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MMX says .vip renewals to be at 70%+

MMX believes the biggest money-spinner in its new gTLD portfolio, .vip, will see first-year renewals in excess of 70%.

The company said this morning that it is projecting renewals towards the top end of industry norms based on manual renewals to date.

.vip was a bit of a hit in China, topping a quarter-million domains in its first month of general availability a year ago. It peaked at around 750,000 domains a month ago.

MMX said in a statement:

To date, actual deletions for the first 31 days of registrations for .vip from China are currently less than 1%, with manually confirmed renewals for the same period already at over 60%, with the remainder being placed on auto-renew by registrars on behalf of their customers.

Whilst not all of those placed on auto-renew will be renewed, MMX expects the overall renewal rate for the first month of .vip registrations, which will be published in late July, to place .vip in-line with the best-in-class renewal rates of leading western facing top-level domains (i.e. c. 70% and above).

While MMX has made much of the fact that it has not sold .vip names for almost nothing, unlike some competitors, they’re still pretty cheap in China.

.vip names sell for the CNY equivalent of $3 to $4 at the major Chinese registrars. GoDaddy prices them at $20.

CEO Toby Hall said that there had been some volume-based discounts available to registrars, but “nothing which took the pricing below our general availability pricing”.

Its actual renewal rate will become clear at the end of July, MMX said.

Time to show ICANN who’s boss!

Kevin Murphy, June 1, 2017, Domain Policy

You are in charge of ICANN.

That statement may sound trite — it is trite — but it’s always been true to some extent.

Even if their individual voices are often lost, members of the ICANN community have always had the ability to influence policy, whether through sporadic responses to public comment periods or long term, soul-crushing working group volunteer work.

ICANN only really has power through community consent.

That’s another trite statement, but one which became more true on October 1 last year, when ICANN separated itself from US government oversight and implemented a new set of community-created bylaws.

The new bylaws created a new entity, the “Empowered Community”, which essentially replaced the USG and is able to wield more power than the ICANN board of directors itself.

Indeed, the Empowered Community can fire the entire board if it so chooses; a nuclear option for the exercise of community control that never existed before.

And the EC is, at the ICANN 59 public meeting in Johannesburg at the end of the month, about to get its first formal outing.

What the EC will discuss is pretty dull stuff. That’s why I had to trick you into reading this post with an outrageous, shameless, sensationalist headline.

Before getting into the substance of the Johannesburg meeting, I’m going to first bore you further for several paragraphs by attempting to answering the question: “What exactly is the Empowered Community?”

The EC exists an an “unincorporated association” under California law, ICANN deputy general counsel Sam Eisner told me.

It doesn’t have shareholders, directors, staff, offices… you wouldn’t find it by searching California state records. But it would have legal standing to take ICANN to court, should the need arise.

It was basically created by the new ICANN bylaws.

It comprises the five major constituencies of ICANN — the Generic Names Supporting Organization, the Country Code Names Supporting Organization, the Governmental Advisory Committee, the At-Large Advisory Committee and the Address Supporting Organization.

They’re called “Decisional Participants” and each is represented on a committee called the EC Administration by a single representative.

Right now, each group is represented on the Administration by its respective chair — GNSO Council chair James Bladel of GoDaddy represents the GNSO currently, for example — but I gather that doesn’t necessarily have to be the case; each group can decide how it appoints its rep.

Bladel tells me that each representative only takes action or casts a vote after being told to do so by their respective communities. As individuals, their power is extremely limited.

When the EC makes decisions, there must always be at least three votes in favor of the decision and no more than one vote against. A 3-1 vote would count as approval, a 3-2 vote would not.

This is to make sure that there is a fairly high degree of consensus among stakeholders while also preventing one community stonewalling the rest for strategic purposes.

The EC’s nine powers are enumerated in article 6.2 of the ICANN bylaws.

It can hire and fire an unlimited number of directors, reject the ICANN budget, file Requests for Reconsideration or Independent Review Process appeals, sue ICANN, and oversee changes to the ICANN bylaws.

Most of these powers are reactive — that is, if the ICANN board did something terrible the EC would have to consciously decide to act upon it in some way.

But one of them — approval of changes to Fundamental Bylaws — places the EC squarely in the legislative pathway. Think of it like the Queen of England’s Royal Assent or the US president’s ability to veto bills before they become law.

That’s the role the EC will adopt in Joburg this month.

The ICANN board recently passed a resolution calling for a new board committee to be created to focus on handling accountability mechanisms such as Reconsideration, removing the function from the overworked Board Governance Committee.

Because this requires a change to a Fundamental Bylaw — those bylaws considered so important they need more checks and balances — the EC has been called upon to give it the community’s formal consent.

To the best of my knowledge, the bylaws amendment is utterly uncontroversial. I haven’t heard of any objections or complaints about what essentially seems to be a probably beneficial tweak in how ICANN’s board functions.

But it will be the EC’s first formal exercise of executive power.

So there will be a session at ICANN 59 in which the EC convenes to discuss the board’s resolution and, probably, hear any input it has not already heard.

The exact format of the session seems to be up in the air at the moment, but I gather an open-mic “public forum” style meeting of about an hour is the most likely choice. It will of course be webcast, with remote participation, as almost all ICANN public meetings are.

No votes will be cast at the session — I’m told the bylaws actually forbid it — but the EC will have only 21 days afterwards to poll their communities and formally deliver their verdict. Assuming at least three of the communities consent to the board resolution and no more than one objects, it will automatically become ICANN law.

The next test of the EC, which would prove to be actually newsworthy enough to write about without a clickbait headline, may well be the ICANN budget. ICANN’s financial year ends at the end of June, and the EC has explicit powers to reject it.

The budget often raises concerns from those parties who actually pay into it, and given the difficulties the industry is in right now there may be more concerns than usual.

Anyway, this is the way ICANN works nowadays. It would make for more interesting reading if a triumvirate of Iran, China and Russia now ran the show, but they don’t. You lot do.

Just be glad Donald Trump isn’t holding the reins.

Sorry, that was also trite, wasn’t it.

MMX stung for $7.7 million by crappy .london contract?

Kevin Murphy, April 26, 2017, Domain Registries

Did MMX take a $7.7 million accounting hit to renegotiate a crappy .london gTLD contract? It looks a bit like that to me.

Found in the company’s full-year 2016 financial results yesterday is the disclosure that it had to pay off an undisclosed gTLD partner after originally making “overly ambitious” predictions about its likely popularity.

The deal apparently had MMX — then under previous management as Minds + Machines — making guaranteed payments to its partner on the assumption that it would sell a lot more domains than it eventually did.

.london currently has about 56,000 names in its zone file, down from a post-launch peak of about 65,000.

According to its statement to the markets, MMX recorded a 2016 one-time contract restructuring expense of $3.8 million and has added a $3.9 million intangible asset to its balance sheet in relation to the contract.

That’s a total of $7.7 million, but CEO Toby Hall told DI that the cash payment was nowhere near that amount. He said:

in reality we have paid no where near that amount and much of this is the accounting treatment of a new contract that we believe has the potential to deliver future economic value to the business and will be covered from future revenues.

The gTLD in question is not named in the statement, and Hall also declined to name it in response to a DI inquiry, but MMX says of the contract:

In very early 2012, at the time when ICANN was still accepting new generic Top Level Domain applications, the then Executive Team entered into an overly ambitious agreement that it believed would provide value to the overall profile of the Group. The agreement had very significant financial commitments over the life of the contract and did not include any clauses that could allow the Group to renegotiate those commitments should the specific top-level domain not perform to the agreed financial projections. The growth of this top-level domain has not come close to meeting those expectations and the agreement has proven – and would have continued proving – to be a significant drag on the Group’s ability to generate positive cashflow from the given TLD.

In late Q4 of 2016 the current Executive team was able to successfully conclude renegotiations of certain components of the agreement by either restructuring or buying out certain financial commitments thus making it more economically viable going forward. As a result of the renegotiation effort, the Group has revised its modeling and believes that it can derive future economic benefit from the renegotiated contract. Accordingly, based on Management’s review, a portion of the buy out ($3.8million) has been expensed as a one-off restructuring cost while the remaining portion ($3.9million) will be capitalized as an intangible asset with future economic benefit.

All the evidence points to .london being the gTLD in question.

First, MMX says that the deal was entered into in “very early 2012”, which ties up with the timing of the request for proposals by the Mayor’s marketing office, London & Partners.

Second, MMX doesn’t have any other partner-based gTLDs that would plausibly have such ambitious commitments.

Third, MMX has previously stated that it was renegotiating some “burdensome” contracts. Last year, without relating it to a renegotiation, it said in a trading update that it was “encouraging to see an increasingly commercial and flexible approach from London & Partners, our Dot London partners”.

Fourth, word on the street back in 2012 was that L&P (which remember is affiliated with the London Mayor, an elected political office) had gone with tax-haven-based MMX rather than UK-based non-profit Nominet because MMX (then Minds + Machines) had offered the best financial incentives.

The scrapping of the old deal is perhaps another indicator of the hubris that accompanied the opening of the new gTLD program five years ago.

While L&P is the “owner” of .london, for want of a better word, in practice I gather that MMX runs it pretty much as if the gTLD was part of its regular portfolio.

The news of the contract changes were made in MMX’s audited 2016 results, which showed its billings doubling to $15.8 million during the year.

Revenue was $15 million, up from $6.3 million in 2015. Less partner payments, revenue was $13.5 million versus $5.5 million a year earlier.

The statement has half a dozen or more bottom lines, depending on what costs you exclude, but the one MMX wants us to look at is “Billings Operating EBITDA before one off restructuring costs”, which was $4.2 million compared to a loss of $6.6 million in 2015.

That, in other words, means that an unprofitable company has become a profitable one.

A lot of that has to do with the revenue from hundreds of thousands of .vip domain sales in China and a swingeing restructuring that led to headcount being slashed from 43 people to 20 people.

The company also sold off its registrar business to Uniregistry and started outsourcing its back-end functions to Nominet.

For 2017, the company has already disclosed two huge sales that will boost domains under management considerably, but at the risk of concentrating a larger part of MMX’s business outlook in just a few hands.

UPDATE: This article was updated a few hours after publication to clarify what MMX has said in relation to .london in previous trading statements.

Uniregistry and Neustar have TLDs approved in China

Kevin Murphy, April 13, 2017, Domain Registries

China’s April batch of approved TLDs has been released, featuring three domains from Neustar and Uniregistry.

Neustar had its longstanding, 2000-round .biz pass regulatory scrutiny, while Uniregistry’s .link and .auto have also been approved.

While .auto is managed by Cars Registry, a joint venture with XYZ.com, its stablemates .car and .cars do not appear to have yet been approved.

The rubberstamping was made by China’s Ministry of Industry and Information Technology, which administers the country’s stringent regulatory framework.

Clearance means that customers of Chinese registrars will actually be able to deploy and use the names they buy.

The registries have also agreed to strict takedown policies for Chinese registrants.

While MIIT appears to be announcing newly approved TLDs on a monthly basis, it’s a slow drip-feed. I believe there are still fewer than 20 Latin-script gTLDs currently cleared for use in China.

Chinese to invade .africa? CEO thinks so

Kevin Murphy, April 11, 2017, Domain Registries

While .africa finally went on sale last week after years of legal fights, it seems Africans may find themselves in the minority of registrants.

A combination of awareness, pricing and anticipated interest from Chinese domain investors, means that Africans could account for as few as 1 in 10 .africa registrations, according to Lucky Masilela, CEO of .africa registry ZA Central Registry.

The domain went into its sunrise period last week, and has a multi-phased launch planned out that will last until July 1, 2018.

After the trademark owners have had their crack at the domain — Masilela tells us that South Africa brands such as Nando’s are among the first to grab theirs — there will be five phases in which domains will be open to all but priced at a premium.

Starting June 5 there will be five landrush periods of five day, each a kind of hybrid between the traditional landrush period and the kind of Early Access Period offered by Donuts and others.

Each landrush will see all names priced at a certain amount, with the amount going down at the start of each period — $5,000 to $2,000 to $1,000 to $500 (all USD).

In the event that any name is claimed by more than one registrant, there will be an auction for that name at the end of the period.

Then on July 4 comes the first period of “general availability”, from which point all domains will be first-come, first-served.

But for the first 28 days of GA, domains will be priced at $150, other than domains categorized by the registry as premium.

Domains then come down to a more affordable $18 wholesale.

But that’s not the end. ZACR has baked in a price reduction to $12.50 wholesale, due to kick in July 1 2018. From then on out, it’s business as usual.

Unlike similar TLDs such as .eu, there are to be no geographic restrictions on who can register .africa names, and Masilela said he expects registrants from Africa to be in a minority.

“I think were are looking at about 10% from the continent, growing gradually over the years,” Masilela said. “The next wave is going to be international registrars.”

“We have a big suspicion that we will probably see a huge uptake coming from the east, which is the China market,” he said. “They’ll probably come in and grab a large number of domain names.”

He said that Chinese investment in Africa offline is likely to be mirrored online.

Pricing is also likely to be a factor. While .africa will bottom out, ignoring periodic discounts, at $12.50, that’s still quite a lot more than you’d expect to pay for African ccTLDs. ZACR’s own .za costs about $4 per year.

The relatively high price of becoming ICANN accredited has also meant that while Africa has 50-something countries, there are currently only about half a dozen gTLD registrars based there.

ZACR proposes to counter this by offering a gateway service rather like the one it already offers in .joburg and .capetown, that would help bring its own .za registrars on board.