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Renewals for .VIP domain in China removes uncertainty from Minds + Machine model

MMX expects the overall renewal rate for the first month of .VIP registrations to be in line with the best-in-class renewal rates of leading western-facing TLDs
VIP business card
The renewal rate for the first month of .vip registrations will be published in late July

Minds + Machines Group Limited (LON:MMX) said renewal rates for its .VIP top level domain (TLD) in China have been above the industry norm.

The .VIP TLD was launched in China on 17 May of last year, which means its renewal time for those on a one-year contract.

The internet TLDs owner and operator has processed the first month of manual renewals and the numbers have been a pleasant surprise.

WATCH: Minds + Machines' Toby Hall hails popularity of .VIP domain name in China

Minds + Machines (MMX) said deletion requests have been received for less than 1% of the domains registered, while manually confirmed renewals are already above 60%, with the remainder being placed on auto-renew by registrars on behalf of their customers (though these auto-renewals may still be subject to cancellation).

MMX said this renewal rate is significantly ahead of those typically seen by new generic top-level domains in the region.

MMX expects the overall renewal rate for the first month of .VIP registrations, which will be published in late July, to place .VIP in-line with the best-in-class renewal rates of leading western-facing top-level domains, which is to say around 70% and above.

READ Minds + Machines lauds .vip launch as Chinese pile in

"The .VIP renewal rates from China, which have not been reliant on aggressive discounting tactics, are testament to the inherent value of the .VIP extension and hard work of our retail partners,” said Toby Hall, chief executive officer of MMX.

"This bodes well for our Chinese premium revenues in H2 as we begin releasing our 2017 .VIP premium inventory for the first time to the broader market in Q3, traditionally the main domain investment season in the region, on the back of .VIP's exceptionally strong renewal profile," Hall added.

The .VIP domain is proving popular with small-to-medium enterprises in China, as well as the region’s established corporates.

Speaking to Proactive Investors in April, Hall explained that VIP is one of the few English-language acronyms to be adopted by the Chinese, and over the decades its meaning has evolved to denote something that is high class or premium, which is slightly different to its connotation in the West.

MMX is currently progressing a further eight extensions through the Chinese regulator’s approval process for potential future release in China.

READ Minds + Machines shares get the VIP treatment

Shares in MMX were up 3.3% at 12.4p in early deals.

“Today’s news removes a large degree of uncertainty from the model given that .vip represented 59% of gross billings in FY16. As such, if we assume that the renewal rate of MMX's other domains are maintained at their 2016 level (of 75%) and combine this with .vip (at 70%), this would suggest FY17 renewal revenue of c.US$5.9mln – up from US$3.8mln in FY16,” calculated Harold Evans, at MMX’s house broker, finnCap.

“Importantly, this would achieve one of the company's stated goals of renewal revenue in excess of operating costs (now less than US$6mln in terms of current run-rate),” he added.

MMX is currently valued at £86.7mln, and Evans calculates that its .VIP asset alone is worth £57mln, while the group revealed in its recent results statement it has US$15.3mln (about £12.2mln) of cash and cash equivalents. 

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