Tucows 2013 Annual Report Download - page 4

ITEM 1. BUSINESS
Overview
Our mission is to provide simple useful services that help people unlock the power of the Internet. We accomplish
this by reducing the complexity of our customers’ experience as they acquire, deliver or use Internet services such as domain
name registration, email and other Internet services.
Our primary distribution channel is a global network of more than 13,000 resellers in over 100 countries who
typically provide their customers, the end-users of the Internet, with a critical component for establishing and maintaining an
online presence. Our primary focus is serving the needs of this network of resellers by providing superior services, easy-to-
use interfaces, proactive and attentive customer service, reseller-oriented technology and agile design and development
processes. We seek to provide superior customer service to our resellers by anticipating their business needs and technical
requirements. This includes providing easy-to-use interfaces that enable resellers to quickly and easily integrate our services
into their individual business processes, and offering brandable end-user interfaces that emphasize simplicity and visual
appeal. We also provide “second tier” support to our resellers by email and phone in the event resellers experience issues or
problems with our services. In addition, our Network Operating Center provides proactive support to our resellers by
monitoring all services and network infrastructure to address deficiencies before customer services are impacted.
We believe that the underlying platforms for our services are some of the most mature, reliable and functional
reseller-oriented provisioning and management platforms in our industry, and we continue to refine, evolve and improve
these platforms for both resellers and end-users.
Our principal place of business is located in Canada. We report our financial results as two operating segments,
Domain Services with three distinct service offerings – Wholesale, Retail and Portfolio and Network Access Services, which
derives revenue from the sale of retail mobile phones and services to individuals and small businesses. Our chief operating
decision maker regularly reviews our operating results on a consolidated basis, principally to make decisions about how we
utilize our resources and to measure our consolidated operating performance. To assist us in forecasting growth and to help
us monitor the effectiveness of our operational strategies, our chief operating decision maker regularly reviews revenue for
each of our service offerings in order to gain more understanding of the key metrics driving our business. Accordingly, we
report revenue in the following service areas:
Wholesale, primarily branded as OpenSRS, derives revenue from its Domain Service and from providing Value-
Added Services. The OpenSRS Domain Service manages over 14 million domain names under the Tucows ICANN registrar
accreditation and for other registrars under their own accreditations. Value-Added Services include hosted email which
provides email delivery and webmail access to millions of mailboxes, Internet security services, publishing tools and reseller
billing services. All of these services are made available to end-users through a network of over 13,000 web hosts, Internet
service providers (“ISPs”) and other resellers around the world. In addition, we also derive revenue from the bulk sale of
domain names and advertising from the OpenSRS Domain Expiry Stream and the Marketing Development Funds we receive
from vendors from time-to-time to expand or maintain the market position for their services.
Retail, primarily our Hover and Ting websites, derives revenues from the sale of domain name registration, email
services and mobile phone service to individuals and small businesses. Retail also includes our Personal Names Service –
based on over 40,000 surname domains – that allows roughly two-thirds of Americans to purchase an email address based on
their last name.
Portfolio generates advertising revenue from our domain name portfolio. We also generate revenue by offering
names in our domain portfolio for resale via our reseller network and other channels. In addition, we generate revenue from
the payments for the sale of rights to gTLD strings under the New gTLD program.
Our business model is characterized by non-refundable, up-front payments, which lead to recurring revenue and
positive operating cash flow.
1
Net Revenues
Wholesale - OpenSRS Domain Service