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China could block GoDaddy’s $120 million MMX swoop

GoDaddy’s proposed $120 million acquisition of essentially all the meaningful assets of portfolio gTLD player MMX will be subject to Chinese government approval, it emerged this morning.

Following GoDaddy’s bare-bones press release announcing the deal last night, this morning MMX added a whole bunch of flesh, including a list of closing conditions, in its statement to shareholders.

GoDaddy is proposing to buy essentially MMX’s entire operating business — the 28 gTLD registry agreements with ICANN, including the four porn-related strings belonging to subsidiary ICM Registry.

Not only do MMX shareholders have to approve the deal — and holders of 64% of the shares have already promised they will — but ICANN approval will be required for the registry contracts to be reassigned.

This may prove a hurdle or delay if third parties raise competition concerns, but ICANN’s pretty opaque approval process generally doesn’t frown too much on industry consolidation.

Another known unknown is China.

MMX told shareholders that it needs: “Approval of Chinese authorities for the change of control of MMX China (including change of control in respect of relevant licenses held by MMX China permitting it to distribute TLDs in China).”

The reason for this is quite straightforward: in volume terms, quite a lot of MMX’s business has been in China in recent years. Popular sellers such as .vip, with over 800,000 names today, have been driven primarily by Chinese investors.

A local presence (in this case MMX China) and approval from the Ministry of Industry and Information Technology is required to legally sell a TLD to Chinese registrants via Chinese registrars.

I’ve no particular reason to believe MIIT will withhold its approval for MMX China to move into GoDaddy’s ownership, but a failure to get the nod from China appears to be a deal-breaker.

MMX’s statement to the markets this morning also provided some clarity on what exactly it is that GoDaddy is proposing to buy.

The gTLDs to be acquired are: .vip,.nrw, .casa, .vodka, .xxx, .fit, .miami, .fishing, .porn, .beer, .surf, .boston, .adult, .yoga, .garden, .abogado, .work, .fashion, .horse, .rodeo, .sex, .wedding, .luxe, .dds, .law, .bayern, .cooking, and .country.

It seems that when Tony Farrow took over as MMX CEO last year, after his predecessor left due to an accounting snafu, he had the portfolio audited and came to the conclusion that it could expect only pretty crappy growth over the coming years.

It had banked on selling expensive defensive trademark blocks in its four porn-themed gTLDs to big brands to make up the shortfall, but then GoDaddy approached in December brandishing its rather large checkbook.

MMX reckons the deal values the company at a 92% premium over its closing share price Tuesday, and 87% and 78% premiums over its 20-day and 90-day average selling price.

.bayern, .nrw and the four porn gTLDs belong to subsidiaries that GoDaddy will acquire outright, but GoDaddy is not proposing to buy MMX itself.

Rather, MMX will likely stay alive and publicly traded long enough to redistribute its cash windfall to investors and sell or wind down about a dozen non-operating subsidiaries.

It has a transition services agreement to manage certain business functions of the registry until January next year, which sounds a bit like what fellow GoDaddy acquisition .CLUB Domains explained to me last night.

After that, London’s Alternative Investment Market rules will treat MMX as a “cash shell”, and it will either have to acquire an operating business from somewhere or make itself the subject of a reverse takeover by a company looking for a quick way to the public markets.

.CLUB CEO on selling to GoDaddy, Clubhouse, and .club’s “twerking moment”

.CLUB Domains CEO Colin Campbell says he’s planning to continue to promote the .club gTLD long after its acquisition by GoDaddy Registry, announced earlier today, closes.

The deal was one of several announced last night by GoDaddy, the highlight being the $120 million purchase of MMX’s portfolio of 28 gTLD contracts.

While the price of the .club deal was not disclosed, Campbell confirmed that it’s a contract reassignment rather than a purchase of the company. He’s not expecting any ICANN regulatory friction, pointing out that .club is relatively small fry in the grand scheme of things.

But .club is arguably one of the success stories of the new gTLD program.

It currently stands at over a million domains under management, recently boosted by the launch of the third-party audio conferencing app Clubhouse, which has driven demand.

“I think Clubhouse was the twerking moment for .club,” Campbell said. “It’s the moment everyone realized — holy shit this is the best domain on the market to start a community, to start a club.”

“Our volume of premium domains went up 700% in January,” he said. “We exploded.”

I understand a “twerking moment” to be a nodal point in a business’s performance so sensational that one feels obliged to stand up at one’s desk and “twerk“. I’d rather not think about it too much, to be honest.

Campbell said the volume decline .club was experiencing prior to Clubhouse launching — its zone file shrank by 200,000 names in 2020 — is misleading as a metric of measuring growth.

“We’ve always been growing,” he said. “What we’ve been doing the last few years is raising prices for the first year, so our quality of registrations is higher now than it’s ever been. Volume’s a joke… what we’re talking about is real registrations, real users. It’s all about usage.”

He was ambivalent on whether the GoDaddy deal would have happened without the Clubhouse boost.

“.club was growing very fast with real usage,” he said. “Clubhouse had nothing to do with this — in my opinion — but who knows, you’d have to ask GoDaddy.”

It seems .CLUB Domains the company will wind up eventually, but Campbell said it will continue to promote the TLD even after the deal closes in a few months.

“I will never stop supporting .club, this is part of my DNA,” Campbell said. Pressed, he said that the company will continue to operate until at least the end of the year.

But why sell his baby? Campbell said “.club was never for sale”, so it appears GoDaddy reached out to .CLUB first. But Campbell sees GoDaddy as a safe pair of hands.

“The people that run GoDaddy Registry are Nicolai [Bezsonoff], and Lori Anne [Wardi], who were the co-founders of .co and they’ve done a good job of promoting .co and I really believe that can promote .club in a similar way,” Campbell said.

GoDaddy buys 30 new gTLDs for over $120 million

GoDaddy Registry has just announced it is acquiring 28 new gTLDs from rival MMX, along with the TLDs .club and .design.

The MMX deal is worth at least $120 million; the value of the other two deals was not disclosed.

GoDaddy is also taking over the back-ends for .rugby and .basketball, which had been contracted to MMX, and said it has won the back-end deal for the dot-brand, .ally.

It’s the most significant pieces of registry consolidation since Donuts and Afilias hooked up in December.

GoDaddy Registry will wind up being the contract holder or back-end for over 240 TLDs, with over 14 million domains under management, the company said.

It’s not entirely clear which gTLDs GoDaddy is acquiring right now, but it appears to be all of those listed on the MMX web site.

It’s currently listed by IANA as the sponsor for 21 gTLDs: .cooking, .fishing, .horse, .miami, .rodeo, .vodka, .beer, .luxe, .surf, .nrw, .work, .budapest, .casa, .abogado, .wedding, .yoga, .fashion, .garden, .fit, .vip and .dds.

MMX subsidiary ICM Registry runs .xxx, .porn, .adult and .sex, not an easy fit with the family-friendly image GoDaddy has attempted to cultivate in recent years.

MMX also manages geographic gTLDs .boston, .london and .bayern on behalf of their respective local governments.

The company hinted in January that it was considering selling off some of its under-performing registries, after a crappy 2020 that saw it forced to restate revenues, lay off staff and can its top executives.

MMX, which is publicly traded in London, has yet to make a statement on the deal but we should no doubt expect something in the morning before the markets open.

The deal appears to be bad news for Nominet, which runs the back-end for most MMX gTLDs. GoDaddy will very likely migrate them over to its own platform eventually.

MMX aside, GoDaddy is also buying .club from .CLUB Domains, according to its press release.

.CLUB is a bit of a rarity — a single-string new gTLD registry that done really rather well for itself without tarnishing its brand by becoming synonymous with cheap domains and spam.

.design, the other GoDaddy acquisition today, is run by Top Level Design, which also runs .ink, .wiki and .gay.

.design has over 120,000 domains in its zone file today, while .club has over 1 million. Both have been on a growth trajectory recently.

GoDaddy also said as part of the same announcement that it has signed Ally Financial’s dot-brand business for .ally, but as Ally was already a client of Neustar (which GoDaddy owns) I’m not entirely sure what it’s getting excited about.

Nominet members wail as ousted director made CEO

Nominet has been accused of being “tone deaf” to its members’ criticisms after it appointed two staffers to its board of directors and named a recently ousted director as interim CEO.

The .uk registry told members last week that Eleanor Bradley will occupy the corner office “for approximately 6 months” while a permanent replacement for Russel Haworth is sought.

Haworth quit last month rather than face the wrath of members at an Extraordinary General Meeting that shortly thereafter voted to remove Bradley and three other directors from the board.

Bradley has been with the company for many years and was head of registry at Nominet, and seems like an obvious pick for an internal appointment, but members took to social media to express their displeasure.

The EGM was held after a campaign to round up the votes at PublicBenefit.uk, organized by Simon Blackler of Krystal Hosting. Members had hoped to install Sir Michael Lyons and Axel Pawlik on the board as chair and deputy chair.

But Nominet said that its bylaws would not allow directors to be selected this way, and there was no vote on that motion.

Instead, after the vote, relatively new director Rob Binns has taken the acting chair’s job and CIO Adam Leach and company secretary Rory Kelly joined the board from staff.

Binns informed the members of the appointments in a letter March 31 (pdf), which also said that Pawlik has been offered a consulting gig but had declined.

While eating a generous slice of humble pie, assuring members that the EGM was “an opportunity to reset and begin rebuilding the relationship between membership and Nominet”, the plan for the company he outlined was not a million miles away from the plan Nominet had put forward to address members’ concerns under its previous management.

Crucially, Nominet is still backing its non-core security business, which many members believe is an unnecessary diversification that diverted focus from the registry and profits from public benefit causes.

Binns said: “We believe those capabilities are integral to the public benefit we provide, so we want to develop a refreshed structure that protects that capability while addressing members’ desire for Nominet to focus more on its core activities.”

He also backed plans for a Registry Advisory Council, which would have seats for members, and said Nominet will bring back its web-based member discussion forum, which was closed down last year.

His letter contains no mention of reducing prices, one of the five big asks the PublicBenefit.uk campaign made.

Most of the social media reaction to Binns’ letter was negative. Notably, Richard Kirkendall, CEO of Namecheap, one of the largest registrars to publicly expressed its support for the campaign, tweeted:

Others had similar points of view, and some speculated that a second EGM may be required to set Nominet on the path the majority of its members appear to want.

XYZ adds .tickets to its gTLD stable

XYZ.com has taken over the ICANN registry agreement for the gTLD .tickets, according to records.

It looks to be the registry’s 23rd TLD, the latest of XYZ’s acquisitions of unused or floundering new gTLDs.

In the case of .tickets, it’s picking up a low-volume, high-price TLD with some rather onerous registration restrictions.

The TLD was originally set up by UK-based Accent Media to provide a space where people going to music, theater and sporting events, for examples, could buy tickets in the assurance that the sellers were legit.

Would-be .tickets registrants have a five-day waiting period before their domains go live, while the registry manually verifies their identities from paper records such as passports or driving licenses.

That high-friction reg process is one reason the shelf price for a .tickets domain is well over $500 a year.

It’s also a reason why very few .tickets domains have been sold. The registry peaked at fewer than 1,200 names in its zone file in 2018 and has been on the decline ever since.

It had 769 names in its zone at the end of March this year.

Registry reports show that the majority of its names are registered via brand-protection registrars and are likely unused. Searches for active .tickets sites return fewer than 100 results.

XYZ might be able to turn this around by smoothing out the reg friction and lowering the price.

But even just 1,000 names at $500 a year could be considered a nice little earner as part of a portfolio with low overheads from economies of scale. XYZ already runs even higher-priced, lower-volume zones such as .cars and .auto.

EFF rages as Ethos closes Donuts buy

The Electronic Frontier Foundation thinks the acquisition of Donuts by “secretive” private equity group Ethos Capital represents a risk to free speech.

The deal, which sees Ethos buy a controlling stake from fellow PE firm Abry Partners, closed earlier this week, having apparently received no official objection from ICANN.

But the EFF now wants ICANN to force Donuts to change its gTLD registry contracts to make it harder for the company to engage in what it calls “censorship-for-profit”.

The group’s senior staff attorney, Mitch Stoltz, raised the issued at the Public Forum session of last week’s ICANN 70 virtual public meeting, and expanded upon his thinking in a blog post this week. He wrote:

Donuts already has questionable practices when it comes to safeguarding its users’ speech rights. Its contracts with ICANN contain unusual provisions that give Donuts an unreviewable and effectively unlimited right to suspend domain names—causing websites and other internet services to disappear.

He pointed to Donuts’ trusted notifier program with the Motion Picture Association, which streamlines the takedown of domains used for pirating movies, as an example of a registry’s power to censor.

Donuts runs gTLDs including ones with social benefit meanings that the EFF is particularly concerned about, such as .charity, .community, .fund, .healthcare, .news, and .university.

Stoltz also makes reference to the Domain Protected Marks List, a Donuts service that enables trademark owners to block their marks, and variants, across its entire portfolio of 240+ gTLDs.

In effect, this lets trademark holders “own” words and prevent others from using them as domain names, even in top-level domains that have nothing to do with the products or services for which a trademark is used. It’s a legal entitlement that isn’t part of any country’s trademark law, and it was considered and rejected by ICANN’s multistakeholder policy-making community.

The DPML is not unique to Donuts. Competitors such as UNR and MMX have similar services on the market for their gTLDs.

When Stoltz raised the EFF’s concerns at last week’s ICANN meeting, CEO Göran Marby basically shrugged them off, saying he didn’t understand why one PE firm buying an asset off another PE firm was such a big deal.

I have to say I agree with him.

Ethos came under a lot of scrutiny last year when it tried to buy .org manager Public Interest Registry, turning it into a for-profit entity, generating cash for Ethos’ still-undisclosed backers.

(This week, Ethos disclosed in a press release that its investors include massive hedge funds The Baupost Group and Neuberger Berman “among others”, which appears to be the first time these names have been mentioned in connection with the company).

But a pretty good case could be made that .org is a unique case, that has had a non-profit motive baked into its DNA for decades. That does not apply to Donuts, which was a profit-making venture from the outset.

It’s not entirely clear why the EFF is suddenly concerned that Donuts will start exercise its contractual right-to-suspend more frequently under Ethos than under Abry. Stoltz wrote:

As we learned last year during the fight for .ORG, Ethos expects to deliver high returns to its investors while preserving its ability to change the rules for domain name registrants, potentially in harmful ways. Ethos refused meaningful dialogue with domain name users, instead proposing an illusion of public oversight and promoting it with a slick public relations campaign. And private equity investors have a sordid record of buying up vital institutions like hospitals, burdening them with debt, and leaving them financially shaky or even insolvent.

Even with the acquisition passing through ICANN easily, the EFF wants Donuts to change its contracts to make it more difficult for the company to suspend domain names on a whim.

I believe the language causing the controversy comes from anti-abuse policies in the Public Interest Commitments found in almost all Donuts’ contracts with ICANN, which state in part:

Registry Operator reserves the right, at its sole discretion and at any time and without limitation, to deny, suspend, cancel, or transfer any registration or transaction, or place any domain name(s) on registry lock, hold, or similar status as it determines necessary for any of the following reasons:

a. to protect the integrity and stability of the registry;

b. to comply with any applicable laws, government rules or requirements, requests of law enforcement, or any dispute resolution process;

c. to comply with the terms of this Registry Agreement and the Registry Operator’s Anti-Abuse Policy;

d. registrant fails to keep Whois information accurate and up-to-date;

d. domain name use violates the Registry Operator’s acceptable use policies, or a third party’s rights or acceptable use policies, including but not limited to the infringement of any copyright or trademark; or

e. as needed during resolution of a dispute.

As a voluntary PIC, this language is unique to Donuts, though other registries have similar provisions in their registry agreements.

ShortDot bought another gTLD. Guess what .sbs stands for now?

Kevin Murphy, March 29, 2021, Domain Registries

Growing new gTLD portfolio registry ShortDot has acquired another unwanted dot-brand, .sbs, which it intends to repurpose as an open, generic TLD.

.sbs was originally owned by SBS, for Special Broadcasting Service, an Australian public-service broadcaster. But the company never used it.

Now, while launch plans are still in development, ShortDot intends to relaunch .sbs to mean something entirely different, much as it recently did with .cfd.

“.sbs will be branded as shorthand for ‘Side by Side’, perfect for social causes, charitable organizations and other philanthropic initiatives,” ShortDot COO Kevin Kopas told us.

That does not appear to be a meaning of the acronym in common usage.

ShortDot is currently two weeks away from general availability for its next most-recent acquisition, .cfd, which originally stood for the financial term “contracts for difference” but is now being marketed as “clothing and fashion design”.

The company, best known for high-volume .icu, which has sold and lost over five million registrations over the last two years, now has five gTLDs in its stable, including unused dot-brand .bond and .cyou.

.sucks mystery deepens. Who the hell is Pat Honeysalt?

Kevin Murphy, March 24, 2021, Domain Registries

Another two .sucks domain names registered by the gTLD’s most prolific registrant have been found to be cases of cybersquatting, but now the squatter’s true identity is becoming more opaque.

In two recently decided UDRP cases before WIPO, registrant Honey Salt Ltd was found to have cybersquatted by registering and offering for sale bfgoodrich.sucks, uniroyal.sucks and tetrapak.sucks.

While earlier cases filed with the Czech Arbitration Forum had identified Honey Salt as a Turks & Caicos company, the latest few WIPO cases say it is a UK-based company.

However, searches at UK Companies House do not reveal any company matching that name.

The latest WIPO cases also identify an individual allegedly behind said company as a respondent, one “Pat Honeysalt”.

That’s either a pseudonym, or we’ve found one of those people who have somehow managed to keep their name out of Google’s index despite being well-funded and tech-savvy.

Honey Salt is believed to be the registrant of thousands of .sucks domains, all matching the trademarks of big companies, which all point to Everything.sucks, a wiki-style web site comprising scraped third-party criticism targeting the brands in question.

Its defense in its UDRP cases to date has been that it is providing non-commercial free speech criticism, and that the inclusion of “.sucks” in the domain means users could not possibly believe the site is officially sanctioned by the brand.

All but one UDPR panel has so far not believed this defense, with panelists pointing out that the domains in question are usually listed for sale on the secondary market (sometimes at cost, sometimes at an inflated price).

They further point out that the criticism displayed on the Everything.sucks site was written by third parties, often prior to the registration of the domain in question, so Honey Salt cannot claim to be exercising its own free-speech rights.

Honey Salt is represented in its UDRP cases by the very large US-based law firm Orrick, Herrington & Sutcliffe, which also represents .sucks registry Vox Populi.

Motion to fire five Nominet directors passes in tight vote

Kevin Murphy, March 22, 2021, Domain Registries

Nominet’s members this afternoon voted to fire five of the .uk registry’s directors, including its chair and CEO, in an unexpectedly tight poll.

There were 2,432,105 votes in favor of the motion to fire Mark Wood, Eleanor Bradley, Ben Hill and Jane Tozer, compared to 2,179,477 against, which works out to 52.74% for and 47.26% against.

Members get allotted votes according to how many domains under management they have, capped at 3% of the total cross-membership vote count.

In the end, it appears that the vote was swung by a small handful of larger registrars. Tucows and Namecheap were the largest registrars to say they would vote for the board cull.

Turnout was 53.5% of eligible voters, which I gather is extraordinarily high for a Nominet member vote. The full results are here (pdf).

The original motion also named CEO Russell Haworth, but he quit his board seat and executive role yesterday.

Bradley and Hill, respectively managing director of the registry and CFO, have left the board but keep their staff jobs.

Rob Binns is now acting chair, Nominet said.

The vote took place at an Extraordinary General Meeting held virtually this afternoon, which was called for after 5% of Nominet’s registrar/domainer members signed a petition at PublicBenefit.uk.

The campaign was orchestrated by Simon Blacker of the registrar Krystal Hosting, reflecting growing displeasure among members about Nominet’s strategic direction and lack of member engagement.

After the result was announced this hour, Blackler was quick to hail it as “a watershed moment in Nominet’s history”, saying that it “demonstrates the resolve of the membership to restore its original purpose”, in a letter (pdf) to the “remnant” board.

He went on to call for the campaign’s original two picks for chair and vice-chair replacements — Sir Michael Lyons and Axel Pawlik — to be appointed to the board on an interim basis.

The EGM, which lasted for about an hour, saw directors repeatedly acknowledge and occasionally apologize for taking too long to recognize the breadth and depth of members’ concerns, promising to turn things around.

The key theme to emerge was that the company is now on the same page as its members and is committed to addressing their concerns, but that eliminating almost half of the 11-person board would delay these actions by months.

Wood also reiterated that the threat of UK government intervention is real, should it be perceived that Nominet — a piece of critical infrastructure in all but name — was becoming unstable.

The EGM result was due around 1800 UTC but was delayed by more than three hours, apparently due to the higher than expected turnout.

Nominet boss jumps before he is pushed

Kevin Murphy, March 22, 2021, Domain Registries

With the almost inevitable prospect of being fired by Nominet’s membership this afternoon, CEO Russell Haworth yesterday quit the company.

He will leave both the board of directors and the corner office after a “short transition” and by “mutual consent”, the board announced. Interim leadership will be announced later.

Chair Mark Wood said in a statement: “The board appreciates his decision to step down now at a time when it is clear the company needs to consider its future direction.”

The announcement came a day before Nominet, the .uk registry, holds an Emergency General Meeting called by its membership of registrars and domainers, unhappy with the direction the company has taken over the five years of Haworth’s leadership.

He has faced criticism for diversifying the business outside of core registry services, inflating his own salary, increasing domain prices, ignoring member input, and slashing the amount of money given to public benefit causes.

Wood’s own position is still precarious — the EGM, which came about after a petition at PublicBenefit.uk secured the support of 5% of Nominet’s members, will in a matter of hours consider a motion to fire Haworth, Wood and three other directors.

A second motion, to install two new hand-picked directors who promised to reconfigure the registry’s strategy, did not make the agenda as Nominet says it is not compatible with the company’s own rules on director selection.

With Haworth’s departure evidently some kind of 11th-hour queen sacrifice, Wood made one last public plea to the PublicBenefit.uk campaign, which is led by Krystal Hosting’s Simon Blackler, to back off.

He told members that Nominet has already moved to address many of their concerns: freezing (although not lowering) domain prices, freezing board/executive compensation, donating more profit to worthy causes, and creating new channels for membership engagement. He wrote:

Nominet is not a standard company. It is a membership organisation, and the members need to buy into the company’s strategy. It is clear many do not.

Simon Blackler’s campaign tapped into this discontent, and we have seen his support grow. At the same time, I have also had the opportunity to speak with a large number of members of different types and sizes all around the world. I have heard consistently that Nominet should focus on registry, that they want better member involvement in decision-making, and that more of our financial reserves should be devoted to public benefit activity. That input should set the framework for where Nominet moves next. And the journey should begin at once.

With the vote now upon us, I think it no longer really matters which way the result goes. The campaign has had its desired impact, reinforced by the dialogue we have had with so many members. We are all moving in the same direction and aiming to achieve the same objectives.

He went on to double-down on claims that the UK government may exercise its decade-old statutory powers to step in and take over the registry, if it detects the company has been destabilized.

I was not scaremongering in warning that government are also watching developments very closely. The .UK registry and our cyber platforms are key parts of critical national infrastructure, and they cannot be put at risk from internal upheaval at Nominet. We have been questioned in detail about developments and have been told bluntly that the government is dusting off its intervention powers under the 2010 Digital Communications Act. We must tread carefully.

The last-minute olive branch and warning combo is probably not enough to save Wood’s bacon, however.

On Twitter, the PublicBenefit.uk campaign this morning continued to call for “the immediate appointment of Sir Michael and Axel Pawlik”, the two men it backs to become chair and vice-chair respectively.

The members-only EGM will be held at 1500 UTC today. PublicBenefit has secured the support of almost 30% of members’ voting rights, including those of large registrars Tucows and Namecheap, but it only needs a simple majority of those who actually show up to the (virtual) meeting today in order to get its resolution passed. Such meetings are historically lightly attended.