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Neustar set to lose contract that provides HALF its revenue

Neustar has been devastated by the news that it is likely to lose a US government contract that provides almost half of its annual revenue.

The US Federal Communications Commission yesterday recommended that Telcordia Technologies take over the Local Number Portability Administrator contract, which Neustar has held since 1997.

The service is basically North America’s centralized phone number registry. It’s not directly related to its domain name businesses.

In 2014, the deal was worth $474.8 million to Neustar, or 49% of its annual revenue.

On the news, the company’s share price fell off a cliff, losing almost 20% of its value before recovering slightly to end the day almost 12% down.

Neustar expressed dismay and anger in a press release, saying the FCC was putting the security of the US phone system at risk:

Although apparently the LNPA is used to port numbers, it is also critical for technology migrations, mergers and acquisitions, disaster recovery, accurate 911 location, and is the only authoritative database for the proper call completion of 11 billion voice calls and text messages each day. The recommendation misunderstands the operating system and would harm public safety, law enforcement, fundamentally burden small carriers, and disrupt service for 12 million consumers — all in pursuit of theoretical savings for a few carriers, which Neustar believes will be dwarfed by the costs and risks of transition.

Switching to Telcordia is currently only a recommendation that FCC commissioners must approve, and Neustar said it will “review all of its options”.

The LNPA deal is due to expire June 30 this year.

Neustar’s domain business — or “security services” as the company calls it — comprises DNS resolution, the registries for .us, .biz and .co, and the back-end registry for many new gTLDs. It brought in revenue of $140.3 million in 2014.

According to Reuters, Neustar is currently talking to advisers about the potential sale of the company, which is currently listed on the New York Stock Exchange, to private equity.

The potential buyers are reportedly waiting for the award of the number portability contract before sealing the deal.

Tucows and Namecheap exit $14m .online deal

Tucows and Namecheap have both pulled out of their joint venture with Radix to run the .online registry.

Tucows revealed the move, which will see Radix run .online solo, in a press release yesterday.

Both Tucows and Namecheap are registrars, whereas Radix is pretty much focused on being a registry nowadays.

While financial terms have not been disclosed, Tucows CEO Elliot Noss had previously said that each of the three companies had funded the new venture to the tune of $4 million to $5 million.

I estimate that this puts the total investment in the deal — which includes the price of winning .online at auction — at $13 million to $14 million.

Noss has also hinted that the gTLD sold for much more than the $6.8 million paid for .tech.

.online has not yet been delegated.

Google buys .app for over $25 million

Kevin Murphy, February 26, 2015, Domain Registries

The fiercely competed new gTLD .app has sold to Google for a record-breaking $25 million.

The company’s Charleston Road Registry subsidiary beat out 12 other applicants for the string, including Donuts, Amazon, Famous Four Media, Radix and Afilias.

The auction lasted two days and fetched a winning bid of $25,001,000, more than any other new gTLD to date.

The previous high is believed to be .blog, which I estimate sold for less than $20 million.

Because it was an ICANN-run “last resort” auction, all of the money goes into ICANN’s special auction proceeds fund, which previously stood at just shy of $35 million.

Previous ICANN auctions have fetched prices between $600,000 and $6,760,000.

Google originally proposed .app as a closed registry in which only Google and its partners could register names.

However, after the Governmental Advisory Committee pressured ICANN to disallow “closed generics”, Google changed its application to enable anyone to register.

Verisign sues .xyz and Negari for “false advertising”

Kevin Murphy, February 24, 2015, Domain Registries

Handbags at dawn!

Verisign, the $7.5 billion .com domain gorilla, has sued upstart XYZ.com and CEO Daniel Negari for disparaging .com and allegedly misrepresenting how well .xyz is doing.

It’s the biggest legacy gTLD versus the biggest (allegedly) new gTLD.

The lawsuit focuses on some registrars’ habit of giving .xyz names to registrants of .com and other domains without their consent, enabling XYZ.com and Negari to use inflated numbers as a marketing tool.

The Lanham Act false advertising lawsuit was filed in Virginia last December, but I don’t believe it’s been reported before now.

Verisign’s beef is first with this video, which is published on the front page of xyz.com:

Verisign said that the claim that it’s “impossible” to find a .com domain (which isn’t quite what the ad says) is false.

The complaint goes on to say that interviews Negari did with NPR and VentureBeat last year have been twisted to characterize .xyz as “the next .com”, whereas neither outlet made such an endorsement. It states:

XYZ’s promotional statements, when viewed together and in context, reflect a strategy to create a deceptive message to the public that companies and individuals cannot get the .COM domain names they want from Verisign, and that XYZ is quickly becoming the preferred alternative.

As regular readers will be aware, .xyz’s zone file, which had almost 785,000 names in it yesterday, has been massively inflated by a campaign last year by Network Solutions to push free .xyz domains into customers’ accounts without their consent.

It turns out Verisign became the unwilling recipient of gtld-servers.xyz, due to it owning the equivalent .com.

According to Verisign, Negari has used these inflated numbers to falsely make it look like .xyz is a viable and thriving alternative to .com. The company claims:

Verisign is being injured as a result of XYZ and Negari’s false and/or misleading statements of fact including because XYZ and Negari’s statements undermine the equity and good will Verisign has developed in the .COM registry.

XYZ and Negari should be ordered to disgorge their profits and other ill-gotten gains received as a result of this deception on the consuming public.

The complaint makes reference to typosquatting lawsuits Negari’s old company, Cyber2Media, settled with Facebook and Goodwill Industries a few years ago, presumably just in order to frame Negari as a bad guy.

Verisign wants not only for XYZ to pay up, but also for the court to force the company to disclose its robo-registration numbers whenever it makes a claim about how successful .xyz is.

XYZ denies everything. Answering Verisign’s complaint in January, it also makes nine affirmative defenses citing among other things its first amendment rights and Verisign’s “unclean hands”.

While many of Verisign’s allegations appear to be factually true, I of course cannot comment on whether its legal case holds water.

But I do think the lawsuit makes the company looks rather petty — a former monopolist running to the courts on trivial grounds as soon as it sees a little competition.

I also wonder how the company is going to demonstrate harm, given that by its own admission .com continues to sell millions of new domains every quarter.

But the lesson here is for all new gTLD registries — if you’re going to compare yourselves to .com, you might want to get your facts straight first if you want to keep your legal fees down.

And perhaps that’s the point.

Read the complaint here and the answer here, both in PDF format.

.xxx boss says new gTLD registries need to “wake up”

Kevin Murphy, February 23, 2015, Domain Registries

ICM Registry president Stuart Lawley may be just weeks away from launching his second and third gTLD registries, but that doesn’t mean he has a positive outlook on new gTLDs in general.

“I think people need to wake up,” he told DI in a recent interview. “If you do the math on some of these numbers and prospective numbers, it just doesn’t stack up for a profitable business.”

“The new ‘Well Done!’ number seems to be a lot less than it was six months ago or 12 months ago,” he said.

Lawley said he’s among the most “bearish” in the industry when it comes to new gTLD prospects. And that goes for ICM’s own .porn, .sex and .adult, which are due to launch between March and September this year.

While he’s sure they’ll be profitable, and very bullish on the search engine optimization benefits that he says registrants could be able to achieve, he’s cautious about what kind of registration volumes can be expected. He said:

If you add up everybody that has ever bought a .xxx name, including the Sunrise B defensives, we have got a target market of about 250,000 names. People to go back to and say, “Look, you still have a .xxx or you had a .xxx at some stage. Therefore, we think you may be interested in buying .porn, .sex or .adult for exactly the same reasons.”

So, our expectations to sell to a whole new market outside of those quarter of a million names is probably quite limited.

Lawley said that he believes that the relatively poor volume performance of most new gTLDs over the last year will cause many registrars to question whether it’s worth their time and money to offer them.

I can see why registrars can’t be bothered. How many of these am I going to sell? Am I going to sell two hundred of them? Am I going to make five dollars per name? That’s one thousand dollars. It’s not worth it to me to put in ten thousand dollars worth of labor and effort to make one thousand dollars in revenue. So, I think that’s a challenge that many of the small lone player TLDs may face.

Lawley said he’s skeptical about the ability of major portfolio players, such as Donuts, to effectively market their hundreds of gTLDs, many of which are targeted at niche vertical markets.

He said in an ideal world a gTLD would need to spend $20 million to $30 million a year for a few years in order to do a proper PR job on a single TLD — ICM spent about $8 million to $9 million, $5.5 million of which was on US TV spots — and that’s just not economically viable given how many names are being sold.

But he added that he thinks it’s a good thing that some new gTLDs are seeing a steady and fairly linear number of daily additions, saying it might point to better long-term stability.

A lot of the TLDs that seem to be doing okay — .club for argument’s sake and several others in that ilk — seem to be doing their three hundred domains per day ADD, or 32 or 12 or whatever the number is, in a relatively linear fashion six or seven months after launch, which I think is potentially positive if one extrapolates that out.

The full interview, which also addresses SEO, dot-brands, registrar pay-for-placement and smart search, can be read by DI PRO subscribers here.