Rightside - What are you doing?

Due to being a publicly listed company, Rightside, is a really interesting case study of the entire domain industry and in particular the new gTLD space. The company has accumulated enough domains that it is a good representative sample of the domain space.

So back in November last year I conducted an analysis of Rightside wrote an article (click here) that predicted there would be layoffs. I stated:

Eventually, the investors will come in and hack the expense line to pieces (ie. fire lots of people) to get the profits up since their returns are unlikely to come from capital growth.

I really didn’t want to be a prophet of gloom and doom but several days ago Rightside downsized by 6%. I am deeply sorry to those people that lost their jobs….it’s never a fun experience to suddenly find yourself without a pay check.

It’s clear that Rightside needed to get their costs under control and generate some profit for the investors. Sadly, I wouldn’t be surprised if there was another round of layoffs towards the middle of the year. The reason why I believe this is that fundamentally nothing has changed with the business.

The registry business is still a very small part of the overall revenue. nTLDstats shows that the new gTLD space is essentially following a linear line to the right and not exhibiting any sort of geometric growth. In fact, it could be argued that the Rightside registry has slowed down growth over the last few days…..but the data around this is inconclusive as yet.

It was originally hoped that the registry was where the company was going to get all of its sizzle from with the market. To get a good exit for some of the early investors Rightside really needed to move into playing the capital value game versus the incremental profit model to provide some sort of investor return.

The staff reduction is clearly an attempt for the management team to buy time for the cumulative effect of the registry business to ultimately have an impact on the bottom line. Such a move would have meant the board (which has a number of investors) is now resigned to play the long-term game prior to exiting their positions. This must of been quite disheartening.....

As I said in my previous post,Rightside needs some new technology that will rapidly scale. This means that any idea that involves either a long corporate sales cycle or a change in consumer mentality is out. The management team doesn’t have the time for the first nor the resources to tackle the second option.

I have a few ideas on how to do really scale but they would require a recognition that the current strategy is not delivering the results that are really required for big returns. Don’t get me wrong, in the long-term, Rightside will produce some great results….the challenge is whether the market will allow the company the time to continue moving forward in the same manner.

I should say that I do not own any shares in Rightside and would recommend that you seek professional advice prior to investing in any company.

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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.