Rightside Group operates a domain registrar and registry business. The document analyzes the company's financials and operations. It finds that: 1) The registrar business, which has thin margins, is the main cause of losses due to excess expenses added since acquisitions; 2) Peer domain registrar companies are profitable, indicating Rightside's losses are due to internal issues rather than industry factors; 3) Service costs consistently exceed domain service revenues, suggesting inefficient operations.

1. Rightside Group
By Cameron Fen

2. Who wants to buy this company?
-20
-15
-10
-5
0
5
2010 2011 2012 2013 2014 June
Net Income
Net Income

3. I Do!
Here is Why…

4. But First…Some Information
• Rightside Group was recently spun off from
Demand Media
• Company has a market cap of approx. $230
MM
• Company has $26 million in net cash
• The company operates a Domain Registrar
Business and a Domain Registry Business

5. 1. The Registrar Business

6. Registrar Business
• Registrars are in the business of registering
domain names
• Typically they charge $10 a year. Typically $8
goes to the registry, which before the new gTLDs
(more later), was predominately Verisign
• Rightside’s Registrar business consists of the
largest wholesale registrar and second largest
registrar after goDaddy, named eNOM.
• Very thin profit margins

7. Earnings Loss
• Rightside’s loss in Earnings are entirely due to
the Registrar Business
• The Registry Business has no revenue yet
• Recent acquisition of Name.com
– Which is interesting because…

8. Rightside turned a Name.com into an
Unprofitable Company

9. It turned a Name.com into an
Unprofitable Company
1-year profit
of Name.com
Expenses added
by Rightside

10. Let’s read Footnotes!!!

11. Note B(ii)

12. Amortization Expense
• Customer relations, owned website names
and trade names do not need to be amortized
as they last forever
• However Rightside is not only amortizing
these intangible assets for their acquisition,
they are doing it for their own operations as
well

13. Rightside Amortization

14. Rightside Amortization

15. Net Income without the additional
Amortization would have been
Approximately $3 million
Why would management do this?

16. The Motive
• Management often downplays the
performance of the company right before the
spinoff so management can get options at
lower valuations
• Also buried in the Form-10 the fact that
Rightside needed a total of more than 10
million dollars between 2013 and 2014 to
start the registry business

17. Unlike what the initial earnings
picture suggests, the company is not
losing pricing power…

18. Company Prices vs Inflation
Date Operating Income Price for Wholesale Account Change in Price Inflation
2014 -9.4 8.98 0.055 0.015
2013 -0.4 8.5 -0.057 0.016
2012 -1.2 9 0.057 0.029
2011 6.3 8.5 0.067 0.016
2010 4.7 7.95 0.000 0.026
2009 5.1 7.95 0.065 -0.004
2008 11.2 7.45 0.069 0.044
2007 6.95
Average 0.037 0.021

19. Company Prices vs Inflation
Date Operating Income Price for Wholesale Account Change in Price Inflation
2014 -9.4 8.98 0.055 0.015
2013 -0.4 8.5 -0.057 0.016
2012 -1.2 9 0.057 0.029
2011 6.3 8.5 0.067 0.016
2010 4.7 7.95 0.000 0.026
2009 5.1 7.95 0.065 -0.004
2008 11.2 7.45 0.069 0.044
2007 6.95
Average 0.037 0.021
Average Increase
in Price > Inflation
The company seems to be able
to raise prices but it looks like
the registrar business is steadily
losing more money

20. Why is the company losing so
much money? Is it sector wide?

21. We can look at Comps
Company Market Cap Net Profit Margin
DADA SpA (BIT:DA) 74.37 1.48
Gabia Inc (KOSDAQ:A079940) 65.40 4.29
Melbourne IT Ltd. (ASX:MLB) 151.75 3.16
Sino-i Technology Limited (SEHK:250) 115.62 -6.30
Tucows Inc. (NasdaqCM:TCX) 150.30 3.85
Name.com 18.00 10.30
Xiamen 35.Com (SZSE:300051) 460.45 6.24
Average 147.98 3.29
Average minus Sino-I and Xiamen 35.com 91.96 4.62
Note: Both Xiamen and Sino-I were excluded because a.) both were based in
China a developing country as opposed to a developed country and b.) Xiamen
has a larger market cap than Rightside and Sino-i spends 50% of its revenue on
marketing

22. We can look at Comps
Company Market Cap Net Profit Margin
DADA SpA (BIT:DA) 74.37 1.48
Gabia Inc (KOSDAQ:A079940) 65.40 4.29
Melbourne IT Ltd. (ASX:MLB) 151.75 3.16
Sino-i Technology Limited (SEHK:250) 115.62 -6.30
Tucows Inc. (NasdaqCM:TCX) 150.30 3.85
Name.com 18.00 10.30
Xiamen 35.Com (SZSE:300051) 460.45 6.24
Average 147.98 3.29
Average minus Sino-I and Xiamen 35.com 91.96 4.62
Every comp is profitable with the exception of
one which would have been profitable had it not
spent 50% of revenue on marketing expense

23. At a 3% Net Profit Margin, the
Registrar business will make over
$5.5 Million
3% is below all of Rightside’s smaller
US peers

24. The problem is with Rightside: it
looks like management has saddled
the company with excess expenses
But before we dig further lets look at
the different sources of revenue…

25. Income Statements
Combined Statements of Operations
2013 2013 2012 2012 2011 2010 2009 2008
Domain Sevices 141.6 104.4 94 126.9 112.6 96.1 86.6 80.8
Aftermarket 43.6 35.3 33.5 46.1 47.8 43.3 42 43.8
Total Revenue 185.2 139.7 127.5 173 160.4 139.4 128.6 124.6
Operating expense
Service Costs 145.3 108.7 93.1 127.5 111.3 99.9 90 81.1
Sales and Marketing 10.3 7.8 6.4 8.8 6.2 6 4.8 3.3
Product Development 11.9 7.9 7.4 9.7 9.2 6.1 6.3 5.7
G&A 25.6 18.6 14.4 19.9 18 11.5 8.3 6.9
Amortization of Intangibles 7.9 6.1 6.6 8.3 9.4 11.2 14.1 16.4
Total Operating expenses 201 149.1 127.9 174.2 154.1 134.7 123.5 113.4
Income before Taxes -15.8 -9.4 -0.4 -1.2 6.3 4.7 5.1 11.2
Gain on other assets 4.2 2.6 0 0 0 0 0 0
Other Expense 0 0 0 0 0 0 0 0.2
Income Tax 0.9 1.9 0.1 0.2 -2.6 -2 -2.3 -4.3
Net Income -10.7 -4.9 -0.3 -1 3.7 2.7 2.8 7.1
9 months ended Sep 30 Year ended Dec 31

26. Income Statement
Combined Statements of Operations
2013 2013 2012 2012 2011 2010 2009 2008
Domain Sevices 141.6 104.4 94 126.9 112.6 96.1 86.6 80.8
Aftermarket 43.6 35.3 33.5 46.1 47.8 43.3 42 43.8
Total Revenue 185.2 139.7 127.5 173 160.4 139.4 128.6 124.6
Operating expense
Service Costs 145.3 108.7 93.1 127.5 111.3 99.9 90 81.1
Sales and Marketing 10.3 7.8 6.4 8.8 6.2 6 4.8 3.3
Product Development 11.9 7.9 7.4 9.7 9.2 6.1 6.3 5.7
G&A 25.6 18.6 14.4 19.9 18 11.5 8.3 6.9
Amortization of Intangibles 7.9 6.1 6.6 8.3 9.4 11.2 14.1 16.4
Total Operating expenses 201 149.1 127.9 174.2 154.1 134.7 123.5 113.4
Income before Taxes -15.8 -9.4 -0.4 -1.2 6.3 4.7 5.1 11.2
Gain on other assets 4.2 2.6 0 0 0 0 0 0
Other Expense 0 0 0 0 0 0 0 0.2
Income Tax 0.9 1.9 0.1 0.2 -2.6 -2 -2.3 -4.3
Net Income -10.7 -4.9 -0.3 -1 3.7 2.7 2.8 7.1
9 months ended Sep 30 Year ended Dec 31
Domain Name
Services is the
recurring revenue
the company
charges for registry
fee

27. Income Statement
Combined Statements of Operations
2013 2013 2012 2012 2011 2010 2009 2008
Domain Sevices 141.6 104.4 94 126.9 112.6 96.1 86.6 80.8
Aftermarket 43.6 35.3 33.5 46.1 47.8 43.3 42 43.8
Total Revenue 185.2 139.7 127.5 173 160.4 139.4 128.6 124.6
Operating expense
Service Costs 145.3 108.7 93.1 127.5 111.3 99.9 90 81.1
Sales and Marketing 10.3 7.8 6.4 8.8 6.2 6 4.8 3.3
Product Development 11.9 7.9 7.4 9.7 9.2 6.1 6.3 5.7
G&A 25.6 18.6 14.4 19.9 18 11.5 8.3 6.9
Amortization of Intangibles 7.9 6.1 6.6 8.3 9.4 11.2 14.1 16.4
Total Operating expenses 201 149.1 127.9 174.2 154.1 134.7 123.5 113.4
Income before Taxes -15.8 -9.4 -0.4 -1.2 6.3 4.7 5.1 11.2
Gain on other assets 4.2 2.6 0 0 0 0 0 0
Other Expense 0 0 0 0 0 0 0 0.2
Income Tax 0.9 1.9 0.1 0.2 -2.6 -2 -2.3 -4.3
Net Income -10.7 -4.9 -0.3 -1 3.7 2.7 2.8 7.1
9 months ended Sep 30 Year ended Dec 31
Aftermarket
Revenue is the
value added
services like
security, web
hosting and email

28. One thing you notice right away is
that service costs are almost always
higher than domain service revenue

29. Service CostsCombined Statements of Operations Year ended Dec 31 unauditedunadited
2013 2013 2012 2012 2011 2010 2009 2008
Domain Sevices 141.6 104.4 94 126.9 112.6 96.1 86.6 80.8
Aftermarket 43.6 35.3 33.5 46.1 47.8 43.3 42 43.8
Total Revenue 185.2 139.7 127.5 173 160.4 139.4 128.6 124.6
Operating expense
Service Costs 145.3 108.7 93.1 127.5 111.3 99.9 90 81.1
Sales and Marketing 10.3 7.8 6.4 8.8 6.2 6 4.8 3.3
Product Development 11.9 7.9 7.4 9.7 9.2 6.1 6.3 5.7
G&A 25.6 18.6 14.4 19.9 18 11.5 8.3 6.9
Amortization of intangible Assets 7.9 6.1 6.6 8.3 9.4 11.2 14.1 16.4
Total Operating expenses 201 149.1 127.9 174.2 154.1 134.7 123.5 113.4
Income before Taxes -15.8 -9.4 -0.4 -1.2 6.3 4.7 5.1 11.2
Gain on other assets 4.2 2.6 0 0 0 0 0 0
Other Expense 0 0 0 0 0 0 0 0.2
Income Tax 0.9 1.9 0.1 0.2 -2.6 -2 -2.3 -4.3
Net Income -10.7 -4.9 -0.3 -1 3.7 2.7 2.8 7.1
9 months ended Sep 30

30. Service CostsCombined Statements of Operations Year ended Dec 31 unauditedunadited
2013 2013 2012 2012 2011 2010 2009 2008
Domain Sevices 141.6 104.4 94 126.9 112.6 96.1 86.6 80.8
Aftermarket 43.6 35.3 33.5 46.1 47.8 43.3 42 43.8
Total Revenue 185.2 139.7 127.5 173 160.4 139.4 128.6 124.6
Operating expense
Service Costs 145.3 108.7 93.1 127.5 111.3 99.9 90 81.1
Sales and Marketing 10.3 7.8 6.4 8.8 6.2 6 4.8 3.3
Product Development 11.9 7.9 7.4 9.7 9.2 6.1 6.3 5.7
G&A 25.6 18.6 14.4 19.9 18 11.5 8.3 6.9
Amortization of intangible Assets 7.9 6.1 6.6 8.3 9.4 11.2 14.1 16.4
Total Operating expenses 201 149.1 127.9 174.2 154.1 134.7 123.5 113.4
Income before Taxes -15.8 -9.4 -0.4 -1.2 6.3 4.7 5.1 11.2
Gain on other assets 4.2 2.6 0 0 0 0 0 0
Other Expense 0 0 0 0 0 0 0 0.2
Income Tax 0.9 1.9 0.1 0.2 -2.6 -2 -2.3 -4.3
Net Income -10.7 -4.9 -0.3 -1 3.7 2.7 2.8 7.1
9 months ended Sep 30
Service costs are
almost entirely costs
related to domain
service’s revenue

31. Comps’ Service Costs
Company 12/31/2013 12/31/2012 12/31/2011
DADA SpA (BIT:DA) 0.65 0.68 0.69
Gabia Inc (KOSDAQ:A079940) 0.55 0.59 0.55
Melbourne IT Ltd. (ASX:MLB) 0.40 0.41 0.35
Sino-i Technology Limited (SEHK:250) 0.17 0.25 0.26
Tucows Inc. (NasdaqCM:TCX) 0.72 0.72 0.70
Xiamen 35.Com Technology Co., Ltd. 0.37 0.36 0.31
Average 0.48 0.50 0.48
Average minus Sino-I and Xiamen 0.58 0.60 0.57
Max 0.72 0.72 0.70
Service costs as a % of domain name revenue

32. Comps’ Service Costs
Company 12/31/2013 12/31/2012 12/31/2011
DADA SpA (BIT:DA) 0.65 0.68 0.69
Gabia Inc (KOSDAQ:A079940) 0.55 0.59 0.55
Melbourne IT Ltd. (ASX:MLB) 0.40 0.41 0.35
Sino-i Technology Limited (SEHK:250) 0.17 0.25 0.26
Tucows Inc. (NasdaqCM:TCX) 0.72 0.72 0.70
Xiamen 35.Com Technology Co., Ltd. 0.37 0.36 0.31
Average 0.48 0.50 0.48
Average minus Sino-I and Xiamen 0.58 0.60 0.57
Max 0.72 0.72 0.70
Service costs as a % of domain name revenue
Rightside's service costs are 6%
higher than the peer maximum

33. Rightside’s service costs are 78.5%
of revenue this year up from 73.7%
the year before and 69.3% the
previous one
Curiously, Rightside lost cost discipline
the moment it came time to spin the
company off and write options for new
management

34. How easy is it to fix Rightside’s
Profit Problem?

35. Very easy, just cut Domain Service
Sales
• Profit (MM) = -.99 - .37 * Domain Service Sales
+ .95 *Aftermarket Sales
Note: Appendix 1. contains the
regression and data used to
derive this equation

36. Very easy, just cut Domain Service
Sales
• Profit (MM) = -.99 - .37 * Domain Service Sales
+ .95 *Aftermarket Sales
This number is probably
too high, however it is
telling that nearly every
dollar of aftermarket
goes to the bottom line
Every dollar of domain
service sales is costing the
company $1.37
Note: Appendix 1. contains the
regression and data used to
derive this equation

37. However, Management is Investing for
the Future
• When management wants the company to
show a profit, all they have to do is to cut
unprofitable domain services sales
• Management has grown domain service
revenue because it allows the companies new
gTLDs, which will be very profitable, to have a
higher market penetration

38. What else might management
cut after the spinoff?

39. What else might management
cut after the spinoff?
G&A Expense

40. Expense Margins
Operating expense as a % of Revenue 9 months ended sep 30 Year ended Dec 31 unaudited unadited
2013 2013 2012 2012 2011 2010 2009 2008
Service Costs 78.46% 77.81% 73.02% 73.70% 69.39% 71.66% 69.98% 65.09%
Sales and Marketing 5.56% 5.58% 5.02% 5.09% 3.87% 4.30% 3.73% 2.65%
Product Development 6.43% 5.65% 5.80% 5.61% 5.74% 4.38% 4.90% 4.57%
G&A 13.82% 13.31% 11.29% 11.50% 11.22% 8.25% 6.45% 5.54%
Amortization of Intangible Assets 4.27% 4.37% 5.18% 4.80% 5.86% 8.03% 10.96% 13.16%
Total Operating expenses 108.53% 106.73% 100.31% 100.69% 96.07% 96.63% 96.03% 91.01%
Income before Taxes -8.53% -6.73% -0.31% -0.69% 3.93% 3.37% 3.97% 8.99%
Gain on other assets 2.27% 1.86% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expense 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.16%
Income Tax 0.49% 1.36% 0.08% 0.12% -1.62% -1.43% -1.79% -3.45%
Net Income -5.78% -3.51% -0.24% -0.58% 2.31% 1.94% 2.18% 5.70%

41. Expense Margins
Operating expense as a % of Revenue 9 months ended sep 30 Year ended Dec 31 unaudited unadited
2013 2013 2012 2012 2011 2010 2009 2008
Service Costs 78.46% 77.81% 73.02% 73.70% 69.39% 71.66% 69.98% 65.09%
Sales and Marketing 5.56% 5.58% 5.02% 5.09% 3.87% 4.30% 3.73% 2.65%
Product Development 6.43% 5.65% 5.80% 5.61% 5.74% 4.38% 4.90% 4.57%
G&A 13.82% 13.31% 11.29% 11.50% 11.22% 8.25% 6.45% 5.54%
Amortization of Intangible Assets 4.27% 4.37% 5.18% 4.80% 5.86% 8.03% 10.96% 13.16%
Total Operating expenses 108.53% 106.73% 100.31% 100.69% 96.07% 96.63% 96.03% 91.01%
Income before Taxes -8.53% -6.73% -0.31% -0.69% 3.93% 3.37% 3.97% 8.99%
Gain on other assets 2.27% 1.86% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expense 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.16%
Income Tax 0.49% 1.36% 0.08% 0.12% -1.62% -1.43% -1.79% -3.45%
Net Income -5.78% -3.51% -0.24% -0.58% 2.31% 1.94% 2.18% 5.70%

42. Expense Margins
Operating expense as a % of Revenue 9 months ended sep 30 Year ended Dec 31 unaudited unadited
2013 2013 2012 2012 2011 2010 2009 2008
Service Costs 78.46% 77.81% 73.02% 73.70% 69.39% 71.66% 69.98% 65.09%
Sales and Marketing 5.56% 5.58% 5.02% 5.09% 3.87% 4.30% 3.73% 2.65%
Product Development 6.43% 5.65% 5.80% 5.61% 5.74% 4.38% 4.90% 4.57%
G&A 13.82% 13.31% 11.29% 11.50% 11.22% 8.25% 6.45% 5.54%
Amortization of Intangible Assets 4.27% 4.37% 5.18% 4.80% 5.86% 8.03% 10.96% 13.16%
Total Operating expenses 108.53% 106.73% 100.31% 100.69% 96.07% 96.63% 96.03% 91.01%
Income before Taxes -8.53% -6.73% -0.31% -0.69% 3.93% 3.37% 3.97% 8.99%
Gain on other assets 2.27% 1.86% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expense 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.16%
Income Tax 0.49% 1.36% 0.08% 0.12% -1.62% -1.43% -1.79% -3.45%
Net Income -5.78% -3.51% -0.24% -0.58% 2.31% 1.94% 2.18% 5.70%

43. Expense Margins
Operating expense as a % of Revenue 9 months ended sep 30 Year ended Dec 31 unaudited unadited
2013 2013 2012 2012 2011 2010 2009 2008
Service Costs 78.46% 77.81% 73.02% 73.70% 69.39% 71.66% 69.98% 65.09%
Sales and Marketing 5.56% 5.58% 5.02% 5.09% 3.87% 4.30% 3.73% 2.65%
Product Development 6.43% 5.65% 5.80% 5.61% 5.74% 4.38% 4.90% 4.57%
G&A 13.82% 13.31% 11.29% 11.50% 11.22% 8.25% 6.45% 5.54%
Amortization of Intangible Assets 4.27% 4.37% 5.18% 4.80% 5.86% 8.03% 10.96% 13.16%
Total Operating expenses 108.53% 106.73% 100.31% 100.69% 96.07% 96.63% 96.03% 91.01%
Income before Taxes -8.53% -6.73% -0.31% -0.69% 3.93% 3.37% 3.97% 8.99%
Gain on other assets 2.27% 1.86% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expense 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.16%
Income Tax 0.49% 1.36% 0.08% 0.12% -1.62% -1.43% -1.79% -3.45%
Net Income -5.78% -3.51% -0.24% -0.58% 2.31% 1.94% 2.18% 5.70%
Like Service Costs, G&A
has been dramatically
increasing up to the
spin off

44. Risks
• If operations do not improve shortly after the
spinoff, the registrar business may continue to
lose money
– NAME’s lackluster stock performance and low
valuation will probably attract activist investors
– NAME’s registry business should earn a lot more
money

45. Registry Business

46. The Registry Business
• This business currently has nearly no revenue
although the CEO is on record in saying that
this business is Rightside’s most important
– Investor Presentation July 1
• The Registry business owns the top level
domain (TLD) and is paid a fee every time a
company buys a domain with that TLD
– i.e. .org, .com, .edu

47. gTLDs
• Congress has deregulated to domain business
– Before Verisign, the company that owns the .com TLD,
could only charge a regulated amount
• Now ICANN, the governing body of the internet is
allowing many more generic TLDs (gTLDs) like for
example .social, .guru, .rest, etc.
• The company that puts in an application for each
gTLD owns it and anyone that wants to use the
gTLD on their website pays the owner

48. Business Rightside is in now

49. Business Rightside’s Registrar Business
Will Be in the Future

50. Registry Business will be in the future

51. Like Verisign, NAME’s Registry business
is an excellent business
• Analogy to the Railroad after they were
deregulated
– Control a monopoly on one domain (eg. .social)
• Pricing Power
– If you were Facebook and you were worried about
phishers stealing login id’s by using the domain name
facebook.social, how much would you be willing to
pay NAME?
– $10,000 would be a small sum, yet NAME is profitable
at $20

52. So how many people are going to
get gTLDs from NAME?

53. Domain Names
• Currently NAME owns 31 domain names
• Projected to own approx. 40 domain names
after all names are auctioned off
• Also does back work for Donuts, the largest
buyer of gTLDs

54. ARI Registry Services
• A research firm affiliated with the Australian
nonprofit registry suggested that the .shop
gTLD could bring in 7 million dollars from
Austrialia, Hong Kong and Singapore alone

55. Previous gTLDs
• Despite being widely perceived as a failure,
.xxx had over 100,000 domains registered
– Each charged a $20 registry fee  2 million dollars
annually for 1 domain
– Despite being designed for the porn industry most
didn’t sign on because they didn’t want to be
filtered out of search sites
– Mainly business like Harvard and Microsoft
bought domains to prevent satirical or defamatory
sites from sprouting up

56. Our Domain Name Model
• Based on rolling domain name registrations, we
estimate that after 2.5 years there will be over
40,000 domain names per gTLD
• At $20 per domain  $800,000
• See Appendix 2. for details
• Our models are much more conservative than
other models and history
– Reason: all of the other projections are based on the
gTLD being the only option but each gTLD competes
with many others

57. What does a Registry business’ cost
structure look like
• Management has said they will have 8-10
million in fixed costs and the rest will be
profits
• Verisign (which is the .com registry business)
has 27% net profit margins over the past 5
years
• Perhaps Verisign has economies of scale…

58. CentralNIC
• CentralNIC is a small 70 million dollar
company that acts as a registry for second
level domains
• CentralNIC has 24 second level domains
compared with NAME’s 31

59. Second Level Domains are less
valuable then TLDs ex
bbc.uk.co

60. Second Level Domains are less
valuable then TLDs ex
bbc.uk.co
Second Level
Domain

61. Second Level Domains are less
valuable then TLDs ex
bbc.uk.co
Top Level
Domain

62. Example gTLDs that NAME owns
Living.Social
A lot more elegant
than a second level
domain

63. Experts Agree
• "Your own gTLD demonstrates confidence and
vision and may accelerate your brand and its
value. An internet address at the Top Level is
far better than registration at the 'low rent'
Second Level.”
-Nick Wood Managing Director at Valideus
Source: http://www.iprinfo.com/julkaisut/iprinfo-
lehti/lehtiarkisto/2009/IPRinfo_2-
2009/fi_FI/Dot_Confusion__ICANN_is_Planning_Hundreds_of_New_gTLDs/

64. Using CentralNIC to estimate NAME’s
Registry Value
• 2 ways
–Margins
–Market Cap

65. CentralNIC

66. CentralNIC Margins
• CentralNIC’s net margins are at 17%
• At 35000 domain names per gTLD at $20 a
domain name and 40 gTLDs comes out to
appox. 5 million dollar profit
• Doesn’t include back end stuff that NAME will
do for Donuts

67. Market Cap way
• NAME and CentralNIC have similar number of
gTLDs
• Thus the market cap of CentralNIC should
equal the value of NAME’s Registry business
• CentralNIC is valued at 70 million dollars,
which puts a lower bound (b/c CentralNIC has
lower quality TLDs and less of them) on
NAME’s registry business

68. Appendix

69. Appendix 1. Regression of
Aftermarket and Domain Services
Operating
Income
Registrar
Income
Aftermark
et Income
2013 -9.4 104.4 35.3
2012 -0.4 94 33.5
2011 6.3 112.6 47.8
2010 4.7 96.1 43.3
2009 5.1 86.6 42
2008 11.2 80.8 43.8
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.940398
R Square 0.884349
Adjusted R Square 0.838089
Standard Error 2.763154
Observations 8
ANOVA
df SS MS F Significance F
Regression 2 291.9137 145.9568 19.11676 0.004549
Residual 5 38.1751 7.635019
Total 7 330.0888
CoefficientsStandard Errort Stat P-value Lower 95%Upper 95%
Intercept -0.99278 3.028811 -0.32778 0.756359 -8.77859 6.793027
Registrar Income -0.36581 0.080655 -4.53549 0.006194 -0.57314 -0.15848
Aftermarket Income 0.952905 0.161185 5.911888 0.001972 0.538567 1.367244

70. Appendix 2. Rolling Domain Name
Registration
3-Jul Difference 9-Jun Difference 5/8/2014 Difference 25-Feb
Total # of gTLDs 255 55 200 35 165 75 90
Total # of domain names
Registered 1600000 660000 940000 290000 650000
domain per gTLD 6275 12000 4700 8286 3939
• The domains were split into cohorts, (eg the first
90 domains online if Feb-25 were one cohort, the
75 that came online from Feb-25 to May 8 another
cohort
• Using a growth function decaying exponentially
with respect to time, an best fit line was
established and used as a growth trajectory