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Verisign says it needs .web because .com is running out of names

Kevin Murphy, April 14, 2021, 16:57:07 (UTC), Domain Registries

Verisign’s affinity for cognitive dissonance has emerged yet again — it’s now claiming that it needs to be awarded the .web gTLD because it’s running out of .com domains to sell.

In legal documents released by ICANN yesterday, Verisign’s lawyers say: “The undisputed evidence is that Verisign needs a TLD like .WEB for growth given the decreased name availability in .COM”.

The admission/claim/lie (delete according to preference) came in a joint post-hearing filing by Verisign and Nu Dot Co, the .web applicant to which Verisign loaned $135 million to bid for the gTLD on its behalf at a record-breaking ICANN auction in 2016.

Afilias, now owned by Donuts, was the second-highest bidder and since November 2018 has been trying to get the auction result cancelled via ICANN’s quasi-judicial Independent Review Process.

The IRP’s final hearing was held over seven days last June, and we’ve been waiting with baited breath for a ruling ever since.

At some point over the last 48 hours, ICANN published three sets of post-hearing arguments — one from itself, one from complainant Afilias and an amicus (non-party, friend of the court) filing from Verisign/NDC.

The Verisign filing (pdf) attempts to rubbish Afilias’ claims across the board, but its rebuttal of the argument that it only wants .web in order to bury it and protect .com’s dominance is particularly interesting:

Verisign Has Every Incentive To Grow .WEB Aggressively. Afilias’ Amended IRP Request asserts without evidence that Verisign seeks to acquire .WEB in order to eliminate a potential competitor for .COM and that Afilias would make a better operator of .WEB. Afilias presented no evidence to support this claim prior to the IRP, and none was presented at the hearing. In fact, the evidence before this Panel refutes Afilias’ claims. The undisputed evidence is that Verisign needs a TLD like .WEB for growth given the decreased name availability in .COM. Even Afilias’ own experts concede that the .COM TLD now has limited name availability. Moreover, the undisputed evidence establishes that Verisign is well-positioned to maximize .WEB’s potential, while Afilias’ recent track record suggests that it would be a less effective operator of .WEB.

In June last year, Verisign had submitted to the IRP panel:

Verisign needs a new TLD like .WEB for growth. Verisign’s growth rate has declined in recent years, largely due to many names in .COM already having been taken and increased competition from new gTLDs and ccTLDs that have superior name availability.

Even Afilias’ own experts concede that the .COM name space effectively is taken. Numerous other industry participants have noted that most of the “good” names in .COM already are taken.

While Verisign had a applied for a few non-English transliterations of .com in the 2012 new gTLD application round, it had avoided getting involved with potential competitors to .com.

But, according to its brief, in 2014 it had just sold off the remainder of its non-domain businesses and, realizing its growth now needed to come from a pure domains strategy, tasked VP Paul Livesay with figuring out how it could worm its way back into the new gTLD program.

Many of the details of Livesay’s research and decision making have been redacted by ICANN (purportedly at Verisign’s request), but it seems he came to the conclusion that the best way to benefit from the program long after the application window closed would be to secretly financially back NDC’s participation in the .web auction, with the provision that the .web contract would be transferred to Verisign should it win.

Quite apart from its regular postings touting .com availability over the last few years, the same year that Verisign was coming to the conclusion that .com was becoming saturated and it needed new growth opportunities in other TLDs, it sued XYZ.com for false advertising for having the gall to suggest that it was hard to find available .com domains. It lost.

Because Verisign apparently enjoys nothing more than holding two diametrically opposed positions simultaneously, its October amicus filing also claims that .web isn’t nearly as awesome as Afilias and others claim.

On the same page that it insists that .web is needed to drive growth, Verisign poo-poos the notion that .web could be a significant competitor to .com, relying on an “expert report” commissioned by Verisign and compiled by University of Chicago economist Kevin Murphy.

(Murphy’s report is redacted in its entirety (pdf) by ICANN, but his 1,119 pages of unredacted exhibits (pdf) prominently include screenshots from this blog, so I feel the need to point out that he’s a different Kevin Murphy — he’s not me, and I’d never even heard of the dude until this morning. On a personal level, the fact that I’m apparently not even the best Kevin Murphy when it comes to the .web story that I’ve been covering for the last two decades is, as you might imagine, as depressing to me as it is presumably amusing to you.)

While his report is redacted, reading around the edges it appears that Murphy reckons .web will not be an exceptional competitor to .com.

Verisign’s October filing states:

.WEB’s Valuation Shows It is Not Particularly Competitively Significant. The Murphy Report models multiple economic scenarios to assess Afilias’ claim that the $135 million price paid for .WEB at the public auction shows that .WEB will be a substantial competitor. None of these scenarios indicate that .WEB is likely to gain a significant market share. Instead, each scenario shows that .WEB is likely to have no more than a 2–3% market share.

Because of the redactions, it’s not clear what market Murphy was referring to, but a 3% market share of the current universe of domain names across all TLDs works out to over 10 million domains. In other words, .web could be a top-five gTLD, up alongside the likes of .org.

But elsewhere in its IRP filings, Verisign cites Murphy to support its argument that .web will have “registrations in the low single digit millions”. That would still be enough to make it one of the best-selling new gTLDs.

This relatively low expected turnout of course begs the question of why Verisign needs .web to grow. It added 4 million net new names across .com and .net last year alone, with .net pretty static, according to its financial filings.

I’m no Kevin Murphy, but here’s a table I’ve thrown together showing Verisign’s domain growth over the last decade.

EOYTotal .com/.net domains (millions)
2010105.2
2011113.8
2012121.1
2013127.2
2014130.6
2015139.8
2016142.2
2017146.4
2018153
2019158.8
2020165.2

Its revenue has consistently grown year over year, from $681 million in 2010 to $1.27 billion in 2020. It’s considered one of the most profitable companies in the world, and its share price has tripled since 2011.

And that was without .web.

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Comments (9)

  1. John says:

    Another lie made by Verisign in this proceeding. It claims it is not a monopoly.

    Excerpt:
    “The Evidence In This IRP Establishes That Verisign Is Not A “Monopoly”.
    Afilias contends that Verisign has a “dominant position” in the industry, and asserts that this
    supposed “fact” justifies barring Verisign from future operation of .WEB. The evidence
    presented by Amici and ICANN establishes that Verisign has far less than a 50% share of a
    properly defined relevant market, which is insufficient as a matter of law to support monopoly
    power. Current market conditions—with over 1,200 gTLDs, globally marketed ccTLDs, and
    competition from TLD-agnostic channels, such as Google Chrome’s search box, social media
    platforms and mobile applications—demonstrate that Verisign lacks the ability to control market
    wide output and prices or entry and expansion. Verisign likewise cannot increase prices above
    competitive levels, because .COM pricing is capped by DOC and the Cooperative Agreement
    includes specific provisions as to when and by how much Verisign can raise prices.”

    These statements by Verisign are false and misleading. Verisign absolutely operates a monopoly. The .com registry has never and will never be subject to competitive bidding because its contracts with ICANN exclude all forms of competition. In 2006, Verisign leveraged multiple sham lawsuits against ICANN – and was able to completely renegotiate its .com Registry Agreement to remove the ability for ICANN to put the contract out for competitive bidding. This would have never occurred under normal business circumstances. Furthermore, under the previous version of the agreement, if Verisign ever wanted to raise .com prices, ICANN had the right to put the contract out for competitive bid to make sure any cost increase were justified. But this clause was also removed from the 2006 .com Registry Agreement – and Verisign walked away with the ability to increase prices by 7% in four out of the following six years. Under the terms of the 2006 .com Registry Agreement (which were achieved as a result of litigation), Verisign was granted the perpetual right to operate the .com registry forever. This is a monopoly. See CFIT vs. Verisign for additional deals.

    Also, Verisign falsely claims it is not able to increase prices above competitive levels. But how do you determine competitive levels if the .com contract has never and will never face competitive bidding? If the monopoly operator never fears losing its lucrative contract to operate the .com registry – how are market forces at play on a captive base of 155 million existing users?

    Why did Verisign announce it will increase its prices by 7% on September 1st of this year on its captive base of 155 million registrants? This 7% gain is absolutely above competitive levels. Heck, the current price of $7.85 is way above competitive levels.

    155 million .com registrants are monopoly locked-into their domains. Registrants are not able to switch to other domain extensions due to extremely high switching cots. When there are no practical substitutes or the cost of switching is extremely high – registry operators have full pricing and market power to charge whatever they want.

    • Rubens Kuhl says:

      A definition of monopoly is always dependent on relevant market. When one looks at VRSN market shares all over the world, in many markets they are the underdog and the leading TLD is the local ccTLD. Think .de, .uk. .br.

      VRSN has monopoly power in the US market, though. Is it enough to block them from getting .web ? Perhaps.

      But identifying relevant markets is crucial to a reasoned decision.

  2. John says:

    More importantly – why was Kevin Murphy’s expert report fully redacted?

    It seems Kevin’s conclusions in the expert report will be forever hidden and not available for the public to consume?
    Who made the request to redact the expert report – ICANN or Verisign?

    Or what damaging information does ICANN and/or VeriSign not want released?

  3. MoGreen says:

    I think the big question here , is there yet another Kevin Murphy in the domain space nobody yet knows about that could claim the #1 spot in the Kevin Murphy Domain Name challenge

  4. Don says:

    .web is to late they waited to long imo. handshake hns domains will resolve in a few years on major search engines and watch for smaller search engines to have them resolve in the coming months.

    Look you can buy your own extension for under 1k and a nice one for 25k, or your own name extension for under 10 bucks with 100 to 500 to million dollar fees just to have a rented extension. Times are changing and the top domain investors in the world own the HNS names.

    • jZ says:

      if new gtlds couldn’t take off what chance do “handshake” domains have? absolutely none! people are deluding themselves.

  5. Ed says:

    So do we have a verdict yet?

    • Kevin Murphy says:

      If there is one, ICANN hasn’t published it. There was, however, a report on .web to the ICANN Board Accountability Mechanisms Committee last week, which I’m taking as a hint that there’s been some recent developments. Minutes of that meeting probably won’t be available for a few weeks, however.

  6. Krish says:

    Is that report on .web a public document like other documents posted about IRPs in icann website ?

    Second question – do you think the hype that was there around .web fizzled out ?

Leave a Reply to Krish