Rightside - Quarterly Results are Ho-Hum...

I just listened to the Rightside quarterly reporting results webcast by CEO, Taryn Naidu. To summarise, there’s been some cost cutting and quarter on quarter growth is the same for the registrar business and declining for the registry and aftermarket.

To be fair to the Aftermarket business it’s off a bumper third quarter and so the revenue of $9.3m isn’t a bad result when you consider it grew at 9% compared to Q3.

Verisign reported on 17 Dec 2015 that the number of domains registered worldwide across all TLDs has grown 5.2% year over year. The Rightside registrar business unit is growing at a sluggish 1.9% (up from 16m to 16.3m domains) by number of domains. Some questions need to be asked why the registrars are not even close to keeping pace with the natural global growth rate.

In terms of revenue, the registrar business grew by 2% in Q4 and overall for the year by 9%. It can be inferred that the increase has largely been off the back of TLD price hikes (eg. .net by 10% in Q1) which has resulted in an overall 3.7% increase in the average revenue per domain.

The registry business revenue of $2.5m is still not having a large impact on the overall revenue and is unlikely to in the near future. It’s still early days but the decline in the quarter on quarter growth rate from a high of 45% in Q1 to 5% in Q4 must be concerning.

It was pointed out on the webcast that the benefits from the recent layoffs and some of the marketing efforts were not evident as yet. The jury is still out on the marketing initiatives but I believe the layoffs, although sad for those impacted, were a move in the right direction by the company.

During the webcast there seemed to be a large emphasis on China and how Rightside is poised to move aggressively into that market. Given the decline in growth in the new gTLDs it almost feels like Rightside is looking for the Chinese market to provide some of the sizzle to get investors interested in the capital valuation game again.

It will be interesting to see how this strategy will impact the bottom line. There’s a lot happening in the Chinese market but I’m unsure of the long-term sustainability of some of the numbers being reported.

Some people have suggested that I'm somehow against Rightside. This couldn't be further from the truth. It's a really good solid business that over the long-term will perform well. In my opinion, the challenge Rightside is facing is how to move from putting all their hopes in the new gTLD basket, that's not paying off fast enough, to something else.

I would suggest that rather than hope China dramatically impacts the bottom line that innovation is what tech-companies really do. This suggests, the investment community is looking for Rightside to announce something "interesting" that has a lot of growth potential.....time will only tell whether my thinking is right or not.

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

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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.