Firstly, I think it’s fair to say that Nominet is a distinctive company. As the guardian of the UK namespace, we deliver public benefit not only through our day-to-day activities, but also on a wider stage via contributions to international internet governance and by funding the work of the Nominet Trust.
As a private company limited by guarantee we can’t distribute our income back to our members – which in effect makes us a ‘not-for-profit distribution’ organization. I think this wording is misleading; Nominet is not a charity, but a business driven by giving back to the wider internet community. In my view, running a successful and profitable business has provided the foundation for Nominet to deliver the high-quality service we are known for.
Members of Nominet – many of whom join to access domains at wholesale prices – are from a broad church of business models. Nominet’s constitution confers a number of benefits to members, such as voting rights which influence our governance – including the composition of our Board. I believe our members also benefit from our customer service, and indirectly from our efforts to engage with policy-makers to reinforce our credentials as an industry capable of self-regulation. Given we’re responsible for the UK namespace, it should come as no surprise that we also have a close relationship with wider stakeholders, including government and law enforcement.
While the lion’s share of our revenue comes from a small number of retail registrars, we have over 2,500 members with diverse interests as members, customers or both.
All of this makes Nominet distinctive; that distinctiveness can create complexity. Our operating environment also presents a raft of new challenges, including dealing with cyberthreats and the increasing political scrutiny of internet companies. The market is also more dynamic, from direct challenges by new gTLDs to alternative online strategies offered by social media. A page on a social network like Facebook is the ‘fast food’ of a presence online; cheap and convenient. It’s a trend that continues to gather momentum and one we cannot ignore.
Since we formed in 1996, when the global internet had just 10 million users, the domain market has grown rapidly, and Nominet has grown with it. However, in recent years the domain market has matured in most G20 markets – the UK being a case in point. Last year the number of new domains registered in the UK fell 5%, while the year before the market had fallen by around 8%. While initially over-hyped, some of the new gTLDs are slowly gathering momentum. We are continuing to assume slower growth from the core registry business over FY16 with overall UK market volumes for domain name registrations expected to decline by 3-4% per annum over the next three years.
With headwinds from a slower growth market, and risks of market share erosion Nominet has two strategic choices. We can either ‘stick to the knitting’, by providing domains at a low price with minimal costs and investments in the namespace, or we can be more ambitious by ensuring that .UK continues to be recognized in a more competitive field by investing in services, infrastructure and security tools, and by diluting our dependence on a single income stream.
We have made the decision to think long-term and shape our own destiny, rather than wait and let events overtake us. Over the last year, we have given that task more shape and focus.
At a high-level, our strategy has three concentric rings. At our core is ‘registry’, the middle ring focuses on ‘new markets’ developed from our DNS expertise, and the outer ring focuses on ‘applied innovation’.
Within our registry business, ensuring .UK is recognised as one of the most desirable and trusted domains in the world benefits members and their customers, as well as the digital economy at large. This takes sustained investment in people, technology and services, including our renowned customer service, in marketing our proposition, and in navigating through complex and often competing stakeholder agendas.
With an array of alternatives to a domain name available, we will be proactive in making the case for having a domain (and a personal/business website). With Go ON UK, we have made the first of a series of strategic partnerships to amplify this message. We are also working with our registrars to find the most effective ways of promoting .UK to new audiences. Sharing market intelligence with our channel will underpin our efforts to leverage opportunities for both registrations and renewals.
We remain committed to keeping .UK as safe and resilient as possible, and are developing a programme that will ensure we continue to raise the bar in this vital area.
And while we are first and foremost investing in the namespace, we are also investing in new products for new markets and in innovation.
Why and how are we diversifying?
Diversifying aims to create an additional revenue stream that in an unpredictable market provides a long-term ‘insurance policy’ for .UK, while at the same time creating new opportunities to deliver public benefit.
Our work in ‘new markets’ is focused on network analytics. Originally developed to keep .UK safe, (which it continues to do on a daily basis), our turing product already has great potential to help other businesses running a large DNS network. We are investing in supporting the commercial success of what we believe is a unique product.
Within ‘applied innovation’, our R&D team are exploring new technologies and opportunities. Again, our focus is on internet infrastructure, within the context of the internet of things. While we are involved with innovative projects from flood prevention to smart car parking, those projects are under-pinned by a clear logic – finding solutions to the infrastructure problems posed by gathering, securing, accessing and processing information from a large number of devices. While it is inaccurate to say the team are tasked solely with producing products for our channel, we are working hard to identify viable opportunities for our members downstream. In this respect, I hope the upcoming ‘cloud’ version of turing is the shape of things to come.
Our strategy both strengthens our position in the domain market – which currently delivers over 95% of our revenue – and now has the focus to support our aim to diversify. We are investing now with a view that the diversified areas of the business will be self-sustaining in the medium-term.
All of this moves Nominet to realise our vision of becoming an internet company offering a wider portfolio; driven by, but not restricted to, running the .UK registry as our route to delivering public benefit.
To accomplish this goal, we need to look, feel and act differently in some areas. To this end, we’ve (i) hired staff with new skills, and strengthened the leadership team (ii) put key resources in markets we anticipate will support our growth (we’ve made two key hires in the US), (iii) mobilised the company culture around key values that foster performance and (iv) implemented a cost-control programme to ensure we are reducing unnecessary expenditure and operating as efficiently as possible.
However, what stays the same is our commitment to running a safe and trusted .UK, to offering a world-class service, to delivering public benefit, and to remaining a membership organisation.
In summary, this year, Nominet’s 20th, we are geared up to deliver in-line with our strategy – in terms of strong core business performance in a difficult market, establishing productive partnerships and harnessing new opportunities.
With a healthy and thriving .UK, complemented by compelling new products and services, we will ensure that we punch above our weight in terms of our contribution to the wider internet community.