Can New gTLDs Save Demand Media ?

Scott Hopkins wrote a piece on Seeking Alpha today stating that the new gtlds were the last chance for Demand Media. Demand Media has been languishing in the stock market for awhile now. The stock is down 25 % this year and is down 46 % over a one year time period.

Demand Media owns Name.com and Enom and that is where Hopkins believes the magic has to happen. He is not a believer in the Demand Media web properties such as eHow and LiveStrong.com.  He refers to these sites as digital sharecropping, always at the whim of another Google algorithm update.

So if Demand Media is going to make a turnaround, Hopkins sees that happening with the new gtlds. It is worth noting some of the registrar figures Hopkins used in his hypothesis are not accurate. His reference to Name.com as having roughly 500,000 registrations is way off compared to latest numbers from registrarowl.com, they put Name.com at 1.2 million as of December 2013.

The article actually quotes Michael Berkens referring to a post he wrote in 2012 but its really just a post on a poll

Michael has already responded to Scott on seekingalpha.com as he believes he has been misquoted but nice to see that confirmation that people from outside the industry read thedomains.com

From the article:

Summary

  • New domain name extensions are being released daily. Will people use them?
  • DMD needs to move away from reliance on search engine traffic.
  • Profitability will depend on eNom and Name.com versus GoDaddy.

Right now Demand Media owns Name.com and eNom wholly. They also own a stake in Namejet. As far as market share is concerned, as you might expect, GoDaddy.com is the leader, with about 30% market share and growing. Second, is eNom with about 8% market share. Name.com is hardly relevant with approximately 500,000 domains registered and less than 1% market share.

eNom is in a valuable position at second place and growing. At over 6 million domain names registered, the company has 20% of the business GoDaddy, the undisputed leader in domain names, accounts for.

The most important element of the success of Demand Media’s domain name companies will be to how well the new gtld’s are promoted and how well the registrars promote them. However, even with great promotion, new TLD’s fail.

He goes on to discuss .CO although he focuses too much on the O.co situation and not the fact they have 1.6 million regs and that they just got bought out by Neustar for $109 million. I think every new string would love that scenario in the long run.

Read the full article here

Web.com Officially Announces The Acquisition of SnapNames.com

webdotcom-logo

Web.com Group, Inc. (WWWW) officially announced today that it has acquired SnapNames from KeyDrive S.A.

Shares are down over 2% in early trading today.

The questions yet to be answered is how will the acquisition effect where expiring domain names from Web.com registrars, including NetworkSolutions.com and Register.com will be going.

All expired domains of Netsol where going to SnapNames.com until it was acquired by Oversee.net, the company that sold SnapNames.com to Keysystems. Once Oversee.net acquired SnapNames.com Netsol went into partnership with Demand Media, INc (DMD) to form Namejet.com which has over the last years been the exclusive auction house for expired Network Solutions domains.

We have asked both Web.com and Demand Media, Inc over the weekend how this acquisition will effect dropped domain names but neither has furnished a definitive answer.

SnapNames is a drop service and online auction house including expiring, deleting and privately-owned domain names.

“We are very pleased to bring SnapNames under the Web.com umbrella,” said David L. Brown, chairman, chief executive officer and president of Web.com. “This acquisition enables us to enhance our existing domain related assets and provide additional services for customers who are looking for specific domain name addresses. In today’s expanding domain resale marketplace, SnapNames is a global industry leader with experience and expertise in domain lifecycle management and auction services.”

“”Web.com owns two of the world’s largest retail registrars in Network Solutions and Register.com. With the addition of SnapNames, Web.com will further expand its global partnership channel by leveraging SnapNames’ extensive international network, thus helping customers find the right domain names the first time they look. In addition, the acquisition complements NameJet, the domain name auction platform managed through a joint venture partnership with Web.com and Rightside.””

In a press release issued by the seller of SnapNames, Key-Systems said:

“Moniker now plans to work even more closely together with KeyDrive and its sister company Key-Systems to strengthen its position on the US registrar market and to become an even more powerful international registrar.

“KeyDrive will be reinvigorating the Moniker brand with new technology, products and commitment to their customer service”, said Alexander Siffrin, Chairman of KeyDrive.”

“”The disposition of SnapNames will have no negative effect on the customer experience of the Moniker clients. The same staff will be taking care of all customer needs and customers will access their accounts as before. Moniker will continue to work with SnapNames as in the past and the usual business will not be interrupted for clients.””

“”In February Bonnie Wittenburg assumed the position as Moniker CEO. Under her leadership the synergies and cooperation that existed between Key-Systems and Moniker will be increased. A series of new service offerings is planned by Moniker in the future through this increased cooperation. Wittenburg plans to focus much attention on the development of Moniker’s customer service as Moniker expands the product offerings.””

“”Among the unique strengths that the parent company KeyDrive and its members bring are the commitment to offer a broad range of domain name extensions including pre-registration for over 700 new top level domains, a large ccTLD offering and a variety of domain-related services such as professional registry services and IT infrastructure services accompanied by a strong costumer focus provided by domain experts.””

Demand Media Fall Under $5 A Share Down 10%

Demand Media, Inc. (DMD) released its earnings for the 4th Quarter of 2013 as well 2013 numbers and the market apparently didn’t like them.

Demand Media, Inc. is hovering around $5 a share down about 10% from the closing price last night hitting an intraday low of $4.95

Demand has a 52 week high of $9.75

At its current price, Demand’s market cap is $459 Million dollars.

Demand Media, Inc, is intending to spin off its registrar, registry and new gTLD business into a new public company Rightside.

 

 

 

Demand Media’s Parking Revenue/Domain Sales Down 33% In 2013 & They Are Confused On gTLD Numbers

In the earnings call yesterday Demand Media, Inc. (DMD) had some interesting details about the financials they released for the 4th quarter of 2013 and for the full year 2013 and some interesting statements which demonstrate they are somewhat confused by the new gTLD numbers.

First for the results:

“In aftermarket services revenue, which represents premium domain sales and advertising revenue from our Owned & Operated third-party park domains of approximately $8 million and decreased 33% year-over-year due to lower advertising yield on domain parking and lower year-over-year domain sales.”

So in 2013 Demand is saying their revenue from parking and domain sales combined, was down 33% in 2013 Vs. 2012.

As for the new gTLD numbers,  well the statements made in the earnings call are inconsistent.

“More than 90 new gTLDs have been launched into the sunrise and/or general availability phases and more than 60 of those are leveraging Rightside backend registry platform, to-date, more than 150,000 domains have been registered on our platform.”

OK we agree with the 150K number which are all Donuts extensions.

Now here is where the trouble starts:

“”The sale number that we mentioned was 150,000 domains. Those were sold in sunrise essentially and so there’s a little bit in [GA], but I think it’s early enough to where there isn’t enough general availability, information to be able to draw, I think, even early trend lines with.””

Hum

Based on a search of the zone files and reported by many blogs trademark holders didn’t widely apply for domains and there are still only 25K registrations in the Trademark Clearing House which at best would represent less than 20% of all registrations.

No Bueno.

Next statement:

“”I would say, we’re pretty pleased with the early results just given that, we — one of the questions was, what do we think the consumer demand is going to be in, within really a couple of weeks of being offered. We’re seeing hundreds of thousands of domains being registered. So we think that’s a pretty positive sign for the industry in general.””

Well the number is 150,000 not hundreds of thousands and if they came mostly in Sunrise then they are not consumers registrations and if they are consumer registrations they are not Sunrise (brand) registrations.

Beyond that we know that the domainer community has a lot of skin in the game.

The words domainer or domain investor were not uttered during the call.

Demand Reports: Registrar Revenue Increases 12% in 4Q and 10% Year-over-Year

Demand Media, Inc. (DMD) reported its financial results for the fourth quarter and fiscal year ended December 31, 2013.

Q4 2013 Financial Summary:

  • Total revenue ex-TAC declined 3% year-over-year, with 12% year-over-year growth in Registrar revenue offset by an 11% decline in Content & Media revenue ex-TAC. Excluding the acquisitions of Society6 and Name.com, total revenue ex-TAC decreased 15%.
    • Registrar revenue grew 12% year-over-year, primarily due to the addition of Name.com, which was acquired at the end of Q4 2012. Excluding the acquisition of Name.com, Registrar revenue increased 2%.
    • Owned & Operated revenue decline of 5% was driven primarily by reductions in search engine referral traffic, offset by revenue of $8.4 million from Society6, which was acquired at the end of Q2 2013. Excluding the acquisition of Society6, Owned & Operated revenue decreased 23%.
    • Network revenue ex-TAC declined 31% due primarily to $3.5 million less revenue from the Company’s YouTube Channels as well as declines in the Company’s Social Media and Network Monetization businesses, offset partially by growth in Content Solutions.
  • Adjusted EBITDA decreased 39% year-over-year, primarily reflecting the negative impact from search engine referral traffic on high-margin revenues and a mix shift to lower margin commerce and Registrar revenue.

“We generated over $8 million of free cash flow in the fourth quarter and over $44 million for the year,” said Demand Media’s CFO Mel Tang. “We will continue to invest our free cash flow into our strategic content, commerce and new gTLD initiatives.”

Business Highlights:

Domain Name Services:

  • Launched our back-end registry platform in Q4 2013, powering the launch for over 60 new gTLDs and over 150,000 domain registrations to date.

 

  • Signed our first registry operator agreements with ICANN in Q4 2013, and have signed 14 agreements to date, including .dance, .democrat, .immobilien and .ninja, which are currently in their ‘sunrise’ launch phase.
  • Our registry entered into its first agreements with registrars to distribute our owned gTLDs, with over 40 signed to date.
  • Our eNom and Name.com registrar channels signed agreements with new registry operators to distribute new gTLDs and have launched over 80 new gTLDs to date.

Content & Media:

  • January 2014 US and Worldwide comScore Rankings:
    • On a consolidated basis, Demand Media ranked as the #19 US web property and Demand Media’s properties reached more than 88 million unique users worldwide.
    • eHow.com ranked as the #27 website in the US and reached more than 50 million unique users worldwide.
    • Livestrong / eHow Health ranked as the #3 Health property in the US, with more than 20 million unique users worldwide.
    • Cracked ranked as the #5 Humor property in the US, with more than 8 million unique users worldwide.
  • In Q4 2013, our Content Solutions business, which delivers custom and hosted content marketing services to partners, grew revenue ex-TAC 50% year-over-year to $2.8 million.
  • During Q4 2013, Society6 had a record $8.4 million of revenue and its sales on Cyber Monday increased 73% year-over-year. Society6 also expanded its product line-up to include mugs, baby onesies, kids T-shirts and a calendar created in collaboration with the artist community.

Q4 2013 Operating Metrics:

  • Owned & Operated page views increased 21% year-over-year to 4.1 billion, driven primarily by mobile page view growth on our core Owned & Operated sites, which more than offset significant declines in search engine referral traffic. Owned & Operated RPM decreased 22% year-over-year, reflecting the mix shift to lower yielding mobile page views as well as lower direct display advertising, offset partially by increased revenue from Society6.
  • Revenue per visit to our Owned & Operated Content sites was $0.05, up 25% year-over-year.
  • Network page views decreased 50% year-over-year to 2.2 billion, reflecting the Company’s decision in Q3 2013 to focus its monetization efforts on its Owned & Operated properties. Additionally, there were lower reported page views from its Pluck customers. Network RPM ex-TAC increased 38% year-over-year, reflecting higher monetization of our Social Media and Monetization page views.
  • End of period domains increased 9% year-over-year to 15.0 million, driven by the acquisition of Name.com, with average revenue per domain up 4% year-over-year, due to higher average revenue per domain on Name.com.

Business Outlook

Due to the planned separation of the Company’s domain name services business and evolution of its content and media business, the Company is replacing quarterly and annual guidance with a discussion of expected short and long term trends.

In 2014, the Company expects the following:

  • Slightly declining revenue year-over-year driven by the Company’s shift away from traditional branded display sales and continued declines in eHow coupled with product and ad format changes to improve user experience, offset partially by growth in Society6, Content Solutions and Registrar revenue.
  • Adjusted EBITDA margins in the mid-teens, reflective of the inclusion of $8-$10 million of annual gTLD operating expenses post the launch of our first gTLDs in February 2014, $10-$15 million of operating expense related to content remediation and infrastructure ramp for Society6 and Content Solutions, and a revenue mix shift to lower margin commerce and domain name services revenue.
  • Significant free cash flow generation.

Longer term, the Company expects the following:

  • Demand Media standalone revenue driven by a return to growth in eHow, as well as our growing Content Solutions and commerce businesses contributing a significantly higher percentage of total revenue.
  • Rightside revenue driven by growth in domain name services revenue from the new gTLD opportunity, partially offset by continued declines in domain parking revenue.
  • For both businesses, we expect margin expansion and to continue to generate significant free cash flow.