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Renewal rate calculations – “Ask a stupid question and you’ll get a stupid answer”

There is a Norwegian saying “du får svar som du spør” which roughly means that the question you ask will impact the answer you are given. The point is that you have to carefully consider how a question is phrased and what you are really asking for, as this will have a large impact on the answer. This principle is especially true when it comes to calculating renewal rates for domain names in a certain namespace.    

It is important for all Registries to know the renewal rates for the domain names registered under their top-level domain(s) in order to properly evaluate how successful a marketing campaign is in the long term and to better be able to forecast future revenues. The renewal rates also provide insights on how domain names in a certain zone are being used, which in turn impacts other strategic decisions for the Registry managing the top-level domain.   

Although most people agree that understanding renewal rates is important, exactly how these rates are calculated vary greatly between different Registries. The differences in methods for calculating renewal rates are problematic because it makes comparisons between top-level domains difficult as well as gives very limited insight into the actual trends and well-being of a zone. A simplified statement would be that renewal rates are merely “the percentage of the registered domains within a period of time that gets renewed”, which is true, but that statement fails to take many important variables into consideration. To illustrate this, let’s have a closer look at some of the many nuances that exists when calculating renewal rates:

First, how a renewal is defined by the organisation making the calculations can impact the outcome. For instance, the expiry date is extended by one year when a domain name is transferred – should that count as a renewal? If a domain is registered for 3 years right at the point of initial registration, should that domain still be considered to be renewed each year during those three years, or only renewed after the third year when the registration would otherwise expire?

Secondly, how an average renewal rate for a time period is calculated can vary substantially and thereby provide more or less valuable information.

Example: Registry X wants to calculate its annual average renewal rate. Let’s have a look at the results if they simply take each month’s renewal rate, sum it up to a total and then divide it by 12 months to get the monthly average for that year.

January – June, 10 000 registrations, monthly renewal rate of 60%

July – December, 1000 registrations, monthly renewal rate of 90%

(60 * 6 months) + (90 * 6 months) = 360 + 540 = 900  

900 / 12 months = 75

Doing the calculation this way gives us an answer of a 75% average renewal rate for that year.

So what’s the problem with this? Although the 75% average makes sense mathematically, it fails to take the volume aspect into account. In the example above, the last six months (July-Dec) accounts for only 10% of the Registry’s yearly total volume, but it lifts the average of the other 90% of the registrations notably (from 60% renewal rate to 75%). In other words, the recipient of the information that Registry X has an average renewal rate of 75% is missing a large portion of important information unless he/she has additional knowledge about the numbers used in the calculation.

One way of avoiding this and to get a more informative and useful result from the renewal calculations is to use a weighted average for the time period. A weighted average will, unlike in the example above, account for volume. In other words, the volume that each percentage represents will be taken into consideration when generating the answer.

Busy with other things? Calculating renewal rates accurately is a complex and time consuming task to perform manually, which is why RegistryOffice now has a feature that removes that burden by automating the process of calculating renewal rates and ensures that the calculations are consistently applied.

Screen Shot 2018-12-19 at 9.07.29 PMRegistryOffice calculates renewal rates for the Registry as a whole, as well as on a per registrar basis, both in and outside of campaign periods. The calculated weighted average renewal rate is also used to provide valuable key performance indicators and trend analysis.

The renewal volume and rates are displayed graphically per year for easy interpretation, as shown in the image above.

If you would like a demonstration of how RegistryOffice calculates renewal rates, please reach out to contact@registryoffice.global.

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