Blogs about the domain industry and the various players and companies within it.

Is Rightside's Strategy Showing Results?

Is Rightside's Strategy Showing Results?

The reason why I like looking at Rightside is because they are a publicly listed company with the three aspects of the domain industry; registry, registrar and aftermarket. Since my last article on the company have things improved or deteriorated and how does this reflect on the overall domain industry.

Let me say from the outset that Rightside is a nice steady business underpinned by a recurring revenue stream. In fact, they are at pains to highlight the recurring revenue model in their quarterly financial presentations. The problem with the business is they are listed on the Nasdaq and as a tech company investors expect more than the current 4% year on year revenue growth rate.

The charts below highlights where the revenue is being generated by the business. The registrar is clearly the driver with over $44m or 80% of the revenue coming from that business unit. The aftermarket has clearly come off the Chinese fuelled peak of $9.3m in Q4 last year and is now settling down at $7.8m for the quarter.

Revenue by Business Unit

The registry grew by $300K in Q2 so it will be interesting to see what the Q3 results will be. Given that Rightside banked a lot on the success of the new gTLDs the relatively lacklustre performance must be of concern.

These numbers are on the back of Registry aggregator, Donuts, offered $70m for the suite of Rightside domain extensions back in June. In my opinion it’s a gutsy move to say no to such an offer in light of the slow growth numbers. The Rightside management/board are either very sure of a significant upswing in their registry growth projections or just walked away from a great offer.

2016 Q2 Revenue By Business Unit

What is concerning is the Quarter on Quarter Growth rates for each of the business units. The registrar is basically flat and the aftermarket is also looking flat with a seasonal dip in Q1 for the last two years. The registry has dropped from a large initial growth rate off a small base to a much more modest level. It will be interesting to see if the uptick in Q2 is at least sustained in Q3.

Quarter Growth Rates By Business Unit

The Year on Year Growth rates also reflect the downward trends of all of the business units (registry references the left hand axis). The overall growth has decreased from 113% back in Q2 2015 to 104% in Q2 2016. It’s clear that there aren’t any massive growth prospects from the fundamental drivers of the business.

Year on Year Growth Rates

According to the July 2016 Domain Industry Brief put out by Verisign there was a global growth in domain names of 11 percent, year over year. The good news for Rightside is the registry has grown by 21% in the same period of time so they are beating the global rates. The bad news is the engine of the business, the registrar, has been basically flat with year on year growth of 0.5% (Q2 2015 vs. Q2 2016).

Below are charts for the number of domains currently in the registry (source: ntldstats.com) for .ninja, .news, .lawyer and .consulting. These four extensions were highlighted in the Rightside quarterly earnings report. As can be seen, there is a significant amount of growth but each of them has a sharp decline as end users elect not to renew the domains. Renewals are the challenge that afflicts all registries as without them the reoccurring revenue model fails.

Consulting

Layer

News

Ninja

I said this in my last blog on Rightside…..the challenge for the company is how to move investors from playing the dividend to the capital return game. I would expect that if the company paid a dividend then many of the shareholders would be scratching their heads and wondering what happened to the new gTLD unicorn promises.

So getting a “pop” off a good solid revenue base must be at the top of mind for the senior execs at the company. At the moment there doesn’t seem to be any rumblings of amazing new tech or even acquisitions coming from the Rightside camp…..but then again, it may still happen. If nothing happens then I wouldn’t be surprised if the recent surge and collapse in the share price will occur time and time again as investors buy and leave the new gTLD dream.

Share Price

Given all of the data from Rightside are the new gTLDs making headway? It's without question that some are and when you are effectively eating into a monopoly's market share there is only one initial direction and that's up.

I'm actually a strong believer in the new gTLDs....they will happen. The question that I'm constantly asking myself is when will the become mainstream? This is why as an industry Rightside is such an important company to watch as their numbers will very likely indicate whether the when has moved to now.

As always, before making any investment decisions please seek your own professional advice.

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Predicting Google's Quarterly Domainer Payout

Predicting Google's Quarterly Domainer Payout

About a month ago I wrote an article suggesting that with enough domain traffic data I could potentially predict a chunk of Google’s next quarterly earnings. After developing my financial model, I thought that I’d have a stab at Q3 2016.

The chart below reflects the quarter on quarter % change in payouts to domain owners (blue chart  - left axis) and also Google’s Traffic Acquisition Costs (Yellow line – right axis) for each quarter since Q1 2015. Since Google has not released the Q3 data yet the yellow line stops short and is replaced by my red predicted line.

Google predicted earnings

 

A couple of things I should say about the blue line. Since the line is the quarter on quarter percentage change (blue line) if everything is static then it should sit at the 100% level. This would indicate that each quarter was paid out exactly the same as the previous quarter.

Actual revenue numbers may change due to traffic volumes but if what advertisers pay and what Google passes on was the same each quarter then the blue line should sit at the 100% level. This means that when the line dips below 100% we are seeing an overall advertisers/Google payout drop for the quarter. Conversely if the line is above 100% then there is an increase in advertiser demand or Google is paying out more.

When we look at the sudden decline during Q3 then we need to ask ourselves what’s really happening here. Has advertiser demand dropped dramatically due to the summer season or has Google just paid out less? Due to the sharp decline it could be a combination of both factors....but let's dig away.

If we look at Q2 to Q3 2015 we can see that the overall payouts are relatively flat even though Google increased what it paid out to the channel by 1%. So if an increase of 1% effectively negated the seasonality factor back in 2015 when Google releases its Q3 data we should have a pretty accurate picture of seasonality….but I digress.

My goal here is to estimate what Google paid to the domain channel for Q3. Essentially the domain payouts contracted by 15% for Q3 which is actually in line with many domain investors’ expectations of the northern hemisphere summer decline. It just looks like a big drop because we came off a high rate of payouts at the end of Q2.

All things considered, I believe the Google TAC will be flat and the drop was the impact of advertiser seasonal demand. Where in 2015 this was largely negated by a higher Google payout, this time Google has passed on the pain.

I’ve drawn the red line in the chart to continue the yellow line so it will be interesting to see if I’m right or not at the end of the month when Google releases its actual quarterly earnings report.

If I am correct then I think it will be time to do a dive into more data to see what else domains can help us predict. The next port of call will be to a stock broker!

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Video - NamesCon Founder, Richard Lau

Video - NamesCon Founder, Richard Lau

In this video, Richard shares some of his background and how he became a domain investor. He then moves onto his passion for the Water School, a charity to helps save lives. He also discusses the beginnings of the first NamesCon and where the huge domain investor conference is headed into the future.

The video is full of personal experiences, adecdotes and insightful thoughts about the domain industry. Richard is one of those special individuals that is willing to take the time to help others in their life's journey.

I hope that you enjoy this video as much as I did in talking with Richard.

I should mention that there has been a correction to the NamesCon discount code mentioned in the video. It's actually "AlwaysThankful". This code provides $200 off the registration price and will expire midnight on November 11th.

Click Here to Go Directly To the NamesCon site with the code applied.

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Why .CLUB Is So Successful

Why .CLUB Is So Successful

I’ve been reflecting on some of the great companies that are being built in the domain industry and I couldn’t go past .CLUB. When you consider the new gTLD have only been in the marketplace for a couple of years it’s remarkable what .CLUB has achieved. There are so many new extensions launched and yet everyone seems to hold .CLUB in high regard. So the question I have is why?

Every company is not built on an excellent team and I just want to highlight a number of the team members that I regularly catch-up with at all the different domain shows around the world. I think that their attitudes and focus really provide a valuable insight into the .CLUB success story.

Colin Campbell (CEO)
Colin CampbellThere are a number of things that strike me about Colin and the first is passion. He’s passionate about .CLUB and provides such a focused drive to see it succeed. That being said, I’ve watched from the sidelines as he’s conducted deals that are beneficial for both parties. He isn’t a scorched earth CEO that has a win at all costs mentality but rather a collaborative one that wants to see others be successful as well.

Dirk Bhagat (CTO)
Dirk BhagatThe first time I met Dirk we were sitting around a fire pit at a hotel somewhere (can’t remember where). Underneath his easy going exterior ticks an incredibly smart individual that, like Colin, has seen the ebbs and flows of the technology industry across many years.

 

Jeff Sass (CMO)
Jeff SassAs chief marketing officers are concerned Jeff would have to be right up there with the most frequent milers ever clocked up. He’s everywhere! We recently chatted in Fort Lauderdale and he headed immediately to Cologne, Germany and we met up a few days later in Hong Kong. Not only does Jeff clock up the miles but he brings an incredibly creative mind to promote .CLUB to so many different cultures.

Michele Van Tilborg (VP Bus. Development, COO)
Michele Van TilborgLike the rest of the .CLUB team, Michele, clocks up the air miles as she makes sure that things happen in one country after another. To understand how dedicated she is to the .CLUB cause, while at DomainFest.Asia in Hong Kong, I watched as she had meeting after meeting, when she really should have been in bed due to being sick. She's a real powerhouse that gets things done.

There are other’s in the .CLUB team that also contribute but the above four are the people I have had the pleasure of interacting with directly. What I’m highlighting is the fact that a great, passionate, focused team is what’s driving the .CLUB brand. At .CLUB's core there is one particular value that seems to stand out more than everything else and that’s generosity.

It’s not often that you can call a business generous….after all, isn’t the goal to make money? When I look from the outside, .CLUB is generous (not stupid) in everything they do. They support the industry through their many sponsorship activities and are very generous with their time. They do whatever they can to help promote up and coming .CLUB based businesses.

For example, they are getting right behind George Verdugo (awesome, fun guy btw) in his plans for hotels.club. George has some incredible ideas for the website and with some of the rates he showed me it won’t be long before he climbs the travel websites ladder of success!

Another example of generosity, is one evening during “The Domain Conference” in Fort Lauderdale, Colin and his wife invited about sixty people to their home for dinner. The food was exceptional, conversation awesome and getting to know Colin’s wife was terrific…..you can really see the real power behind .CLUB :-)

.CLUB is inspirational on many fronts and I’m sure that over a few drinks the team will also share about the many mistakes they’ve also made. Which brings up a last point I would like to make…..they are a fun group to just hang out with. I think this last ingredient is what makes them a very special company…..they all individually and as a team seem to be having a great time expanding .CLUB to the world. Well done!

I thought that it was about time that I wrote about .CLUB as they are really and truly a real beacon of success for the new gTLDs. I really do believe that it's early days for the registry and it won't be long before .CLUB domain extensions are being used everywhere.

I want to state up front that I was not asked to write this article by anyone and that no one has twisted my arm in any manner whatsoever. I believe that great companies should be lauded and .CLUB is one of them.

Recent comment in this post
Kassey
Very strong management team with years of experience. I see great future for .club in China.
04 October 2016
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DomainFest Hong Kong Presentations

DomainFest Hong Kong Presentations

As promised, please find links below to the presentations that I lead attendees at DomainFest Hong Kong through. I hope that you find them valuable and please feel free to ask any questions.

Domain Monetisation 101
This is an introduction to monetising your domains and then focuses on the various metrics used in generating revenue from domain traffic. This also includes what we can influence on a parked page and setting keywords.

Domain Monetisation MasterClass
This dives into the data and first of all defines the benefits of a normalised RPM. From there the presentation takes through the difference between intelligently switching versus rotating traffic. How to run a traffic test is briefly covered and followed up by managing a portfolio for profit.

Domain Monetisation for Registrars and Registries
The first part of the presentation covers the opportunities that registrars have to monetise their traffic with ParkLogic. This is followed by a registry perspective and the unique symbiotic relationship between registries and registrars.

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