Latest news of the domain name industry

Recent Posts

Trump gives Verisign almost $1 billion in free money

Kevin Murphy, November 5, 2018, Domain Registries

The Trump administration may have just handed Verisign close to $1 billion in free money.

That’s according to the back of the envelope I’m looking at right now, following the announcement that the National Telecommunications and Information Administration is reinstating Verisign’s right to increase .com registry fees.

As you may have read elsewhere already (I was off sick last week, sorry about that) a new amendment to the Verisign-NTIA Cooperative Agreement restores Verisign’s ability to raise prices by 7% per year in four of the six years of the deal.

The removal of the Obama-era price freeze still needs to be incorporated into Verisign’s ICANN contract, but it’s hard to imagine ICANN, which is generally loathe to get into pricing regulation, declining to take its lead from NTIA.

Verisign would also have to choose to exercise its option to increase prices in each of the four years. I think the probability of this happening is 1 in 1.

Layering this and a bunch of other assumptions into a spreadsheet, I’m coming up with a figure of roughly an extra $920 million that Verisign will get to add to its top line over the next six years.

Again, this isn’t an in-depth study. Just back-of-the-envelope stuff. I’ll talk you through my thinking.

Not counting its occasional promotions, Verisign currently makes $7.85 for every year that a .com domain is added or renewed, and for every inter-registrar transfer.

In 2017, .com saw 40.89 million add-years, 84.64 million renew-years and 3.79 million transfers, according to official registry reports.

This all adds up to 129,334,643 revenue events for Verisign, or just a tad over $1 billion at $7.85 a pop.

Over the four-year period of the price increases transaction fees will go up to $8.40, then $8.99, then $9.62, then $10.29. I’m rounding up to the nearest penny here, it’s possible Verisign may round down.

If we assume zero transaction growth, that’s already an extra $762.2 million into Verisign’s coffers over the period of the contract.

But the number of transactions inevitably grows each year — more new domains are added, and some percentage of them renew.

Between 2016 and 2017, transaction growth was 3.16%.

If we assume the same growth each year for the next six years, the difference between Verisign’s total revenue at $7.85 and at the new pricing comes to $920 million.

Verisign doesn’t have to do anything for this extra cash, it just gets it.

Indeed, the new NTIA deal is actually less restrictive on the company. It allows Verisign to acquire or start up an ICANN-accredited gTLD registrar, something it is currently banned from doing, just as long as that registrar does not sell .com domains.

Verisign’s .net contract also currently bans the company from owning more than 15% of a registrar, so presumably that agreement would also need to be amended in order for Verisign to get into the registrar business.

I say again that my math here is speculative; I’m a blogger, not a financial analyst. There may be some incorrect assumptions — I’ve not accounted for promotions at all, for example, and the 3.16% growth assumption might not be fair — and there are of course many variables that could move the needle.

But the financial markets know a sweetheart deal when they see one, and Verisign’s share price went up 17.2% following the news, reportedly reaching heights not seen since since the dwindling days of the dot-com bubble 18 years ago.

The reason given for the lifting of the price freeze was, for want of a better word, bullshit. From the NTIA’s amendment:

In recognition that ccTLDs, new gTLDs, and the use of social media have created a more dynamic DNS marketplace, the parties agree that the yearly price for the registration and renewal of domain names in the .com registry may be changed

Huh?

This seems to imply that Verisign has somehow been disproportionately harmed by the rise of social media, the appearance of new gTLDs and some unspecified change in the ccTLD marketplace.

While it’s almost certainly true that .net has taken a whack due to competition from new gTLDs, and that the domain marketplace overall may have been diminished by many small businesses spurning domains by choosing to set up shop on, say, Facebook, .com is still a growing money-printing machine with some of the fattest margins seen anywhere in the business world and about a 40% global market share.

If the Trump administration’s goal here is to make some kind of ideological statement about free markets, then why not just lift the price caps altogether? Give Verisign the right to price .com however it pleases?

Or maybe Trump just wants to flip the bird to Obama once more by reversing yet another of his policies?

Who knows? It doesn’t make a lot of sense to me.

Co-founder Nevett leaves Donuts

Kevin Murphy, October 18, 2018, Domain Registries

Donuts executive vice president of corporate affairs Jon Nevett has left the company, Donuts said yesterday.

He’s the last of the four co-founders of the new gTLD portfolio owner to step aside from their original roles over the last couple of years.

There’s no word on whether he’s got a new gig lined up, but given the recent acquisition of Donuts by Abry Partners, which gave the founders the opportunity to dispose of their shares, Nevett presumably will be in no rush.

Donuts said in a statement that Nevett, who led policy at the company, will continue to act as an advisor.

He follows Dan Schindler and Richard Tindal as co-founders who have since left the company.

Founding CEO Paul Stahura stepped into the executive chair role a couple of years ago to make way for Bruce Jaffe, who led the firm through its merger with Rightside and subsequent sale to Abry.

Jaffe himself will leave next month to allow former ICANN bigwig Akram Atallah into the hot seat. Former ICANN CEO Fadi Chehade is one of Abry’s lead overseers of Donuts.

Donuts loses to ICANN in $135 million .web auction appeal

Kevin Murphy, October 16, 2018, Domain Registries

Donuts has lost a legal appeal against ICANN in its fight to prevent Verisign running the .web gTLD.

A California court ruled yesterday that a lower court was correct when it ruled almost two years ago that Donuts had signed away its right to sue ICANN, like all gTLD applicants.

The judges ruled that the lower District Court had “properly dismissed” Donuts’ complaint, and that the covenant not to sue in the Applicant Guidebook is not “unconscionable”.

Key in their thinking was the fact that ICANN has an Independent Review Process in place that Donuts could use to continue its fight against the .web outcome.

The lawsuit was filed by Donuts subsidiary Ruby Glen in July 2016, shortly before .web was due to go to an ICANN-managed last-resort auction.

Donuts and many others believed at the time that one applicant, Nu Dot Co, was being secretly bankrolled by a player with much deeper pockets, and it wanted the auction postponed and ICANN to reveal the identity of this backer.

Donuts lost its request for a restraining order.

The auction went ahead, and NDC won with a bid of $135 million, which subsequently was confirmed to have been covertly funded by Verisign.

Donuts then quickly amended its complaint to include claims of negligence, breach of contract and other violations, as it sought $22.5 million from ICANN.

That’s roughly how much it would have received as a losing bidder had the .web contention set been settled privately and NDC still submitted a $135 million bid.

As it stands, ICANN has the $135 million.

That complaint was also rejected, with the District Court disagreeing with earlier precedent in the .africa case and saying that the covenant not to sue is enforceable.

The Appeals Court has now agreed, so unless Donuts has other legal appeals open to it, the .web fight will be settled using ICANN mechanisms.

The ruling does not mean ICANN can go ahead and delegate .web to Verisign.

The .web contention set is currently “on-hold” because Afilias, the second-place bidder in the auction, has since June been in a so-called Cooperative Engagement Process with ICANN.

CEP is a semi-formal negotiation-phase precursor to a full-blown IRP filing, which now seems much more likely to go ahead following the court’s ruling.

The appeals court ruling has not yet been published by ICANN, but it can be viewed here (pdf).

The court heard arguments from Donuts and ICANN lawyers on October 9, the same day that DI revealed that ICANN Global Domains Division president Akram Atallah had been hired by Donuts as its new CEO.

A recording of the 32-minute hearing can be viewed on YouTube here or embedded below.

Google abandons its .kid gTLD bid

Kevin Murphy, October 10, 2018, Domain Registries

Google has retreated from the interminable three-way battle for the .kids/.kid gTLDs.

The company this week withdrew its application for .kid, leaving the fight for .kids a two-horse race between Amazon and the not-for-profit DotKids Foundation.

Google’s application was intertwined with the two .kids applications due to a String Confusion Objection, which it won, drawing its bid into contention with DotKids and Amazon.

The contention set was, and arguably still is, due to be settled by an ICANN last-resort auction, but has been repeatedly postponed due to appeals to ICANN by DotKids, which doesn’t think it has the financial clout to beat its rivals.

Most recently, the auction was put on ice again after DotKids asked for ICANN money, then filed a Request for Reconsideration when ICANN refused.

Google’s .kid application had proposed an area for “kid-friendly content”. Registrants would have been vetted in advance of their domains going live to ensure they were established providers of such content.

ICANN number two Atallah is new CEO of Donuts

Kevin Murphy, October 9, 2018, Domain Registries

Akram Atallah, head of ICANN’s Global Domains Division, has quit and joined Donuts as its new CEO, DI has learned.

According to multiple sources, Atallah’s last day at ICANN was yesterday.

While neither company has announced the move yet, I gather that ICANN staff were informed by CEO Goran Marby today.

The news comes just a month after private equity firm Abry Partners, which counts former ICANN CEO Fadi Chehade among its partners, acquired Donuts for an undisclosed sum.

While the revolving door between industry and ICANN is pretty much continuous, Atallah is probably the highest-profile example since Kurt Pritz in 2012 and Peter Dengate Thrush in 2011.

As head of ICANN GDD, he was responsible for all things gTLD. Before the creation of the role, he was COO.

He was also interim president and CEO of the organization on two occasions, keeping the seat warm prior to the arrival of Chehade and Marby,

Atallah and Chehade also worked together in their pre-ICANN days in the software industry.

Donuts is of course the largest new gTLD registry in terms of TLDs, with 241 in its stable.

I’ve no word yet on where Bruce Jaffe, Donuts’ current CEO, is going, but I’ll update this post when I do.

Jaffe joined Donuts as chief a little over a year ago, replacing founder Paul Stahura.

Presumably, Jaffe was the turnaround guy and with Donuts’ acquisition secured the new owners figured it was time to hire an ops guy.

UPDATE 2022 UTC: Donuts just issued a press release in which it said that Jaffe will remain a senior adviser during the transition. It also said that Atallah starts in his new job November 12.

UPDATE October 10: ICANN said in a statement overnight that VP of DNS industry engagement Cyrus Namazi will head GDD on an interim basis, with support from CTO David Conrad.