This past week has been incredible…..so much happening and so quickly that it makes my head spin. I just love it when it’s like this. Development is going full steam ahead, had some great client meetings and the team is working on a couple of ground breaking ideas. Amongst all of this excitement there is always someone or something that rains on your parade….in my case it was Pepper.

For those of you that don’t know, Pepper is my cat. She’s been a part of the family for over fifteen years and we all absolutely love her.

Whenever I go away she comes and sits in my study and stares out the window waiting for me to come back from my travels. When Roselyn and I sit on the couch to watch television she inevitably climbs up between us and demands a scratch under the chin. Well, this was her behaviour until last week….

About a week ago Roselyn decided that it was time for Pepper to have some worming medicine and after a bit of a fight (which involved a few scratches) she gave up. As far as our cat was concerned we’d crossed the line. No more sitting next to me as I worked or snuggling up on the couch together. She almost stopped eating, banished herself outside and meows pitifully if we come near.

Like I said, there’s always someone that spoils your week. Sometimes it’s because in your wild enthusiasm you just trod on a few toes or forgot to do something you committed yourself to. In these cases, maybe it’s time for some apologies to get things back on track.

I’ve always been amazed at people that won’t apologise. The person that is strong in themselves doesn’t view saying sorry as a weakness but rather as a strength. So who is stronger, the one that apologises or the one that digs their heels in?

So I’m apologising to Pepper. This has involved debasing myself to moving the food to where she is resting rather than in the normal spot. Ensuring that she has premium irresistible quality, full of flavour and goodness rather than cheap dry stuff. I’ve even coaxed her inside with a few scratches behind the ears…..and slowly but surely she is responding.

So if you’ve ever had someone spoil your awesome week then take them out for a really good dinner followed by a massage….you’ll win every time.

Have a great weekend!

Michael

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.

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.

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.

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.

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.

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.

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.

Author, JRR Tolkien, suggested in “The Lord of the Rings”, that the one ring allowed wearers to rule but each time they put it on they tended to spiral down into deprivation and psychosis. The character of Frodo did his best to resist the rings temptations but sometimes he just couldn’t help it. I sometimes wonder whether domains are a lot like this.

Remember when you bought your first domain name? The nervousness of the purchase followed by the terror of what the heck are nameservers and EPP codes. But you were hooked. The desire to buy or sell just one more domain each day becomes an irresistible allure that you just can’t seem to deny. If you don’t believe me then consider the following….

What’ the first thing you do each day? Is it check your domain stats to see whether they are up or down? How about jump onto Afternic or Sedo to check out any domain offers?

What’s the last thing you do before you go to bed? My wife used to ask me whether I’d tucked my computer in as yet….which is a euphemism for have I checked my domain stats?

When you really consider it the last thing we needed was the monetisation providers, registrars and marketplaces to develop apps and responsive websites. This then meant we could feed our addiction to domains during the day while we were catching a train, in a staff meeting or having a coffee with our loved ones.

Of course we could disguise our domain addiction by mumbling something about checking up on an important client email, but between you and me, we know the truth. You’re a domain addict.

So what is it that is so mesmerising about something you can’t touch, talk to and is full of technical mumbo jumbo? I think I have the answer to that question. Domains are all about power. We may be embarrassed to admit it, but any domain addict worth their salt loves the fact that they own and control something that can impact the world, is unique and, well, hmmmm…..precious.

So deep down inside we are all “Lord of the Rings” Gollum’s coveting our preciouses. Let’s look at the similarities. The one ring impacted the world, so do domains. Tick! There was only one “One ring” and there is only one of each domain. Another tick! The one ring was precious and so are domains. Let’s face it, most of our domains have little stories about how we acquired them and we recount other addicts all about them over drinks at conference bars.

I could carry the analogy further by saying that we, domain owners, stare at computer screens in the dark…..Gollum stared at silver fishes in the dark. He was addicted to the ring….we are to domains. The list goes on and on….which leads me to one conclusion…..the size of eyes of some NamesCon attendees seems to be getting larger each year……oh dear, they may be on their way to “Gollumhood”.

What’s also interesting about domains is the social structure they have developed. Consider for a second who has a more important social standing. The domain investor that owns download.com or joes-pizza-shop-around-the-corner-is-open-now.com?

So like the “One ring” domains do imbue a kind of power! I’m either a somebody or a nobody because of my domains. So when you look at the flood of investors into the new gTLDs it’s all about their quest for controlling something that is powerful.

What many don’t realise is there’s “one .COM to rule them all and in the darkness bind them”. This is a fancy way of saying that you may own an amazing new gTLD but ultimately you will bend your knee to the .COM. It makes me wonder how long it will be until there is a rebellion……

I don’t know about you but right now I’m feeling an incredible urge to go an register just one more precious....I mean domain…..and then it will be mine! All MINE!

Have a great weekend.

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.

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!

As many of you are aware, Sarah, my daughter, has over the years helped me on and off with Whizzbangsblog. In my recent travels I had a number of people ask me what she is doing now…so here it goes!

Over the last five months Sarah has been working as a specialist make-up artist for “The Body Shop” in their flagship store here in Australia. It’s really allowed her to hone her craft as a make-up artist and more recently showcase some of her work on social media (Instagram).

She’s been reading everything there is about how to grow a following on Instagram and then posting a new photo each day. It hasn’t taken her that long to gain close to one thousand followers….which from a standing start is pretty good going.

She now has her sights clearly set on her next target of ten thousand followers. Apparently at around this number you can begin to get some sponsorship onboard.

The reason why I’m writing this particular blog is I’m wanting to help Sarah grow her Instagram followers. To see her Instagram page just click here or the link at the bottom of the page. If you’re into Instagram, then any “likes”, a follow or even a repost would be awesome!

If you have any expertise in social media and growing a following then I'm sure Sarah would be all ears. She plans on attending NamesCon in January so don't be surprised if you are confronted by a really enthusiastic young lady that is focused on learning everything she can.

Yes, I know that I’m shamelessly promoting my daughter…..but that’s what Dad’s are for JSo do a guy a favour and help me out…..if you’re a father or a mother then you know exactly what it’s like to have a daughter you’re just so proud of.

CLICK HERE FOR SARAH'S INSTAGRAM PAGE.