Verisign cites a number of headwinds in its existing TLD business while it withdraws one of its IDN applications.
Verisign held its quarterly investor conference call yesterday after releasing it first quarter earnings.
The company processed 8.6 million new registrations across .com/.net, compared to 8.8 million in the same quarter a year ago. The renewal rate also dipped.
Here’s what Verisign discussed on the call.
Why the growth rate is shrinking
Verisign blamed a number of factors for slowing growth:
- Registrars focusing on bundles and average revenue per user instead of using domains for customer-acquisition. The company has noticed some registrars returning to a domain-focused pitch, especially outside of the U.S.
- Changes in pay-per-click (e.g. parking, heavily monetized sites).
- The law of large numbers, which makes it more difficult to push the needle.
Additionally, CEO James Bidzos said it was too early to tell how much impact new TLDs will have on growth:
…there are roughly 100 — over 100 new gTLDs that are delegated into the zone, and they’re accepting registrations right now, and have been pretty much for most of the first quarter, for roughly almost 3 months now. And in total, there are about 570,000 registrations in, collectively, all of the new gTLDs year-to-date. I think that information is current as of just a couple of days ago. So it’s too soon to tell if any of those registrations or what part of those registrations are at the expense of a .com or a .net registration, because until we see the first renewal cycle on these new gTLDs, it’s really going to be difficult to assess how much impact they might have on the .com/.net zone.
The company expects 0.3 million to 0.8 million net adds in Q2.
New TLDs
Verisign has withdrawn its application .com IDN transliteration in traditional Chinese while retaining its simplified Chinese application. This was due to ICANN’s policy on variants, which Verisign said did not consider one applicant applying for variants. It hopes it will be able to reinstate the traditional Chinese application once this policy is settled. It went with simplified Chinese because it believes it’s a bigger market.
Also, Verisign thinks one of its back-end registry customers for new TLDs will launch in the second quarter.
Monetizing intellectual property
Verisign reported that it is beginning to receive inquiries from competing registry operators about using certain elements of its patented registry technology.
The first signs of the erosion of Verisigns near monopoloy on the space?
04:20:
“With the Chinese variant contention set behind us, We are now ready to engage in the negotiating contracting process with icann on our remaining 13 applications”
Interesting to know when the actual signing will happen.
ICANN never really got it’s head around the variant question.
The registries running non-latin scripts as IDN’s within legacy gTLD’s should have automatically been assigned those gTLD’s in the script language (either translit or translated), with all currently registered IDN’s within the legacy TLD moved across to the correct IDNgTLD. This would be a vast improvement, DNS security wise.
Instead, ICANN treats each one as a separate, new, gTLD. Ridiculous.
The legacy gTLD’s should have demanded a separate IDN program like the ccTLD’s got. But most of the staff at the legacy gTLD’s don’t really understand the IDN market anyway, which got them into this mess in the first place.
Verisigns .com and .net base will continue to grow this year and part of next year. Then, as some of the leading outlier ‘new’ GTLDs start to reduce prices and as Amazon and Google’s new GTLDs come online at low (or no) price you will see expiration-erosion in the “tasting” related domain names that Verisign acquired between 2005-2012 (as well as many of the speculative long-tail names in com/net.)
There will still be growth in com/net but that collective growth viewed against the spectrum of ‘new’ spaces will make com/net look like they are failing (as opposed to growing slowly).
I was surprised by this call. It is still very early in the game and shows that Verisign seriously miscalculated the coming changes to its core business. This is still too early to be seeding warnings. The later, coming changes will be more dramatic and require more significant explaining.
Most importantly, the 500,000 registrations in new extensions over the past month are a trickle and very small beginning that came in the weakest un-contended generics, with little registrar support. As the best extensions get released by the best funded and most creative competitors there will be further erosion and more of a “blood in the streets” situation with Verisign. At a minimum their multiple will fall and if they just coast on their core business they will get badly punished (as a stock) for not investing deeper.
I expect they will do something with their cash hoard or they will get crushed within a decade; likely loosing their .com monopoly to Amazon and Google who would gladly perform the services Verisign currently performs (for free); in exchange for a mercantilist advantage on “their” new extensions.
It has just started to get interesting but only the ripples show.