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…but it paints availability in the best possible light.
Ever since new top level domains started rolling out, Verisign has been pushing the idea that plenty of high quality .com domain names are still available.
It’s sort of right. Click here to continue reading
Parked domains make up the bulk of new TLD registrations.
Verisign analyzed registrations of new top level domain names to determine how second level registrations under these new domain names are being used.
The analysis determined that just 3% of domains registered so far are being used for a “business website” and the majority of domains are parked:
The breakdown is much more nuanced than what the company presents about its own TLDs, .net and .com. When it decides to report the numbers, the company splits .com/.net into three buckets: one page websites, multiple page website and no websites. The breakdown amongst these groups is typically around 20%/65%/15%. (I’ve asked Verisign if it will run the same analysis it ran for new TLDs for .com.)
Verisign provides a number of caveats and points out outliers in the data. For example, the parked page percentage would be much lower if Web.com wasn’t registering and parking .xyz domain names on behalf of its customers.
It’s worth noting that every new top level domain name registration is less than 8 months old. I suspect the numbers for .com domains registered less than 8 months are even more skewed to parked pages than the slash line I noted above.
Verisign is careful not to draw any conclusions from the data, only noting that it’s “early days for new gTLDs” and that “this analysis offers an interesting snapshot of the first few months of new gTLD general availability.”
Of course, we all know where Verisign stands on new TLDs.
Domain Name Industry Brief shows continued growth of registered domain names.
Verisign released its Domain Name Industry Brief (pdf) today , estimating that the total base of registered domain names grew by 5 million to 276 million in Q1 this year.
(Yes, that’s Q1 — not the most recently concluded quarter.)
That’s 1.7% more than at the end of Q4, and 7.5% growth year-over-year.
The base of country code domain names grew at a faster clip than gTLDs, with a 2.9% increase quarter over quarter and a 13.1 percent increase year over year.
There wasn’t a big shakeup in overall rankings. Russia’s .ru surpassed .info as the the 8th biggest TLD overall. (More likely, .info fell below .ru.)
125 generic top level domain names were delegated in the root during the first quarter as new TLDs launched. A couple of them should crack into the top 10 gTLDs list when second quarter numbers are calculated.
Investor does a pretty good job explaining how Verisign has a license to print money.
Verisign has a wonderful license to print money.
Its contract with ICANN to run .com allows it to charge $7.85 per .com domain name registered. The company enjoys fat 55% operating margins as a result.
Stephen Pomeroy of Pomeroy Capital Partners, L.P. recently sent a letter to his limited partners about Verisign (of which his fund is a stockholder) and published it on SeekingAlpha.
The crux of the article is that the IANA transition away from the U.S. government will have no affect on Verisign and its contract to run .com. He’s right.
Pomeroy also does a good job explaining the agreement and why it provides a stable future for Verisign.
One point in his letter that I take issue with is the idea that Verisign is hedged against eroding market share from new TLDs:
Additionally, ICANN is in the early stages of introducing a whole slew of new gTLDs possibilities including such “blockbusters” as .today, .ninja, .company, and .tips!11 While much has been made of this new “land-rush” of domains, .ninja hardly seems like a plausible threat to the long establish standard of .com or any of the alternatives already available. Nonetheless, it is always good to be prepared. Accordingly, should any of the new gTLDs prove more popular than anyone expected, VRSN stands to benefit as applicants for approximately 200 of these new gTLDs are already in contract with VRSN to provide back-end registry services.
The problem with these 200 registry contracts is that they’re mostly .brand applicants. They won’t be high volume TLDs, for the most part. Verisign will also make much less per domain registered with these third party TLDs than on a .com registration.
Ultimately, I’d argue there are two levers that investors in Verisign should consider: growth of .com and renewal pricing.
How much more will .com grow? If it stops growing, will it remain basically flat or will it shrink?
On the pricing side, how much will Verisign be able to charge going forward?
As Pomeroy notes, Verisign has a presumptive right of renewal of the .com contract. However, that doesn’t mean Verisign will be able to charge $7.85 forever.
In fact, Verisign stock took a huge (although temporary) hit when it renewed its contract last year. Its previous contract allowed it to increase .com prices 7% per year for four out of the six years of its contract. The new contract requires it to maintain a $7.85 price throughout the term, barring extraordinary circumstances. (I don’t doubt they’ll try to invoke an increase, although their margins might have to shrink first.)
Will the next contract renewal include stable prices? Worse, a decrease? Or will competition from new TLDs mean a more lax contract with the option for price increases?
Stock investors still think .com is king.
Verisign reported earnings yesterday and shares in the company are up 12% in trading so far today.
Why the jump in share price after a dismal quarter for net domain name adds?
Well, Citigroup upgraded the company from sell to neutral today saying “fundamentals have likely bottomed”. Financials apparently exceeded most expectations.
Verisign had just 0.42 million net adds in .com and .net last quarter. It expects Q3 net adds to rebound to between 0.6 million and 1.1, which is definitely a move in the right direction. With slipping renewal rates, these targets would indeed be rather strong and require strong new registrations.
The company also announced a 10% price hike on .net. No knowledgeable analyst didn’t see that coming, though.
Of course, when the first credible report comes out suggesting that new TLDs are making a dent in .com…