Tucows 2013 Annual Report Download - page 35

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Portfolio generates advertising revenue from our domain name portfolio and from our advertising-supported website
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 primarily by non-refundable, up-front payments, which lead to recurring
revenue and positive operating cash flow.
For the years ended December 31, 2013, 2012 and 2011, we reported revenue of $130 million, $115 million and
$97 million, respectively. For the years ended December 31, 2013, 2012 and 2011, our OpenSRS domain service offering
accounted for 67%, 77% and 79% of our total revenue, respectively.
KEY BUSINESS METRICS
We regularly review a number of business metrics, including the following key metrics to, assist us in evaluating
our business, measure the performance of our business model, identify trends impacting our business, determine resource
allocations, formulate financial projections and make strategic business decisions. The following table sets forth, the key
business metrics which we believe are the primary indicators of our performance for the periods presented:
Year ended
December 31, (1)
2013
2012
2011
(in 000’s)
Total new, renewed and transferred-in domain name
registrations provisioned
9,076
9,213
8,576
Domain names under management
Registered using the Tucows Registrar
Accreditation
10,630
10,643
10,482
Registered using our Resellers’ Registrar
Accreditations
3,564
3,363
1,400
Total domain names under management
14,194
14,006
11,882
(1)
For a discussion of these period to period changes in the domains provisioned and domains under
management and how they impacted our financial results see the Net revenue discussion below.
OPPORTUNITIES, CHALLENGES AND RISKS
The increased competition in the market for Internet services in recent years, which we expect will continue to
intensify in the short and long term, poses a material risk for us. As new registrars are introduced, existing competitors
expand service offerings and competitors offer price discounts to gain market share, we face pricing pressure, which can
adversely impact our revenues and profitability. To address these risks, we have focused on leveraging the scalability of our
infrastructure and our ability to provide proactive and attentive customer service to aggressively compete to attract new
customers and to maintain existing customers.
Our direct costs to register domain names on behalf of our customers are almost exclusively controlled by registries
such as Verisign and by ICANN. Verisign provides all the registry services operations for the .com, .net, .cc, .tv and .name
domain names. ICANN is a private sector, not-for-profit corporation formed to oversee a number of Internet related tasks,
including domain registrations for which it collects fees. The market for wholesale registrar services is both price sensitive
and competitive, particularly for large volume customers, such as large web hosting companies and owners of large
portfolios of domain names. We have a relatively limited ability to increase the pricing of domain name registrations without
negatively impacting our ability to maintain or grow our customer base.
We are still participating in ICANN’s New gTLD program to own minority interests and/or operate New gTLD
strings. The New gTLD Program's goals include enhancing competition and consumer choice, and enabling the benefits of
innovation via the introduction of a wide range of new gTLDs. In June 2012, ICANN announced that it had received over
1,900 applications through which over 1,300 new gTLDs could become available in the next few years on a rolling basis
related to over 1,400 new gTLDs. As of February 26, 2014 ICANN delegated and introduced 160 of these new gTLDs into
the Root Zone. We believe that the introduction of the wide range of new gTLDs, once completed, will result in an increase
in the number of domains we register and related revenues commencing in 2014. In addition, while the delegation of New
gTLDs could substantially change the domain name industry in unexpected ways, we believe that the New gTLD Program
will provide us with new revenue opportunities commencing in 2014.
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