Stock Analysis firm Trefis had some interesting comments on Verisign in a note entitled “Drop In Verisign Shares Highlights Risks Associated With Domain Business”
The note went on to say that the biggest risk to the Verisign business is growth in ccTLD domain names.
Trefis didn’t mention the new gTLD’s at all.
It would be one thing to mention new gTLD’s and then conclude that the wouldn’t impact Verisign market share of the global domain market, but for the company not to even mention new gTLD’s makes it look like Trefis doesn’t even know they exist.
Regarding the contract to run the .net and .com registry, all Trefis had to say was that “Losing the contract for either of these domain names come 2018 would mean a severe cut in the company’s top line”
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The post did not mention ICANN or the impact that the US possibility giving up oversight might effect the contract the next time it comes up for renewal.
Here is the post:
How Will Losing The .com/.net Contract Impact VeriSign?
VeriSign is the sole registrar for the .com/.net domain names, and had a market share of approximately 46.7% in global top level domain name registrations in 2013. At the end of Q3FY13, VeriSign had a total of 126 million .com and .net domain names registered in the adjusted zone out of a total 265 million domain names registered globally.
Losing the contract for either of these domain names come 2018 would mean a severe cut in the company’s top line. You can take a look at the impact a loss in contract to another registry service provider such as Neustar on VeriSign’s stock by changing its share of all domain registrations worldwide.
“Currently, we believe the only threat to VeriSign’s market share in the global domain name registrations market is from country code top level domain names (ccTLDs). ccTLD registrations reached 119.5 million at the end of Q3FY13 and have been increasing at almost three times the growth rate in .com/.net domain names. “
“This rapid increase in ccTLD registrations, combined with restrictions on domain name pricing, have strained top line growth for VeriSign, which fell to 10.5% in 2013 from 13% in 2012. ”
“We expect VeriSign’s market share to decline gradually until the end of our review period as ccTLD registrations continue to grab potential .com/.net registrants.””
ccTLDs are the major competitive force against .com, but this is already how things are. The only reason why ccTLD share is growing is the economic growth of regions where ccTLDs are much stronger than .com, like Brazil. Although gTLD share is declining in some countries with strong ccTLDs, this is due to Verisign retracting investments they once had, which are wise decisions to maximize shareholder value.
Main problem is economic downturn in markets with strong gTLD usage, like the US. Second after is people not being able to get the .com they want, and .net is much weaker than .com when it comes to plan-B domains. .co, .me, .net have been sharing this plan-B options, and now new gTLDs can make this segment much more crowded.
In almost every country where there is a strong ccTLD, .COM moves to being a joint first choice. As the ccTLD becomes stronger, the .COM moves to being a second choice TLD with many of its new registrations being ccTLD/COM pair registrations where the registrant registers their .ccTLD and their .COM and perhaps another domain. It is the obvious and only real choice for a global TLD though. The new gTLDs don’t really feature as significant percentages (>5% of any country level domain footprint) yet. Even in the EU, the .EU ccTLD has found it difficult to gain market share. The other newer gTLDs outside the COM/NET/ORG TLD core also have low shares. Cumulatively, the new gTLD count is somewhere around that for .ASIA. It is not yet a global player in terms of market share so in a way, Trefis is right to concentrate on the immediate and short term threats.