CentralNIC (LON:CNIC) boss Ben Crawford believes the .xyz web domain could become the new ‘.com’, and the strong take-up of the new top level domain in the last few months backs that up.
For most investors, the internet company appeared on the radar last summer, as the AIM share price more than doubled after Google chose a .xyz web domain name for the corporate web site of Alphabet, Google’s new holding company.
It was certainly a high profile moment for CentralNIC, though to those already watching the company closely it confirmed what they had already observed; this was a new and exciting opportunity in the web domain business.
“Xyz was always the most successful new top level domain," Crawford said.
“There were already over one million domains registered to .xyz, and none of the others new domains have come close.”
The high profile news event put the spotlight on the potential of new domains generally, and .xyz specifically.
CentralNIC is the technical partner and distributor of .xyz web domains and four others in the top twenty out of more than 900 new top-level domains (TLDs) launched to date.
Driven by the domain’s popularity it has captured a major portion of the market share – 23.94% of all new generic top level domains (gTLDs), according to domain industry statistics web site ntldstats.com.
CentralNic was the first company globally to achieve two million new TLD registrations in November 2015, and it did not take long – three months – for the company to breeze past the three million milestone.
The sale of any single domain name, even to Google, represents only a small amount of revenue share to CentralNic, but multiply that by the 1.5 million domains (and climbing) that CentralNic has sold, the revenues are meaningful and increasing.
More important than the revenues from Google is the endorsement of CentralNic’s new domains and the exposure achieved for .xyz and other alternatives to .com and .co.uk domain names.
It was the kind of high profile validation that Crawford and his team had been expecting, albeit they did not know exactly how and when it would come.
“We had announced at the beginning of the year that when the global ‘mega-brands’ start to use new TLDs that will be when everyone in the world will suddenly start learn about them.
“Exactly as we predicted, that is what happened with abc.xyz.
“Suddenly, a global mega-brand (Google) decides to a .xyz domain and twice as many people than before now know about the new top level domains. This is the first time it has happened (for xyz). It will happen again and again as other large companies chose new domains for launching new projects, and that high profile use would build awareness and drive new demand.
CentralNIC is about more just than xyz
As well as xyz, CentralNIC is the partner for many new domains - for example top twenty domains .online, .website, .space and .site, as well as specialist domains like .tickets, and .fans – contributing to the company currently being ranked in the top-two of wholesale sellers of the new domains.
CentralNic acts as the key technical intermediary. It is the exclusive middleman between entrepreneurial investors – those that secured the rights to the new domains - and customer facing internet companies like GoDaddy that sell them to web site owners.
Once you set aside the computer science and the jargon of the internet, the business is a really quite simple.
The company’s platform is the technical ‘back-end’. It creates and maintains the list of web site addresses on the particular domain, and it allows the web browser software to find those web sites.
This is a well-established and standardised process. It has essentially been in the same since the early days of the World Wide Web.
While .xyz, .website and the other “big sellers” are suitable for any web site (like .com before them), the majority of the new domains represent a new phase of compartmentalisation of internet addresses.
Addresses ending with .tickets and .fans for example have been set up with specific purposes and target audiences in mind – basically to resonate specifically with a certain type of audience or purpose. This new ‘usefulness’ has already been recognised by major brands like Manchester United, Formula One and eBay (to name just a few).
In the same way, other new domains from CentalNic such as .bar, .press or .college have clearly defined types of customers in mind.
Xyz seen as ‘truly generic
Xyz is more open. Indeed, Crawford describes it as 'truly generic'.
Rather than focusing on premium yet fairly narrow markets, the plan has been to offer a new lower cost mass market domain that could rival the ubiquitous .com domain.
"Xyz’s flexibility and its usability means it can be used for anything," Crawford explains.
"It doesn’t actually contain any information about what kind of web site it represents, all it does tells you is this is an address for a web site, in the same way that .com does.
"You could say it is the same business model as .com, and that’s been the most successful business model in the history of the internet to date. It is as flexible as possible, and it is reasonably priced."
Price and availability are the key selling points for xyz, Crawford says, and in comparison to .com they represent a potentially significant opportunity.
Three decades worth of .com domains - about 120 million - already exist, and are registered either to existing web sites or stockpiled into speculative portfolios of domain investors.
A cheaper alternative for new business
As many start-ups will likely have found to their cost, it can be challenging to secure the right web site address for new businesses or projects.
"It is a very common experience that when someone comes up with a project and they try to get the .com domain it is either not available, because it is already in use or a domain investor has already bought it and is charging a very large amount of money.
"Xyz is a solution to that problem.
"There are still over one hundred million of domain names available under .xyz that aren’t easily or affordably available on .com. That’s potentially over 100mln satisfied .xyz customers. Clearly, that’s a good thing for us."
The Verisign comparison
What happened with .com is central to the investment case for CentralNic, and this potential becomes clear with just a cursory comparison with Verisign (the Nasdaq quoted operator of .com and .net).
Verisign, worth nearly US$8bn, ended 2014 with around 130mln .com and .net domain names in its ‘name-base’ and it generated some $600mln of cash flow, from US$890mln of revenue. Around 0.6mln new .coms were added – it is very much a recurring revenue business, with web site owners paying each year to retain their names.
So, if Crawford is right and .xyz is the new .com then the potential for very significant value creation appears obvious.
Nevertheless, given today’s market value of around £50mln, it still remains very early days before CentralNIC and Verisign can be described as peers.
Verisign does, however, represent the key for Crawford, CentralNic and xyz domain rights owner Daniel Negari.
"I would honestly say that the .xyz team – including us – we are looking at .com (owned and operated by Verisign, a Nasdaq quoted company worth around $8bn) and seeing what is an amazing business,” Crawford said.
"Verisign has made billions selling .com domains. So, from our point of view, it is not a fantasy to think that selling domains can be a billion dollar business. We know it can be a reality. We can see it right in front of us.
"So, together we’re hugely ambitious. We’re doing the hard work and we’re making the investments."
"It is why, we’re never going to be satisfied just selling a few thousand xyz domains when we know it is possible to sell 100mln – because someone else is already doing it."
Crawford added: “We’re already very close to xyz.com (Negari’s company that owns the xyz rights) and we’ve been working with Daniel Negari for years.
“I wouldn’t rule out anything in the future in regards to us becoming closer in the different ways that companies can.
“Clearly, together as a team, we’ve been more successful than any other new domain company and we’ve got .xyz going as the number one new domain globally. On both sides we think we make a great team and we’re already committed to doing a lot more together.”