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Could ICANN reject Verisign’s $135m .web bid?

Kevin Murphy, September 21, 2016, Domain Registries

ICANN is looking into demands for it to throw out Verisign’s covert $135 million winning bid for the highly prized .web gTLD.

ICANN last week told the judge hearing Donuts’ .web-related lawsuit that it is “currently in the process of investigating certain of the issues raised” by Donuts through its “internal accountability mechanisms”.

Donuts is suing for $22.5 million, claiming ICANN should have forced Nu Dot Co to disclose that its .web bid was being secretly bankrolled by Verisign and alleging that the .com heavyweight used NDC as cover to avoid regulatory scrutiny.

ICANN’s latest filing (pdf), made jointly with Donuts, asked for an extension to October 26 of ICANN’s deadline to file a response to Donuts’ complaint.

It was granted, the second time the deadline has been extended, but the judge warned it was also the final time.

The referenced “internal accountability mechanism” would seem to mean the Cooperative Engagement Process — a low-formality bilateral negotiation — that Donuts and fellow .web bidder Radix initiated against ICANN August 2.

The filing states that the “resolution of certain issues in controversy may be aided by allowing [ICANN] to complete its investigation of [Donuts’] allegations prior to the filing of its responsive pleading.”

In other words, Donuts is either hopeful that ICANN may be able to resolve some of its complaints in the next month, or it’s not particularly impatient about the case progressing.

Meanwhile, fellow .web applicant Afilias has demanded for the second time that ICANN hand over .web to it, as the second-highest bidder, throwing out the NDC/Verisign application.

In a September 9 letter, published last night, Afilias told ICANN to “disqualify and reject” NDC’s application, alleging at least three breaches of ICANN rules.

Afilias says that by refusing to disclose Verisign’s support for its bid, NDC broke the rules and should have its application thrown out.

The company also confirmed on the public record for what I believe is the first time that it was the second-highest bidder in the July 27 auction.

Afilias would pay somewhere between $57.5 million and $71.9 million for the gTLD, depending on what the high bid of the third-placed applicant was.

In its new letter, Afilias says NDC broke the rule from the Applicant Guidebook that does not allow applicants to “resell, assign or transfer any of applicant’s rights or obligations in connection with the application”.

It also says that NDC was obliged by the AGB to notify ICANN of “changes in financial position and changes in ownership or control”, which it did not.

It finally says that Verisign used NDC as a front during the auction, in violation of auction rules.

“In these circumstances, we submit that ICANN should disqualify NDC’s bid and offer to accept the application of Afilias, which placed the second highest exit bid,” Afilias general counsel Scott Hemphill wrote (pdf).

Hemphill told ICANN to defer from signing a Registry Agreement with NDC or Verisign, strongly implying that Afilias intends to invoke ICANN accountability mechanisms (presumably meaning the Request for Reconsideration process and/or Independent Review Process).

While Afilias and Donuts are both taking issue with the secretive nature of Verisign’s acquisition of .web, they’re not necessarily fighting the same corner.

Donuts is looking for $22.5 million because that’s roughly what it would have received if the .web contention set had been resolved via private auction and $135 million had been the winning bid.

But Afilias wants the ICANN auction outcome to stand, albeit with NDC’s top bid rejected. That would mean Donuts, Radix, and the other applicants would still receive nothing.

There’s also the question of other new gTLD applications that have prevailed at auction and been immediately transferred to third-party non-applicants.

The most notable example of this was .blog, which was won by shell company Primer Nivel with secretive backing from WordPress maker Automattic.

Donuts itself regularly wins gTLD auctions and immediately transfers its contracts to Rightside under a pre-existing agreement.

In both of those cases, the reassignment deals predated, but were not disclosed in, the respective applications.

There’s the recipe here for a messy, protracted bun fight over .web, which should come as no surprise to anyone.

Chinese investor pumps $7 million into M+M as .vip pushes firm into profit

Kevin Murphy, September 20, 2016, Domain Registries

Minds + Machines made a profit, kinda, in the first half of the year, due to the popularity of .vip in China.

The company today announced a loss of $1.9 million for the six months to June 30, compared to a $1.6 million loss in the comparable 2015 period, on revenue that was up 115% at $7.4 million.

But factoring out discontinued operations — M+M started to close its registrar and registry back-end businesses during the half — it actually managed to sneak a profit of $56,000.

Its revenue was also unaffected by one-time gains from gTLD auction losses, something which had pumped up its top line regularly for the last few years.

Chairman Guy Elliot said in a statement to the markets that M+M “has successfully been navigated out of troubled waters”.

The turnaround is due in no small part to the success of .vip, which racked up over 400,000 registrations in its first month (back in May), the large majority of which were sold to Chinese investors.

The company said that $5.5 million of the $8 million in H1 billings were made in the first 21 days of .vip’s availability.

Having started 2016 with no sales in Asia whatsoever, it expects 45% of its revenue to come from China by the end of the year.

As a direct consequence of .vip’s sales, M+M has received a £5.5 million ($7.2 million) investment from Goldstream Capital Master Fund I, a Cayman Islands shell company owned by Chinese private equity firm Hony Capital.

Hony, which manages $10 billion in assets, is perhaps best known for owning the pizza restaurant chain Pizza Express, which it acquired for $1.54 billion in 2014.

According to its web site, Hony’s own investors include three large Chinese state-owned investment vehicles.

The investment deal includes clauses preventing Hony from trying to get a director on M+M’s board and/or launching a hostile takeover bid.

It will own 7.17% of M+M after buying 50 million shares at £0.13 each, assuming M+M’s simultaneously announced £13 million ($17 million) share buyback is fully subscribed.

M+M opened a subsidiary in China (a Wholly-Owned Foreign Enterprise) during the half, in order to better serve the Chinese market and comply with Chinese government regulations.

It simultaneously laid off 44% of its staff in the US — engineers no longer needed due to the shift into an almost entirely marketing-focused business — and expects to end the year with only 13 employees there.

Uniregistry to release 10 million domains on October 4

Kevin Murphy, September 20, 2016, Domain Registries

Uniregistry plans to release millions of registry-reserved domain names, many at standard registration fee, two weeks from now.

The company, which has about 25 new gTLDs in its stable, will release 10 million currently reserved names on October 4, CEO Frank Schilling told DI.

The revelation follows news that the company has started allowing thousands of registry-owned domains to expire and return to the available pool.

About 200,000 domains originally registered to North Sound Names, a separate Schilling-controlled company, are being made available via regular channels.

Those domains were registered (rather than reserved) so that Uniregistry could throw up landing pages inviting potential buyers to make offers. After they drop, they will no longer resolve.

But Schilling said a further 9.8 million names will also hit the market next month.

“It’s just a much better time because we have greater distribution and we are less likely to see all our names taken at land rush by one or two commercial registrants,” he said.

“We are unblocking and deleting 10 million domain names and making them available for registration through more than 200 registrars,” he said.

“Almost all will be standard reg [fee],” he said, when asked about pricing. Others will carry premium fees.

A web site publishing lists of newly released names will go live in about a week, he said.

DNW has previously reported that Uniregistry plans to release names that were initially blocked due to ICANN’s name collisions mitigation plan.

Those lists (which are usually mostly junk) are already published by ICANN and can be found accompanying the Registry Agreement for the relevant TLD linked from this page. Here’s the 35,000-name .link collisions list (.csv) for example.

.blog gets 600 applications halfway through sunrise

Kevin Murphy, September 19, 2016, Domain Registries

WordPress developer Automattic has received over 600 applications for .blog sunrise registrations halfway through its sunrise period.

The company’s registry subsidiary, Knock Knock Whois There, said Friday that it has passed the 600 mark with about another 30 days remaining on the clock.

While it’s a poor performance by pre-2012 standards, if all the applications to date convert into registrations it’s still enough to put .blog into the top 10 most-popular sunrises of the current round.

According to DI’s data, the top three sunrise performers from the 2012 application round are .porn (2,091), .sucks (2,079) and .adult (2,049).

The most recent successful sunrise, by these standards, was GMO Registry’s .shop, which finished with 1,182 applications.

.blog’s sunrise ends October 17. It seems to be expecting to benefit from a late flood of applications, as is sometimes the case with sunrise periods.

General availability begins November 21.

Verisign data shows new gTLDs drive almost three quarters of Q2 growth

Kevin Murphy, September 19, 2016, Domain Registries

New gTLDs were responsible for the large majority of domain name industry volume growth in the second quarter, but you’d never know it reading Verisign’s latest Domain Name Industry Brief.

The domain universe increased to 334.6 million names at the end of June, according to the latest DNIB, which was published (pdf) last week.

That’s a 8.2 million increase on the 326.4 million it reported in its Q1 DNIB report (pdf).

Verisign reports the increase as 7.9 million, possibly due to new data that emerged after the Q1 report was published.

Whether it was 7.9 million or 8.2 million, most of the growth was due to new gTLDs.

In the DNIB, data on new gTLDs is always presented on page three of the three-page report in such a way to make apples-to-apples comparisons with .com and ccTLDs not straightforward.

While the reports highlight the growth of ccTLDs and Verisign’s own .com and .net registries in absolute and percentage terms, they do not do so for new gTLDs.

(They’ve also been calling ccTLDs “geographic gTLDs” for years and nobody seems to have noticed.)

But comparing Q1 and Q2 DNIB reports shows that new gTLDs contributed 5.9 million of the 8.2/7.9 million quarterly increase, in other words just shy of 72% of the industry’s total volume growth.

That’s the biggest contribution new gTLDs have made to growth in any quarter to date.

The growth can be attributed to .xyz’s penny deals in June, which saw domainers acquire millions of names for essentially nothing.

Meanwhile, .com and .net combined contributed just 700,000 domains to growth and .net actually shrunk by 100,000 names, its first dip since Q1 2015.

The ccTLD market data presented in the DNIBs is probably not entirely reliable. Verisign is still using the December 2014 number for free ccTLD .tk, which I think is about six million names lower than its current level.