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Tucows says eNom may be shrinking as Melbourne IT drives 2016 growth

Kevin Murphy, February 8, 2017, Domain Registrars

Tucows yesterday reported an 11% increase in revenue for 2016, driven partly by an acquisition, but warned that its more recent acquisition, eNom, may be shrinking.

The company reported revenue for 2016 of $189.8 million, up from $171 million in 2015. Net income was up 41% at $16 million.

For the fourth quarter, revenue was up 9% year-on-year at $48.8 million. Net income was down 9% at $2.8 million.

In a conference call, executives linked some of the growth to the April 2016 acquisition of Melbourne IT’s reseller business, which added 1.6 million domains to Tucows’ DUM.

While Tucows also operates its Ting mobile phone service, the majority of its revenue still comes from domains and related services.

In the fourth quarter, revenue was $30 million for this segment. Of that, $23.1 million came from domains sold via its wholesale network and $3.8 million came from Hover, its retail channel.

CEO Elliot Noss noted that the acquisition of the eNom wholesale registrar business from Rightside last month made Tucows easily the second-largest registrar after GoDaddy, but made eNom sound like a neglected business.

“The eNom business is a flat, potentially even slightly negative-growth business in terms of gross margin dollars,” he told analysts.

eNom’s channel skews more towards European and North American web hosting companies, which are a growth challenge, he said. He added:

We acquired a mature retail business and associated customers which for the past few years has been more about maintaining and servicing eNom’s existing customers as opposed to growth. It has not been actively promoted and as a result has a flat to declining trajectory. It’s something we don’t intend to change in the short-term, but as we look under the hood and get a better sense of the platform as we will with all of the operations, the long-term plan might be different.

The acquisition was “overwhelmingly about generating scale and realizing cost efficiencies”, Noss said.

Tucows paid $83.5 million for eNom, which has about $155 million in annual revenue and is expected to generate about $20 million in EBITDA per year after efficiencies are realized.

Donuts sticks with Rightside despite Google support

Kevin Murphy, February 8, 2017, Domain Registries

Donuts has renewed its back-end registry services contract with Rightside, Rightside has announced.

That’s despite indications a few months ago that it might have been preparing for a switch to Google’s new Nomulus platform.

Rightside said yesterday that the deal, which has seen Rightside handle the registry for Donuts’ portfolio of almost 200 gTLDs for the last five years, has been extended.

It’s a “multi-year” deal, but the length of the extension has not been revealed.

Donuts had suggested last October that it might be ready to move to Nomulus instead.

The company revealed then that it had been quietly working with Google for 20 months on the software, which uses Google’s cloud services and is priced based on resource usage.

Then-CEO Paul Stahura said Nomulus “provides Donuts with an alternative back-end with significant benefits.”

Now-CEO Bruce Jaffe said yesterday that “Rightside’s registry platform has the right combination of innovative features, ease-of-operation, scalability, and highly responsive customer support”.

Now MMX kills off premium renewals

Kevin Murphy, January 23, 2017, Domain Registries

Are we witnessing the beginning of the end for the premium renewal business model?

MMX, aka Minds + Machines today became the latest new gTLD registry to announce it is getting rid of premium renewal fees for all of its premium domain names.

The price changes are retroactive to January 6 and affect all MMX gTLDs, such as .beer, .fishing and .horse.

“We started the process of rebooting our strategy in July last year, when we alerted our many registrar partners that 100% of our premium names sold after January 6th 2017 would have standard, GA [general availability] renewal prices,” CEO Toby Hall said in a statement.

MMX also said today that it is “revisting” its existing pricing tiers.

The reduced pricing will make the domains more attractive to domainers and end users alike, but I suspect the former will be more likely to exploit the new deal at first.

It’s the second new gTLD registry, after Rightside, to announce such a move this month.

Rightside said it was abolishing premium renewals on its expensive Platinum-level domains, though they will remain on more modestly priced premiums.

Rightside sells eNom to Tucows for $83.5m

Kevin Murphy, January 23, 2017, Domain Registrars

Tucows is to become “the second largest registrar in the world” by acquiring eNom from Rightside, paying $83.5 million.

The deal will give Tucows another 14.5 million domains under management and 28,000 resellers, giving it a total of 29 million DUM and 40,000 resellers.

That DUM number, which appears to include ccTLDs, makes Tucows the undisputed volume leader in the reseller world and the second-largest registrar overall.

GoDaddy, the DUM leader, had about 55 million domains just in gTLDs at the last count.

Tucows CEO Elliot Noss told analysts that the deal, along with the April 2016 acquisition of Melbourne IT’s reseller business, were “individual opportunistic transactions”.

He said that Tucows will take its time integrating the two companies, but expects to realize cost savings (presumably read: job losses as duplicate administrative positions are eliminated) over 24 months.

The reseller APIs will not change, and Tucows will not migrate names over to its own existing ICANN accreditations. This could help with reseller retention.

For Rightside, the company said the spin-off will allow it to focus on vertical integration between its gTLD registry business and its consumer-facing registrar, Name.com.

Rightside had come in for a certain amount of high-profile investor criticism for its dogged focus on new gTLDs at the expense of its eNom and Name.com businesses.

Activist investor J Carlo Cannell, supported by fellow investor and Uniregistry CEO Frank Schilling, a year ago accused Rightside of putting too much emphasis on “garbage” new gTLDs instead of its more profitable registrar businesses.

Since then, Rightside has rebuffed separate offers for some or all of its gTLDs by rivals Donuts and XYZ.com.

Last June, it also announced plans to modernize eNom, which Cannell and others had accused of looking stale compared to its competitors.

RightSide cuts super-premium fees in half, drops premium renewals

Kevin Murphy, January 11, 2017, Domain Registries

New gTLD registry RightSide has slashed the minimum price of its so-called “Platinum” tier premium domains and dropped renewal fees for these domains down to an affordable level.

The price changes come as part of two new marketing initiatives designed to start shifting more of its 14,000-strong portfolio of super-premiums through brokers and registrar partners.

The minimum first-year price of a Platinum-tier name has been reduced immediately from $50,000 to $25,000.

In addition, these domains will no longer renew every year at the same price. Instead, RightSide has reduced renewals to a more affordable $30.

“We weren’t selling them,” RightSide senior VP of sales and premiums Matt Overman told DI. “There is not a market for $50,000-a-year domain purchases.”

Now, “we feel comfortable enough with amount money we’re going to make up-front”, Overman said.

However, premium renewals are not being abandoned entirely; non-Platinum premium names will still have their original higher annual renewal fees, he said.

RightSide has sold some Platinum names in the five and six-figure range, but the number is quite small compared to overall size of the portfolio.

But Overman said that “none of them sold with a $50,000 renewal”. The highest renewal fee negotiated to date was $5,000, he said.

Before yesterday’s announcements, RightSide’s Platinum names were available on third-party registrars with buy-it-now fees that automatically applied the premium renewal fees.

However, it seems that the vast majority if not all of these sales came via the company’s in-house registrars such as Name.com and eNom, where there was a more flexible “make an offer” button.

Under a new Platinum Edge product, RightSide hopes to bring this functionality to its registrar partners.

It has made all 14,000 affected names registry-reserved as a result, Overman said. They were previously available in the general pool of unclaimed names and available to registrars via EPP.

Each affected name now has a minimum “access fee” of $25,000 (going up to $200,000 depending on name) that registrars must pay to release it.

They’re able to either negotiate a sale with a markup they can keep, or sell at “cost” (that is, the access fee) and claim a 10% commission, Overman said.

A separate Platinum Brokerage service has also been introduced, aimed at getting more professional domain brokers involved in the sales channel.

Brokers will be able to “reserve” up to five RightSide Platinum names for a broker-exclusivity period of 60 days, during which they’re expected to try to negotiate deals with potential buyers.

While no other brokers will be able to sell those names during those 60 days, registrars will still be able to sell those reserved names.

Overman said that if a registrar sells a name during the period it is under exclusivity with a participating broker, that broker will still get a commission from RightSide regardless of whether they were involved in the sale.

“We won’t give that name to any other broker, but if it sells through a registrar they still get their 10%,” he said. The registrar also gets its 10%.

This of course is open to gaming — brokers could reserve names and just twiddle their thumbs for 60 days, hoping to get a commission for no work — but the broker program is expected to be fairly tightly managed and those exploiting the system could be kicked out.

RightSide will be making the case for the two Platinum-branded offerings at the upcoming NamesCon conference in Las Vegas, where it also expects to name its first brokerage partners.