Comment by patio11 | Hacker News Reader

Comment by patio11 | Hacker News Reader

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Dirty little secret of the domain registration industry: all the money is in upsells to email, shared hosting, pre-rolled $30 a month shopping carts, etc. Domains themselves are cheap and fairly low margin.

You know who buys those comparatively expensive high-margin services? SMB owners and people planning to be one. Suffice it to say that Oprah is slightly more well-known than (pick a tech personage) in that demographic.

This is also why GoDaddy brands with supermodels rather than with "You'll love our automated tools to assist with SSL renewals." (Which, FWIW, are pretty good.)

P.S. Fun fact about GAAP revenue recognition which Bob Parsons hates with a burning passion: Suppose I spend $1,000 on domain purchases or renewals this year. How much revenue does GoDaddy book? Answer: $200 or so, because I renew for 5 years at a time, and they can only book a prorated amount of the $1k per day. The remaining $800 sits on their balance sheet as a liability. If they spend the corresponding cash prior to 2018, as an accounting matter, it looks like they are in debt to Kalzumeus Software. This is crazy to me as an operator, because I cannot ask for that money back and because I know that the carrying cost of my business to them is so close to zero as to be unmeasurable, but it makes the business look artificially over leveraged.

That fact of GAAP accounting actually makes sense. Suppose after 1 year, GoDaddy screws up and botches your registration. Your domain is permanently gone. Now GoDaddy owes you $800.

So yes, booking it as debt GoDaddy owes you which they pay down in services actually does make sense. It's extremely low risk debt, but debt nonetheless.

Thanks. Accounting isn't my thing at all. I recently heard that a previous employer of mine was begging staff to take some leave as all the leave on their books is somehow counted as a debt and it makes the books better if people burn off some of their accrued leave. People were forced to take 2-3 month holidays to clear their 10+ years of leave they had saved up. Quite how the workplace functioned with so many on leave at the same time is beyond me.

Prepaid services are technically a debt, but a very low risk one. In contrast, paid leave is a high risk liability - an employee with 4 months accrued leave can quit at any time and they are owed 4 months of pay when they do.

(I think the company can opt to pay out their 4 months of leave over the course of 4 months to smooth cash flow issues, but I'm not sure of this.)

Companies allocate money into a contra account (to the leave liability) each period (i.e. monthly) so that its all "accounting money". Otherwise companies would go bankrupt if too many staff took leave at a time.

That is while staff with large leave balances look bad, they don't effect the profitability of the organisation.

In that case there is something I don't understand. If the company has a debt and an offsetting asset pegged specifically to that use, why does it look bad?

If anything, that should look good: "we owe $X to employees at 0bps interest and we have $X in the bank at 40bps."

It looks bad because they have a large liability on there balance sheet. Also you have to remember that your leave entitlement stays the same if you get promoted/ pay rise so the organisation actually has to pay more then what they've offset

The employer I worked for operated under one of the 2 systems allowed by New Zealand law. Leave is accrued as a percentage of hours worked. Overtime and penal rates could have one of two effects. Either the hourly rate payed out when on leave was increased, or the amount of leave you got increased as you did more shifts, call etc. They did the latter. The odd bit was that you earned leave while on leave (which I supposed has to happen). So after I was paid out when I left, I wrote to them and asked if the 3 months leave owed entitled me to an extra percentage as I'd have earned leave while on leave had I taken it. They paid me. So I wrote again, and they paid me again. Obviously this had rapidly decreasing returns, but it struck me as rather funny.

>"This is crazy to me as an operator"

But they are in debt, they are in debt with their customers. What would be crazy is to recognise a 5 year service commitment as 1 year. This is no different from how the NYT, The Economist, National Geographic... account for the yearly subs. http://www.fasb.org/revenue_recognition.shtml

Imagine that GoDaddy is acquired by another company, and this other company wants to pivot GoDaddy's business into only hosting. The new owners need to recognise that there is cash in the balance sheet from domain registration services, a service that is yet to be offered. It could even be the case that that cash from domain registrations is no longer in the balance sheet, but has already been distributed as a dividend. If GoDaddy stops providing a service it has committed to, they have to pay back customers. Plain and simple. That to me is a liability, but it is not financial "leverage" or debt as you imply. This liability is noted as "Prepaid revenues" and hence not recognised as financial debt a.k.a leverage.

Let me tell you a dirty little Namecheap secret:

We're the company that most people go to because there aren't any upsells.

see you soon? ;)

I am currently at a cafe writing on my iPad, but given that you have just tapped me in the face with an Internet glove, I am going to walk back to my apartment so that I can access a machine which will let me do image editing. One moment please.

To assist you in identifying the parts of your company's checkout flow which are typically referred to as upsells, I have taken the liberty of taking a screenshot and highlighting them for you. The green highlights are what I expressed desire to buy, the red are the suggested upsells / cross-sells. Namecheap no-confirm opts me into one of them.

http://images1.bingocardcreator.com/blog-images/hn/i-found-y...

Steps to reproduce:

1) Go to Namecheap.com

2) Enter any arbitrary string in the central search box. I used "patio11testregistration." Trigger the search.

3) A list of domains pops up. The .com was available (fancy that) so I clicked Add To Cart then View Cart.

4) The screenshotted web page pops up. I reduced to 50% screen resolution to get it all on one page, and cropped to only show the central column, then added the green/red highlighting and my comments. It is otherwise unedited and had no user input applied to it.

I was so hoping for a reply to this... I guess it was too much of a slam-dunk.

As others have said this GAAP/FASB principle makes sense. The only thing I'll add is that you mentioned not being able to ask for that money back. The accounting activity involved in a refund of prepaid liabilities would be to reduce both their cash and their prepaid liabilities. This would be a perfectly sensible transaction, so GoDaddy could certainly accommodate this from an accounting perspective.

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