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After ICANN nod, MMX buys .xxx

MMX has closed the acquisition of porn-focused ICM Registry, after receiving the all-clear from ICANN for the contract transfers.

The deal is worth roughly $41 million — $10 million cash and about $31 million in stock.

ICM runs .xxx from the 2003 gTLD application round (though it didn’t go live until 2011) and .porn, .adult and .sex from the 2012 round.

MMX, which now has 29 fully-owned TLDs and another five in partnerships, will now become roughly a quarter-owned by former ICM employees and its back-end provider, Afilias.

ICM president Stuart Lawley now owns 15% of MMX and is its largest shareholder.

CEO Toby Hall said in a statement to the markets that he has “identified a number areas of potential growth and synergy”.

The company noted that the deal increases the share of its revenue coming from the US and Europe, implicitly highlighting the reduction of its exposure to the volatile Chinese market, where .vip has been its biggest money-spinner to date.

ICM had something like 152,000 .xxx domains under management at the last count, but over 80,000 of those are reservations. It has about 92,000 names in its zone file currently.

The three 2012-round names are faring less well, with about 8,000 to 10,000 names apiece in their zones.

Somebody once jokingly told me that ICM stood for “Internet Cash Machine”, due to the perception that porn-focused names would sell like, well, porn. Just thought I’d mention that.

MMX rejected three takeover bids before buying .xxx

MMX talked to three other domain name companies about potentially selling itself before deciding instead to go on the offensive, picking up ICM Registry for about $41 million.

The company came out of a year-long strategic review on Friday with the shock news that it had agreed to buy the .xxx, .adult, .porn and .sex registry, for $10 million cash and about $31 million in stock.

CEO Toby Hall told DI today that informal talks about MMX being sold or merged via reverse takeover had gone on with numerous companies over the last 11 months, but that they only proceeded to formal negotiations in three cases.

Hall said he’d been chatting to ICM president and majority owner Stuart Lawley about a possible combination for over two years.

ICM itself talked to four potential buyers before going with MMX’s offer, according to ICM.

Lawley, who’s quitting the company, will become MMX’s largest shareholder following the deal, with about 15% of the company’s shares. Five other senior managers, as well as ICM investor and back-end provider Afilias, will also get stock.

Combined, ICM-related entities will own roughly a quarter of MMX after the deal closes, Hall said.

ICM, with its high-price domains and pre-2012 early-mover advantage, is the much more profitable company.

It had sales of $7.3 million and net income of $3.5 million in 2017, on approximately 100,000 registrations.

Compared to MMX, that’s about the same amount of profit on about half the revenue. It just reported 2017 profit of $3.8 million on revenue of $14.3 million.

There’s doesn’t seem to be much need or desire to start swinging the cost-cutting axe at ICM, in other words. Jobs appear safe.

“This isn’t a business in any way that is in need of restructuring,” Hall said.

He added that he has no plans to ditch Afilias as back-end registry provider for the four gTLDs. MMX’s default back-end for the years since it ditched its self-hosted infrastructure has been Nominet.

The deal reduces MMX’s exposure to the volatile Chinese market, where its .vip TLD has proved popular, accounting for over half of the registry’s domains under management.

It also gives MMX ownership of ICM’s potentially lucrative portfolio of reserved premium names.

There are over 9,700 of these, with a combined buy-now price of just shy of $135 million.

I asked Hall whether he had any plans to get these names sold. He laughed, said “the answer is yes”, and declined to elaborate.

ICM currently has a sales staff of three people, he said.

“It’s a small team, but their track record is exceptional,” he said.

The company’s record, I believe, is sex.xxx, which sold for $3 million. It has many six-figure sales on record. Premiums renew at standard reg fee, around $60.

With the ICM deal, MMX has recast itself after a year of uncertainty as an acquirer rather than an acquisition target.

While many observers — including yours truly — had assumed a sale or merger were on the cards, MMX has gone the other route instead.

It’s secured a $3 million line of credit from its current largest shareholder, London and Capital Asset Management Ltd, “to support future innovation and acquisition orientated activity”.

That’s not a hell of a lot of money to run around snapping up rival gTLDs, but Hall said that it showed that investors are supportive of MMX’s new strategy.

So does this mean MMX is going to start devouring failing gTLDs for peanuts? Not necessarily, but Hall wouldn’t rule anything out.

“Our long-term strategy is ultimately based around being an annuity-based business,” he said. He’s looking at companies with a “strong recurring revenue model”.

About 78% of ICM’s revenue last year came from domain renewals. The remainder was premium sales. For MMX, renewal revenue doubled to $4.8 million in 2017, but that’s still only a third of its overall revenue (though MMX is of course a less-mature business).

So while Hall refused to rule out looking at buying up “struggling” gTLDs, I get the impression he’s not particularly interested in taking risks on unproven strings.

“You can never say never to any opportunity,” he said. “If we come across and asset and for whatever reason we believe we can monetize it, it could become an acquisition target.”

The acquisition is dependent on ICANN approving the handover of registry contracts, something that doesn’t usually present a problem in this kind of M&A.

101domain founders suing Afilias over unpaid $1 million after $15.5 million acquisition

The two former owners of 101domain are suing Afilias over an unpaid $1 million portion of their $15.5 million acquisition deal.

And Afilias is suing them right back, claiming it doesn’t have to pay because the deal left it saddled with an undisclosed tax bill in excess of $1 million.

The suit was filed by Anthony Beltran and Wolfgang Reile, who has since died, in February and Afilias counter-sued a couple of weeks ago, but I only recently became aware of the case and I don’t believe it’s been reported elsewhere.

Afilias bought 101domain back in 2015 for a then-undisclosed sum, its first big push into the registrar side of the industry.

Court documents now reveal that the Ireland-registered company gave 90%-owner Reile and 10%-owner Beltran a combined $12.5 million cash, along with a promissory note to pay $3 million more over the next two years.

Afilias paid them the first $2 million owed in September 2016, but when it came to paying the remaining $1 million the company refused, saying it had discovered 101domain had a VAT liability from before the deal closed of around $875,000.

Last month, after the suit was filed, it re-estimated the alleged liability at over $1 million.

Under the terms of the promissory note, Afilias reckons it does not have to pay up. What’s more, it wants the two men to cover the difference between the money it owes them and the amount of the tax bill.

In their initial complaint (pdf), Reile and Beltran disputed whether the liability even exists, saying “Afilias has failed to provide an adequate accounting for the purported pre-closing VAT liability”.

Reile died April 6, but Afilias filed its counter-complaint (pdf) April 19 and the legal wheels still appear to be turning.

Beltran, who declined to comment on the case, is still listed as 101domain’s president on the registrar’s web site.

MMX could announce acquisition this week

New gTLD registry MMX could announce plans to be acquired as early as this week.

The company told the markets last week that its delayed 2017 financial results would be announced in “early May”, along with the “conclusion of the strategic review” it has been teasing investors about for almost a year.

The “strategic review”, announced last May, is exploring “how MMX can participate in a broader industry consolidation” including acquisition or merger.

MMX said last week that “constructive discussions continue to progress”.

It has previously described the duration of the negotiations, initially slated to close last September, as “frustrating”.

Unlike AIM-listed rival CentralNic, which has confirmed it is in reverse-takeover talks with KeyDrive, MMX has not revealed which potential buyer(s) it has been talking to.

MMX, also listed on AIM, has a market cap of £69.3 million ($94.3 million) today.

In January, it informally reported that its 2017 billings are expected to be around the $15.6 million mark, allowing the company to hit operating profitability for the first time.

The company runs 25 new gTLDs solo and five more in partnerships with other companies, but by far and a way the best volume performer is .vip, which accounts for well over half of its registrations largely due to its resonance in China.

CentralNic and KeyDrive in merger talks

Kevin Murphy, March 14, 2018, Domain Registries

CentralNic and KeyDrive, two major European domain firms, are in merger talks, CentralNic confirmed this morning.

CentralNic said that the transaction, should it close, would be a “reverse takeover” of itself by KeyDrive.

That’s where a private company, in this case KeyDrive, reverses into a public one, in this case AIM-listed CentralNic.

Luxembourg-based KeyDrive is the holding company for brands including the registrars Key-Systems, Moniker and BrandShelter and the registries OpenRegistry and KSRegistry.

London-based CentralNic is a registry provider for the likes of .xyz, recent acquirer of Slovakian TLD .sk, and owner of registrars Internet.bs and Instra.

CentralNic said: “CentralNic and KeyDrive Group believe that the combination of the two businesses would have strong strategic logic and economies of scale, and would represent an opportunity to create a group with advanced technology platforms delivering significant recurring revenues for every major customer type within the industry.”

If a deal should be struck, it would happen in the second quarter, the company said.

The announcement was made today after news of the talks leaked.

Trading in CentralNic shares has been temporarily suspended.

Donuts may make .travel names easier to buy after acquiring its first legacy gTLD

Kevin Murphy, February 14, 2018, Domain Registries

Donuts has added .travel to its swelling portfolio of gTLDs, under a deal with original registry Tralliance announced today.

It’s the company’s first acquisition of a legacy, pre-2012 gTLD, and the first “community” gTLD to join its stable of strings, which now stands at 239.

.travel went live in 2005, a part of ICANN’s 2003 round of “sponsored” TLD applications.

As a sponsored TLD, .travel has eligibility and authentication requirements, but executive vice president Jon Nevett told DI that Donuts will look at “tinkering with” the current process to make domains easier to buy.

The current system requires what amounts to basically a self-declaration that you belong to the travel community, he said, but you have to visit the registry’s web site to obtain an authentication code before a registrar will let you buy a .travel domain.

Given that the community captured by .travel is extremely broad — you could be somebody blogging about their vacations and qualify — it seems to be a barrier of limited usefulness.

Nevett said Donuts has no immediate plans to migrate the TLD away from the Neustar back-end upon which it currently sits.

The rest of its portfolio runs on its own in-house registry platform, and one imagines that .travel will wind up there one day.

While .travel is one of Donuts most-expensive domains — priced at $99 retail at its own Name.com registrar — Nevett said there are no plans to cut pricing as yet.

There may be discounts, he said, and possibly promotions involving bundling with other travel-related gTLDs in its portfolio.

Donuts already runs .city, .holiday, .flights, .cruises, .vacations and several other thematically synergistic name spaces.

.travel had about 18,000 domains registered at the last count, with EnCirca, Name.com, 101domain, Key-Systems and CSC Corporate as its top five registrars.

It peaked 10 years ago at just under 215,000 registrations, largely due to to speculative bulk registrations made by parties connected to the registry that were dumped a couple of years later.

It’s been at under 20,000 names for the last five years, shrinking by small amounts every year.

The price of the acquisition was not disclosed.

Famous Four chair pumps $5.4 million into AlpNames to settle COO lawsuit

Kevin Murphy, February 8, 2018, Domain Registrars

Famous Four Media chair Iain Roache has bought out his former COO’s stake in AlpNames, its affiliated registrar, settling a lawsuit between the two men.

He’s acquired Charles Melvin’s 20% stake in the company for £3.9 million ($5.4 million), according to a press release.

A spokesperson confirmed that the deal settles a lawsuit in the companies’ home territory of Gibraltar, which we reported on in December.

Roache said in the press release that he has a plan to grow AlpNames into a “Tier 1 registrar”:

“I’ve got a 10 year strategic plan, which includes significant additional investment, to set the business up for future growth and success,” he said. “We’re going to bring the competition to the incumbents!”

AlpNames is basically the registrar arm of Famous Four, over the last few years supporting the gTLD portfolio registry’s strategy of selling domains in the sub-$1 range and racking up huge market share as a result.

But it’s on a bit of a slide, volume-wise, right now, as hundreds of thousands of junk domains are allowed to expire.

According to today’s press release, AlpNames has 794,000 gTLD domains under management. That’s a far cry from its peak of 3.1 million just under a year ago.

Seller Melvin, according to the press release, “has decided to pursue other interests outside of the domain name industry”.

It appears he left his COO job at Famous Four some time last year, and then sued Roache and CEO Geir Rasmussen (also an AlpNames investor) over a financial matter. Previous attempts to buy him out were rebuffed.

Last October, the Gibraltar court ruled that the defendants has supplied the court with “forged documents” in the form of inaccurately dated invoices between the registry and AlpNames.

The pair insisted to the court that the documents were an honest mistake and their lawyer told DI that there was no “forgery” in the usual sense of the word.

But it appears that Melvin’s split from the companies was less than friendly and the £3.9 million buyout should probably be viewed in that light.

MMX profitable as acquisition talks drag on

Kevin Murphy, January 29, 2018, Domain Registries

New gTLD registry Minds + Machines became profitable as an operating company for the first time in 2017, the company announced on Friday.

MMX saw billings of $10 million in the second half of the year, compared to $5.6 million in the first half, as domains under management grew 67% to 1.32 million.

Billings is a measure of sales, rather than the more formal measure of revenue for accounting purposes.

Renewals accounted for $5.6 million of billings in the year, which “for the first-time has exceeded fixed operating costs which have been reduced to below $5.5 million for 2017”.

The company’s bottom line will also boosted by $2.1 million due to MMX losing the .inc and .llc new gTLD auctions.

MMX also provided an update on its “strategic review”, a code word for the “acquisition by or sale/merger of the Company” that it announced last May.

The company said “the longevity of the discussions has been at times frustrating” but that it hopes to have something to announce by the time it reports its formal 2017 results in April.

MMX had originally hoped to have concluded these talks before last September.

CentralNic now owns .sk after $30m deal closes

Kevin Murphy, December 12, 2017, Domain Registries

CentralNic has just closed its acquisition of SK-NIC, the ccTLD operator for Slovakia, the company announced today.

The London-based firm announced the deal back in August, when it was to be worth €21.27 million up front, with a deferred performance-related cash payout of €4.85 million cash over three years.

But the deal, originally intended to close in September, was delayed by legal “complexities” and restructured from an asset purchase to a purchase of SK-NIC, including its liabilities, in its entirety.

The purchase price is now €20.27 million in advance, with €5.85 million deferred. That’s still a total of €26.12 million ($30.67 million).

The acquisition is unusual in that it sees a ccTLD transferring to control of a foreign entity, and was opposed by many in the Slovakian internet community.

A petition was organized calling for the transfer of .sk to a new independent body with more community and government oversight.

There had been fears that CentralNic would do to .sk what it has to Laos’ .la — repurpose it to mean something other than “Slovakia” — but CentralNic told DI that it will no do so.

The deal means .sk will move from its outdated old registry infrastructure to CentralNic’s standards-based EPP platform, which should make it easier for registrars to integrate.

It’s also likely to mean it’s going to be much easier for non-Slovaks to be able to register .sk domains.

SK-NIC currently has about 360,000 domains under management.

CentralNic promises $30 million .sk will only ever mean “Slovakia”

Kevin Murphy, August 30, 2017, Domain Registries

CentralNic has committed that it will not repurpose Slovakian ccTLD .sk to mean anything other than “Slovakia”, following its purchase of SK-NIC this week.

The acquisition of the Bratislava-based registry, which will cost between €21 million and €26 million ($25 million to $31 million) depending on performance, has been controversial in Slovakia, with many leading registrars campaigning against the sale.

One of the charges leveled against CentralNic was that its modus operandi has been to market ccTLDs as if they have other meanings. It markets Laos’ .la as a TLD for Los Angeles, and acts as the back-end for Palau’s .pw, which is marketed as an acronym for “Professional Web”.

“From a technical point of view, it’s definitely a good acquisition. CentralNic has a good system that is stable and working well, but we don’t agree with their sales and marketing policies,” Ondrej Jombik of Slovak registrar Platon told DI today.

Jombik is the person who organized a petition against the sale that attracted almost 10,000 signatures.

“We don’t agree with how they manage national TLD registries,” he said. “What they do in Palau is not acceptable. What they do in Laos is not acceptable. We’re kind of scared what they plan to do with our domain, how they plan to market it.”

But CentralNic CEO Ben Crawford said in an email interview that these concerns are misplaced. He said:

CentralNic has never had plans to repurpose .sk, and CentralNic commits not to market it with any other meaning than as the Slovak country code. Moreover, while some of the ccTLDs we work with welcome the export revenues from repurposing their TLDs, such practices are specifically restricted under recent contractual requirements put in place by the Slovak Government in response to this concern being raised by SK-NIC’s policy committee.

Jombik’s petition, which claimed to be supported by 13 of the top 15 .sk registrars covering 73% of .sk’s 360,000 domains, called for the ccTLD to be handed over to a “new independent non-profit organization” that more fairly represented the Slovak internet community.

But Crawford said that .sk already has strong community representation, which is guaranteed by the registry’s contract with the Slovak government.

“I am honestly unaware of any ccTLD where the Government, the internet community in general and the registrars all have such a defined and important role,” he said, adding:

There will be changes under our management: The Government contract has recently been beefed up placing further stability and disclosure responsibilities on SK-NIC, including escrowing the registry data to the Government cloud, a formalised Service Level Agreement, giving the Government the right to audit SK-NIC’s performance, etc., all of which we will abide by. We have other ideas too on contributing to the Slovak internet, and we are planning to hold discussions with not for profits, industry associations, Universities and other such entities in Slovakia, to seek their guidance on the best ways to do this.

Whether these promises and actions will be enough to assuage critics of the deal, who are also motivated by a sense of national pride and aggrieved that what is arguably a national resource is falling into foreign hands, remains to be seen.

Having a ccTLD manager acquired outright by a foreign entity without a redelegation by ICANN/IANA is an unusual occurrence. Only the $109 million acquisition of .CO Internet by US-based Neustar back in 2014 springs to mind.