End of sales agreement could have broad implications for Australian domain company.
It’s been a rough year for Dark Blue Sea (ASX: DBS), parent company of Fabulous. Its profits are down by three quarters, it has cut half its staff, and one of its biggest shareholders is trying to oust its Chairman. But the news got worse yesterday, as reported by Domain Name News: GoDaddy terminated its sales agreement with the company.
This is a big deal. Dark Blue Sea was counting on GoDaddy to lift its aftermarket domain sales, primarily by selling to customers who were looking to register a domain name but found their ideal one was already registered. The company was also able to bulk list its domains — and customers in the Domain Distribution Network — on Go Daddy Auctions (formerly TDNAM). According to a source familiar with the matter, a significant number of domain names are sold through GoDaddy’s “premium domain” upsell during the registration process.
Dark Blue Sea views its own domain portfolio as a money maker, whereas domain parking and domain registration are low margin service businesses. In fact, it has held discussions with other domain companies about acquiring parts of its service business.
When asked for comment, Go Daddy VP Adam Dicker stated, “We have evaluated our premium domain channel and made a business decision to discontinue our use of the Domain Distribution Network.” (Domain Distribution Network is Dark Blue Sea’s domain sales system.)
That doesn’t say much, but I speculate the deal wasn’t going well for GoDaddy. GoDaddy signed a deal with BuyDomains to sell its domains alongside DBS’ domains. BuyDomains’ inventory sold better, so it gave those domains more exposure. Over time, it wasn’t worth listing DBS’ mostly hand registered domains at all.
Another big factor was the drop in Dark Blue Sea’s stock price. Dark Blue Sea gave millions of options to GoDaddy, exercisable at 65 cents. The thinly traded stock now trades for 15 cents.
What does this mean for Dark Blue Sea? The company released a statement that “the impact of this may have a material adverse affect on future revenue and profit.”
The company has fiercely loyal customers of its Fabulous domain registrar. This may present an opportunity for another registrar to make a value acquisition.