Tucows Domains continues to tread water, company comments on blockchain domains

Its domain name business shrunk a bit last quarter.

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Tucows’ (NASDAQ: TCX) domain name business continues to tread water, the company reported today.

Revenue in the domains business was $61.1 million in Q2 2022, down 2% from the same quarter a year ago.

Dave Woroch, CEO of Tucows Domains (one of Tucows’ three businesses), said this is to be expected given the hangover from the pandemic surge in domain registrations. In a pre-recorded analyst briefing, he pointed out that Verisign reported a 14% year-over-year decrease in new registrations in .com and .net in Q2. He does not expect outsized growth in the domain business, at least from traditional areas.

Woroch commented on Unstoppable Domains raising $65 million. The round valued the company at $1 billion, which is more than what Tucows is worth. (Granted, the terms of a private company fundraising can artificially inflate the valuation.)

Tucows is on the record as supporting Web3 but thinks this particular effort is flawed. Woroch stated:

At its simplest, Unstoppable Domains is offering domain name registrations in strings like .crypto and .nft. I do not want to get too technical in an investor call, but these domains do not work without special software that needs to be installed in order to use them. This is referred to as “using an alternative root.” People have been attempting to launch alternative roots since the ’90s, and there is simply too much of a chicken and an egg problem.

We have discussed our views on Web3 before. We are fans. What is most interesting about this news item is that it shows that investors have an appreciation for the relationship between domain names and identity. While we are not believers in this particular effort, we do think they are doing some interesting things—albeit with some fatal flaws—but nevertheless, we are thinking a lot about the relationship between domain names, identity and Web3.

Woroch said that any experimentation with Web3 at Tucows will likely take place in its domains business.

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