27 July 2014

Verisign Earnings Call, Most Important Takeaway, gTLD winners and losers

The most important takeaway from the Verisign earnings call (registry for .COM and .NET) is in bold below -- Verisign +11.6% on healthy guidance, buyback expansion - VeriSign, Inc. (NASDAQ:VRSN) | Seeking Alpha: "... The company has $1.5B in cash to finance buybacks with. Q2 domain name net adds totaled 420K, towards the low end of a 300K-800K guidance range. But Verisign expects net adds to grow to 600K-1.1M in Q3. Total active .com/.net domain names amounted to 128.9M at the end of Q2, +3.7% Y/Y. However, processed domain names slipped by 200K Y/Y to 8.5M, and the company discloses renewal rate fell 60 bps [basis points] in Q1 to 72.6% ..."

So there you have it: Q2 2014 Verisign had total domain name net adds of 420,000 but expects total domain name net adds to grow to 600,000 to 1,100,000 in Q3 2014. No explanation was given as to how this will happen, but it will be interesting to watch and see if Verisign is right.

Tracking daily net adds recently for all gTLDs on Registrar Stats has indicated the domain extensions consistently driving net new growth in gTLD domain name registrations are .COM and .XYZ (a new gTLD). All other gTLDs are either: (1) in the red (negative in net adds/losing registrations) which is where most of the legacy gTLDS (except .COM) are; (2) at zero or near -0- net new registrations which is where most of the new gTLDs are since they do not have any renewals or drops until next year and are not getting many new registrations; or (3) have some growth although mostly unimpressive (the sole standout in this subcategory being .CLUB with total registrations of 88,529 as of July 25).

Here are the top 3 gainers and losers for July 25, 2014, of all gTLDs:
Extension  Total Domains  Net Add or Loss
.COM          113,843,335    +24,209
.XYZ                   380,355      +7,527
.TOKYO*             11,981        +497  *new gTLD launch week
.INFO              5,665,636         -775
.MOBI                924,719         -772
.BIZ                 2,641,321         -386

Total net adds for all the gTLDs (legacy including .COM + all new gTLDs) were almost 34,000 for July 25th. If you subtract the .COM net adds, then all the other gTLDs (new and old) only garnered about 10,000 net new adds, most of which went to .XYZ. How many of those .XYZ adds were for free domain names, is unknown. And of course, not every day recently shows such adds for either .XYZ or .COM (which also has a few net loss days recently).

So, yes ICANN decided to increase the number of gTLD domain name extensions from 22 to over 1000, but increasing supply does not increase demand. There will be many losers (many new gTLDs are already failing in registration growth) and just a few winners. Currently the total gTLD pie of net new domain name registrations is growing, albeit slowly if you subtract the net new adds in the .COM and .XYZ extensions from the totals.

Final notes: as a Verisign officer said during the call (paraphrasing): .NET is like a new gTLD whereas .COM is in a category by itself. Daniel Negari (.XYZ) took a different path from most other new gTLD applicants--his extension .XYZ is literally a "generic" extension--.XYZ stands for nothing other than the last 3 letters in the English/Latin Script/Roman Script alphabet - "the most widely adopted writing system in the world commonly used by about 70% of world's population" according to Wikipedia. We will know a year from now whether his aggressive marketing has paid off when we have figures from renewals and drops. In the meantime, how is Verisign going to increase net new adds in their gTLDs in the 3Q 2014, to 600,000 to 1.1 million (from only 420,000 in 2Q 2014)? And finally, while almost everyone is focused on the new gTLDs, the real growth story for the last few years has been in ccTLDs (Country Code Top-Level Domains):
Global growth is driven by ccTLDs"In the last seven years ccTLDs have driven the growth of the global market, out-growing gTLDs every year except 2010 when a near 10 million drop in .cn domains (due to policy changes) had a massive impact on the total. In 2012 ccTLDs grew nearly three times as fast as gTLDs (+18.3% vs +6.4%)."

--report submitted by contributing editor, John Poole, Domain Mondo

Update October 23, 2014: Dot COM Still King! Verisign 3Q 2014, Highest Q3 on Record!

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