Company will invest more in marketing to improve new top level domain name results.
Yesterday, Rightside released Q4 earnings. The good news is that it turned in record revenue and an adjusted EBITDA that topped guidance.
The bad news is that revenue growth over Q3 was nominal, especially for new top level domain names.
While it’s probably fairer to look at year-over-year revenue growth in most product lines, new TLDs are different. Rightside needs to show strong quarter-over-quarter growth in this category, as it is telling investors this is where all of the growth will come from, and it needs to show some return on its investment.
A $144,000 increase in new TLD revenue isn’t particularly encouraging.
On the investor conference call yesterday, CEO Taryn Naidu explained that the lackluster growth is partially due to the company being out of the launch phase. Previous quarters were boosted by launches of some of the bigger new TLDs. Of course, at just $144,000 of growth, one or two six-figure premium domain name sales can also have a large impact.
Rightside is going to spend an addition $2 million on marketing new top level domain names in 2016. Some of this will go the channel. The rest will go to vertical marketing. For example, Rightside recently sponsored the Summit live streaming conference, and got them to adopt the Summit.live domain name.
Of course, selling its own new TLDs has also boosted the fortunes of Rightside’s registrar business. In that respect, it’s not fair to just look at the low registry services revenue growth.
Retail (Name.com) is doing well. Wholesale (eNom) is not.
To that end, Rightside is looking to harvest eNom. It reduced headcount on the wholesale side, is undertaking “price optimization”, and is looking at other ways to drive efficiencies, such as infrastructure.
None of this bodes well for eNom customers. But it might be the right thing for Rightside to do from a profitability standpoint.