, RC, Vonage, MegaPath and others, so if GoDaddy's customers are struggling, well, that says something about the perception GoDaddy has of their customers.
GoDaddy hired a General Manager and Senior Vice President, Telephony. They must see it as a strategic product line. Or they figure since Intermedia.net bought 2 VoIP companies - Telanetix and AccessLine - that they should too.
One channel company thought this would position GoDaddy against Microsoft. Clearly, that editor has no idea. GoDaddy, other domian merchants and Vistaprint use upsell techniques to raise ARPU. Have you tried to buy a simple $10 business card product? Or a single domain? How many screens did you have to go through? Now one screen will offer a vanity toll-free number. Another will offer a cloud phone service. That isn't a position against Skype.
Also, GoDaddy acquired Apptix cloud business last year for $22.5M. "GoDaddy is one of Microsoft's largest Office 365 resellers".
Tucows, another domain merchant, launched Ting, an MVNO, in 2012. Ting is now in the fiber to the premise business as well in VA and NC.
Domains are a commodity business. GoDaddy went public in 2015, which means money is easy to get to buy some revenue. So here you go. They don't get a SIP Trunking business with FV, which means they won't be enabling Skype for a while. The Hosted Phone system platform was being re-worked when I last saw it in early 2013.
The PR says, "FreedomVoice products will continue to be available online and through partners. GoDaddy and FreedomVoice plan to deliver new cloud-based voice products in the near future." With changes like this, partners usually get wary. Acquisitions mean layoffs -- there is no other way to squeeze that $42M out of this VoIP business.
In other news, a company that just crossed my radar screen - Better Voice - was acquired by Inteliquent. Inteliquent used to be called Neutral Tandem, before they bought Tinet's network assets, re-branded, then later sold those very assets to GTT to re-focus on tandem switching. Now it is buying a cloud communications platform with an API to add to its Omni portfolio.
More M&A to come. Too many players and not enough market share for Hosted VoIP - probably because of the way it is sold, implemented and deployed.