Web.com: Right Strategy, But Wrong (Shady) Tactics?

Web.com is a fast-growing (publicly traded:WWWW) behemoth in the small business web host/design/market space. About a year ago the company purchased Register.com (roughly doubling its size), and a few days ago it bought Network Solutions (tripling it on top of the previous acquisition).

Coincidentally, a critical piece was written at Mike Blumenthal’s local search blog regarding a Register.com advertisement last week. The article, and subsequent comments, describe a company using deceptive ads to gain customers on overpriced monthly contracts. So, what’s the real story with Web.com, Register.com, and now Network Solutions?

Web.com’s Strategy

From the annual report:

Using a consultative approach, Web.com offers small businesses a single point of entry to an array of effective, affordable online products and services that will help drive their business.

Sounds good. Many small companies need help online, and it is easier to work with one provider than trying to piece together web design, hosting, SEO, paid search, social, etc. Web.com discusses using its scale to keep prices low, which is obviously beneficial as well.

The Challenge

I’ve written previously about the challenges companies face in acquiring small business customers at a rate to keep Wall Street happy. Yodle and Reachlocal, two of the subjects of that article, have started buying companies for their customers (and the third, Yext, has refocused its strategy).

Web.com faces the same issue, selling products that are confusing for the target market. Plus the businesses they want to sell to have often been burned by online marketing scams, or are being overrun with sales people from daily deal providers.

The company does acquire customers through many channels, including cold calls, resellers, the whole gamut of online marketing, including affiliates (to whom they pay ~$100.00 for a new customer), and even a small local sales force. This all, however, pales in comparison to the number of customers they have acquired through acquisition.

How Web.com Grows

Acquisition

With Network Solutions, Web.com will service close to 3 million small businesses. This compares to around 1 million before the deal, and 300,000 before the Register.com purchase. They’ve grown their customer base about 10x through these deals.

Both Network Solutions and Register.com were focused on domain registrations and basic web hosting. Web.com can purchase these companies and sell its higher-priced, more complete online marketing solutions to drive revenue growth.

Aggressive Promotion

In order to find new customers, and to encourage upgrades from all those recently-purchased customers, Web.com aggressively promotes its “Do-It-For-You” service offerings. This is where the company has been receiving criticism.

Where Web.com Went Wrong (WWWW)

The previously-referenced article critical of Register.com primarily made fun of the fact that Register was offering “Google Places For Free!” – which the blog’s knowledgeable audience found laughable, since Google Places listings are always free.

Register.com is able to advertise this, because their Google Places service is normally $24.95/month. This is not ridiculous, as many small businesses do not want to manage a Google Places listing, and would be happy to pay someone to manage it. But Register.com is not particularly clear about the fact that these listings can easily be created by anyone.

Additional criticisms centered around the real value of the total package, which seems poor for any long-term customer. Although businesses avoid an upfront setup fee, the ongoing price of $94.95 per month is roughly three times what one might pay for web hosting, annual directory listings from the likes of Universal Business Listing, and the free Google Analytics – a setup that would largely mirror the ongoing help provided by Register.com.

Avoiding a setup fee is something any business would like to avoid, but this is for a small, template-based website, something which should be inexpensive to create. Register.com provides some basic content creation and SEO, but again, these are services which would cost very little to provide.

As icing on the cake, the charges are “$94.95 per month” – but fine print says this is billed every 4 weeks. Which would indicate a 13 month year. Plus they provide a 1-800 tracking number – which is all kinds of a problem for local search.

Conclusion

Web.com appears to have a good strategy. The need for a one-stop online marketing shop exists, and Web.com has created services that target this need. But the pricing seems high, and the marketing feels deceptive – which is unfortunate, given that Network Solutions’ huge customer base will certainly be seeing these offers in their inbox in the coming months.