The February 2016 trading update from Minds + Machines (LON:MMX) was another giant stride from the internet domain name specialist away from its “land grab” past.
Although the company is still in the running for seven yet-to-be assigned generic top level domains (gTLDs) – a TLD being the part of an internet address after the final dot – the successful launch in the final quarter of 2015 of .law, the Spanish-language equivalent .abogado and also .miami demonstrated that the company is very efficient at making money from the properties it already owns.
The key, not only to a successful launch but also a healthy post-launch existence for a TLD, is the company's work with third-party partners.
“We're making the transition from acquiring assets and beginning to monetise them, through forging the right commercial relationships, chief executive Antony Van Couvering told Proactive Investors.
“We like to encourage usage of the domains as that leads to renewals. We're pretty happy with the renewals rate,” he added.
Though it may not be as involved as it was at the start of its life as a public company in grabbing new assets, it still has its eye on new markets, most notably China, described by Van Couvering as “a hot market”.
It is a complicated process operating in China, requiring lots of liaison with the government and close working relationships with local partners.
The new gTLD market grew globally in 2015 from 3.71mln registered domains at the beginning of the year to 11.2mln, with the growth being fuelled by significant growth in the second half of the year in China.
At the end of January, Minds+ Machines revealed it was working with registry services company ZDNS as its Chinese infrastructure partner, while it had appointed marketing group Allegravita to help introduce registry businesses into China.
To date (and prior to their alliance with Minds + Machines), ZDNS and Allegravita have seen more than 2.3mln generic top level internet domains sold via Chinese registrars, so it is understandable that Minds + Machines wants in; Van Couvering said the company had high hopes for its .vip TLD in China.
Unusually for an AIM-listed company, it is awash with cash, and though some of that will doubtless be needed as ammo for forthcoming gTLD auctions, it has been using a portion of it to buy back shares, simply because management believes the shares are undervalued.
“We're not sure the market totally understands the business. It is a bit complicated, but we understand the business and we think the shares are undervalued, so that's why we're buying them back,” Van Couvering told Proactive Investors.
It’s a slightly odd function of the whole bidding process for internet domains that the winner of the auction process pays those who lost out in the auction, and while getting rewarded for not winning is all very nice, it is not a sustainable long-term business model for Minds + Machines. It is more interested in acquiring the rights to gTLDs and earning money from them – year after year after year.
The 2015 numbers, though yet to be audited, point to the company having made a good start in this regard.
At the year-end, total billings for the year rose 57% to US$7.92mln from US$5.03mln the year before, with standard name billings accounting for US$4.86mln and premium name billings – what might be termed the Harrods end of the market – accounting for US$2.94mln, with the rest accounted for “other billings”.
In contrast, its gross receipts for the year from one-off private gTLD auctions slumped to US$9.15mln from US$37.5mln the year before.
As mentioned earlier, that speaks of a company very firmly with its eyes on exploiting its assets, and with the company's entry into the rapidly expanding Chinese market, there is every chance the company will remain a high growth company for some time to come.