The six months ending 30 June were a less-than-stellar first half for web services company MelbourneIT, but managing director Theo Hnarkis has revealed a new revenue stream to help get the company back in the black: premium top-level domain names.
Generic top-level domain (gTLD) names were approved by the Internet Corporation for Assigned Names and Numbers (ICANN) recently. This means that companies can now register any domain suffix they like for their website. Coca-Cola, for example, could choose http://www.coca.cola as its website. Yet, the new TLDs don't come cheap, with registers like MelbourneIT charging between $45,000 and $75,000 just for the application process.
"That [figure] doesn't include all the other things we can charge for in the future," Hnarkis told ZDNet Australia on an analyst call today, adding that he expects even a small number of applications to make a sizeable impact on the company's bottom line.
"We believe that we can generate a reasonable amount of applications [for gTLDs] and I've indicated pricing is between $45,000 and $75,000. That doesn't include management or any other activities.
"Even a modest number of applications will bring a substantial impact."
MelbourneIT's annual report reveals that the company is currently working through approximately 230 applications of interest for premium brand gTLDs, but Hnarkis told analysts that the number is closer to 270, with 17 customers already officially signed on within six weeks of the services becoming available.
Hnarkis, however, was playing full revenue forecasts for TLD sales close to the chest, indicating only that they would be in the millions.
"I don't want to give you the absolute detail. We are in a competitive environment. We don't want to be sharing this with our competitors," he said.
The TLD revenue stream is sure to be a boon for MelbourneIT, after the company reported an 11 per cent drop in revenue for the first half of the year.
Revenue was down to $87.6 million in the half compared to revenue of $98.1 million in last year's first half. As a result, net profit after tax took a 30 per cent hit, down from $7 million last year to $4.9 million this year.
Over half of MelbourneIT's revenue streams come from business in Europe and the US, meaning that much of the poor result can be attributed to the effects of the strong Australian dollar, Hnarkis said.
This isn't the first reporting round where MelbourneIT has indicated that the exchange rate was affecting its business. Last year's second-half profit figures were down between 5 and 10 per cent due to the strong currency rates alone.
Results documents show that the negative impact on revenue, due to the high exchange rate against the US greenback for the first half of 2011, has been estimated at $4 million, with the negative impact to earnings before interest and tax amounting to $1 million.
Hnarkis told ZDNet Australia on the results call yesterday that the company could do little but ride out the foreign exchange storm. While the company could increase its focus on hedging, Hnarkis said, it would do little to soften the blow in the short to medium term.
"I've given up trying to predict what the Australian dollar will do next," he said.
Despite the poor results, Hnarkis projected a strong close to the year for MelbourneIT.
"We're all disappointed in the first half. We've seen several impacts that affected our first half, but that has not impacted what we believe can be achieved in the second half that can get us in line with last year," he said.
MelbourneIT's plans include the launch of new products, like Windows Server 2008, onto its infrastructure, new contracts with overseas partners, like Yahoo and retail giant Best Buy, and the push into the premium TLD market.
Hnarkis said that the company would also watch its costs by outsourcing some of its staff. The company is currently piloting an outsourcing strategy for its customer service call centre staff, with approximately 15 staff now situated in the Philippines.
Hnarkis said that there are between 120 and 150 call centre staff working for MelbourneIT right now, and the proposed outsourcing program will likely see half of their roles moved to the Philippines, adding that a call centre staff member based overseas costs the company half of what it pays for a staff member in Australia.
The services company also added that its transformation program is on track and on budget, and hopes to move to its new Oracle financial platform in the first quarter of next year.