Web.com Buys Network Solutions

Can a roll-up of marquee brands from the early days of the Web remain relevant in the age of cloud computing and social media? Web host and online marketing firm Web.com aims to find out. Web.com today said it would acquire hosting and domain provider Network Solutions in a deal valued at about $560 million.

Web.com is the successor to hosting pioneer Interland, and bought Register.com last year. In acquiring Network Solutions from private equity firm General Atlantic, Web.com emphasized the importance of scale as it attempts to compete with Go Daddy, the juggernaut in small business web services.

Cites Shift to Online Marketing

"The acquisition of Network Solutions immediately delivers enormous scale to Web.com and better enables us to capitalize on the significant shift from traditional marketing channels to online marketing as mass adoption by SMBs continues," said David Brown, Chairman and CEO of Web.com.

After its 2005 rebranding from Interland to Web.com, the company was bought by WebSitePros in 2007 in a deal that marked a shift to move beyond web hosting and offer online marketing services for small businesses. Today Web.com offers design services for Facebook pages as well as web sites.

"Small and mid-sized businesses are increasingly looking to leverage the growing adoption of online local search, social media and mobile devices to grow, and they need cost-and time-efficient help," said Brown. "Our combined organization will have far greater resources to market our end-to-end suite of solutions, in addition to using the power of a national brand for the first time in our history."

Acquisitions vs. Organic Growth

In its deals to buy Register.com and Network Solutions, Web.com (NASDAQ: WWWW) has acquired hundreds of thousands of additional customers for its hosting and marketing services. Once the NetSol deal closes this fall, the combined company will have approximately 3 million paying subscribers with more than 9 million domains under management.

But it is still dwarfed by Go Daddy, which has 9 million customers and manages 49 million domains, achieving that scale through organic growth, with almost no acquisitions. Small businesses seeking to build an online presence have also flocked to Facebook, Twitter and other social media platforms, further splintering the market for online marketing for SMBs.

NetSol's Long Legacy

The deal marks the latest change in ownership for Network Solutions, the Internet's original domain registrar. Network Solutions was founded in 1979 as a joint venture with the National Science Foundation and AT&T. In 1993 the company was awarded the exclusive contract to register domain names when the NSF outsourced the job. Two years later Network Solutions was bought by Science Applications International Corporation (SAIC), which took it public in 1997. In March 2000, SAIC sold Network Solutions to VeriSign for a reported $15.3 billion stock.

In 2003, VeriSign sold Network Solutions to investment firm Pivotal Private Equity/Najafi Companies, which paid $100 million for a controlling 85% stake. In 2007, General Atlantic bought NetSol for a reported $800 million.

With today's acquisition, General Atlantic will wind up with a 37 percent stake in Web.com. "As growth investors, we are very excited to participate alongside other Web.com stockholders in its exciting strategy to be the web services and online marketing resource for SMBs," said Anton Levy, a Managing Director of General Atlantic. "With this transaction, Web.com wins the race to scale, which is critically important at this moment in the shift to online marketing by small and medium-sized businesses."