Tucows 2015 Annual Report Download - page 84

Domain Services
Wholesale
During Fiscal 2015, domain services revenue decreased by $1.6 million to $85.0 million and the number of
transactions from all new, renewed and transferred-in domain name registrations that we processed remained relatively
flat at 9.1 million when compared to Fiscal 2014. Domain services revenue and transaction volumes continue to be
impacted by the ongoing migration of a few large, low margin customers. These customers have been moving their
domain management and domain transaction processing to their own accreditations and in-house systems. We
anticipate that the number of new, renewed and transferred-in domain name registrations will continue to be impacted
by decisions that large volume customers make with regard to acquiring their own accreditations, as well as the impact
on the market, of the significant expansion in the number of New gTLDs added pursuant to the implementation of
ICANN’s New gTLD Program. 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 of these factors could affect the
growth of domain names that we manage. Primarily for the same factors impacting domain transactions mentioned
above, total domains that we manage under our own accreditation remained relatively unchanged at 10.2 million as of
December 31, 2015, when compared to December 31, 2014. Also, as of December 31, 2015, total domains that we
manage on behalf of other accredited registrars who use our technical systems to process domain registrations with
their own accreditation, decreased to 3.1 million when compared to 3.3 million at the end of December 31, 2014,
primarily the result of a single customer that transitioned their domain management platform to an in-house system in
Fiscal 2014.
Value-Added Services decreased by $0.4 million to $9.3 million when compared to Fiscal 2014. This decrease
was largely due to the $0.6 million decrease in revenue from pay-per-click advertising and the sale of names through the
OpenSRS Domain Expiry Stream. The revenue associated with names sales and advertising has experienced flat to
declining trends due to the uncertainty around the implementation of ICANN’s New gTLD Program, lower traffic and
advertising yields in the marketplace, which we expect to continue.
Retail
Net revenues from Retail for Fiscal 2015, as compared to Fiscal 2014, increased by $1.9 million to $12.3 million.
This increase was largely due to 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.
Portfolio
Net revenues from Portfolio for Fiscal 2015, as compared to Fiscal 2014, decreased by $1.0 million to
$4.1 million. The decrease is primarily related to lower sales of big ticket domains and a decrease in online advertising
revenue largely due to the flat to declining trends as a result of factors such as uncertainty around the impact of ICANN’s
New gTLD Program and lower traffic and advertising yields that this market is experiencing.
COST OF REVENUES
Network Access Services
Mobile and Other Services
Cost of revenues for network access services includes the costs of provisioning mobile services (primarily our
customers' voice, messaging, data usage provided by our MNOs), the costs of providing mobile phone hardware (the cost
of mobile phone devices and SIM cards sold to our customers, order fulfillment related expenses, and inventory write-
downs) as well as the costs for provisioning high speed Internet access (network access fees, software licenses), and any
direct costs incurred in providing web hosting and IT consulting services.
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