Note on CentralNic sheds light on domain parking business

Note reveals performance of domain monetization during pandemic downturn. 

Did you know that public firms can pay research firms to cover them? Well, at least if the firm is traded on the London AIM.

Domain name firm CentralNic (London AIM: CNIC) entered into a deal to pay Edison Investment Research £49,500 per year to produce a detailed note on the firm and make quarterly updates.

With that significant disclosure out of the way, Edison’s initial note is worth reading. It lays out the CentralNic roll-up investment thesis in a way that the firm probably couldn’t do itself due to forecasting and guidance rules.

It also discloses more details regarding the firm’s domain name monetization business that it purchased late last year — Team Internet.

Team Internet owns domain parking firm ParkingCrew.com.

As I suspected, Team Internet has taken a bit of a hit in Q2 during the Covid-19 crisis as the ad market has come under pressure.

CentralNic grossed $56.4 in Q1 2020, but Edison forecasts $43 million in Q2 due to the ad slowdown. Domain registrations are up, so the hit on the ad business must be severe.

The note states that CentralNic hopes to cater more to domain investors with its buyout of Team Internet.

It also discloses some of the economics of the ParkingCrew business. The service monetizes 22 million domains owned by 35,000 people. It pays 75% of its earnings to the investor and keeps the other 25%. This nets out to $10.09 on average per domain per year to the investor and $3.36 to CentralNic.

Update: Edison has updated its note, changing the numbers it noted regarding parking. The note now states:

From its share, Team Internet pays the majority (the exact percentage is based on multiple factors like the quality of traffic) to the domain name investor, retaining a modest portion to run the platform. Based on 22m domain names, Team Internet’s noted revenue of US$74m (51 weeks to 24 December 2019), implies average revenue per domain name for Team Internet of c US$3.36.

I wouldn’t discount the original note details, still. I suspect that, on average, it pays out 75% and keeps 25%. Its noted revenue numbers are likely net of partner payouts.

The business generates $1.6M of revenue per employee.