You may wonder “How can GoDaddy offer you a .99 cent (or even cheaper domain name)?”
Since we’ve dealt with GoDaddy a few times recently, I will let you know 1) why this is possible and 2) how they make way more money from you on the other end.
Domains under $1 are a loss leader.
If you are a domain reseller (like GoDaddy or just about any other company you can buy a domain from), you can buy a domain for $8-10. Maybe if you are GoDaddy, Network Solutions, or some other large provider, maybe you can get them slightly cheaper for your bulk purchasing power. But $10 is a good general rule.
Because people/companies pay to be domain resellers (around $400/year I believe), they need to charge you a bit more than $10 to make up for paying this reseller fee, the time to help you buy the domain, etc. A company I use (Enom) charges $13.95. So Enom makes $4 on me when I buy a domain from them. This helps pay their reseller fee, their website support, and all that stuff.
What happens when GoDaddy charges 50 cents or 99 cents for a domain? They take a loss. I’ve even heard this acknowledged from someone who works there.
In the retail world, we have loss leaders. That means a product is advertised below cost to get bodies in a store (who ideally buy more things) and GoDaddy has taken this concept into the virtual world.
They make their money in the end, trust me.
The other day, we went to buy a SSL certificate for a client (we’re making them a donation form). We bought a $12.95 cent Geotrust one from Enom to use on their site. The organization uses GoDaddy for hosting so we went to install it. Clicking on SSL certificates kept taking us back to the account page so we called up GoDaddy. This was my conversation with the guy almost verbatim:
Me: Hi, I have this SSL I just bought elsewhere and I want to install it on my site… but clicking the SSL icon keeps taking me back to the homepage for the account. Am I just not looking in the right spot?
GD Guy: No you are. You can’t install a third party SSL on a GoDaddy site, you have to buy one of our SSLs.
Me: But yours cost $69 and I bought the one I need for $12 and I want to use it.
GD Guy: Sorry, that’s not possible. What’s the refund policy on the one you just bought?
Me: I don’t want to buy something for $69 when I can have it for $12.
GD Guy: Well if you look up ‘GoDaddy coupon codes’ in your web browser, you’ll find some crazy deals. Then just buy it at least for a few years to lock it in.
So there you go. Once you enter the GoDaddy ecosystem, you are kind of stuck there. And some of their solutions seem to cost more (sometimes substantially more like in this case) than other equivalent solutions I’ve seen on the open market.
You can think of the free domain as your hotel offering you ‘free’ WIFI or your wedding photographer offering you a ‘free’ 8×10 print. It is a gesture of goodwill you are indirectly paying for anyway.
If you want to be one of those people that buys domains from GoDaddy and immediately transfers them elsewhere, be my guest. I have friends who do it! But saving $10 means taking the time to apply for the transfer, approve it, etc. so I find just buying it at the right spot works for me.
So whenever you see a low price tag like Godaddy charges for domains, pause and think about why it’s so much cheaper than everything else. Reading online reviews, asking colleagues, and researching the company will tell you if it’s a deal… or something else.