Verisign provides data after short seller raises alarm.
Shares in Verisign plummeted on Friday before swiftly recovering.
It was a bit surprising to see the decline after Thursday’s earnings release. It seemed like the company had a solid quarter and, more importantly, things were looking up for domain growth.
But Verisign created an opening with a less-than-satisfactory explanation of the impact changes in Google Adsense for Domains would have on the company’s domain base.
During the investor call, CEO Jim Bidzos responded to two analysts’ questions about what impact these changes would have on demand for domains. Bidzos gave fairly generic answers, noting that domains parked for monetization have been on a downward slide since 2011. He declined to provide a breakdown of the number of domains parked for monetization.
That created an opening for a short seller to claim that the changes would have a significant impact on Verisign.
Later on Friday, the company released a statement refuting the short seller’s analysis. It revealed that its own calculations show that about 2% of its domain base (which is 171.9 million) is parked for monetization, and that it’s unlikely all of those wouldn’t be renewed.
I think this is the data investors were looking for, and the company could have avoided the sell-off on Friday had it provided this data during the investor call. It is clearly an area of concern that the company could have addressed more specifically.
Here’s Verisign’s complete statement:
A small New York City research firm called “DeMatteo Research” sponsored a short seller’s faulty and incorrect analysis of the impact of recent AdSense changes on Verisign’s domain name business. Based on this incorrect analysis by a presenter who was introduced as being “short Verisign”, the presenter made unsubstantiated and unwarranted conclusions that the impact on our business would be “severe.” This is false. We stated on our earnings call yesterday that any possible impact is very likely to be “minimal” and immaterial.
The “short Verisign” presenter conflated domain names that are parked with those that are registered to collect advertising revenue from Google AdSense for Domains. Domain names that appear to be “parked” are primarily configured that way for three reasons: the registrant has not setup a website and the registrar displays a temporary holding page on their behalf, the registrant intends to resell the domain name at a premium to another registrant or the registrant is attempting to monetize the traffic on the domain name with advertising. Only the third category is likely to be impacted by the changes to the AdSense product, and this category contains less than 2% of our domain name base, by a careful analysis of our own data. This is hardly an amount that would have a “severe” impact if not renewed. As noted in our call yesterday, this small cohort of domain names has been shrinking since at least 2011 and does not represent a significant portion of our business.
Moreover, we have no reason to believe all domain names in this small cohort will not be renewed. Some registrants have already found profitable alternatives to AdSense, including a recently announced option offered by Google, and we expect that others in this cohort will as well.
Source: https://domainnamewire.com/
