Go Daddy 2015 Annual Report Download - page 46

Table of Contents
• multi-party review panels established by the governing agreement between ICANN and the U.S. Department of Commerce, the so-called Affirmation
of Commitments, or by successors to this agreement, may take positions unfavorable to our business.
If any of these events occur, they could create instability in the domain name registration system and may make it difficult for us to continue to offer existing
products and introduce new products, or serve customers in certain international markets. These events could also disrupt or suspend portions of our domain name
registration product and subject us to additional restrictions on how the registrar and registry products businesses are conducted, which would result in reduced
revenue.
ICANN recently authorized the introduction of new TLDs, and we may not have the right to register new domain names to our customers based on such TLDs,
which could adversely impact our business and results of operations.
ICANN has periodically authorized the introduction of new TLDs and made domain names related to them available for registration. Our competitive
position depends in part on our ability to secure access to these new TLDs. A significant portion of our business relies on our ability to sell domain name
registrations to our customers, and any limitations on our access to newly-created TLDs could adversely impact our ability to sell domain name registrations to
customers, and thus adversely impact our business.
In 2013 , ICANN significantly expanded the number of gTLDs, which resulted in the delegation of new gTLDs commencing in 2014 , which we refer to as
the Expansion Program. We and certain of our competitors have expended resources filing gTLD applications under the Expansion Program to pursue the
acquisition of gTLD operator rights. We continue to pursue the rights to become the registry for .godaddy, a gTLD. The Expansion Program could substantially
change the domain name industry in unexpected ways and is expected to result in an increase in the number of domains registered by our competitors. If we do not
properly manage our response to the change in business environment, and accurately predict the market’s preference for specific gTLDs, it could adversely impact
our competitive position or market share.
The relevant domain name registry and ICANN impose a charge upon each registrar for the administration of each domain name registration. If these fees
increase, it would have a significant impact upon our operating results.
Each registry typically imposes a fee in association with the registration of each domain name. For example, VeriSign, Inc. (VeriSign), the registry for .com
and .net, has a current list price of a $7.85 annual fee for each .com registration, and ICANN currently charges an $0.18 annual fee for most domain names
registered in the gTLDs falling within its purview. The fee charged by VeriSign for each .com registration increased from $6.86 per year to $7.34 per year in July
2010 and increased again to $7.85 per year in January 2012 . We have no control over ICANN, VeriSign or any other domain name registries and cannot predict
their future fee structures.
Per the extended registry agreement between ICANN and VeriSign approved by the U.S. Department of Commerce on November 30, 2012 , VeriSign will
continue as the exclusive registry for the .com gTLD through November 30, 2018 . The terms of the extension set a maximum price, with certain exceptions, for
registry products for each calendar year beginning January 1, 2012 , which shall not exceed 107% of the highest price charged during the preceding year. In
addition, pricing of new gTLDs is generally not set or controlled by ICANN, which in certain instances has resulted in aggressive price increases on certain
particularly successful new gTLDs. The increase in these fees with respect to any new gTLD either must be included in the prices we charge to our customers,
imposed as a surcharge or absorbed by us. If we absorb such cost increases or if surcharges result in decreases in domain registrations, our business, operating
results and financial performance may be adversely affected.
Our business and financial condition could be harmed materially if small consumers and small businesses and ventures were no longer able to rely upon the
existing domain name registration system.
The domain name registration market continues to develop and adapt to changing technology. This development may include changes in the administration
or operation of the Internet, including the creation and institution of alternate systems for directing Internet traffic without using the existing domain name
registration system. The widespread acceptance of any alternative system, such as mobile applications or closed networks, could eliminate the need to register a
domain name to establish an online presence and could materially and adversely affect our business.
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