Re: [registrars] Posting from Snapnames

[Rick H Wesson <wessorh@ar.com>]

The snapnames adendum is attached as a pdf, we'll see about getting it on
the web site too.

-rick

On Fri, 4 Jan 2002, Rob Hall wrote:

> SnapNames - Search BoxPlease find below a posting and attached a document
> from Snapnames that they have asked that I post to the Registrars list.
>
> The Word file attached is in a better format that below (I have just cut and
> pasted the doc below), so I would suggest reading it.  If possible, I will
> try and have it converted to a .pdf sometime tomorrow.
>
> Rob.
>
> ****************************************************************
>
>  Dear Colleagues,
>
>
> The domain Wait List Service (WLS) proposed by VeriSign to maximize
> registrars’ revenue on expiring domain names would provide more revenue, to
> more registrars, than anything the registrars are now doing or could do
> instead.  As many of you are aware, SnapNames is the domain name
> infrastructure technology company that would provide the technological
> back-end for the WLS if adopted.
>
>
>
>  SnapNames has lived, slept, breathed, and intensively studied the reality
> of the secondary/expiring domain names market.  We are confident that
> registrars’ revenue and customer service opportunities have never been
> greater than they can be through WLS.  For the benefit of our colleagues and
> partners, we have prepared a simple table to summarize the benefits of WLS,
> and to compare it to the status quo (as used here, “status quo” includes
> as-yet unsupported claims of speculative future innovation).  We have also
> briefly outlined what we see as the most significant benefits of WLS to
> registrars and to the broader community.
>
>
>
> In structuring the WLS the same principles of the primary domain name
> business were incorporated.  Key among these was the flexibility for
> registrars to price and brand the product any which way they please, to suit
> their own unique business models.  This is the opportunity that many
> registrars have been waiting for to boost their margins and replace their
> diminishing revenues from primary name sales with a sustainable new growth
> source.
>
>
>
> Please take a moment to review the following information, which I and my
> SnapNames colleagues have prepared in order to keep you well-informed on
> WLS.  As always, we welcome your thoughtful comments and encourage you to
> contact us directly by telephone if we can assist in any way to help every
> registrar get the maximum leverage out of this new opportunity.
>
>
>
> A final note.  VeriSign’s WLS proposal was never intended to go outside of
> the Registrars Constituency that requested it, including to the media.  A
> member of that Constituency forwarded the proposal to resellers, speculator
> customers, and the media, and that resulted in the story becoming, well, a
> story.  After this process was set in motion, and an information vacuum
> created, VeriSign and SnapNames were obliged to release further information
> for public consumption.
>
>  My phone number is:  503/219-9990 x. 229.  I look forward to speaking with
> you personally.
>
>  Sincerely,
>
>
>
> Cameron Powell
>
> Vice President of Business Development
>
> SnapNames
>
>
>
> Comparison Table:
> Current Offering and Wait Listing Service
>
>
> Registrar Margins:                               Current System
> WLS
>
>
>
>       Retail Prices per Name
>      $6.75 to $35 for all names, no matter their value
>      $69.00-99.00+ for WLS names
>
>
>
>       Registrar Margin per Name
>      Mean:  $4 - $5 for all names
>
>       Range:  from $0.25 to $20+
>      $23 - $53+ for WLS names
>
>
>
>
>
>
>
>
> Registrar/Reseller Experience:                Current System
> WLS
>
>
>       Registrars able to participate at reasonable rates of effectiveness
>
>
>      About 10
>      All ICANN-accredited registrars
>
>       Resellers able to participate
>      0
>      All
>
>       Registered domain names capable of being ordered should they expire
>      Only the handful of names in a Registry’s 5-day delete cycle
>      Nearly all 32+ million registered domain names
>
>       Renewal rates
>      Low, and no proposals for meaningful improvement offered
>      Existence of WLS order will give original registrant strong incentive
> to renew by the customer.  Having the next customer already in line in the
> event of an expiration also boosts renewal rates for the name.
>
>       Company valuations
>      Decreasing; lack of revenue visibility hampers increase
>      High revenue visibility on wait-listed names anticipated to improve
> overall valuations
>
>
>
>
> Customer Experience:                           Current System
> WLS
>
>
>       Success Rate in Registering Average Expiring Name – Speculator
>      5 - 30% (and decreasing as more registrars compete for limited Registry
> connections)
>
>
>      100%
>
>       Success Rate in Registering Average Expiring Name – Mainstream
>      0 - 10%
>      100%
>
>
>
>       Equality of customer access
>      None
>      Total
>
>
>
>       Customer Experience Relatively complex, inconvenient, frustrating,
> uncertain
>
>
>      Simple and certain
>
>       Customers able to participate
>      A select few – under 1%
>      All
>
>       Registered domain names capable of being ordered
>      Only the handful of names in a Registry’s 5-day delete cycle
>      Nearly all 32+ million registered domain names
>
>       IP owners able to participate
>      None
>      All
>
>
>
> Summary of WLS Benefits
>
>
> Wide Margins on Retail Pricing
>
>
>
> Registrars currently earn gross margins on domain name sales ranging from
> $0.25 to the high $20s.  The mean is probably about $2 - 5 per name.
>
>
>
> Although most registrars currently derive no revenue at all from the
> secondary market in expiring domain names, customers have long clamored for
> an effective way to purchase such names.
>
>
>
> The WLS answers this demand and effectively, reliably, and profitably allows
> all registrars to charge retail prices of $69 to $99+ for valuable priority
> access to expiring names.  The WLS therefore results in profit margins to
> registrars of $23 to $53+, net of wholesale cost and $6 registry fee upon
> realization of the waiting customer’s registration.  The rate of customer
> adoption of WLS need be only a very small percentage of first-time
> registrations for this to provide very substantial revenue.  Customers’
> ability to transfer their WLS subscription to a new name (if the customers
> change their minds, or if the registrant renews) will also ensure that
> customers get excellent value for their money.
>
>
>
> SnapNames has more experience than anyone else in understanding the retail
> price points that the market will bear for an expiring name service.  For
> several months, we have been charging $49 for a 70% effective service and
> yet we continue to receive customer complaints that usually go something
> like this: “.  .  .  all the desirable wait-listed names are already taken!”
> Sound familiar?  “Taken,” at $49.  Because of the tremendous response we
> have generated at $49, it is apparent that – even for only a 70% success
> rate – our current retail prices are below market price.  Accordingly,
> SnapNames is in the process of raising the retail price of our current (70%
> effective) service to $69 (scheduled to be effective on January 15th).
>
>
>
> So what will customers pay for a service that is virtually 100% successful,
> as WLS will  be?  Our research indicates that up to $100 is a good rule of
> thumb.  And if it turns out that the market will not bear this price level,
> then basic economics dictates that prices seek a more appropriate level.  In
> any case, we anticipate that the registrars who have long been eviscerating
> each other’s margins in price wars may become increasingly careful about
> setting their initial retail prices too low.
>
>
>
> It will be registrars’ job to keep retail prices at reasonable market
> levels.  As the co-founder of Speednames put it recently, in discussing WLS,
> “To my best knowledge, there is no reason that registrars have to continue
> the malpractice of marking services up $0.50.”  We quite agree.
>
>
>
> Further, we think that if registrars set retail WLS prices high enough to
> approach actual market prices, they might thereby eliminate the incentive
> for intermediaries (who have preferential access to names) to buy names
> merely for re-sale to end-users (who have inferior access).  As Bruce Tonkin
> of MelbourneIT put it:  “I agree that the ‘price point’ should be set high
> enough so as not to encourage abusive speculation of WLS subscriptions.”
>
>
>
> Company Valuations – Increased Visibility of Top-Line Revenue
>
>
> Market valuations in the domain name industry, like any other, are based
> largely on visibility of future revenue, including revenue dependent on
> renewal rates.  One truism among domain industry analysts is that they value
> visibility on revenue and renewal rates.  As Lehman Brothers recently noted:
>
>
>
> VeriSign is one of the few tech companies with predictable earnings,
> analysts said.  Israel Hernandez, an analyst at Lehman Brothers, said the
> company's stock should do better than most tech stocks since the company has
> "strong revenue visibility."  He upped VeriSign to "strong buy" from
> "buy."[1]
>
>
>
> Bear Stearns states that two of the four “key positives” for VeriSign stock
> are “deferred revenues” and a “high degree of revenue visibility.”[2]
> Similarly, Bear Stearns has stated Afilias’ multiple-year registration
> capability “bodes well for long-term deferred revenues – and visibility.”[3]
> A.G. Edwards confirms this:
>
>
>
> In times of market duress, business models such as VeriSign’s are very
> attractive. VeriSign starts a quarter with over 75% revenue visibility and
> we believe the companies with high revenue visibility will shine.[4]
>
>
>
> As any of these analysts will tell you, wait-listed names provide exactly
> such visibility and show precisely how much demand is in the pipeline at any
> time.  Only wait-lists allow orders on the 30+ million names currently in
> .com, .net, and .org.  Unlike the current service, in which unpredictable
> last-minute orders from speculators can make predictions difficult, the WLS
> back-order system permits analysts following a particular registrar to state
> with much greater confidence that “at least X many names will be registered
> in the coming period, and most of those will have value-added services
> attached.”  Thus, WLS provides an important tool that industry analysts can
> use to make more confident – and therefore more favorable – assessments of
> registrars’ values.
>
>
>
> Attractive Wholesale Price for 100% Efficacy
>
>
>
> Stock analyst A.G. Edwards has validated VeriSign’s wholesale price point
> for back-order services:
>
>
>
> So what is a service like this worth to the GRS, registrars and end-users?
> We are aware of a few companies that offer back-ordering capabilities to
> registrars including SnapNames.  The company offers its service at $49
> retail[5] .  .  .  To our knowledge, SnapNames roughly receives 70% efficacy
> on domain name availability through its service  .  .  .  GRS could possibly
> offer 100% efficacy on all available domain names.  So with 100% efficacy at
> stake, we would assume that this service should be worth more at retail than
> other back-ordering services.  Taking into account what services like
> SnapNames currently charge at retail as well as the prior comments, we
> believe that the VeriSign GRS could offer the back-ordering service at
> roughly $35 to $45 wholesale (excludes any revenue share at the wholesale
> level and also excludes the actual domain registration at $6 each).
>
>
>
> A.G. Edwards & Sons, Inc., Equity Research - INTERNET SERVICES, December 17,
> 2001.
>
>
>
> Based on our own experience, the experience of our current registrar
> partners and affiliates, ongoing market research, and the validation
> provided by well-regarded industry analysts, SnapNames believes that the
> proposed WLS wholesale price is appropriate, and offers registrars an
> unparalleled opportunity to generate excellent margins on an excellent
> service.
>
>
>
>
>
>
>
> ----------------------------------------------------------------------------
> ----
>
> [1] See Larry Dignant, “VeriSign to buy Illuminet for $1.2 billion,” CNET
> News.com (Sept. 24, 2001) at
> http://news.cnet.com/news/0-1004-200-7279551.html?tag=lh.
>
> [2] Bear Stearns Equity Research, January 24, 2000 at 1.
>
> [3] Bear Stearns Equity Research, November 14, 2000 at 1.
>
> [4] A.G. Edwards & Sons, Inc., Equity Research - INTERNET SERVICES
> (September 24, 2001) at 2.
>
> [5] Note:  increasing demand has justified SnapNames raising this to $69.
> (Footnote supplied).
>
>

snapnames_wls.pdf