An encouraging trend for VeriSign (
VRSN
) over the last few quarters has been the increasing renewal rates
of its .com and .net domain name business. We expect that the
declining market share trend for VeriSign in the .com and .net
domain business could see a temporary stabilization in 2010 mainly
due to healthy renewal rates. If VeriSign manages to maintain its
market share in the long term as well, there could be an upside of
12% to our
$38.82 Trefis price estimate for VeriSign stock
.
VeriSign the Leader in Domain Name Registration
VeriSign currently controls the rights to the exclusive registry
of .com and .net internet domain names. The company collects a
fixed fee each time individuals or businesses register a new .com
or .net domain name, or renew the registration of an existing
domain name.
VeriSign's share in the domain name market has declined from
around 54% in 2006 to around 50% in 2009, and we expect it to
continue to decline to around 43% by the end of Trefis forecast
period.
We believe the primary factor behind the declining market share
trend for VeriSign has been the faster rise in country-specific
domain names compared to .com and .net names. This effect is
partially due to the fact that emerging markets like China, Russia
and India, which seem to have a higher tendency to use
country-specific domain names, have also shown faster GDP growth
than the US. The majority of .com and .net domain names are
registered in the US, which is one reason why the US economy's slow
growth over the last few years has led to market share declines for
VeriSign.
Renewal Rate Increase Could Present Upside
VeriSign's observed renewal rate has steadily increased from
around 70% in Q2 2009 to 73% in Q3 2010. The increasing
renewal rate means that the number of domain name registrations is
expected to increase from 97 million in 2009 to 105 million in
2010, indicating that VeriSign could maintain its market share in
2010 at 50%. Hence we expect VeriSign's market share to show signs
of stabilization despite the country-specific domain name growth
described above.
There could be an upside of around 12% to our estimate for
VeriSign stock if the company is able to maintain its market share
at around 50% over the Trefis forecast period.
Modify the trend-line in the chart above to assess the impact
of various market share scenarios on VeriSign's stock value.
See our full analysis for VeriSign here