With the crossing over the 10 million mark for the total number of new gTLDs registered I thought that it would be worthwhile conducting an analysis of what is happening in this new market. As is typical of any new market, quite a number of new gTLDs are struggling but as registrations increase, time is on the side of those that have the cash to survive.

The first chart shows the total number of new gTLDs that have been registered month on month since Feb 2014. As can be seen from the graph it’s basically been a linear growth rate until the last month, where it has taken a definite turn upwards. It will be interesting to see if this recent trend will continue moving forward.

When we look at the growth rate per month chart there has been a rapid downward slide that has stabilised around the 10% per month mark. This is not unexpected as the initial numbers were small and any growth off a small base will be quite large.

What is interesting is the fact that the trend line is flattening out to just over 7% growth. According to a recent report the overall global domain growth is around 6.5% so trending down to just over 7% isn’t surprising. Once again, the uptick in Nov is a bit of an aberration so it will be interesting to see if the trend continues.

Now here’s the challenge for the new gTLDs. According to nTLDstats.com (where this data comes from) just over 8 million domains are parked (ie. 77%) or not being used in the “wild”. What this suggests is that the majority of the growth is coming from the domain investor community.

Why is this a problem? For a start, this means that the majority of domains are not being seen by the general public in more traditional forms of advertising. Hopefully this will change as some of the global brands that have their own extension will begin advertising with it.

Secondly, domain investors are after a return based upon the value of the domain sales that they achieve. Given the massive influx of domain supply this value is unlikely to be realised in the near term. This means that there won’t be as much money to reinvest into the new gTLDs from the domain investor community and it’s very likely that over the next couple of years a lot of the domains will be dropped.

Here’s the other issue. Other than November the number of domains registered per month is basically linear BUT the number of extensions available to register has been growing rapidly! This essentially means that there are more and more new gTLDs fighting over the same sized pie. What this suggests is the new gTLDs have been largely unsuccessful in enticing new money into the domain space and are totally reliant upon a finite domain investor pool of investment funds.

Now let’s take a look at .club as they are often regarded as the poster child of what to do right in this space. Since they were launched they have been growing month on month in a roughly linear fashion until July where growth essentially stopped and then resumed at a more modest rate until October and then skyrocketed in November.

Given the northern hemisphere summer period a slowdown in growth for July and August should be expected but the rapid surge into October and November is staggering. I would like to claim that the rapid increase was a direct result of readers seeing the .club banner advertisement on my blog but sadly, this is unlikely to be true…..although I cross my fingers.

I actually believe the team at .club have been really smart in laying the ground work to tap into the Chinese domain market. This became particularly focused since the beginning of September when they attended DomainFest Macau. It was clear that they were on a mission to evangelise .club to the Chinese marketplace.

The recent release of a slew of premium domain names into two auctions has created a huge amount of interest in the extension. This has clearly spilled over outside the auction domains into the wider .club inventory and has resulted in a rapid increase in registrations. It’s being smart about how to leverage these publicity events that has made .club a standout in the industry.

Given the recent surge in registrations, a back of the envelope calculation would immediately indicate that .club is a profitable extension. The entire industry should celebrate any extension getting over the line and this will hopefully spur those that are struggling onwards.

I would not be surprised if Colin and the team at .club are casting their eye over a few of these struggling extensions and considering an acquisition or two. With their proven marketing muscle this would almost be a no brainer. It will be interesting to see what happens in the months ahead.

In the meantime, I'm going to be keeping my eye on the industry as I believe there are a lot more acts to this play before the final curtain is raised.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

So many business owners have an incredible desire for profit but so few actually understand why it’s so important or how to attain it. So I’m going to first ask a really dumb question, “So why is profit so important?”

At its core, profit is a measure of a business’s sustainability. If year after year a business is not profitable then it will ultimately fail. Yes, you can keep on raising capital but at some stage investors will stop investing and demand a return on their investment. This will either be in the form of a dividend or a capital increase.

So in terms of a domain portfolio, unless you are earning a profit then your business will fail unless you (ie. the shareholder) keep on funding it through cash injections. This is very different from running short of cash to pay domain renewal fees….more on that later.

So the question needs to be asked, why do domain business often fail? I personally believe that there is a really simple answer to this question. Most domain businesses aren’t businesses at all. They have more of the characteristics of a hobby than a business where the owners are collectors rather than investors.

Just ask yourself the following questions:

1.      Do you have a cashflow?
2.      When was the last time you looked at your balance sheet and profit and loss statements?
3.      Do you have a clearly defined business model for each of your domains?
4.      When was the last time you cleared out non-performing assets?
5.      Does your accountant about how to treat domain names?
6.      Why is tracking both the purchase and the sales price so important for your business?
7.      What is the return on your investment and could you gain a better return elsewhere?
8.      How much do you value your time in your business plan?
9.      When was the last time you seriously considered outsourcing to free up your time?
10.  Do you understand the difference between cash and profit?

Let me tackle point number ten with a little story as it’s often really confusing for people to understand. It’s very easy to have a highly profitable business that doesn’t have any cash....let me show you how.

Imagine a domainer looks at their bank account and sees a whole lot of money has accumulated for the year from their domain parking earnings. They clap their hands with glee and go out and spend it all by purchasing a $30,000 premium domain that they've always wanted to own.

Sadly, even though they’ve spent the $30,000 in cash they actually can’t expense it. In most countries the accounting/tax rules insist that they take this sized item to the asset side of their balance sheet. Here’s the problem, let’s imagine they have $10,000 worth of expenses during the year. This means their profit is revenue less expenses or $30,000 less $10,000 = $20,000.

The government will put its hand out for their fare share of the profit. In the case of Australia, they want 30% or just under $7,000. But hang on! The domainer just spent the $30,000 and don’t have a spare $7,000 lying around.

I hope that this simple example illustrates the traps that many domain investors fall into. They completely confuse both cash and profit. This often compounds if they’re able to defer their taxes and can result in what seems like a double whammy if they continue to make the same mistakes.

So let’s imagine they managed to borrow some money from a friend to cover their taxes and this is secured against the $30,000 domain. If the friend is charging interest on the money then the domainer can expense it during the financial year that it was incurred BUT the capital payments will ultimately need to come out of the following year’s profit (not going to get involved with depreciation here). Yep, it’s starting to feel like a knotted ball of string already!

Suddenly, the ultimate business opportunity arises for their $30,000 domain. A major developer would like to partner with them to develop out the domain on a 50/50 basis. The developer is the ideal fit and they are absolutely convinced they’re going to make a killing. All they have to do is put their domain into the venture and the developer will match it with $30,000 of development.

Hang on a second……they’ve now essentially encumbered the domain twice. Their friend’s $7,000 is secured against the domain and if they default on the payments they won’t be too happy if the domainers gone into a partnership that involves the domain with someone else. At this point in time I’ve seen many domain owners say, "I just won’t default"….and try to slide the second transaction on through.

As time goes by, this scenario gets played out across more partnerships and more domains. Documentation of the transactions becomes scarce and before they know it, the wheels come off the cart and the domain owner is in a complete mess, defaulting on payments and trying to understand how they got into the mess they’re now in.

Fundamentally what it all comes down to is that the domain owner really doesn’t understand business but they love their hobby. They didn’t really know what profit is and how it’s different from cash. This level of naiveté is played out across all of their other business dealings.

Here’s a few sage words of advice, “Have a good account that you talk to regularly. Avoid all deals which involve forming equity partnerships…..they rarely, if ever work out.”

I’ll share more on business thoughts in future blog posts.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

I’ve had my cat, Pepper, for around 13 years now and to say that she’s a part of the family is actually not quite true. For a start, the previous statement is completely incorrect. Pepper has decided to grace our family with her presence for the past 13 years and we are a part of her life would be a more correct statement. For those of you that have a cat, you will completely understand the not so subtle shift in those sentences and who actually runs the household.

Pepper has the entire world figured out. She has servants that feed her, give her a regular massage and she sleeps for about eighty percent of the day. The house is hers and she only lets the family live in it because we play a necessary part in her hedonistic lifestyle of eat, sleep and lie in the sun.

As all cats will confirm, they are absolute geniuses. For example, Pepper has saved me from spending untold thousands of dollars on completely irrelevant domain names. When I get excited about a name and I’m about to press the “buy now” button she just looks at me in a disapproving manner and that’s all it takes. I abandon my misguided shopping cart with a sense of relief that once again I’ve been saved by my beloved feline.

After a particularly intense day of work she graciously lets me pat her head and give her a bit of a scratch under the chin. The stress seems to leave me with each passing minute and Pepper just looks up me with a knowing smirk on her be-whiskered face that once again she’s manipulated me into getting what she wants.

Every now and then she has to whip her underlings into shape and demand the attention due her status. On one particular day her bowl wasn’t brimming over with delectable delights so she calmly entered my study and started chewing on my iphone 6 USB cord to let me know her displeasure. Within half a second I had bowed to my master, filled her bowl and asked if there was anything else that I could do for her.

I sometimes think that if Pepper deemed it worthy of her station she could have the entire domain industry whipped into shape in no time. Google would be transparent, monetisation providers would soon have the flexibility to really innovate and some registrars wouldn’t “accidentally lose domains. They’d all be terrified that she would pay them a visit to truly express her displeasure at their actions.

Even as Pepper dictates this blog, I’m feeling a little intimidated by the forcefulness of her purring. It’s almost like she’s decided to place the entire domain industry on notice. Then again, what would a cat really know? Oh, oh, she just growled at me for writing that!

Have a great weekend.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

In a previous article (click here) I wrote about some of the challenges that I believed that the publicly listed company, Rightside, was facing in the short-term. In particular, I explored the registry business as a reflection of the entire new gTLD space.

Now let’s take a look at the Rightside registry, now from a quarterly targets perspective but from a more long-term point of view. If the business unit can sustain the most recent quarter on quarter growth rate of 26% then in the long-term the registry business will just print money.

As the following chart shows, a consistent 26% growth rate will mean the registry business will eclipse the registrar business and leave it behind. At the end of 2018 (which is only just over 3 years away) the business will be doing around $50m per quarter.

The great part about this is the cost base doesn’t scale with the revenue. Adding additional records to a database isn’t a big problem once the servers and software has been developed. To date, Rightside has been sensibly focused on expanding the distribution channels for its own TLDs and partnering with companies such as Donuts to supply registry services.

If the latest growth rate in ngTLDs is sustainable then the Rightside registry will very quickly become the largest business unit in the company. In my previous article I indicated that Rightside was a great company without any sizzle……although the registry looks exciting there’s still the risk that the growth rate falls off.

If the rate of grown falls back by 50% to 13% then the revenues at the end of Q4 2018 drop dramatically to $11.8m per quarter. Remember that globally the sales of new domains is running at around 6.5%.

I still believe that there is an opportunity for Rightside to purchase a business or develop a complimentary business over the next few years that can augment all of their business units. More importantly, it needs to be one that will get the market excited and interested in playing with the stock for capital value. This will then ease some of the pressure of the management team and allow them to take a longer-term view of the business.

I would remind everyone that I do not own any Rightside shares and that if you are considering to invest in anything that you seek professional advice before doing so.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

Each morning Roselyn and I wake up to the beautiful sounds of a family of magpies warbling their very unique song in our garden. The mother and father hunt out worms for the juvenile that tags along behind them constantly needing to be fed. It’s a beautiful sight to see a family enjoying life and living in peace.

I then contrast this to the mayhem and destruction in Syria, Paris, Lebanon and now Mali. My heart goes out to the families and friends that lost loved ones in any of the terrorist incidents. I was so inspired by the story of a Parisian husband that had lost his wife and in his grief he made the decision to not rise up in hatred against his wife's killers. What an inspiration to be admired and also aspire to.

So why is it that so much terror against innocents is being justified as the answer to improving the lives of the perpetrators? How is it that death has triumphed over life as the solution to happiness?

There’s only one answer and the butler, Alfred, in the Batman franchise of movies summed it up by saying, “Some people just want to see the world burn.”

Yes, there are parts of the world that are burning and a small group of people rejoicing in the fact. Slaughtering people and treating the preciousness of life as something to be carelessly disposed of is a crime….but more than that, it’s a sickness and a disease.

When I look at the madness that is driving the hatred and carnage and I can’t help but feel sorry for the perpetrators. To be living with such a tortured mind that taking the life of another is the only salve for their insanity must be a horrible place to be.

I used to get angry at terrorists but I don’t anymore. I view them as incredibly sick individuals that need our help. For some of them they need to be shown that love will triumph over hate and that there is a better way of life not death.

For others, sadly, to stop the infection spreading they need to be excised from humanity and ushered into where they believe they will be happy. We shouldn’t rejoice and treat it as revenge but do so with a heavy heart that a fellow human has become so deranged that the only solution is to cauterise humanities wound.

To me the answer is really simple to a complex problem. An ultimatum needs to be given by the world against those infected, choose love over hate and life over death. If you genuinely do so we will embrace you and help you and your families. If you don’t turn from your ways then you leave us no choice but to remove you from existence – the people of the world have spoken.

The overwhelming majority of people just want to have a good family, friends and enjoy life to its fullest. We need to stop highlighting on our televisions the 0.001% of people that don’t want this. Starve them of the media oxygen that fans the flames of hatred and focus a lot more on the magpies in the garden.

Yes, this article is simplistic….but love often is. Have a great weekend!

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.