Latest news of the domain name industry

Recent Posts

Verisign likely $135 million winner of .web gTLD

Kevin Murphy, August 1, 2016, Domain Registries

Verisign has emerged as the likely winner of the .web gTLD auction, which closed on Thursday with a staggering $135 million winning bid.

The shell company Nu Dot Co LLC was the prevailing applicant in the auction, which ran for 23 rounds over two days.

Just hours after the auction closed, Domain Name Wire scooped that Verisign had quietly informed investors that it has committed to pay $130 million for undisclosed “contractual rights”.

In its Securities and Exchange Commission quarterly report, filed after the markets closed on Thursday, Verisign said:

Subsequent to June 30, 2016, the Company incurred a commitment to pay approximately $130.0 million for the future assignment of contractual rights, which are subject to third-party consent. The payment is expected to occur during the third quarter of 2016.

There seems to be little doubt that the payment is to be made to NDC (or one of its shell company parents) in exchange for control of the .web Registry Agreement.

The “third-party consent” is likely a reference to ICANN, which must approve RA reassignments.

We speculated on July 14 that Verisign would turn out to be NDC’s secret sugar daddy, which seems to have been correct.

Rival .web applicant Donuts had sued ICANN for an emergency temporary restraining order, claiming it had not done enough to uncover the identity of NDC’s true backers, but was rebuffed on multiple grounds by a California judge.

Donuts, and other applicants, had wanted the contention set settled privately, but NDC was the only hold-out.

Had it been settled with a private auction, and the $135 million price tag had been reached, each of the seven losing applicants would have walked away with somewhere in the region of $18.5 million in their pockets.

This draws the battle lines for some potentially interesting legal fallout.

It remains to be seen if Donuts will drop its suit against ICANN or instead add Verisign in as a defendant with new allegations.

There’s also the possibility of action from Neustar, which is currently NDC’s named back-end provider.

Assuming Verisign plans to switch .web to its own back-end, Neustar may be able to make similar claims to those leveled by Verisign against XYZ.com.

Overall, Verisign controlling .web is sad news for the new gTLD industry, in my view.

.web has been seen, over the years, as the string that is both most sufficiently generic, sufficiently catchy, sufficiently short and of sufficient semantic value to provide a real challenge to .com.

I’ve cooled on .web since I launched DI six years ago. Knowing what we now know about how many new gTLD domains actually sell, and how they have to be priced to achieve volume, I was unable to see how even a valuation of $50 million was anything other than a long-term (five years or more) ROI play.

Evidently, most of the applicants agreed. According to ICANN’s log of the auction (pdf) only two applicants — NDC and another (Google?) — submitted bids in excess of $57.5 million.

But for Verisign, .web would have been a risk in somebody else’s hands.

I don’t think the company cares about making .web a profitable TLD, it instead is chiefly concerned with being able to control the impact it has on .com’s mind-share monopoly.

Verisign makes about a billion dollars a year in revenue, with analyst-baffling operating margins around 60%, and that’s largely because it runs .com.

In 2015, its cash flow was $651 million.

So Verisign has dropped a couple of months’ cash to secure .web — chickenfeed if the real goal is .com’s continued hegemony.

In the hands of a rival new gTLD company’s marketing machine, in six months we might have been seeing (naive) headlines along the lines of “Forget .com, .web is here!”.

That won’t happen now.

I’m not privy to Verisign’s plans for .web, but its track record supporting the other TLDs it owns is not fantastic.

Did you know, or do you remember, that Verisign runs .name? I sometimes forget that too. It bought it from Global Name Registry in late 2008, at the high point of its domains under management in this chart.

.name

I don’t think I expect Verisign to completely bury .web, but I don’t think we’re going to see it aggressively promoted either.

It will never be positioned as a competitor to .com.

If .web never makes $135 million, that would be fine. Just as long as it doesn’t challenge the perception that you need a .com to be successful, Verisign’s purchase was worth the money.

Verisign announces .net price increase

Verisign has just announced that prices for .net domains are going up again this coming February.

Announcing its second-quarter earnings, the company revealed plans to raise its registry fee from $7.46 to $8.20, effective February 1, 2017.

That’s the maximum 10% price hike it’s allowed to claim under its .net Registry Agreement with ICANN.

Raising .net prices has become a bit of an annual tradition with Verisign, one of the few gTLD registries to still have its prices regulated by ICANN.

The company had about 16.2 million .net domains under management at the last formal, published count in March. Its daily “domain base” has .net at 15.7 million names today.

M+M billings quadruple on China .vip surge

Minds + Machines this morning said that its billings increased to $8.05 million in the first half of 2016.

That’s a 300% increase on the comparable year-ago period, the company said in a preliminary statement to the markets.

It added that its domains under management grew from 217,200 at the end of June 2015 to 728,940 a year later.

While the statement did not elaborate on the reasons behind the growth, the recently launched .vip gTLD seems to be the main factor.

It went to general availability a little over two months ago and quickly topped 400,000 registrations.

Just a few weeks before the end of the reporting period, M+M said its billings and orders for .vip alone had already hit $5.5 million.

That’s due to interest from Chinese domain investors, who were courted by M+M during a conference in Beijing.

M+M will report its full interims on September 20.

“Ditch .com!” government to tell Indians

The Indian government is to urge citizens to register .in domain names instead of .com, according to local reports.

The Economic Times reports today that the Ministry of Economy and IT is to launch a “massive advertising campaign aimed at companies, individuals and startups” promoting .in.

Rajiv Bansal, MEIT joint secretary, is reported as saying the campaign will play up to nationalist sentiments

The government wants to grow .in from about 2.1 million domains to 3 million domains by March next year, it said.

Prices could come down to the $2 to $3 range, the paper said.

The campaign is due to start in a month or so, it was reported.

Donuts denied! .web auction to go ahead today

A California judge had denied Donuts’ eleventh-hour attempt to delay today’s .web gTLD auction.

In a ruling late yesterday, Judge Percy Anderson rejected the company’s request for an emergency temporary restraining order preventing ICANN from selling off the premium gTLD.

This means the auction is pretty much certain to go ahead starting at 1300 UTC — that’s 6am local time for ICANN — today.

Donuts had sought the TRO because it claims ICANN failed in its duty to investigate whether rival bidder Nu Dot Co is now backed by a new big-money controlling party.

Its ultimate goal appears to have been to somehow force .web to private settlement, where all the unsuccessful applicants could get a multi-million dollar pay-off.

Anderson dismissed the request for a multitude of largely technical legal reasons surrounding the timing of Donuts’ request.

He said that, had ICANN not already filed its opposition to the TRO, he would have ruled against Donuts simply for failure to formally serve ICANN in a timely fashion.

But on the merits, he ruled that there was not a strong likelihood of Donuts winning a full trial, due to the statements of two NDC executives, who swore on oath there had been no change to the company’s ownership or management.

Anderson wrote (pdf):

Based on the strength of ICANN’s evidence submitted in opposition to the Application for TRO, and the weakness of Plaintiff’s efforts to enforce vague terms contained in the ICANN bylaws and Applicant Guidebook, the Court concludes that Plaintiff has failed to establish that it is likely to succeed on the merits, raise serious issues, or show that the balance of hardships tips sharply in its favor on its breach of contract, breach of the implied covenant of good faith and fair dealing, and negligence claims. Moreover, because the results of the auction could be unwound, Plaintiff has not met its burden to establish that it will suffer irreparable harm in the absence of the preliminary injunctive relief it seeks. The Court additionally concludes that the public interest does not favor the postponement of the auction.

He did give Donuts leave to amend its request, but given that the auction is due to start today before California office/court hours, that courtesy seems moot.

It’s likely that by the end of the day we will know how much the .web, and possibly .webs, domains fetched. We’re certainly looking at eight figures for .web, in my view.

Some have guessed prices in the ballpark of $50 million, based on the $41.5 million paid for .shop earlier this year.

It seems at least seven of the eight applicants in the auction will be bidding blind, strategically speaking.

Circumstantial evidence suggests that NDC does indeed have one or more secret sugar daddies supporting its bid, insulated from public view by NDC’s corporate structure.

The applicants for .web are NDC, Radix, Donuts, Schlund, Afilias, Google and Web.com. Vistaprint’s bid for .webs is also in the auction.

ICANN currently has over $100 million in a bank account, segregated from its operating funds, from previous last-resort auctions.