Latest news of the domain name industry

Recent Posts

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.

101domain founder Wolfgang Reile dies at 67

Kevin Murphy, April 14, 2018, Domain Registrars

Wolfgang Reile, founder and former CEO of the registrar 101domain, has died, according to his former business partner and other sources.

He died unexpectedly at 67, April 6, according to Anthony Beltran, who took over the management of 101domain from Reile when Afilias acquired it back in 2015.

Born in Munich, Reile migrated to the US in the early 1990s and founded the registrar in 1999, Beltran said. He told DI:

He was a regular fixture in the ICANN scene, was a fun guy to be around, and was a natural storyteller (once you got used to the authentic German accent)

He was a friend and mentor to many, especially the staff at 101domain, and if you knew him and his straight-forward German fashion — was very opinionated, passionate, and yelling at you only meant he considered you a friend. He brought a passionate and dedicated energy that’s rare these days.

His international business background, including a spell at Disney in Asia, inspired 101domain’s strategy of providing access to the broadest possible range of ccTLDs and gTLDs, Beltran said.

The company currently has close to 140,000 gTLD domains under management and says it has tens of thousands of clients.

After the two men sold 101domain to Afilias, Reile stepped away from the industry to focus on family, travel and other businesses, Beltran said.

He is survived by his wife and three daughters. I gather his funeral will be held in San Diego, California, later today.

Afilias scraps plan to scrap Whois

Kevin Murphy, April 5, 2018, Domain Policy

Afilias has “temporarily suspended” its plan to migrate its TLDs to an essentially thin Whois model.

In what appears to be an effort to roll back some GDPR-related gun-jumping, the registry said it will instead wait and see how ICANN’s efforts to consult with European data protection authorities play out.

Afilias had told its registrars earlier this week that its public Whois output from May 25 will be devoid of any contact information for the registrant, as reported by DNW.

It had said that it would continue to work with law enforcement on access to Whois records, but said that others (such as trademark owners) would not have access until ICANN comes up with an accreditation program.

It was the first major gTLD registry to announce its GDPR plans, but it evidently received push-back.

The affected TLDs were to be: .info, .mobi, .pro, .poker, .pink, .black, .red, .blue, .kim, .shiksha, .promo, .lgbt, .ski, .bio, .green, .lotto, .pet, .bet, .vote, .voto, .archi, .organic and .llc.

Many more client gTLDs would have been able to opt-in to the same scaled-back system.

But the company told registrars today that it wanted to correct “mis-characterizations” of that message and wanted to “clarify that Afilias is not ‘going it alone'”.

Rather, it’s going to hang back until ICANN gets guidance from the EU’s DPAs.

“Importantly, we expect that ICANN’s request for guidance from the data protection authorities will yield helpful input that, in conjunction with the best thinking of the community, will enable a workable solution to emerge,” the Afilias message said.

The company said in a statement sent to DI tonight:

Afilias today announced that it is temporarily suspending plans to limit the display of WHOIS data to comply with the EU General Data Protection Regulation (GDPR) currently scheduled to take effect on 25MAY2018. Afilias has received a number of questions about its plans, and anticipates that they may be affected by guidance from data protection authorities that has been requested by ICANN. This guidance is expected to be materially helpful in the community’s efforts to resolve the various issues surrounding GDPR requirements.

Afilias is participating in a number of community groups that are considering these issues, including as a principal in ICANN’s pilot implementation of the Registration Data Access Protocol (RDAP), a potential technical solution for enabling differentiated access to registration data depending on the legitimate purpose of the requestor. For example, law enforcement may need access to certain types of Personally Identifiable Information (PII), trademark guardians to other types, etc. RDAP enables the management of this access in an efficient and effective manner.

As the deadline for GDPR implementation approaches, the community is working diligently in a number of areas to find solutions needed to balance a wide range of community interests. Afilias will continue working collaboratively within these groups in the expectation that appropriate solutions will be reached prior to the GDPR implementation date. Absent guidance from the data protection authorities, Afilias will reconsider its plans as appropriate to ensure compliance with GDPR.

It’s still very possible that Afilias, and other gTLD registries and registrars, could end up gutting Whois in much the same way come May 25 anyway, but for now at least it seems Afilias it willing to play wait-and-see.

As a reminder, there’s going to be an ICANN-supported conference call tomorrow on an Intellectual Property Constituency proposal for a post-GDPR Whois accreditation model.

Marby ponders emergency powers to avoid fragmented Whois

Kevin Murphy, April 4, 2018, Domain Policy

ICANN could invoke emergency powers in its contracts to prevent Whois becoming “fragmented” after EU privacy laws kick in next month.

That’s a possibility that emerged during a DI interview with ICANN CEO Goran Marby yesterday.

Marby told us that he’s “cautiously optimistic” that European data protection authorities will soon provide clear guidance that will help the domain industry become compliant with the General Data Protection Regulation, which becomes fully effective May 25.

But he said that a lack of such guidance will lead to a situation where different companies provide different levels of public Whois.

“It’s a a high probability that Whois goes fragmented or that Whois will be in a sort of ‘thin’ model in which very little information is collected and very little information is displayed,” he said. “That’s a sort of worst-case scenario.”

I should note that the interview was conducted yesterday before news broke that Afilias has become the first major gTLD registry to announce its Whois output will be essentially thin — eschewing all registrant contact data — from May 25.

Marby has asked European DPAs for two things.

First, guidance on whether its “Cookbook” proposal for a dramatically scaled-back, GDPR-compliant Whois is in fact GDPR-compliant.

Second, an enforcement moratorium while registries and registrars actually go about implementing the Cookbook.

“If we don’t get guidance that’s clear enough, we will see a fragmented Whois. If we get guidance that is clear enough we can work it out,” Marby said.

A moratorium could enable Whois to carry on in its current state, or something close to it, while ICANN goes about creating a new policy that fits with the DPA’s guidance.

If the DPAs refuse a moratorium, we’re looking at a black hole of indeterminate duration during which nobody — not even law enforcement or self-appointed trademark cops — can easily access full Whois records.

“It’s not something I can do anything about, it’s really in the hands of the DPAs,” Marby said. “Remember that it’s the law.”

While ICANN has expended most of its effort to date on creating a model for the public Whois, there’s a parallel effort to create an accreditation program that would enable organizations with “legitimate purposes” to access full, or at least more complete, Whois records.

It’s the IP lawyers that are driving this effort, primarily, terrified that their ability to hunt down cybersquatters and bootleggers will be diminished come May 25.

ICANN has so far resisted calls to endorse the so-called “Cannoli” draft accreditation model, with Marby publicly saying that it needs cross-community support.

But the organization has committed staff support resources to discussion of Cannoli. There’s a new mailing list and there will be a community conference call this coming Friday at 1400 UTC.

Marby said that he shares the worries of the IP community, adding: “If we get the proper guidance from the DPAs, we will know how to sort out the accreditation model.”

He met with the Article 29 Working Party, comprised of DPAs, last week; the group agreed to put Whois on its agenda for its meeting next week, April 10-11.

The fact that it’s up for discussion is what gives Marby his cautious optimism that he will get the guidance he needs.

Assuming the DPAs deliver, ICANN is then in the predicament of having to figure out a way to enforce, via its contracts, a Whois system that is compliant with the DPAs’ interpretation of GDPR.

Usually, this would require a GNSO Policy Development Process leading to a binding Consensus Policy.

But Marby said ICANN’s board of directors has other options, such as what he called an “emergency policy”.

This is a reference, I believe, to the “Temporary Policies” clauses, which can be found in the Registrar Accreditation Agreement and Registry Agreement.

Such policies can be mandated by a super-majority vote of the board, would have to be narrowly tailored to solve the specific problem at hand, and could be in effect no longer than one year.

A temporary policy could be replaced by a compatible, community-created Consensus Policy.

It’s possible that a temporary policy could, for example, force Afilias and others to reverse their plans to switch to thin Whois.

But that’s perhaps getting ahead of ourselves.

Fact is, the advice the DPAs provide following their Article 29 meeting next week is what’s going to define Whois for the foreseeable future.

If the guidance is clear, the ICANN organization and community will have their direction of travel mapped out for them.

If it’s vague, wishy-washy, and non-committal, then it’s likely that only the European Court of Justice will be able to provide clarity. And that would take many years.

And whatever the DPAs say, Marby says it is “highly improbable” that Whois will continue to exist in its current form.

“The GDPR will have an effect on the Whois system. Not everybody will get access to the Whois system. Not everybody will have as easy access as before,” he said.

“That’s not a bug, that’s a feature of the legislation,” he said. “That’s not ICANN’s fault, it’s what the legislator thought when it made this legislation. It is the legislators’ intention to make sure people’s data is handled in a different way going forward, so it will have an effect.”

The community awaits the DPAs’ guidance with baited breath.