According to VeriSign’s Earnings call report for the 4th quater of 2008, new domain registrations (.com’s & .net’s) were down 15% in the 4th quarter of 2008 compared to the 4th quarter of 2007.
In 2008 there were 6.3 million new domain name registrations, compared with 7.5 million names during 4Q 07.
There are a lot in interesting information in the report including these gems:
“”””The decline..reflects the continuation of weakness in names registered for the he online advertising portion of the Naming business, which accounts for 7% of all domains. These Domains are seeing pronounced weakness due in part to weakening EPC trends, including Google’s AdSense program, change and lower spending trends in internet advertising.””
“”We expect online advertising will increasingly become a smaller part of our Naming business.”
“”Currently these online advertising names make up 7 percent of registered names and .com and .net names”
“As a result we plan to discontinue the reporting of metrics for online advertising after this quarter.”
“”we expect that the first quarter of 2009, will also see the highest number of non-renewals.””
“””The renewal rate for Q3 rounded up to 72%, but was down from 73% in Q2. While the Q3 renewal rate decline was most obviously affected by domain names registered for the purpose of monetizing online advertising traffic, the renewal rate for traditional names also came down in Q3.
While renewal rates are not fully determinable until 45 days after the end of the quarter, we believe that for Q4 it may decline slightly more than 1%, with the Q4 renewal rate rounding down to 70%.”””
One of the participants, in the earnings call, Phil Winslow from Credit Suisse, asked the following question:
Regarding renewal rates, In the previous down cycle (reffering to the late 1990’s when the internet blubble burst), renewal rates got down into the 50s and even at one point touching the 40s. What’s different about this cycle than the last and where would you expect renewal rates to bottom out at?
Mark McLaughlin, President and COO, responded for VeriSign.
“”I don’t think we see anything near what we saw in …when the bubble burst, and primarily the reason for that, is back then, what we saw was the business models and the domain name business that weren’t yet baked at all, so, there was a tremendous amount of name given away for free by registrars that went into the base with some wild attempts at monetization. When that didn’t play out, they deleted them wholesale. So, those sorts of programs haven’t existed for years here, so I don’t think we would go anywhere near that at all.”
Then Sarah Friar from Goldman Sacks asked as they say the $64,000 question (for of you old enough to know what that is):
How does will the weaking economy impact your decision on price increases?
In response Mark Mclaughlin, responded:
“From a price increase standpoint, as you know, we have the right to raise prices under the contract and we take a look at that on a one at a time basis at the appropriate time. And we take into account the market conditions around that, primarily related to whether those price increases would have a negative impact on our business either from number the names coming into the system or for other reasons that are broader in the community.
So, we will take a look at that one at a time and, as far as the impact from that, we hadn’t seen an impact in the past from a price increase standpoint in the number of new units coming in today. So I am not sure that that would change in the future.”
So what do we take from all this?
New domain registrations are declining as we predicted would happen last year.
Renewal continue to decline, slightly for now but VeriSign most recent real stats on this are based on the 3rd quarter of last year.
VeriSign continues to report the domain industry accounts for 7% of the domain registrations, but the number of domains used for advertising, continues its decline, for the past several quarters.
VeriSign believes that the domains used for advertising will continue to decline and become less important in overall domain registrations, to the point that VeriSign will NO LONGER REPORT STATS ON PPC DOMAIN REGISTRATIONS.
To the extent domainers had any influence with VeriSign, that is about to disappear. Now that VeriSign will mix our 7% into just the general population, and consider it just another domain registration or renewal, for VeriSign the domain industry will no longer exist.
Finally VeriSign does not believe the previous rate increased have hurt new domain registrations or renewal rates.
So while VeriSign did not announces a new price increase, I read between the lines to conclude, you better get your check books out because, it seems like they will exercise their rights under the contract to raise their fees again in October of 2009.
If VeriSign does exercise there rights under the contract to renew rates, their rate currently at $6.88 will go up 7% or $.48 per to $7.36 a domain.
Again domainer failed to support the ICA or organize in any other fashion when this contract was up for renewal several years ago. The contract was awarded as a no bid contract, where no other companies were permitted to bid on providing the central registry service.
The VeriSign contract is up in 2012 but has a “presumptive renewal” clause which will almost guanaratee renewal and it seems more and more price increases.
Of course VeriSign will continue milking their anti-competitive monopoly until people speak out. If folks have a moment, they should complain about VeriSign’s market power to the USDOJ Antitrust division at:
http://www.usdoj.gov/atr/contact/newcase.htm
(scroll down for their contact information, including their email address of antitrust.complaints@usdoj.gov ). Under a competitive tender process, dot-com costs would likely be on the order of $2/yr instead of $7/yr, which with 80 million dot-coms means that consumers and businesses are paying $400 million/yr more than they should be.
Do the math for your own holdings. If you own 100 domains, that’s $500 out of your pocket this year, and even more year after year as VeriSign continues to raise prices. If you own 1000 domains, that’s $5,000/yr. If you own 10,000 domains, that’s $50,000/yr. For the folks like BuyDomains, NameAdmin, Vertical Axis, Fabulous, etc. who each own more than 100,000 domain names, that’s $500,000/yr and more.
Guess what — if the DOJ does nothing, then you’ve not lost anymore than a few minutes spent complaining. But, if they ultimately investigate after hearing from many consumers and do find the behaviours to be anticompetitive, against the interests of consumers, and order a tender process, then you will save a lot of money! (as will other consumers and businesses worldwide)
Imagine if the DOJ created its own “stimulus package” by putting that $400 million/yr back into the pockets of businesses and consumers?
So, if you’re reading this and agree, take a moment, send a brief logical email to the DOJ complaining about VeriSign’s market power, and maybe a year or two from now you’ll have helped to make a big difference to domain economics (and your wallet) by promoting competition and lower fees for consumers.
George,
“Do the math for your own holdings. If you own 100 domains, that’s $500 out of your pocket this year…”
At a $0.48 per domain increase the cost would be an extra $48 per 100 domains, not $500. Just a math error there.
Maybe we should buy Versign stock (assuming it will go up 7% per year) to offset the cost of the increase.
A risky play but if you think they are going to have a net gain in cash of 7% then their stock should reflect that and maybe that’s a way to hedge your investment in domains?
Rob: I’m comparing the current cost (say $7/yr) to what the true wholesale cost would be if the operation of the .com registry were to be tendered (around $2/yr by most estimates). That’s where the biggest savings would be ($5+/yr per domain).
Investing in VeriSign won’t hedge your risk, as knowledge of the contracts is already perfectly incorporated by the market into their current stock price. Price changes in stock markets occur due to unexpected things, not due to expected things.
Rob
What George is saying in simpler terms, is if the contract for the central registry was opened to bidding from all interest parties, and the contract awarded under normal business circumstance, that is finding a company capable of providing the services, for the lowest price possbile, it would result, George estimate in someone willing to do it for $2 a name.
When the contract was up, other parties including Godaddy indicated they would like to bid on the contract and would offer to provide the same service of handling the central registry at a much lower price than VeriSign was at that point, which was $6 a name.
Therefore George’s numbers are correct as to what the “real” cost of each domain would be to domain holders if open bidding was allowed.
Your numbers are correct as to the actual additional cost if the prices are raised later this year.
“When the contract was up, other parties including Godaddy indicated they would like to bid on the contract and would offer to provide the same service of handling the central registry at a much lower price than VeriSign was at that point,”
I remember GoDaddy saying they could offer domain registrations at around the $2 mark at that time.
And they were not the only ones.
Anti-competitive behavior is just the tip. VeriSign is trying to control DNSSEC as well so that you will not only get your SSL cert from them but also rely on them for every secure DNS lookup you do. As Kaminsky has written, if done right, we could have free SSL certs from DNSSEC. I dont think VeriSign would like that. Write to the Department of Commerce NTIA if these issues bother you. I hear encouraging competition is their Job #1.