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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.

Priced to sell: $46m of two-letter .xxx names

Kevin Murphy, January 7, 2016, Domain Registries

ICM Registry has added over 1,200 two-character .xxx names to its catalog of priced premiums.

With prices ranging from $100,000 to $37,500, the newly offered domains carry a total ticket price of over $46 million.

The only six-figure name on the list is vr.xxx. ICM said in a press release today it has already sold vr.porn and vr.sex for $100,000 apiece.

There are seven names with adult connotations (such as 69.xxx and bj.xxx) priced at $75,000, eight more at $50,000 and two at $40,000.

The rest of the list of 1,227 names are being offered at $37,500, which is roughly 10 times the prices on the equivalent .porn, .sex and .adult domains.

While ICM noted the interest in domain investing from China recently, it does not appear to have valued its numeric-only domains (such as 88.xxx) any more highly than less attractive-looking combinations (such as 0o.xxx).

Judging by the list published on ICM’s web site, it has already sold well over 300 two-character domains in its newest three gTLDs.

Had those sold at the buy-now prices it would have raised over $1.1 million in revenue.

But ICM since September has been offering an option to register premium names for premium annual fees that are lower than the one-off price. A $37,500 domain costs $3,000 a year to register, under this model.

The total value of ICM’s premium list, including all the longer domains, is roughly $115 million.

ICM claws back 68 .porn names it accidentally released

ICM Registry has recovered nine .porn and .adult domain names from their registrants after they were accidentally released into the market.

Domains such as ads.porn, hosting.adult and buy.porn were among those snapped up by registrants, despite the fact that they were supposed to be registry-reserved.

ICM CEO Stuart Lawley told DI that a list of 68 .porn/.adult names (34 strings in each of the two gTLDs) have been brought back into the registry’s portfolio.

Only nine had been registered in the less than 24 hours the names were in the available pool, he said.

Lawley said it was his own personal fault for not sending the reserved list to back-end provider Afilias.

The affected registrants have been offered a domain from ICM’s premium list up to the value of $2,500 for each of the names ICM took back, he said.

Only one registrant has so far declined the offer, Lawley said.

Konstantinos Zournas of OnlineDomain, who broke the news about ads.porn yesterday, identifies this former registrant as “James” and reported that he is taking legal advice.

This is not the first time that a registry has accidentally released reserved names into the pool, where they were subsequently snapped up by domainers.

In January, .CLUB Domains accidentally sold credit.club, a name it had planned to keep on its premium reserved list for $200,000, for $10.99.

In that case, .CLUB honored the purchase after the buyer agreed to develop the site, scoring many brownie points in the domain investor community.

Both .CLUB and ICM have terms in their agreements allowing domains accidentally released to be recovered.

In ICM’s case, the names it accidentally released were not premiums, but rather domains that the registry plans to use as part of its own business — not to be sold at any price.

It used buy.xxx as a cornerstone of its .xxx marketing, for example, and it plans to use buy.porn and buy.adult for the exact same purpose.

ICM beats own annual projections with .porn on day one

ICM Registry says it managed to comfortably beat its own expectations for annual sales within the first eight hours of .porn and .adult going into general availability yesterday.

CEO Stuart Lawley said that there were 10,038 .porn domains and 8,277 .adult domains in its registry at the end of yesterday.

The company’s new gTLD applications with ICANN had predicted 10,000 .porn domains and 3,000 .adult domains at the end of the first year of availability, he said.

“We are therefore delighted to have exceeded those numbers on day one of GA,” he said. “We are particularly pleased with the high numbers from .adult.”

The majority of the names were registered either during the sunrise periods (ICM had two per TLD) or the recently ended “domain matching” program, which gave .xxx owners first dibs on matching .porn and .adult names.

A month ago, the company said .porn received 3,995 registrations while .adult had 3,902 at the end of the sunrises.

Earlier this week, after domain matching ended, Lawley said that .porn had almost 7,500 names while .adult had almost 7,000.

ICM will launch .sex in September.