Radix says it’s profitable after making $12 million this year

New gTLD stable Radix said today that it expects to top $12 million in revenue this year.
The company also told DI that it is currently profitable.
Radix, which counts the likes of .site and .store among its portfolio of nine active gTLDs, said revenue so far for the calendar year has been tallied at $11.7 million.
The company said that more than half of revenue came from “non-premium domain renewals”, an important metric when considering the long-term health of a domain business.
Recurring revenue of non-premiums was almost twice as much as new registrations, Radix said. Only $1.76 million of revenue came from premium sales (14%) and renewals (86%).
The US accounted for just under half of revenue, with Germany at 14.4% and China, where .site was fully active for the whole year and four other TLDs were approved in October, coming in at 7.7%.
Radix is a private company, part of the Directi Group, and has not previously disclosed its financials.
Assuming apples-to-apples comparisons are valid (which may not be the case), its figures compare favorably to public competitors such as MMX, which expects to report 2017 in the same ball-park despite having more than twice as many gTLDs under management.

M+M turns $22m profit into $10m loss

Minds + Machines today reported a 2015 loss of $10 million and further outlined its “transformative” restructuring and China strategy.
It’s the second full year of operating results M+M has posted since its first new gTLDs went live, and they’re not encouraging.
Revenue for accounting purposes was $6.3 million, but the cost of sales was $6.2 million, leaving gross profit of just $101,000.
Factoring in $12.1 million of operating expenses, a $7.9 million gain from losing new gTLD auctions, and other expenses, the total loss before tax was $10 million.
That’s compared to the $22 million profit M+M reported for 2014, a number entirely reliant on $33.7 million of auction loss payments.
The company also reported its “billings”, a line item that does not use the accounting method of deferring revenue across the life of a domain and is therefore more in line with incoming cash.
Billings for 2015 were $7.9 million, compared to $5 million in 2014. Gross profit under that measure was $1.7 million, but the $12 million of operating costs still made the company very unprofitable.
Ignoring the auction benefits in 2015, which will not last forever, it’s pretty clear that M+M was a company spending much more operating new gTLDs than it was making from them.
COO/CFO Michael Salazar said in a statement:

However, billings of $7.9 million for the year were simply not of a sufficient scale to cover the associated cost of sales ($6.2 million) and operating expenses ($12.2 million), which combined reached $18.4 million for 2015. Similarly, the $0.6 million savings achieved in the period by the decisions mid-year to stream-line the existing operational set-up were not of a magnitude to have any material impact in the year under review. That said, forfeited cost of sales and operational expenses as a result of the 2015 cost-cutting decisions will amount to $2.7 million in 2016

It’s perhaps little wonder that activist shareholders, apparently not prepared to play the long game, threw out half of the board and key senior executives during the period.
Former PR man Toby Hall took over as CEO in February, replacing co-founder Anthony Van Couvering, and announced earlier this month that M+M is dumping its registrar and back-end registry businesses.
Its registrar customers have been sold to Uniregistry, and it will outsource its registry back-end to Nominet, to save costs.
Salazar said that the two deals will lead to $2 million in savings, but won’t be complete before the fourth quarter. It seems unlikely they’ll have a great impact on 2016 numbers.
Headcount has been reduced from a peak of 61 to 43 at the end of the year, and is expected to drop further to 25. Salazar said this will save it $4.7 million a year.
Even with these cost reductions, M+M will still need to essentially double its revenue in order to hit operating profitability, it seems.
The company is pinning some of its growth hopes on .vip, which it expects to do well in China. It launches May 18.
Hall said in a statement that M+M would not follow the lead of competitors (Famous Four Media springs to mind) by offering first-year registrations for free to build market share. He said:

Based on the enquiries received during Sunrise and feedback gained through our two recent marketing trips to China, it is clear that there is genuine interest in the domain both within and outside of China. As a result, we will not be using a year-one freemium approach to simply inflate year-one registrations. Instead, we intend to be keenly priced to ensure margin to ourselves — and registrations — as well as protect the integrity of the domain. The volume we anticipate to be generated through keen pricing will then support the sales of our premium names in this domain.

The company also plans to invest in its .law sales team, because billings for that gTLD have been behind expectations.
M+M had $34.6 million in the bank and eight outstanding contested new gTLD applications at the end of the year.

ICANN ups new gTLD revenue forecast

ICANN has increased its new gTLD revenue projections for fiscal 2016.
The organization released its draft FY17 budget over the weekend, showing that it expects its revenue from new gTLDs for the 12 months ending June 30, 2016, to come in at $27.3 million.
That’s a 13% increase — an extra $3.1 million — on what it expected when it adopted its FY16 budget last June.
The anticipated extra money comes from registry and registrar transaction fees, spurred no doubt by the crazy speculation in the Chinese market right now.
Registry transaction fees are now expected to be $2.8 million (up from the earlier prediction of $2 million) and $3 million (up from $2.3 million).
The bulk of the new gTLD revenue — $21.5 million — still comes from fixed registry fees, which do not vary with transaction volume.
For fiscal 2017, which starts July 1 this year, ICANN is predicting new gTLD revenue of $41.5 million, a 52% annual growth rate.
The adopted FY16 budget is here. The new proposed FY17 budget is here. Both are PDF files.
The FY17 proposals are open for public comment.

Go Daddy tech support is a cash cow

Go Daddy’s call center support staff make the company hundreds of thousands of dollars a day in up-sells, according to documents revealed as part of an employee class-action lawsuit.
I covered the lawsuit (PDF), filed by three former Go Daddy employees, for The Register on Friday.
One of the plaintiffs, Toby Harris, was fired after he leaked “confidential” screenshots of the company’s CRM system to his home email address.
I’m not going to get into the details of the lawsuit, which concerns labor practices, here.
But the screenshots, which offer a bit of insight into how much revenue these front-line call center staff make for Go Daddy, are worth looking at.
According to one, Harris delivered over $10,000 in gross sales for the company over nine working days in January, taking about 5% of that for himself in commission.
Not bad for a rookie $12-an-hour support guy, considering how cheap most Go Daddy products are.
Another CRM screen shows the performance of a couple dozen members of Harris’ team, including how much commission they made over a two-week period and how many customer calls they handled.
These 23 employees made between $1,290 and $255 in commissions over the period, averaging $564 each, dealing with on average 31 calls each per day.
If that’s 5% of the gross, over 10 business days, you could try to extrapolate some company-wide data, but the screenshot probably represents too small a sample to make any precise calculations.
Still, it’s pretty clear that that a substantial chunk of Go Daddy’s revenue is generated by call center staff.
Harris told me he was expected to shift $250 to $450 worth of product every day, the equivalent of selling at least one new $8 domain name to every caller.
Domain Name Wire reported last December that the company had 1,600 support staff. At the low end of $250 a day, that would equate to $400,000 a day or $146 million a year from the phones alone.
I guess I found this a little surprising because while I always knew Go Daddy’s web site was a cash machine, I had assumed its call center spent most of its time providing technical support.
As a customer, I often wondered how the company managed to run such a high-quality support service on such a pitifully low-margin loss-leader.
Now I know. Judging by these leaked numbers, those guys more than pay for themselves.