|Founded||Flint, Michigan (1993)|
|Key people||Elliot Noss (President and CEO)
Stanley Stern (Chairman)
|Revenue||$80.939 million USD (2009)|
|Net income||$12.241 million USD (2009)|
Tucows Inc. is an Internet services and telecommunications company, headquartered in Toronto, Ontario. The company is one of the largest domain registrars and operates Hover, and OpenSRS, a platform for domain resellers. In 2012, Tucows launched Ting, a wireless service provider, and continues to operate its namesake directory of shareware and freeware software downloads.
- 1 Company history
- 2 Business lines
- 2.1 Domain registration
- 2.2 Domain portfolio management
- 2.2.1 Income from domain portfolio
- 2.2.2 Domain portfolio
- 2.3 Email services
- 2.4 Retail services
- 2.5 Mobile phone services
- 3 De-emphasis and divestment of business lines
- 4 Business strategy and discriminators
- 5 Business prospects for domain registrars
- 6 See also
- 7 Citations
- 8 External links
Scott Swedorski started Tucows in 1993 to provide users with downloads of both freeware and trial versions of shareware. The name originally was an acronym for The Ultimate Collection Of Winsock Software. Internet Direct, owned and operated by John Nemanic, Bill Campbell, and Colin Campbell, acquired Tucows in 1996. STI Ventures acquired Tucows in 1999.
The company employed roughly 30 employees in Flint in 1998. There were additional employees in Canada. Scott Swedorski personally oversaw day-to-day activity in the Flint office located in the White House building on Beecher Road in Flint for several years.
Merger with Infonautics
In 2001, Tucows, Inc. became a wholly owned subsidiary of Infonautics, and after acquiring Tucows, Infonautics changed its name to Tucows, Inc., a business tactic called a "reverse takeover." Information Today, Inc. reported on August 26, 2002 that Tucows had sold eLibrary and Encyclopedia.com, its search and reference services properties, to Alacritude, LLC, a Chicago-based company. Tucows had acquired eLibrary and Encyclopedia.com in a merger with Infonautics, Inc. in August 2001.
Acquisition of NetIdentity.com
On June 15, 2006, Noss disclosed that the portfolio of NetIdentity's surnames acquired by Tucows represents at least 68 percent of US and European surnames. Noss disclosed that the cost of the acquisition was $18 million. On February 19, 2008 Tucows announced that they were launching a "Personal Names Service" using their portfolio of 39,000 surname domain names. "The launch of the Personal Names Service marks the complete integration of the surname assets we acquired with NetIdentity into our wholesale channel," said Elliot Noss, President and CEO of Tucows.
Acquisition of ItsYourDomain.com
On July 27, 2007, Tucows acquired ItsYourDomain.com (IYD), another privately held ICANN-accredited wholesale registrar offering domain services through a network of over 2,500 affiliates with over 700,000 domains under management. Tucows paid US$10.35 million in cash for IYD. "From our perspective IYD was perhaps the only substantial wholesale domain registration base that might be available over the next few years, and it's a compatible business that we'll be able to fold in to our existing operations," said Elliot Noss, President and CEO, Tucows Inc. ItsYourDomain.com managed 699,951 domains compared to Tucows's 5,919,987, at the time of the sale in July 2007 ItsYourDomain.com's monthly growth of 29,181 exceeded Tucows growth of 21,126.
Birth of Hover.com
By June 2008, Tucows had a total of three domain name registration services called ItsYourDomain (IYD), NetIdentity, and DomainDirect. Tucows decided to discontinue these three services, and merge them into one new domain name registration service, called Hover. Hover is a simple domain registration service powered by Tucows Inc, that started in July 2008. All IYD, DomainDirect, and NetIdentity customers are forwarded to Hover.com to resume their domain needs.
Launch of Butterscotch.com
On November 6, 2008, Tucows announced that they were launching Butterscotch.com, an online video network that with video tutorials to explain Internet technology and that the site was beginning with 35 video tutorials with plans to reach 500 clips by Spring 2009. "We're proud of Butterscotch.com's fall lineup of technology shows and look forward to adding more content that will wow and educate viewers about technology," said Andy Walker, General Manager, Butterscotch.com. Skeptics raised questions about the launch of Butterscotch and wondered if the launch made sense in terms of Tucows stated goal to divest non-core assets and focus on its core strengths in its four business lines. "...creating a site like this is expensive and lots of work (if you plan to execute on it). It certainly seems like a diversion from Tucows’ focus," wrote Andrew Allemann at Domain Name Wire. "Based on its intention to 'divest non-core assets', the move has confused analysts," wrote HostSearch.
On October 14, 2011, Butterscotch.com producer Sean Carruthers commenced issuing posts from his personal Twitter account that Butterscotch.com has ceased new production and has been shut down.
In 2000, Tucows acquired Linux Weekly News. In 2004, Tucows acquired Mississippi-based Boardtown Corporation, a billing software provider. In January, 2006, Tucows completed its acquisition of certain assets of Critical Path, an outsourced email services provider. On 26 August 2006, Tucows was the winning bidder on an eBay auction for the web calendar site Kiko.com. In a blog entry about the purchase, it was revealed that they plan on rolling the features of Kiko into their existing email platform. In June, 2006 Tucows paid $18 million to purchase Mailbank.com Inc - a company that owns over 17,000 domain names for common surnames like smith.net or brown.org. Mailbank generates income from selling advertising on the websites of the name-based domains and also from customers who want e-mail accounts with their surname as the domain.
On February 7, 2008, Elliot Noss, President of Tucows, announced during the Q4 Earnings Call that Tucows had decided to change the way they categorize their lines of business into four lines: Domain Registration, Domain Portfolio, email, and retail business. Noss announced that Tucows is de-emphasizing software libraries. "We have made these changes for a number of reasons; first the emergence of our domain portfolio as an anticipated high growth area of our business, second, the importance of email as a key driver of future growth, third the increased size of our retail business as a result of recent acquisitions, and fourth the de-emphasis of our software libraries," said Noss. On May 7, 2008 Elliot Noss reported during the Q1 2008 Earnings Call that Tucows sees the domain registration business as a strategic asset that feeds two other business lines - the domain portfolio and email services. "We changed the way that registrars create value out of domain registration, by positioning ourselves to not only take advantage of revenue growth but also to create a long-term asset in the domain name portfolio," says Noss.
Tucows is the third largest ICANN-accredited registrar in the world and the company is the largest publicly traded registrar. Tucows was the first competitive registrar to compete seriously with Network Solutions for market share when Tucows began selling domain names for $10 in January, 2000. Up until 2000, Network Solutions was the only registrar and sold domain names for $30 and up. By the end of the first year of competition in domain names sales, Network Solutions' market share had fallen from 100% to 52.9%.
In the Quarterly Earnings Call for Tucows' third quarter, held on November 6, 2007, President Elliot Noss said that Tucows hadn't been "competitive enough around price" in their wholesale domain name business and announced a substantial price cut in Tucows wholesale domain name services.
On February 7, 2008, Tucows President Elliot Noss disclosed in the Q4 2007 conference call that domain registration continues to provide Tucows with a strong base of revenue. Domain Registration "is a great driver of new customer relationships," said Noss. "In 2008, we expect this business to continue to grow and feed into our other businesses. Using IYD as a model, we expect to launch a hosted storefront option that will make us much more attractive with very small resellers looking for simple and easy options for selling Tucows service. We also planned on making fundamental enhancement for the user experience for our customers and their end users alike."
On May 7, 2008 Elliot Noss reported during the Q1 2008 Earnings Call that the price reduction that Tucows had put in place in August, 2007 is having the desired effect. "Renewal transactions are up 18% year-over-year, new transactions from small resellers to whom the price reduction was targeted, are up 15% year on year," said Noss. "This is a very positive turn around for us in this business segment where we had previously been losing business." Noss added that there had also been an increase in the deals won in the quarter and that the domain pipeline is growing. "Our largest competitors in this segment have all moved further away from wholesale to retail, media and corporate services, allowing our focus on this segment to have greater impact and benefit," said Noss.
On July 28, 2008, Tucows announced that they are rebranding their wholesale services and calling it "Open SRS".
Domain portfolio management
Income from domain portfolio
Tucows has three sources of income from their Domain portfolio: 1) Income from advertising from pages of domains within their domain name portfolio; 2) Income from sales of domains from their portfolio, which is constantly being replenished; 3) Income from the auction of the steady stream of thousands of domain names that expire every day and become available for resale.
Income from advertising
In Tucows' 10-Q filing with the SEC on November 14, 2007, Tucows disclosed that they offer pay-per-click advertising on the pages of domains within their domain name portfolio. When a user types one of these domain names into the command line of the browser (direct navigation), they are presented with dynamically generated links which are pay-per-click advertising. Every time a user clicks on one of the links listed on a web page, it generates revenue for Tucows through their partnership with third parties who provide syndicated pay-per-click results. In their financial reports, Tucows does not break out their advertising income due to Direct Navigation from advertising income from other sources including the download site. However, Tucows announced $1,068,195 in total income from advertising during the quarter ending September 30, 2007.
On February 7, 2008 Tucows President Elliot Noss disclosed in the Q4 2008 conference call that Tucows switched from Google Ads to a new advertising partner in 2007 which led to a revenue increase of over one third. "It is important to note this increase was primarily the results of better yields," said Noss. "The Gem and Surname portions of our Domain Portfolio have not yet been optimized and over the coming months, we expect to improve performance there as well." Noss also disclosed that Tucows is doing a better job of monetizing parked pages and have new tools available "to grade and segment our inventory of domain names, [(which) will enable smarter decisions in domain transactions and therefore more and more profitable transactions."
Income from domain sales
On June 19, 2007 Tucows announced that it has sold approximately 2,500 domain names from its portfolio of domain names for US$3.0 million in a private transaction and that it may earn an additional US$1.2 million from the sale in one year's time if certain performance criteria are met. "This sale indicates some of the latent value of our domain name portfolio," said Elliot Noss, President and CEO of Tucows Inc. "As I have stated in the past, we will continue to be opportunistic with our domain name assets." The cost per domain if the performance criteria are met is $1,680 per premium domain name. On August 7, 2007 Noss commented on the $3 million sale and said he expected more domain name sales in the future. "We do not think the $3 million in domain name sales in a year will be atypical," said Noss. "It will probably be the average over the next three years, and it will certainly be the average over the next five years. It is still very early days in this market and we would be learning every quarter as we move forward." Tucows also announced that they had entered into partnership with Domain Distribution Network and NameMedia to offer to over 600,000 premium domains for sale. Tucows' wholesale network supports near-instant transfers of premium names.
On August 16, 2007 Tucows announced that they plan to further monetize their domain portfolio and that they had hired Bill Sweetman as General Manager of the domain name portfolio to develop and execute a strategy to enhance the quality and profitability of Tucows's portfolio. Sweetman's team reviews and selects domain names from daily lists for possible acquisition by Tucows, grades and prices domain names, and optimizes the landing pages of parked domains. The team also generates reports on data trends and patterns and supports inquires about domain names in Tucows portfolio.
On February 7, 2008 Tucows President Elliot Noss disclosed that Tucows is seeing traction in sales of brandable names at prices higher than $10,000. "We are not breaking out the sales of this type at this time. But the traction is there and we believe it will continue," Noss said. "Finally, we expect to continue the sale of domain assets in bundles that we commenced last year. We are very focused on increasing the number of transactions across all of these segments. We expect the Domain Portfolio to be our fastest growing line of business and to grow as a percentage of our total business."
On February 18, 2008 Tucows that the company was participating in the domain auctions at the annual T.R.A.F.F.I.C. Conference in Las Vegas with a total of five premium domain names up for auction. Domain Name Wire reported on February 21, 2008 that Tucows' premium domain name "Jewellers.com" sold for $30,000 in Moniker’s live domain auction held at the TRAFFIC convention in Las Vegas from February 18–21, 2008. Information on the sales price for the other four premium domain names Tucows was planning to list in the auction is not available.
On May 7, 2008 Elliot Noss reported during the Q1 2008 Earnings Call that Tucows had put a process in place for the regular sale of direct navigation names and had just completed the first sale under the new process for 3,700 domain names for just under $1 million. "We have not only concluded the transaction and nailed down the transaction process, but we now have buyers ready for more," said Noss. "We have some who sat on the side lines in the first sale and are now eager to get in." Noss said that Tucows had created the "most efficient means of monetizing the expiring domain name stream of any registrar" and that Tucows had demonstrated the certainty of a regular revenue stream for the domain name business segment. "Domain Portfolio Services should continue to show great growth for years to come," said Noss. "It is clearly the growth engine for Tucows for 2008 and looks well up to the task."
In reply to a question from Thanos Moschopoulos of BMO Capital Markets, Noss elaborated on the model and how Tucows planned to bring some regularity to the sale of domain names. "We take a bundle of names that literally are from our perspective, financial assets," said Noss. "We will then place them essentially in an account that will allow a prescreened group of buyers to follow along through the course of roughly 30 days. They can all watch the names, they can see how they perform, and they can see them using the usual metrics as they as inventory holders are very familiar with. At the end of the process they win." Noss added that Tucows planned to hold the sales regularly which might mean monthly or bi-monthly but that "it is a regular basis where there is always some names under viewing and there are always some names under transaction."
Noss said that the domain names are good financial investments and that there is no shortage of buyers. "We have an inflow of names every month," said Noss. "We think it is appropriate to have an outflow as well." In the RBC Capital Markets Growth Conference held on October 27, 2008 Noss disclosed that 180,000 domain names expire each month from customers who decide they no longer want the domain names and that Tucows is able to select the ones they want to keep from these domain names. Tucows had disclosed in the Q4 2007 conference call that they pick up 6,000 to 8,000 names each month from these expiring domains.
Income from auction of expired domain names
Tucows announced on June 12, 2008 that they have reached an agreement with Afternic to auction Tucows’ large daily inventory of expired domain names. "We have over eight million domains under management and thousands expiring every day, so this deal provides us with a great way to share revenue with our resellers while participating in Afternic’s popular secondary domain name marketplace,” said Bill Sweetman, General Manager of Tucows Domain Portfolio. Tucows will share 10% of the gross sale price with the reseller for the sale of expired domains that were originally registered through the reseller. Revenue will be shared automatically without the reseller having to take any additional action. Sweetman explained that Tucows chose Afternic as a partner even though SnapNames with Register.com and NameJet with NetSol/eNom are the dominant players in expired domains. "We believe the bigger and long-term opportunity in the secondary domain market is with the SMB (Small and Medium Sized Business) market, so we chose to work with the one company that really understands that market and how to sell to them," says Sweetman. "Afternic also has the most user-friendly marketplace and best customer service of any of the expired name services we evaluated. And with 100,000+ expired domains from Tucows now flowing into their platform, Afternic is a dominant player in expired domains."
Direct sales of premium domain names
On October 29, 2008 Tucows announced that they would begin direct sales from their inventory of premium domain names under the brand name of Yummy Names. The service was created especially for marketers to obtain a high-quality domain name from Tucows inventory including countryrock.com, divorced.com, lemons.com, listener.com, mygarden.com, myhomepage.com, thepub.com, tool.com, and veggies.com. ""Domain names are a vital component to successfully marketing a brand - whether it's the launch of a new company, website or marketing campaign," said Bill Sweetman, General Manager, YummyNames. "A high-quality domain name is short, relevant and most importantly, easy to remember. Customers have the option of purchasing a premium domain name outright or leasing the name.In 2009 one of Tucows' subsidiaries Buydomains Holdings Inc. sold another premium domain name for a record $50,000 for Myhomepage.com.
Size of domain portfolio
On February 20, 2008 Tucows issued a press release disclosing that the company owns over 180,000 domain names in its private domain name portfolio. The portfolio includes over 1,000 "gems" - domain names that have the highest potential value in the portfolio including names such as "Jewellers.com," "Actresses.com," "BasketballPlayers.com," and "ProjectManagers.com." Tucows portfolio also includes 39,000 surnames, 22,000 brandable names, and 88,000 direct navigation names. "Over the past two years, Tucows has built a portfolio of domain names that we view as one of the best in the world," said Tucows President Elliot Noss. "We have sold thousands of these names to date, and we will continue to pursue sales of domain names from our portfolio both individually and as bundles." Domain Name Wire reported on May 19, 2009 that "BuyDomains has sold the domain name Myhomepage.com for $50,000. - "The buyer appears to be in Germany and the page currently resolves to WhyPark’s name servers.” - “This will be one to watch, as the buyer clearly has plans for it.” wrote Andrew Allemann. Similarly the year prior, February 21, 2008 Domain Name Wire also reported that; Tucows' premium domain name "Jewellers.com" sold for $30,000 in Moniker’s live domain auction held at the TRAFFIC convention in Las Vegas from February 18–21, 2008. David Goldstein wrote in DomainNews on March 15, 2008 that Tucows is hogging domain names with their portfolio of 150,000 Internet domain names in its private domain name portfolio. "...What is the value to anyone apart from Tucows of them hogging these domain names?" writes Goldstein. "There could be entrepreneurs who could be using these domain names now. Still, it is perfectly legitimate so one must not quibble too much!"
Increase in domain portfolio inventory
On February 7, 2008 Tucows President Elliot Noss disclosed in the Q4 2007 conference call that the inventory in Tucows Domain portfolio constantly increases. "Please remember we pick up 6000 to 8000 more names each month from expiring domains," said Noss. "We made the decision two years ago to acquire expiring names that we believe add value. Our competitors primarily choose the option names at the time of expiry." In reply to a question from Thanos Moschopoulos of BMO Capital Markets if the ICANN rules change in domain tasting would have any impact to Tucows, Noss replied, "no". Tucows had previously announced their support for ICANN’s resolution to introduce a fee to discourage domain tasting and Google's decision to drop names added and deleted during the AGP from its AdSense program.
Legal defense of domain name ownership
Domain Name Wire reported on February 28, 2008 that Tucows had successfully defended against an arbitration proceeding over the domain name Batchelor.com, that Tucows had acquired as part of its NetIdentity purchase. The complaint had been filed by Ken Batchelor Cadillac Company, a car dealership in San Antonio, Texas. The National Arbitration Forum panel determined that the car dealership had not established rights in the mark "Batchelor." Bill Sweetman, General Manager, Domain Portfolio at Tucows, said that Tucows has won every surname arbitration proceeding it has responded to and that Tucows does not sell domains from its NetIdentity portfolio. "If we were to sell one of those domains, not only do we sell the business value associated with the surname, but it hurts the overall portfolio," said Sweetman. "It’s different from a portfolio of generic domains. You don’t think twice about selling one of those for the right price."
In another case on September 18, 2007 Weidner Investment Services, Inc. filed a complaint claiming that Weidner was considered a trademark or service mark in which the Complainant had rights and asked the National Arbitration Forum to order the transfer of Weidner.com from Tucows to Weidner. Tucows failed to respond to Weidner in the case and the National Arbitration Forum transmitted a Notification of Respondent Default to the parties and on November 7, 2007 ruled that Tucows had to transfer Weidner.com to Weidner Investment Services, Inc.
Tucows provides millions of email boxes through their network of over 9,000 service providers. Customers of Tucows fully hosted email service are provided with POP3, IMAP, WAP and webmail access. Providers using Tucows Email Service have the option of using Tucows' spam and virus filtering with their current email infrastructure.
History of email problems
As part of the NetIdentity acquisition, Tucows had problems migrating retail customers' email from a third party provider to Tucows in-house mail systems in September 2006. That migration is the basis for the article "System migration may be the most dangerous thing you ever do" in ITworld.
Starting August 12, 2008 Tucows Email Service running on their servers designated as Cluster A experienced a multi-day outage lasting until the afternoon of Friday, August 15, 2008. This failure was reported to be the result of a failed head unit in a NetApp cluster. On October 6, 2008 Cluster A again suffered another multi-day outage affecting at least 50% of users and at times all users. As of the afternoon of October 9, 2008 this cluster was still partially down ("degraded") preventing an unknown number of users from being able to retrieve email. A video of Rick Yazwinski, Principal Engineer at Tucows, was posted by Tucows explaining the problem. Per the video, the root cause of the October outage was not identified until the evening of October 8, 2008 and is described as an NFS lock resource leak attributed to a bug introduced in the 2.6.20 Linux kernel that Tucows was using to connect to their NetApp mail stores. NetApp was able to provide a work around and Tucows was able to begin restoring service until the load increased and began thrashing the NetApp causing Tucows to take the system partially down to allow it to catch up under a lighter load.
New direction with email
On February 7, 2008 Tucows President Elliot Noss disclosed that Tucows integration of the new email system and the migration of all accounts to the new system is progressing as planned. "During the quarter, we continue to make progress in migrating customers from the legacy system to our new platform," said Noss. "This is simply hard work and it's progressing, as it should." In the same conference call, Noss added that Tucows sees its email system as an asset to the company. "Our Webmail Client is on par with Yahoo, Google, and Hotmail, more importantly we are focused on making the customer experience superior," said Noss. "Tucows and our service provider partners are in a position to provide a far superior user experience than a mega portal. And as I said at last quarter's call, we have a tremendous sales team in place, which is excited to sell this enhanced service into our channel, and I'm pleased to report we are seeing customer wins and building a solid pipeline." On March 14, 2008 Tucows announced that Rohan Jayasekera had joined Tucows as Director of the Tucows Email Service.
On May 7, 2008 Elliot Noss reported during the Q1 2008 Earnings Call that Tucows expected to complete the migration to the new email platform by the end of the 2nd quarter. Noss added that one of the advantages of the migration would be a savings in data center and bandwidth costs. "Average data center costs in the first seven months of this year will be roughly $290,000 per month. In the last five months, it will be less than $90,000 per month," said Noss. "In fact, data centre and bandwidth costs in 2007 last year were in the range of $3 million for the full year. For 2009, they will be in the range of only $1 million." Noss also said that once the migration was complete, Tucows expected to begin growing the email business. "Our sales group was finally able to start going out and building a pipeline again," said Noss. "Since November of last year, the email sales pipeline has more than tripled. It is now the highest it has even been for email by a fair bet."
On January 9, 2009, Tucows scheduled a maintenance window and shut their email servers down for about 4 hours. Unfortunately, a hardware failure occurred which caused their OpenSRS team to need to perform a hard drive restore. This took about 17 hours.
On February 7, 2008 Tucows President Elliot Noss disclosed that the division that sells Tucows services to consumers and small businesses and offers personalized email through net identity has grown with some of Tucows' recent acquisitions. "Our fourth line of business is Retail, which has grown through some of our recent acquisitions," said Noss. "Our Retail division sells Tucows services to consumers and small businesses. We offer retail domain registration and other internet through domain direct. We offer personalized email through net identity." In the RBC Capital Markets Growth Conference held on October 27, 2008 Noss explained that Tucows uses retail services as a "testing ground to see what might be next in the market and then roll those into the wholesale channel." On June 15, 2006 Noss disclosed that Tucows will earn income for the 90,000 customers who have email accounts, hosting, and other services with NetIdentity of between $3 and $4 million. Tucows also expected to receive income for pay per click advertising revenue from domain parking the surnames.
Mobile phone services
De-emphasis and divestment of business lines
De-emphasis of software downloads
Tucows maintains a download archive that includes more than 30,000 software titles in its worldwide network of partner sites. Although some listing features are now available only for pay, basic listing remains free. The original creator of the Tucows software archive, Scott Swedorski, announced in November 2003 that he had resigned from Tucows. On March 10, 2006, Tucows Content division closed its satellite office located in Flint, Michigan, USA and relocated the remaining editorial functions to its corporate head office in Toronto. The Content division now operates solely from the corporate head office in Toronto under the direction of Greg Weir.
On February 7, 2008 Tucows President Elliot Noss disclosed that Tucows plans to de-emphasize the software download aspect of their business. "In regard to our other de-emphasized businesses such as our content business," said Noss, "we are exploring strategic alternatives to maximize their value to the company and to the shareholders and we'll discuss developments in this regard as appropriate."
Divestment of web hosting accounts
On May 6, 2008 Tucows announced that they are getting out of the web hosting business. Ross Rader wrote on the Tucows corporate blog that the decision had been made to simplify the company's offerings. "Many of our competitors attempt to provide a 'one-stop internet services shopping experience'" wrote Rader. "We call this 'the Walmart way'. We believe that we have a much higher chance at succeeding by doing very few things extremely well for our clients." As part of the divestment Tucows signed an agreement for Hostopia to purchase about 14,000 Domain Direct, NetIdentity and ItsYourDomain.com (IYD) customer web hosting accounts for $1.6 million in cash and would migrate the web hosting accounts to Hostopia's unified web service platform by July 2008. "Rather than trying to compete with companies like Hostopia to offer better hosting services that they do, we are going to focus on making sure that our products work better with their great services than any other provider does," wrote Rader.
Divestment of equity interest in Afilias
On November 5, 2008 Tucows announced that it was selling its entire 7.38 percent equity interest in Afilias for $7.4 million. "This sale is another step in our stated goal to divest non-core assets in order to unlock hidden value for shareholders," said Elliot Noss, President and CEO of Tucows. "The proceeds of the sale provide additional funds that will be used to fund further share repurchases." Afilias is the registry operator of the .info and .aero TLDs, and the service provider of the .org generic top-level domain (gTLD), .mobi mobile phone TLD, and a provider of domain name registry services for several countries around the world, including .AG (Antigua and Barbuda), .BZ (Belize), .GI (Gibraltar), .HN (Honduras), .IN (India), .ME (Montenegro), .SC (the Seychelles), and .VC (St. Vincent and the Grenadines).
Business strategy and discriminators
Reputation and values
On January 8, 2008, Tucows published an article on their company web site titled "Registrar Reputation and Trust" explaining the company's values and their position on domain name front running. "We work to uphold the rights of Registrants. That means, for example, not putting 60-day locks on domains when a Registrant makes a change to their WHOIS information effectively locking some into a renewal and blocking domain name transfers to other Registrars. That also means having a clear, defined policy surrounding expiry and redemption periods." wrote Tucows employee James Koole. Koole says that Tucows has found a way to address the issue of domain tasting. "Tucows works to prevent domain name tasting by charging our Resellers a monetary fee on domain name registrations that are cancelled within the five-day Add Grace Period (AGP)," Koole said. "Tucows doesn’t use WHOIS query data or search data from our API to front-run domain names," Koole added.
On January 30, 2008, Tucows announced that although they support ICANN’s resolution to introduce a fee to discourage domain tasting and Google's decision to drop names added and deleted during the AGP from its AdSense program, Tucows thinks Add Grace Period (AGP) abuse could be further diminished or eliminated by shortening the AGP period to 12 hours or less allowing registrants to correct spelling mistakes that the AGP was originally intended for.
Industry comparison of domain portfolios
Publicly traded companies
Public disclosures of domain name portfolio holdings by publicly owned companies include the following:
- On February 20, 2008 Tucows issued a press release disclosing that the company owns over 150,000 domain names in its private domain name portfolio. Tucows announced $1.06 million in total income from advertising from direct navigation and other sources during the quarter ending September 30, 2007.
- David Kesmodel wrote in the Wall Street Journal on November 17, 2005 that Marchex Inc., has a portfolio of more than 200,000 domains. "A year ago, the publicly traded online advertising company paid $164 million for a portfolio of more than 100,000 domains from Name Development Ltd., a British Virgin Islands company," wrote Kesmodel. "Seattle-based Marchex owns sites such as debts.com and camcorders.com, as well as many ZIP Code-oriented sites like 90210.com. Ad revenue from Marchex's direct navigation sites totaled $7.7 million in the third quarter, up from $6.4 million in the second quarter."
Privately held companies
Public disclosures of domain name portfolio holdings by privately owned companies include the following:
- David Kesmodel wrote in the Wall Street Journal on November 17, 2005 that BuyDomains Holdings Inc., Waltham, Mass., owned a portfolio of 500,000 domains, including jobfinder.com and travelchoices.com. "It has advertising-oriented domains in 90 "verticals," including travel, music and finance. Kesmodel wrote. On February 6, 2006 Frank Michlick wrote that BuyDomains, a division of YesDirect, Inc., owns a portfolio of more than 600,000 domain names. BuyDomains announced on January 23, 2007 that they had acquired 32,000 “.com” domain names. "The acquired one and two word domains are concentrated in the lucrative advertising verticals of finance, travel, education, and recruitment," wrote Michlick.
The Wall Street Journal reported on December 7, 2007 that Platinum Management LLC had reported holding a 5% stake in Tucows, according to a Schedule 13D filed with the U.S. Securities and Exchange Commission. Platinum said that Tucows' public market valuation does not reflect its intrinsic value despite a "strong history of positive cash flow generation and expansion prospects in 2008" and that Tucows has "an extremely attractive recurring revenue business model as a top-three domain name registrar along with several hidden assets that are misunderstood, including its ad business, premium names business and newly launched hosted e-mail business." Mark Nordlicht is the manager and controlling person in Platinum Management.
On December 21, 2007 Tucows disclosed that they had retained Investor Relations firm, The MKR Group, to provide investor relations and corporate communications services in the United States. "Over the past year we have made significant progress in strengthening our overall business by improving our wholesale domain name and email services and adding to a now large domain portfolio, thereby positioning the company for greater growth and profitability," said Elliot Noss, President and CEO of Tucows. "As a result, we believe this is the ideal time to articulate the Tucows message to investors. An expanded Investor Relations effort in the US will enable us to better communicate our story to Wall Street, increase the overall awareness of the company, and unlock hidden shareholder value," Elliot added.
Business prospects for domain registrars
On February 17, 2008 "Seeking Alpha" published an article by Alistair Croll critiquing the business models of domain registrars and asserting that despite the huge growth in internet sites, domain registrars like GoDaddy, Network Solutions, and Tucows face hard times. "Two of the major sources of revenue for these companies are premium domains and hosted services. And both are under attack," said Croll. "ICANN wants to end domain tasting. Google’s eating away at hosting margins," Croll added. "Some — like Tucows, wholesaler eNom, and Go Daddy’s Wild West Domains wholesale business — are better positioned to weather the storm by focusing on resellers and local ISPs."
Croll was not entirely negative and highlighted some areas that could be profitable with opportunities for growth. "There’s still money to be made from premium domains," said Croll. "Tucows, for example, has a name auction service that sells expired names to the highest bidder. These previously active names have a known traffic history, so when they expire it’s easy to know whether they’ll generate money without tasting."
On February 20, 2008 Tom Millitzer wrote on WHIR that Tucows has almost $80 million in liabilities on its books and it would take almost 10 years to pay it back at the current EBITDA, not including interest. Millitzer says that Tucows is based on a deferred revenue business model and that the bulk of their liabilities time out every year. "Financially speaking there are not many firms like Tucows. They sell millions of little things, sort of like Coca Cola. However, those little things are domain names, selling for let's say $12," said Millitzer." Since they are paid 'up front' for a specific period, usually one year, the revenues for these are recognized at $1 per month, not the $12 when the transaction occurred. Sort of like cash vs. accrual accounting."
In the RBC Capital Markets Growth Conference held on October 27, 2008 Noss disclosed that Tucows had "been through nuclear winter of 2002" and that their management team has been through tough times before but that they see the next one or two years as a "great opportunity to derive value from our own stock" by buying back stock if it remains underpriced.
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- Say Hello to Hover
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- Domain Name Wire. "Moniker Auction Nets $4.4 Million, SkiResorts.com sells for $850,000" February 21, 2008.
- Domain Name Wire. "Next Week’s Auctions are Important for Domain Industry" February 15, 2008.
- RBC Capital Markets Growth Conference "Tucows Presentation" October 27, 2008.
- Tucows Corporate blog. "Tucows and Afternic.com Team Up for Expired Domain Auction" June 12, 2008.
- Domain Name Wire. "Tucows and Afternic Deal Q&A" June 12, 2008.
- Tucows Press Release. "Tucows Opens Hidden Treasure Chest of Premium Domains with YummyNames" October 29, 2008.
- Tucows Press Release. " Tucows Reveals Key Domain Name Portfolio Assets" February 20, 2008.
- Domain News. "Tucows Reveals Key Domain Name Portfolio Assets" by David Goldstein. March 15, 2008.
- Tucows Blog. "ICANN Proposed Tasting Fee a Good First Step" by Adam Eisner. January 30, 2008.
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- Tucows Press Release. "Tucows Sells Equity Interest in Afilias for $7.4 million" November 5, 2008.
- Afilias - Global Registry Services
- Tucows. "Registrar Reputation and Trust" by James Koole. January 8, 2008.
- Wall Street Journal. "Thanks to Web Ads, Some Find New Money in Domain Names" by David Kesmodel. November 17, 2007.
- Domain Editorial. "BuyDomains purchases portfolio of 32,000 COM domain names" by Frank Michlick. February 1, 2006
- Wall Street Journal. "Platinum Management Reports 5% Tucows Stake" December 7, 2007.
- SEC Filing. "Schedule 13D" December 7, 2007.
- Yahoo Finance. "Tucows Inc. retains the MKR Group for investor relations counsel"
- Seeking Alpha. "VeriSign, Tucows: It's a Bad Year To Be a Registrar" by Alistair Croll. February 17, 2008.
- WHIR. "Tucows - Has a deferred problem" by Tom Millitzer. February 12, 2008.
- Tucows Corporate Website
- Tucows Resellers Info
- Tucows Software Archive
- An Independent Financial Model for Ting and Tucows