Why Rightside is a Good Long-Term Investment

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.