I didn’t write much leading up to the Verisign (VRSN) acquisition of .Web for $135 Million this week, but I have plenty of thoughts about it.
First and foremost it’s a no brainier for Verisign.
Forget the $1.9 Billion they have sitting in the bank and focus in on the over $9 Billion dollar valuation the company has which went up over 3% on Friday which more than made up for spend.
.Web in my opinion since the announcement of the new gTLD program has been the only possible new gTLD that could possibly threaten the original Top Level Domain’s market share; .com, .net and.org.
That is not to say that other extensions don’t have value or a market but not the broad appeal as a .web.
So if you were Verisign and could only get one new gTLD, .web would have been the one to get.
I would argue Verisign getting .web (which they did not apply for) was simply a brilliant move and I would argue that if they did not get the extension it would have been gross negligence on their part.
As far as the cost of the extension to win .web, it’s really peanuts to Verisign
$100 Million, $135 million, $150 Million. $200 Million really what is the difference to Verisign?
Actually the purchase price was arguable cheap compared to Neustar’s acquisition of .Co two years ago for $109 Million when it only had 1.6 million registrations.
.info has over 5.5 million registrations and there has been over 4 million .info registrations, each year for the last 10 years (with a high of almost 8 million).
At even $8 wholesale that’s a cool $40 Million a year and of course Verisign has all the infrastructure in place so most of the income will fall right to the bottom line.
Verisign already has a profit margin of over 61% pretty incredible for a public company.
The second interesting issue is who was the second high bidder?
The ICANN auction, which lasted more than a day, was a step auction, which means one or more other applicant was bidding along with Verisign and drove them up to the $135 Million price.
Who was the 2nd place applicant?
What was the business model for the 2nd and 3rd place finisher in the auction?
It was certainly a lot different from it might be for Versign.
Consider that Web.com entire market cap is less than $900 million, how could they spend $200 Million for one new gTLD extension.Web?
Donuts offered just $70 Million for all of Rightside’s (NAME) strings which at the time they had already launched 40 of them.
The third interesting issue is how high would have Verisign gone to secure the extension if pushed higher by other bidders.
I think there was no way that Verisign was going to lose .web; no one could afford it like Verisign; no one needed it like Verisign.
For domain investors who participate in auction for domain names its common to have losers remorse.
“Hell I lost that auction at $1,100 maybe I should have bid $1,200 and would have won the domain.”
Well IMHO there is no way Verisign was going to lose this auction, and no one else could pay as much as them.
The 4th issue is now what is Rightside (NAME) worth?
Donuts offered $70 Million for all of the strings owned and operated by Rightside which had the time had launched 40 new gTLD’s and had around paid 550,000 registrations, many with premium renewal fees.
Now with Verisign paying $135 Million for one unlaunched string, what does that make Rightside’s new gTLD business worth?
At the time of Donuts offer, I predicted the $70 Million dollars would be rejected.
As of Friday’s close, Rightside has a market cap of $230 million, but that includes not just the new gTLD strings, but the operation of the backend for its owned and operated strings, and providing the backend for all of Donuts owned strings which totals over 2.3 million domains.
Rightside also owns the 2nd largest registrar in the world; Enom.com, as well as Name.com and 1/2 of Namejet.com among other assets.
It seems Verisign paying $135 million for just one string arguably makes Rightside shares look cheap at its close on Friday at $12 a share.
For .com domain investors my guess is that Verisign’s acquisition of .web is that best thing they could have hoped for, but only time will tell.
Verisign was probably the best buyer for .com holders as Verisign .web acquisition is more defensive and that another company could have gone after .com aggressively.
Will Verisign price .web domains with a premium renewal or not?
We might expect Verisign to use .web to make a play quite different from its contractually obligated pricing of .com and .net with premium pricing for registrations and renewals which at the moment they can’t do with .com’s and .net’s
On the other hand Verisign could just basically give away .web addresses as part of a .com/.net/.tv registration package.
In the domain space remember life is long and most of those investing in the new G’s did it for a long-term play (5 years +).
However lets not lose sight of the fact there are just over 23 million new gTLD’s registered some at great discounted pricing of $1 or under.
All of the new gTLD’s still don’t exceed the number of .net and .org registrations not to mention .info and .biz.
So .web while has a ton of potential lets not forget that Verisign hasn’t exactly set the world on fire with .cc which it also owns or even .tv.
Speaking about .tv my guess is that is the way that Verisign might price the “premium domains” with a one time premium charge and normal renewal fees but we will just have to see how it plays out.
Verisign has a lot of options of what to do with .web.
Finally what does the $135 Million acquisition of .web mean for future rounds of new gTLD’s?
Combined with .Store $40+ million auction, Google’s acquisition of .app for $25 Million; the next round of new gTLD’s will not go unnoticed.
As someone who was out on the road telling Fortune 5000 company’s about the coming new gTLD opportunity years ago, I was met mostly with rejection
Basically there was no interest
The next round will be an easy sale.
Especially if the price falls significantly from the $185,000 application fee you may see 10,000 or more applications submitted.
At that point you can make many arguments how it will affect the domain name aftermarket.
It just maybe become a hot mess where most companies that can afford it will go with a .com or a relevant ccTLD while startups and smaller businesses going with a much lower priced domain looking to upgrade when they get funded to a .com
In any event I did tell readers 5+ years ago I had no idea of how the new gTLD’s would affect the domain market and industry at the time but it was coming and everyone needed to pay attention to it.
I think on that front my thinking was not wrong.
