GoDaddy (GDDY) To Acquire Marketing Platform Main Street Hub

GoDaddy Inc. (NYSE:GDDY) recently announced that it will acquire Main Street Hub, a marketing platform that carries out social media marketing of small businesses, for $125 million in cash, including up to $50M in potential future earn outs.

The transaction was approved by GoDaddy’s board of directors and is expected to close in the later part of second-quarter 2018.

For now, Main Street Hub will continue to operate like it did before the acquisition and Main Street Hub’s co-CEOs and co-founders, Matt Stuart and Andrew Allison will assume leadership positions at GoDaddy. But the company doesn’t expect to realize the benefits of this acquisition anytime soon. This is probably the reason that its guidance for 2018 remains unchanged.

Notably, shares of GoDaddy have gained 52% in the past 12 months, outperforming the 50.4% rally of the industry it belongs to.

About Main Street Hub

Founded in 2010, Main Street Hub provides social media engagement services to small businesses. The company enhances online presence of small businesses by providing services like marketing automation, CRM, social media, reputation management and mobile, web and email marketing for a monthly fee from its customers.

Main Street Hub has a customer base of 10,000 small businesses, including the likes of restaurants, auto repair shops and others. These businesses generally do not have an online presence and the company, with the help of its team of photographers, writers, designers and marketers, creates and manages the content of these businesses' social media pages to help them acquire new customers.

How Main Street Hub Will Benefit GoDaddy

Following the completion of the deal, GoDaddy will integrate Main Street Hub's services into its own and offer them to its 17 million small business customers. This means that GoDaddy’s customers will soon be able to rely on a single platform for handling everything - business' website creation, email marketing and social media platforms.

According to Lauren Antonoff, senior vice president of Presence and Commerce at GoDaddy, the customer base of both the companies significantly overlaps, meaning that the customers who opt for GoDaddy’s services also use Main Street Hub’s.

Given this fact, offering combined services certainly presents a significant revenue generating opportunity. Plus, revenues from Main Street Hub’s services will be recurring in nature, which will lend stability to its revenue stream.

In a statement, Antonoff said, "GoDaddy's 17 million small business customers come to us because they know their online presence can help them reach their customers and grow their businesses, but even with the right tools, customers struggle to find the time or know-how to effectively manage their social media presence." Antonoff also added, "Joining forces with Main Street Hub better enables us to help our customers reach their goals, while saving them time and offering peace of mind."

Zacks Rank & Stocks to Consider

GoDaddy has a Zacks Rank #3 (Hold)

Some better-ranked stocks in the broader technology sector are STMicroelectronics N.V. (NYSE:STM) , SMART Global Holdings, Inc. (NASDAQ:SGH) and Mellanox Technologies, Ltd. (NASDAQ:MLNX) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

STMicroelectronics, SMART Global Holdings and Mellanox have a long-term expected earnings growth rate of 5%, 15% and 16%, respectively.

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