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Did XYZ.com pay NetSol $3m to bloat .xyz?

Kevin Murphy, August 25, 2015, 19:52:15 (UTC), Domain Registries

Evidence of a possibly dodgy deal between XYZ.com and Network Solutions has emerged.
Court documents filed last week by Verisign suggest that the .xyz registry may have purchased $3 million in advertising in exchange for $3 million of .xyz domain names.
Verisign, which is suing .xyz and CEO Daniel Negari over its allegedly “false” advertising, submitted to the court a list of hundreds of exhibits (pdf) that it proposes to use at trial.
Among them are these two:

  • Email from Negari to Andrew Gorrin re EPP Feed and billing directly for $3,000,000 in domains
  • Credit Memo to Andrew from Negari “We have elected to pay for our $3MM Q2 advertising insertion order, which was dated May 20th with a credit…….” (5/31/14)

Gorrin is Web.com’s senior VP of marketing and Negari is Daniel Negari, XYZ.com’s CEO.
The documents these headings refer to are not public information, and are not likely to be any time soon, but they appear to refer to on the one hand XYZ billing NetSol for $3 million in domain names and on the other NetSol billing XYZ for $3 million in advertising.
Only one of the two document headings is dated, so we don’t know how closely they coincided.
Other headings, among the 446 documents Verisign wants to use at trial, suggest that they happened at pretty much the same time:

  • Email from Andrew Gorrin to Ashley Henning (web.com) re Bulk Purchase of .xyz domains (5/29/14)
  • Email from Andrew Gorrin to Negari re XYZ.Com Advertising IO and Marketing Agreement attaching signed agreements (5/20/14)
  • Email string Ashley Henning to Christine Nagey, Andrew Gorrin, Edward Angstadt re Bulk Purchase of .XYZ Domains (5/30/14)

The emails Verisign cites were dated May 2014, shortly before .xyz went into general availability June 2.
What we seem to be looking at here — and I’m getting into speculative territory here — are references to two more or less simultaneous transactions, both valued at exactly $3 million, between the two parties.
Both companies have consistently refused to address the nature of their deal, citing NDAs.
As you recall, the vast majority of .xyz’s early registrations were provided by NetSol, which pushed hundreds of thousands of free .xyz domains into its customers’ accounts without their explicit consent.
The number of freebies is believed to be about 350,000, based on comments Negari recently made to The Telegraph, in which he stated that .xyz, which had about 850,000 domains in its zone at the time, would have 500,000 registrations if the freebies were excluded.
With a registry fee roughly equivalent to .com’s (.xyz’s is believed to be a little lower), 350,000 names would work out to roughly $3 million.
Negari has stated previously that every .xyz registration was revenue-generating, even the freebies.
Is it possible that NetSol paid XYZ’s registry fees using money XYZ paid it for advertising? Is it possible no money changed hands at all?
I’m not saying either company has done anything illegal, and it’s completely possible I’m completely misunderstanding the situation, but it does rather put me in mind of the old “round-trip” deals that tech firms used to dishonestly prop up their tumbling revenue at the turn of the century.
Back in 2000, the dot-com bubble was on the verge of popping, taking the US economy with it, and companies facing the decline of their businesses came up with “creative” ways to show investors that they were still growing.
AOL Time Warner, for example, “effectively funded its own online advertising revenue by giving the counterparties the means to pay for advertising that they would not otherwise have purchased”.
Regulators exercised their legal options in these cases only where there appeared to be dishonest accounting, and I’ve seen no evidence to suggest that XYZ or Web.com unit NetSol have failed to adhere to anything but the highest accounting standards.
Again, I’m not saying we’re looking at a “round-trip” deal here, and there’s not a great deal of evidence to go on, but it sure smells familiar.
Certainly, questions have been raised that Verisign did not raise in its initial complaint.
Anyway.
On a personal note, I’d like to disclose that among the documents Verisign demanded from XYZ are dozens of pages of previously confidential emails exchanged between myself and Negari.
I’ve read them, and they’re mostly heated arguments about a) his refusal to give details about the NetSol deal and b) my purported lack of journalistic integrity whenever I published a post about .xyz with an even slightly negative angle.
XYZ had no choice but to supply these emails. I can’t blame it for complying with its legal requirements.
I wasn’t the only affected blogger. Mike Berkens, Konstantinos Zournas, Rick Schwartz and Morgan Linton also had their private correspondence compromised by Verisign.
I don’t know how they feel about this violation, but in my view this shows Verisign’s contempt for the media and its disregard for the sanctity of off-the-record conversations between reporters and their sources.
And that’s what I have to say about that.

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Comments (16)

  1. Joseph Peterson says:
    August 25, 2015 at 8:30 pm

    Anybody would be upset when private emails are pulled into somebody else’s legal proceeding. Justified or not, the action would be annoying. And it might have a chilling effect on communication later.
    But aren’t there times when private emails ought to be included? Take an extreme case. If O. J. Simpson and I had been talking about his wife’s death, then when he went on trial for murder, maybe such correspondence should become Exhibit X or Y or Z. Even if O. J. Simpson was my source, he’s also the guy on trial. For anything he said, he was the source. It can’t all be exempt, can it?
    Where is the line? I don’t pretend to know the answer. Curious.

    Reply
    • Kevin Murphy says:
      August 25, 2015 at 9:03 pm

      If somebody confessed murder to me I would immediately inform the police. Any journalist worth a damn is a person first, journalist second.

      Reply
      • Joseph Peterson says:
        August 25, 2015 at 9:19 pm

        That’s an extreme example. Most likely O. J. would’t confess, but they might still want to review the emails to see what he did say.
        What I’m getting at is that there are cases where we’d be more sympathetic surrendering emails and cases where we’d be bristling with frustration. In your opinion, where should the dividing line fall between those 2 scenarios? That’s not a rhetorical question. I’m interested in your opinion here, Kevin.

        Reply
        • Kevin Murphy says:
          August 25, 2015 at 9:23 pm

          The line would be drawn somewhere above bullshit civil cases between two unethical companies.

          Reply
          • Joseph Peterson says:
            August 25, 2015 at 9:31 pm

            Enjoyed that answer!
            I do see your point. Trouble is, some judge has to decide. Even if both companies are unethical, the judge isn’t supposed to have an opinion about their souls when he does / doesn’t grant access to email conversations. As for bullshit, the judge can’t decide about the allegations in advance.
            So it comes down to interpreting what makes for procedural bullshit. Either that or a blanket rule pertaining to civil cases saying no access to private emails.

          • Kevin Murphy says:
            August 25, 2015 at 9:36 pm

            My problem is not with the judge. My problem is with the company that demanded my private, off-the-record emails.

          • Domenclature.com says:
            August 25, 2015 at 9:35 pm

            Ouch!

          • Joseph Peterson says:
            August 25, 2015 at 9:47 pm

            Kevin, I don’t fault you, since I’d probably feel much the same way. You publish online more than I do, yet the same thing might happen to anybody who writes about controversies. So when I ask about a dividing line, I’m anticipating that what happened in your case might one day happen to me. Not idle banter.

          • Kevin Murphy says:
            August 25, 2015 at 9:55 pm

            Do you also write a blog?

          • Joseph Peterson says:
            August 25, 2015 at 9:56 pm

            At DNW. More to come.

          • Kevin Murphy says:
            August 26, 2015 at 12:19 am

            Good luck feller. Andrew is a fair employer. Cheap, but fair 🙂

  2. Acro says:
    August 25, 2015 at 9:42 pm

    Ah, that reference to “MM” again, Kevin 😉

    Reply
  3. Snoopy says:
    August 26, 2015 at 12:10 am

    Keep up the good work on this Kevin!

    Reply
  4. Josh says:
    August 26, 2015 at 12:56 am

    Good job, Kevin. Hey, ever since there have new new TLD’s, there’s been scammy behavior. Beauty.cc once “sold” for 1 million back in 2001 or so. And it took a while for that story to unravel.

    Reply
  5. John Berryhill says:
    August 26, 2015 at 7:25 pm

    I can recall the episode many, many years ago when the combined NSI/Verisign was offering sweetheart deals to bulk registrants in order to keep the .com registration numbers inflated, so they could report those numbers to their investors. Their stock took a slide anyway and they terminated all of those deals. I still have Phil Sbarbaro’s voice ringing in my ear shouting “Termination for convenience, John, it’s in the contract!”

    Reply

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