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Domainers up in arms as DomainTools pricing rockets

Kevin Murphy, April 27, 2016, Domain Services

Domain investors are loudly complaining about DomainTools’ plan to double its prices and slash query limits.

Some are even calling for a boycott.

Effective June 25, all the existing non-enterprise membership tiers are being folded into a new “Personal” account, which costs $99 a month or $995 a year, DomainTools said.

Previously, customers on a “Professional” account paid $49.95 a month. Some were paying as little as $12 under older, discontinued Gold, Silver and Bronze plans.

If the price hike weren’t significant enough, the company is also reducing the number of queries customers can make.

Whois History reports have been slashed from 100 domains to 25, for example, as have Hosting History reports. The Brand Monitor tool has been reduced from 10 monitored strings to 3.

DomainTools offers a broad range of services in its standard bundle, and the cuts are pretty much across the board.

DomainTools said in an email to bloggers this week that a 30% discount will be offered on the first payment under the new plan for existing customers, adding:

The Personal Membership package adds four products that have never been offered before to individual members. Bulk Parsed Whois and Reverse Whois Research Mode have previously only been available to Enterprise members. In addition, we are including our newest product, Reverse IP Whois, which works like our Reverse Whois for domain Whois, but across IP Whois records. And finally, Personal Membership also includes 5 Domain Reports per month.

The company says that it is focusing more now on its enterprise security customers, where one imagines margins are higher than its mass-market domainer-oriented services.

Domainers, as you might expect, are not happy. Message boards and domainer blogs are filled with negative commentary.

There are currently 50 comments slamming the move on DNW, many saying they will quit the service, and a call for a boycott on NamePros

Some are predicting customers will flock to rivals DomainIQ and Whoisology.

Disclosure: myself and several other domain industry bloggers are on complimentary plans and will not be affected by these changes. In some months, the new Personal plan would have been adequate for my needs; in others, not so much.

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M+M turns $22m profit into $10m loss

Kevin Murphy, April 27, 2016, Domain Registries

Minds + Machines today reported a 2015 loss of $10 million and further outlined its “transformative” restructuring and China strategy.

It’s the second full year of operating results M+M has posted since its first new gTLDs went live, and they’re not encouraging.

Revenue for accounting purposes was $6.3 million, but the cost of sales was $6.2 million, leaving gross profit of just $101,000.

Factoring in $12.1 million of operating expenses, a $7.9 million gain from losing new gTLD auctions, and other expenses, the total loss before tax was $10 million.

That’s compared to the $22 million profit M+M reported for 2014, a number entirely reliant on $33.7 million of auction loss payments.

The company also reported its “billings”, a line item that does not use the accounting method of deferring revenue across the life of a domain and is therefore more in line with incoming cash.

Billings for 2015 were $7.9 million, compared to $5 million in 2014. Gross profit under that measure was $1.7 million, but the $12 million of operating costs still made the company very unprofitable.

Ignoring the auction benefits in 2015, which will not last forever, it’s pretty clear that M+M was a company spending much more operating new gTLDs than it was making from them.

COO/CFO Michael Salazar said in a statement:

However, billings of $7.9 million for the year were simply not of a sufficient scale to cover the associated cost of sales ($6.2 million) and operating expenses ($12.2 million), which combined reached $18.4 million for 2015. Similarly, the $0.6 million savings achieved in the period by the decisions mid-year to stream-line the existing operational set-up were not of a magnitude to have any material impact in the year under review. That said, forfeited cost of sales and operational expenses as a result of the 2015 cost-cutting decisions will amount to $2.7 million in 2016

It’s perhaps little wonder that activist shareholders, apparently not prepared to play the long game, threw out half of the board and key senior executives during the period.

Former PR man Toby Hall took over as CEO in February, replacing co-founder Anthony Van Couvering, and announced earlier this month that M+M is dumping its registrar and back-end registry businesses.

Its registrar customers have been sold to Uniregistry, and it will outsource its registry back-end to Nominet, to save costs.

Salazar said that the two deals will lead to $2 million in savings, but won’t be complete before the fourth quarter. It seems unlikely they’ll have a great impact on 2016 numbers.

Headcount has been reduced from a peak of 61 to 43 at the end of the year, and is expected to drop further to 25. Salazar said this will save it $4.7 million a year.

Even with these cost reductions, M+M will still need to essentially double its revenue in order to hit operating profitability, it seems.

The company is pinning some of its growth hopes on .vip, which it expects to do well in China. It launches May 18.

Hall said in a statement that M+M would not follow the lead of competitors (Famous Four Media springs to mind) by offering first-year registrations for free to build market share. He said:

Based on the enquiries received during Sunrise and feedback gained through our two recent marketing trips to China, it is clear that there is genuine interest in the domain both within and outside of China. As a result, we will not be using a year-one freemium approach to simply inflate year-one registrations. Instead, we intend to be keenly priced to ensure margin to ourselves — and registrations — as well as protect the integrity of the domain. The volume we anticipate to be generated through keen pricing will then support the sales of our premium names in this domain.

The company also plans to invest in its .law sales team, because billings for that gTLD have been behind expectations.

M+M had $34.6 million in the bank and eight outstanding contested new gTLD applications at the end of the year.

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Registrars say Amazon is “closing” open gTLD

Kevin Murphy, April 25, 2016, Domain Registries

A group comprising some of the largest domain registrars has claimed Amazon is attempting to close off a new gTLD that it previously indicated would be unrestricted.

The 12-strong group, which includes Go Daddy, Network Solutions and Tucows, also claims that the company’s proposal for a “Registration Authentication Platform” is anti-competitive.

The complaints follow Amazon’s filing of a Registry Services Evaluation Process request with ICANN in March.

The RSEP speaks in broad terms about rejigging the conventional domain registration path so that all .moi sales are funneled through Amazon’s registry site, where registrants will have their eligibility verified and then be offered a set of add-on “technology tools” before being bounced back to their chosen registrar.

Amazon hasn’t said who will be eligible to register .moi domains, nor has it explained what technology tools it plans to offer. I expect the tools will include things such as hosting and security, where many registrars currently make money.

Unsurprisingly, many registrars are not happy about these vague proposals.

In a comment (pdf) to the RSEP filed yesterday, they said:

Ultimately, the use of pre-registration verification and “optional” value added services will negatively impact competition. By tying both practices in a TLD, a TLD Operator can create a “captive audience” via the pre-registration verification and then offering optional services. This will effectively bypass the existing registration and purchase process, putting TLD Operator in a privileged position. The TLD is set up to capture customers earned via the Registrars marketing efforts to promote its own tools and services.

It’s not unusual for “sponsored” or “restricted” gTLDs to implement registry-side verification, they admitted, but said that .moi is meant to be “open”.

They wrote:

While this practice is not explicitly prohibited under gTLDs, we believe that post-delegation inclusion of these practices should only be allowed in compelling circumstances because they are, in effect, retroactively “closing” what was applied for and approved to be operated as an open, generic TLD.

Amazon’s application for .moi, like all of its new gTLD applications, is not entirely clear on what the company’s plans are. There’s vague talk about eligibility, but no details and nothing substantial to suggest a tightly restricted zone.

The signatories to the registrar comment represent the majority of registered domain names. They are: Astutium, Blacknight Internet Solutions, Domain.com, EuroDNS, GoDaddy.com, OpenproviderNetEarth One, Key-Systems, Netistrar, Network Solutions, Nordreg, Realtime Register, Tucows Domains.

One registrar, Com Laude, whose sister company Valideus handles Amazon’s gTLD applications, wrote a comment (pdf) expressing the opposite view.

Com Laude says that it’s not unusual for registries to require registry-side verification. It points to .bank, .pharmacy and .travel as examples.

The company also claims that the 12 registrars are in essence complaining about the idea of vertical integration — where registries and registrars are under common ownership — which is already in place at companies such as Uniregistry and Rightside.

Com Laude’s Jeff Neuman wrote:

We do not believe that it is unacceptable for a company like Amazon to do what these other companies have been doing for some time. To apply different standards to Amazon Registry than it does for each of the other vertically integrated entities would single them out for disparate treatment – especially when there is no factual basis to believe that Amazon Registry has not adhered to its vertical integration-related obligations under the Registry Agreement.

What’s going on here, I suspect, is a bit of a proxy war.

Neither Amazon nor the registrars care a great deal about .moi, I think. The gTLD is merely a canary for Amazon’s 30-odd yet-to-be-launched gTLDs. The company has the rights to potentially more attractive strings, including .book, .song and .tunes.

Amazon originally wanted to make these strings “closed generics”, or what ICANN calls “exclusive access” gTLDs, where only Amazon could register names.

It has since disavowed such plans, but still hasn’t said who will be able to register names in its portfolio or how they will prove eligibility.

.moi was not originally identified as a closed generic by ICANN, but it could represent a model for what Amazon plans to do with the rest of its stable.

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IWF finds child abuse imagery on new gTLD domains

Kevin Murphy, April 21, 2016, Domain Services

The Internet Watch Foundation said it found child abuse imagery on new gTLD domain names for the first time in 2015.

The UK-based organization, tasked with identifying and blocking child abuse imagery online, today released its 2015 annual report.

The report says that it found 68,092 unique URLs with this illegal content in the year, spread over 1,991 domains. It says:

Five top level domains (.com .net .ru .org .se) accounted for 91 per cent of all webpages identified as containing child sexual abuse images and videos.

However, it also says that child abuse was found on new gTLDs for the first time.

While the report doesn’t make much of this trend, it should be worrying.

The IWF said it took action on 436 new gTLD domains in 2015, many of which “appeared to have been registered specifically for that purpose”.

While new gTLD names appear to be responsible for a very small percentage of flagged URLs, they seem to be 21% of the total number of domains on which child abuse imagery was found.

This discrepancy may be explained by the fact that 78% of the total abuse URLs were found on free-to-use image hosting sites, probably concentrated in .com.

The IWF added that 138 of the new gTLD domains hosted “disguised” abuse sites. These are sites where illegal content is only shown when visitors arrive from a specific referrer link.

The IWF offers a “Domain Alerts” service to its members, which allows registries and registrars to quickly take down domains confirmed as containing illegal material.

Judging by its member list, not many domain name companies are members.

Members include Go Daddy, ICM Registry, .London Domains, Rightside, Afilias and Nominet.

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.hotel fight gets nasty with “criminal” hacking claims

Kevin Murphy, April 19, 2016, Domain Registries

A group of would-be .hotel gTLD registries have called on ICANN to reject the winning applicant’s bid or be complicit in “criminal acts”.

The group, which includes Travel Reservations, Famous Four Media, Radix, Minds + Machines, Donuts and Fegistry is threatening to file a second Independent Review Process complaint unless ICANN complies with its demands.

Six applicants, represented by Flip Petillion of Crowell & Moring, claim that Hotel Top Level Domain Sarl should forfeit its application because one of its representatives gained unauthorized access to their trade secrets.

That’s a reference to a story we covered extensively last year, where an ICANN audit found that DotBerlin CEO Dirk Krischenowski, or at least somebody using his credentials, had accessed hundreds of supposedly confidential gTLD application documents on ICANN’s web site.

Krischenowski, who has denied any wrongdoing, is also involved with HTLD, though in what capacity appears to be a matter of dispute between ICANN and the rival .hotel applicants.

In a month-old letter (pdf) to ICANN, only published at the weekend, Petillion doesn’t pull many punches.

The letter alleges:

Allowing HTLD’s application to proceed would go agaist everthing that ICANN stands for. It would amount to an acquiescence in criminal acts that were committed with the obvious intent to obtain an unfair advantage over direct competitors.

ICANN caught a representative of HTLD stealing trade secrets of competing applicants via the use of computers and the internet. The situation is even more critical as the crime was committed with the obvious intent of obtaining sensitive business information concerning a competing applicant.

It points out that ICANN’s Applicant Guidebook disqualifies people from applying for a new gTLD if they’ve been convicted of a computer crime.

To the best of my knowledge Krischenowski has not been convicted of, or even charged with, any computer crime.

What ICANN says he did was use its new gTLD applicants’ customer service portal to search for documents which, due to a dumb misconfiguration by ICANN, were visible to users other than their owners.

Krischenowski told DI in an emailed statement today:

According to ICANN, the failure in ICANN’s CSC and GDD portals was the result of a misconfiguration by ICANN of the software used (as mentioned at https://www.icann.org/news/announcement-2-2015-11-19-en). As a user, I relied on the proper functioning of ICANN’s technical infrastructure while working with ICANN’s CSC portal.

HTLD’s application for .hotel is currently “On Hold”, though it is technically the winner of the seven-application contention set.

It prevailed after winning a controversial Community Priority Evaluation in 2014, which was then challenged in an Independent Review Process case by the applicants Petillion represents.

They lost the IRP, but the IRP panelists said that ICANN’s failure to be transparent about its investigation into Krischenowski could amount to a breach of its bylaws.

In its February ruling, the IRP panel wrote:

It is not clear if ICANN has properly investigated the allegation of association between HTLD and D. Krischenowski and, if it has, what conclusions it has reached. Openness and transparency, in the light of such serious allegations, require that it should, and that it should make public the fact of the investigation and the result thereof.

The ruling seems to envisage the possibility of a follow-up IRP.

ICANN had told the panel that its investigation was not complete, so its failure to act to date could not be considered inaction.

The ICANN board resolved in March, two days after Petillion’s letter was sent, to “complete the investigation” and “provide a report to the Board for consideration”.

While the complaining applicants want information about this investigation, their clear preference appears to be that the HTLD application be thrown out.

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