Tucows 2013 Annual Report Download - page 6

Portfolio names are sold through our premium domain name service, auctions or in negotiated sales. The size of our
domain name portfolio varies over time, as we acquire and sell domains on a regular basis to maximize the overall value and
revenue generation potential of our portfolio. In evaluating names for sale, we consider the potential foregone revenue from
pay-per-click advertising, as well as other factors. The name will be offered for sale if, based on our evaluation, the name is
deemed non-essential to our business and management believes that deriving proceeds from the sale is strategically more
beneficial to the Company. In addition, we generate revenue from the payments for the sale of rights to gTLD strings under
the New gTLD program.
Portfolio names that have been acquired from third-parties or through acquisition are included as intangible assets
with indefinite lives on our consolidated balance sheet.
We also generate advertising and other revenue through our ad-supported content site, tucows.com. The site
primarily derives revenue from banner and text advertising. In addition, their revenue is derived from software developers
who rely on us as a primary source of distribution. Software developers use our Author Resource Center to submit their
products for inclusion on our site and to purchase promotional placements of their software
Intellectual Property
We believe that we are well positioned in the wholesale domain registration and email markets due in part to our
highly-recognized “Tucows” and “OpenSRS” brands and the respect they confer on us as a defender of end-user rights and
reseller friendly approaches to doing business. We were among the first group of 34 registrars to be accredited by ICANN in
1999, and we remain active in Internet governance issues.
Our success and ability to compete depend on our ability to develop and maintain the proprietary aspects of our
brand name and technology. We rely on a combination of trademark, trade secret and copyright laws, as well as contractual
restrictions to protect our intellectual property rights.
We have registered the Tucows trademark in the United States, Canada and the European Union and we register
additional service marks and trademarks as appropriate and where such protection is available.
We seek to limit disclosure of our intellectual property by requiring all employees and consultants with access to our
proprietary information to commit to confidentiality, non-disclosure and work-for-hire agreements. All of our employees are
required to sign confidentiality and non-use agreements, which provide that any rights they may have in copyrightable works
or patentable technologies accrue to us. Before entering into discussions with potential vendors and partners about our
business and technologies, we require them to enter into a non-disclosure agreement. If these discussions result in a license or
other business relationship, we also generally require that the agreement containing the parties’ rights and obligations include
provisions for the protection of its intellectual property rights.
Customers
The majority of the customers to whom we provide Reseller Services are generally either web hosts or ISPs. A small
number are consultants and designers providing our services to their business clients. Our Retail Services customers are a
very broad mix of consumers, small businesses and corporations.
No customer represented more than 10% of our consolidated revenues in any of the last three fiscal years.
While web hosts and ISPs are capitalizing on the growth in Internet usage and the demand for new services, they
also face significant competition from numerous other service providers with competitive or comparable offerings. This has
led such web hosts and ISPs to focus on core competencies, as such resellers are increasingly seeking to outsource non-core
services. Outsourcing enables these resellers to better focus on customer acquisition and retention efforts by eliminating the
need to own, develop and support non-core applications in-house.
3
Seasonality
During the summer months and certain other times of the year, such as major holidays, Internet usage often declines.
As a result, many of our services (OpenSRS, Hover and Tucows.com) may experience reduced demand during these times.
For example, our experience shows that new domain registrations and traffic on our download site decline during
the summer months and around the year-end holidays. Seasonality may also affect advertising, which may have a slight