VeriSign Faces Lawsuits Over Turning Typos Into Cash

Despite the outcry over VeriSign's(VRSN Quote - Cramer on VRSN - Stock Picks) controversial new Internet search service, analysts are upbeat about the company's effort to profit from typos.

VeriSign has not disclosed how much revenue it expects to generate from its new Site Finder service, which provides search results for Internet users who mistype a Web site address. The company includes search results from paid advertisers, similar to the "sponsored links" offered on Google's search result pages.

Previously, Web surfers who mistyped a domain name address ending in .com or .net received an error message. But because VeriSign has sanctioned monopoly control of the domain registry that enables users to connect to domain names ending in .com and .net, the company can redirect incorrectly spelled Internet addresses to its Site Finder page. A large raft of critics -- from rival domain registrar services to search engines to regulators -- have lambasted VeriSign for using its monopoly position to draw revenue from the new search service.

The discord appears to be scaring some investors. Shares of VeriSign have dropped about 4% since the service launched Sept. 15, while the Nasdaq Composite has climbed about 3%. However, analysts see little reason for alarm.

"In all honesty, it has created a lot of noise, and I think that's just what it is right now -- noise," said Legg Mason analyst Todd Weller, who has a buy rating on VeriSign. At this point he doesn't expect Site Finder to generate enough revenue to change his model, Weller said. His firm hasn't done any banking with VeriSign.

Wedbush Morgan Securities analyst Tim Leehealey characterized Site Finder as one of several value-added products launched by VeriSign to incrementally boost the company's revenue. Site Finder, he speculated, is "probably a sub-$50 million opportunity." Leehealey has a buy rating on VeriSign and his firm hasn't done any investment banking with the company.

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