⚠ Switching Costs Do Not Stop DeletionModerate threat
VeriSign (VRSN) — threat to the moat
The customer who leaves does not switch to a competitor. The name simply stops existing.
Switching costs stop a customer moving. They do nothing to stop a customer leaving.
This is the distinction VeriSign's moat has to survive. A registrant who abandons a name does not go to a competitor — there is nothing to go to, since the name itself simply stops existing. They stop needing an address at all. And the base is full of registrations that were never attached to anything: speculative inventory, dollar promotions, defensive registrations bought to stop somebody else having them.
That is why the base fell for six consecutive quarters without a single customer switching to a rival.1 Roughly a quarter of names fail to renew each year, and the renewal rate has ranged from 72.2% to 76.3% in the last two years — a four-point band that is worth several million names annually.2
The consolation is that the volatile part of the base is also the least valuable part. A dollar first-year registration that lapses cost VeriSign almost nothing to acquire and produced almost nothing while it lasted.
The thing to watch is the renewal rate, not the base. A falling base with a rising renewal rate is speculative inventory washing out. A falling renewal rate is something else.
- ReportedThe .com and .net base fell for six consecutive quarters through the third quarter of 2024, with no competing registry able to take a .com registration.Domain Name Wire — price increases boost revenue at Verisign as domain registrations continue to slide. The .com and .net base fell for a sixth consecutive quarter to 169.6 million at the end of the third quarter of 2024, down 2.5% year over year, with U.S. registrars prioritising revenue per customer over customer acquisition and very low-cost new gTLDs taking share; the third-quarter 2024 renewal rate was approximately 72.3%. — Q3 2024 · publ. 2024-10-25 · source ↗
- ReportedThe renewal rate has ranged from about 72% in 2024 to 76.3% in the first quarter of 2026.VeriSign, Inc., Reports Second Quarter 2026 Results — Form 8-K Exhibit 99.1, 23 July 2026. Revenue $435 million, up 6.0% year over year; operating income $296 million against $281 million; net income $217 million and diluted EPS $2.38 against $207 million and $2.21. Cash, cash equivalents and marketable securities $1.03 billion, up $454 million from year-end 2025; deferred revenues $1.45 billion at 30 June 2026, up $64 million from year-end. Cash flow from operations $232 million. On 26 June 2026 VeriSign issued $550 million of 5.10% Senior Notes due 2031 and on 20 July 2026 used the proceeds with cash on hand to redeem $550 million of 4.75% Senior Notes due 2027. 0.7 million shares repurchased for $197 million; an additional $884 million authorised effective 23 July 2026 bringing the total authorisation to $1.50 billion; a quarterly dividend of $0.81 per share declared on 20 July 2026. The domain name base ended at 179.1 million .com and .net registrations, a 5.1% increase year over year and a net increase of 3.05 million in the quarter; a record 12.7 million new registrations were processed against 10.4 million; the final first-quarter 2026 renewal rate was 76.3% against 75.5%. CEO Jim Bidzos: the record of 100% availability for the .com and .net domain name resolution system was extended to 29 years, and more than 100% of free cash flow was returned to the investing public through dividends and share repurchases. The .web top-level domain has been delegated into the DNS root zone with VeriSign as the designated registry operator. — Q2 2026 · publ. 2026-07-23 · source ↗