Tucows 2013 Annual Report Download - page 49

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Wholesale
During Fiscal 2012, Wholesale revenue increased by $12.6 million, or 15%, to $98.0 million when compared to
Fiscal 2011, primarily as a result of OpenSRS Domain Service revenue increasing by $11.2 million or 15% to $87.4 million.
These increases resulted primarily from our success in attracting customers with increased transaction volumes, the impact of
the transfer of a significant number of names certain of our customers from our registrar accreditation to their own registrar
accreditation, the contribution from the EPAG acquisition that we completed during the third quarter of last year and the
impact of our passing on the 7% registration fee increase implemented in January 2012 for registration fees paid to certain
registries.
50
Value-Added Services increased by $1.3 million or 14% to $10.6 million when compared to Fiscal 2011. These
increases resulted primarily from the sale of domain names and advertising from the OpenSRS Domain Expiry Stream and
increased digital certificate sales.
During Fiscal 2012, the number of transactions from all new, renewed and transferred-in domain name registrations
that we processed increased by 0.6 million transactions to 9.2 million when compared to Fiscal 2011. While we anticipate
that the number of new, renewed and transferred-in domain name registrations will continue to incrementally increase in the
long term, the volatility in the market could affect the growth of domain names that we manage.
As of December 31, 2012, the total domain names under our management increased by 0.2 million to 10.6 million,
when compared to December 31, 2011. This increase was impacted by certain of our customers transferring a significant
number of domain names from our registrar accreditation to their own registrar accreditation. In addition, we provide
provisioning services on a monthly basis to accredited registrars who use our technical systems to process domain
registrations with their own accreditation. As of December 31, 2012, we managed 3.4 million domain names on behalf of
other accredited registrars, an increase of 2.0 million compared to the 1.4 million we managed as of December 31, 2011. The
increase is attributable to one of our accredited registrars transferring 1.8 million domain names they were directly managing
under their own accreditation onto our platform.
Retail
Net revenues from Retail for Fiscal 2012, as compared to Fiscal 2011, increased by $5.5 million to $10.7 million.
This increase was largely due to an increase of $4.0 million to $4.0 million for Ting's mobile device and service sales made
during Fiscal 2012 as well as the success that our retail marketing initiatives and improved websites are having on our ability
to attract new customers and retain existing ones for Hover.
As of December 31, 2012, Ting had approximately 10,000 customers and approximately 15,000 mobile devices
under our management.
Portfolio
During Fiscal 2012, Portfolio revenue decreased by $0.4 million, or 5%, to $6.0 million when compared to
Fiscal 2011. This decrease primarily resulted from advertising and other revenue through our ad-supported content site,
tucows.com decreasing by $0.8 million and the delivery of third-party advertisements on parked pages decreasing by
$0.4 million. These decreases were partially offset by the increase in sales of domain names from our domain name portfolio.
The decrease in revenue from our ad-supported sites was primarily the result of certain of our vendors electing not to repeat
market development programs that they undertook during Fiscal 2011 while parked pages advertising declined as a result of
the impact our domain name sales have on our advertising revenue. The increase in portfolio sales primarily reflects the
timing of portfolio domain name sales and may not be repeatable in future quarters. The market for monetization of domain
names is rapidly evolving and there is no guarantee that we will be able to continue to acquire the same caliber of names for
our portfolio from future expiring domains or that names we acquire in future will provide the same revenue impact as we
have experienced from past acquisitions. In addition, the revenue we derive from our Portfolio is driven by general
macroeconomic factors that affect Internet advertising. Our advertising revenues are typically sensitive to economic
conditions and tend to decline in recessionary periods and other periods of economic uncertainty.
COST OF REVENUES
Wholesale
OpenSRS Domain Service