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Two companies “capture” auDA

Membership votes of the Australian ccTLD registry auDA could now essentially be captured by just two companies, potentially including new back-end provider Afilias, according to data from a disgruntled former director.

According to Josh Rowe’s analysis of auDA’s newly swollen members list, 39.2% of auDA’s members are now employees of CrazyDomains owner Dreamscape Networks, after Dreamscape signed up a whopping 527 staffers.

Assuming bloc-voting, Dreamscape would need support from only one of either Afilias (with 12.4% of members) or the registrar Arq Group (formerly Melbourne IT, with 15%) to obtain a simple majority in any member vote, judging by Rowe’s figures.

His analysis, sent out to supporters and forwarded to DI this week, was based on auDA’s official member list, which includes full contact information for each member. He had to crowdfund a couple hundred bucks to obtain the list from auDA.

Rowe told ITWire that in most cases the new members listed their employer’s address as their own.

The names-only list published on auDA’s web site currently stands at 1,345 people by my count, about a thousand more than it contained just a few days ago.

Rowe’s tally chimes roughly with my previous estimate that about 150 Afilias employees had joined auDA. Rowe makes it 166.

auDA had previously publicly thanked the three aforementioned companies, along with the registrar Ventra IP, for helping with the membership drive, which auDA says will help it diversify its membership as per the instructions of the Australian government.

The new members will not have the ability to vote in the auDA extraordinary general meeting, which is due to take place at midnight UTC tonight (1000 Friday morning in Melbourne). Their memberships should be active by the time the annual general meeting rolls around in a few months, however.

Tonight’s meeting will see the 300-odd older members vote on whether to fire auDA’s three independent directors. A fourth motion, to express no confidence in CEO Cameron Boardman, was removed from the agenda by the auDA board.

auDA was forced to called the meeting after Rowe and his allies, dismayed by what they see as policy and transparency missteps, managed to rally the support of more than the threshold 5% of the member base.

That was fewer than 20 people under the smaller membership (though Rowe’s petition obtained 22 signatures). Now it would be around 67 people.

This presumably means that Rowe’s allies — the so-called “Grumpies” — have lost their ability to shake things up in the auDA boardroom in future.

However, it presumably also means that if DreamScape, Afilias or Arq wanted to cause trouble, they could strong-arm their employees into supporting whatever flag they wanted to wave.

auDA chair defends $9 million windfall as no-confidence vote looms

Kevin Murphy, July 18, 2018, Domain Policy

The chair of .au registry auDA has appealed to its membership for calm ahead of a vote of no confidence in himself, the CEO, and two of his fellow directors.

Chris Leptos yesterday defended the AUD 12 million ($9 million) windfall the organization has received as a result of its transition from long-term registry back-end Neustar to rival Afilias.

By opening the back-end contract to competition, and going with a bid far cheaper than the incumbent’s historical pricing, auDA saved itself a tonne of cash.

Some members reckon the money, which has been placed in a “marketing and innovation fund”, should have instead be returned to registrants via far lower prices for .au domains.

Leptos said the money was better used to promote .au rather than disappearing to the coffers of the back-end provider, writing;

What is most surprising to me is that a small number of members are criticising the new $12 million Marketing and Innovation Fund that will be used to grow the .au namespace. The fact is that auDA now has more funds, and those funds are being ploughed back into lower wholesale prices, and programs that will benefit participants in the .au namespace, rather than benefiting the private owners of the former registry operator. On any reasoned analysis, this is a good thing.

He assured disgruntled members that their concerns about this and other matters are being listened to, but noted the diversity of views among the membership.

Some members say auDA is not listening to their concerns. I can assure you that auDA is listening to its members and stakeholders at both management level and board level. The reality, however, is that auDA needs to balance the requirements of many members and stakeholders who disagree among themselves.

Leptos and two other directors are facing a vote to fire them from the board on July 27. CEO Cameron Boardman faces a no-confidence vote the same day,

The meeting was scheduled following a petition of members orchestrated at Grumpier.com.au, which managed to get signatures from over 5% of auDA’s then 320-odd members.

The Grumpies are currently trying to crowd-fund AUD 4,650 to pay for legal and other fees associated with this meeting. At time of writing, they’re about half-way there.

They’re also unhappy with auDA’s transparency, and with moves such as the currently delayed plan to sell direct second-level .au domains.

Leptos yesterday urged members to vote against the four resolutions, saying that the organization should not be “distracted” from implementing reforms recently mandated by the Australian government following a review.

auDA recently received 955 new membership applications — a four-fold increase in its member base — largely as a result of hundreds of sign-ups from staff at Afilias and the largest .au registrars. These people will not be approved in time to vote at the July 27 meeting.

Fight breaks out as Afilias eats Neustar’s Aussie baby

The transition of .au to Afilias’ registry platform over the weekend seems to have gone quite smoothly, but that hasn’t stopped Neustar and a former key executive from lashing back at what it says are the gaining company’s “misinformed” statements.

The war of words, which has got quite nasty, came as Afilias transferred all 3.1 million .au domains to its control, after 16 years with the former incumbent.

Neustar, which hadn’t said much about losing one of its most-lucrative TLD contracts, on Friday published a lengthy blog post in which it said it wanted to “set the record straight” about Afilias’ statements leading up to the switch.

Afilias, in a series of blog posts and press releases since it won the .au contract, has been bigging up its technical capabilities.

While it’s not directly criticized Neustar and predecessor AusRegistry (which Neustar acquired for $87 million), the implication of many of these statements is that Neustar was, by comparison, a bit shit.

In Neustar’s latest post, Aussie VP George Pongas takes issue with several of these claims.

Any implications that the company did not offer 24/7 registrar support were incorrect, he wrote. Likewise, the idea that it did not have a DNS node in Western Australia was not true, he wrote.

He also took issue with claims that Afilias would offer improved security and a broader feature set for registrars, writing:

We’ve raised a number of concerns directly with auDA about what we considered to be inaccurate remarks comparing Neustar’s systems with the new Registry and implying that the new Registry will include “all previous functionality plus enhanced security and authentication measures”, as stated in recent auDA Member communications. We questioned auDA about this and were informed that the statement is comparing the various testing phases of Afilias’ Registry – so the latest version has “all previous functionality” of the earlier versions. It doesn’t mean the Registry will have “all previous functionality” of Neustar’s platform – which we believe the statement implies. It is a fact that a number of the proprietary features and services that Neustar currently provides to Registrars will no longer be available under the new Registry system, and thus Registrars will likely notice a difference.

“We stand by our statements,” an Afilias spokesperson told DI today.

While Neustar’s corporate stance was fairly reserved, former AusRegistry boss Adrian Kinderis, never a shrinking violet, has been reacting in an almost presidential fashion, using Twitter to describe auDA CEO Cameron Boardman as “incompetent”, criticizing a reporter, and using the hashtag #crookedcameron.

Kinderis, who headed up AusRegistry for the whole of its 16-year run with .au, left Neustar in April, three years after the acquisition. He’s now running something called MadBarry Enterprises and is still associated with the new gTLD .film.

He reckons Neustar lost the .au contract purely for financial reasons.

While Neustar is believed to have lowered its registry fee expectations when pitching to continue as the back end, auDA will save itself about AUD 9 million a year ($7 million) under Afilias, compared to the old regime.

auDA is not expected to hand this saving on to registrars and registrants, though I hear registrars have been offered marketing rebates recently.

auDA has previously told us that Afilias scored highest on the technical evaluation of the nine bidders, and that it was not the bidder with the lowest fee.

Kinderis is also of the opinion that Afilias is among those helping auDA stack its membership with compliant stooges.

Last month, auDA announced a dramatic four-fold increase in its membership — getting 955 new membership applications in just a month.

auDA thanked Afilias for this growth in membership, alongside three of the largest .au registrars: Ventra IP, Arq Group (formerly Melbourne IT), and CrazyDomains owner Dreamscape Networks.

An Afilias spokesperson said that the company had offered its staff the option to become auDA members and about half — I estimate at roughly 150 people based on Afilias’ previously published headcounts — had taken it up on the offer.

It sounds rather like Afilias footed the AUD 22 per-person “Demand-class” membership application fees.

The rapid increase in membership at auDA has raised eyebrows in the .au community, with some accusing the registry of “branch stacking”.

That’s an Australian term used to describe the practice of signing up large numbers of members of a local branch of a political party in order to swing important votes.

The 955-plus new members will not be approved in time to influence the outcome of the vote to oust the auDA chair and others later this month.

But they will have voting rights by the time auDA’s annual general meeting comes around later this year. The AGM is when auDA will attempt to reform itself in light of a harsh government review of its practices.

As for the migration to Afilias itself, it seems to have gone relatively smoothly. I’m not aware of any reports of any serious technical issues, despite the fact that it was the largest TLD migration ever.

Some members have pointed out that most of .au’s ops are now off-shore, and old auDA Whois service is now hosted on a .ltd domain (hey, somebody’s got to use it) which is itself protected by Whois privacy.

I also noticed that the auDA web site, which used to have a hook into the registry that published an updated domain count every day, is no longer working.

Biggest TLD handover in history happens this weekend

Australia’s ccTLD registry will be down for 36 hours this weekend as it executes the biggest back-end transition in the history of the DNS.

Starting 0800 AEST on Saturday (2200 UTC on Friday), Afilias will take over the running of .au from Neustar-owned AusRegistry, after about 16 years in the saddle.

DNS will not be affected — meaning all .au domains should continue to resolve — but there won’t be any new creates, renews, transfers or changes during the downtime.

There are over 3.1 million domains in .au, more than the 2.7 million names in the .org registry when Afilias took over that contract from Verisign in 2003.

Afilias was picked from a pool of nine candidate back-end operators last December.

auDA, the registry, will save itself AUD 9 million ($7 million) per year at least, due to the lower per-domain fee Afilias is charging.

But hardly any of that saving is going to be passed on to registrars and ultimately registrants.

Bruce Tonkin, who chaired the selection committee for auDA, told us a few months back that much of the cash will be invested in marketing.

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.