Tucows 2012 Annual Report Download - page 6

Download and view the complete annual report

Please find page 6 of the 2012 Tucows annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

1
PART I
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 one operating segment
with three distinct service offerings – Wholesale, Retail and Portfolio. 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 and from our two large advertising-
supported websites, butterscotch.com and tucows.com. We also generate revenue by offering names in our domain
portfolio for resale via our reseller network and other channels.
Our business model is characterized by non-refundable, up-front payments, which lead to recurring revenue and
positive operating cash flow.