Emerging Markets Could Be The Key To VeriSign’s Success In The Long Term

This year saw healthy growth figures in internet registrations for .com and .net domain names, fuelled particularly by increased activity in emerging economies like China, India, Vietnam and Indonesia. In Q3 2015, VeriSign (NASDAQ:VRSN) recorded net registrations to the tune of 1.7 million, while gross registrations were recorded at about 9.2 million. This brings the current count of total .com and .net registrations to about 135.2 million. ^[1] So where is this figure headed in the future? Considering the potential for growth in internet penetration in emerging economies and the e-commerce boom, it seems highly plausible that domain name registrations are going to increase at an unprecedented rate in the years to come.

See our complete coverage of VeriSign

Higher Internet Penetration in Developing Economies:

Domain name registrations and the number of internet users are directly proportional. The four key countries in which VeriSign sees potential for increased business are China, India, Vietnam and Indonesia. To gain a better perspective, it would be worthwhile to analyze the internet penetration levels in two of the largest economies in question here — India and China.

The number of internet users in India has grown (and continues to grow) at unprecedented levels in the recent past. The country witnessed an addition of more than 200 million users to its internet user base over the last 5 years. ^[2] In the latest reports available from October, India’s internet user base was recorded at 375 million users (significantly higher than the population of the U.S.). This figure is expected to reach 400+ million users by the end of this month (a whopping 49% jump over last year). ^[3] The country now stands only second to China when it comes to the highest number of internet users in the world. Much of the reason for such growth figures is due to the introduction of affordable and accessible smartphones (manufactured in China and India) and data plans in the Indian market. Mobile internet users account for almost 60% of the total internet users in the country. However, despite these impressive figures and statistics, internet penetration in the country is still very limited. Only about 30% of the country’s population has access to the internet. This definitely leaves a great scope for growth in the coming years.

China leads the pack with the largest internet user base in the world. The country has almost 668 million citizens with access to the internet. Like India, most of the users in the country access the internet via their smartphones — almost 89% of the internet using population. Internet penetration in the country now stands at close to 49%. Given the current economic conditions, it does seem plausible that the rate of growth is going to come down marginally, but this could prove to be only a temporary setback. ^[4]

The Rise of E-commerce:

There has been a shift in the way consumers are buying products today. It has been noted that many people prefer buying goods online rather than by walking into a physical store. To put this into perspective, the sales recorded from e-commerce was about $830 billion in 2014 and is expected to reach $990 billion this year. Total sales from e-commerce are estimated to reach around $1.5 trillion by 2018, which is a remarkable 51% projected increase in three years. In the U.S. itself, e-commerce sales have increased almost 200% in the last five years. ^[5] Such growth figures seem to make sense though, considering that all online sales account for only 6.6% of the total world-wide sales. ^[6] Going forward, it seems highly plausible that sales from online platforms could obtain a larger share of total sales.

As producers and entrepreneurs continue to see greater potential in e-commerce, many of them have created online platforms to sell their products. Apart from established companies, a large number of start-ups have sprung up in recent times to take advantage of the sudden surge in online buying. With further growth in this space, it is very likely that more such companies will enter the market and website registrations will rise considerably in the near future.

Given the reasons highlighted above, it seems highly plausible that there is scope for heavy registrations in the .com and .net space over the next five years. If economic conditions remain favorable, we could be seeing numbers as high as 450 million registrations by the end of our Trefis forecast period.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

1. Verisign Reports Third Quarter 2015 Results, www.seekingalpha.com [↩]
2. Internet Users in India, www.dazeinfo.com [↩]
3. India on Course to Overtake U.S. Next Month in Internet User Base, www.livemint.com [↩]
4. There are 668 Million Internet Users in China, www.scmp.com [↩]
5. VeriSign Growth: Domain Name Registration is a Key Factor, www.marketrealist.com [↩]
6. Just How Big Is The E-commerce Market?, lemonstand.com [↩]