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New gTLD revenue cut by HALF in ICANN budget

Kevin Murphy, January 22, 2018, Domain Policy

The new gTLD industry is performing terribly when compared to ICANN’s predictions just six months ago.

ICANN budget documents published over the weekend show that by one measure new gTLDs are doing just 51% of the business ICANN thought they would.

The new budget (pdf) shows that for the fiscal year 2018, which ends June 30, ICANN currently expects to receive $4.6 million in registry transaction fees.

These are the fees registries must pay for each new registration, renewal or transfer, when the TLD has more than 50,000 domains under management.

In a draft budget (pdf) published March 2017, its “best estimate” for these fees in FY18 was $8.9 million, almost double its newest prediction.

That prediction lasted until the approved budget (pdf) published last August.

The budget published at the weekend expects this transaction revenue to increase 31.1% to $6 million by June 30, 2019, still a long way off last year’s estimate.

At the registrar level, where registrars pay a transaction fee regardless of the size of the customer’s chosen gTLD, ICANN expects new gTLD revenue to be $3.9 million in FY18.

That’s just 52% of its March/August 2017 estimate of $7.5 million.

Looking at all reportable transactions — including the non-billable ones — ICANN’s projection for FY18 is now 21.9 million, compared to its earlier estimate of 41.7 million.

ICANN even reckons the number of new, 2012-round gTLDs actually live on the internet is going to shrink.

Its latest budget assumes 1,228 delegated TLDs by the end of June this year, which appears to be a couple light on current levels (at least according to me) and down from the 1,240 it expected a year ago.

It expects there to be 1,231 by the end of June 2019, which is even lower than it expected have in June 2017.

I suspect this is related to dot-brands cancelling their contracts, rather than retail gTLDs going dark.

Revenue from fixed registry fees for FY18 is expected to be $30.6 million, $200,00 less than previous expectations. Those numbers are for all gTLDs, old and new.

Overall, the view of new gTLDs is not pretty, when judged by what ICANN expected.

It shows that ICANN is to an extent captive to the whims of a fickle market that has in recent years been driven by penny deals and Chinese speculation.

By contrast, legacy gTLDs (.com, .info, etc) are running slightly ahead of earlier projections.

ICANN now expects legacy registry transaction fees of $48.6 million for FY18, which is $200,000 more than predicted last year.

It expects registrar transaction fees of $29.5 million, compared to its earlier forecast of $29.4 million.

This is not enough to recoup the missing new gTLD money, of course, which is why ICANN is slashing $5 million from its budget.

ICANN slashes millions from its budget

Kevin Murphy, January 22, 2018, Domain Policy

ICANN has cut $5 million from its annual budget, warning the community that difficult decisions have to be made amid a slowing domain name market.

Staff and community members will all be affected by the cuts, whether in the form of less generous pay raises or fewer travel opportunities.

Cuts have also been proposed to international outreach, tech support, contractual compliance and translation services.

The organization at the weekend published for comment its proposed budget for fiscal 2019. That’s the year that begins July 1, 2018.

It would see ICANN spend $138 million, $5 million less than it expects to spend in fiscal 2018.

Four of the five top-line areas ICANN reports expenses will be cut for a total of $12 million in savings, while one of them — personnel — is going up by $7.3 million.

This rounds out to a $5 million cut to the total FY19 ICANN budget. Here’s the breakdown:

  • Personnel costs going up from $69.5 million to $76.8 million, up $7.3 million.
  • Travel and meetings costs are to go down from $17.8 million to $15.6 million, a $2.2 million saving.
  • Professional services costs will go down from $27.7 million to $23.4 million, a $4.3 million saving.
  • Administration and capital costs will go down from $22.5 million to $17.8 million, a $4.7 million saving.
  • The contingency budget is going down from $5.3 million to $4.5 million, a $800,000 saving.

Personnel costs are going up due to a combination of new hires and pay rises, but the average annual pay rise will be halved from 4% to 2%, saving $1.3 million, ICANN documentation states.

Headcount is expected to level out at about 425, up from the current 400, by the end of FY19.

The travel budget is going down due to a combination of cuts to services provided at the three annual meetings and the number of people ICANN reimburses for going to them.

The Fellows program — sometimes criticized for giving people what look like free vacations for little measurable return — is seeing the biggest headcount cut here. ICANN will only pay for 30 Fellows to go its meetings in FY19, half the level of FY18. The Next Gen program, a similar outreach program for yoof participants, goes down to 15 people from 20.

The Governmental Advisory Committee will get its number of funded seats reduced by 10 to 40. The ALAC and the ccNSO also each lose a few seats. Other constituencies are unaffected.

At the meetings themselves, translation is to be scaled back to be provided on an as-requested basis, rather than automatically translating everything into all six UN languages. Key sessions will continue to have live interpretation.

Outside of the three main meetings, ICANN is pulling back on plans to expand its irregular “capacity building” workshops in “under-served” areas of the world.

It’s also slashing the “additional budget request” budget by 50%.

In terms of compliance, a proposed Technical Compliance Monitoring system that was going to be built this year — a way to make sure gTLD registries and registrars are stable and secure — appears to be at risk of being deprioritized.

ICANN said it “will develop an implementation plan in due time, depending on the RFP results and, if needed, work with the Board to identify necessary resources and funds to support implementation of the project.”

The documents published today are now open for public comment until March 8.

The cuts I’ve reported here can be found from page 19 of this document (pdf).

The reason for the cutbacks is that ICANN’s revenue isn’t growing as fast as it once did, due to the slower than expected growth of the domain name industry in general. I’ll get to that a later article.

ICANNWiki could be first victim of budget cutbacks

Kevin Murphy, December 20, 2017, Domain Policy

ICANN is mulling whether to cut funding to ICANNWiki, the independent community encyclopedia, as part of its efforts to rein in spending.

There’s $100,000 at stake, more than half of the Oregon-based non-profit’s annual budget.

Ray King, the gTLD registry CEO who founded ICANNWiki in 2005, told DI today that ICANN has been providing funding for the last three years.

“While no decision has been made yet, there is a possibility that ICANN will not continue it,” he said in an email.

“We’ve poured our hearts and minds into this project for many years so this would be disappointing to say the least,” he said. “We believe in our mission and that it is in the community’s interest for this support to continue”.

An ICANN spokesperson said: “At this time, while it is highly unlikely that ICANN will be renewing its contract with ICANNWiki, we have not come to a final determination.”

ICANNWiki currently carries about 6,000 volunteer-edited articles covering many aspects of the ICANN community and the domain name industry in general.

George Clooney circa 1997It’s perhaps most recognizable for the frequently shared caricatures of community members it produces, such as this handsome devil, and the playing card decks handed out as freebies at ICANN meetings.

According to a letter (pdf) sent to ICANN earlier this month, ICANNWiki receives cash contributions of $161,000 a year, $61,000 of which comes from 10 corporate sponsors.

ICANNWiki estimates the 2,200 hours per year of volunteer work it benefits from is worth about $66,500. It says it has in-kind contributions worth about $40,000 from other companies.

It puts the value of its “reference services” at $339,959 a year.

That’s based on estimated visits to its site of 182,774 in 2017 (not including visits from its editors and staff) and a value per visit of $1.86 (based on an unrelated ROI calculation Texas Public Libraries used to justify its own existence earlier this year).

The ICANN $100,000 contribution is at risk now due to the organization’s plan to cut back on spending in the face of revenues that are coming in lower than expected due to a weak domain name market.

CEO Goran Marby said yesterday that its fiscal 2018 is currently running a million dollars short. Coupled with a perceived need to add an extra $80 million to its reserve budget, ICANN is looking for areas to cut costs.

ICANNWiki funding may be the low-hanging fruit in this endeavor; while it’s no doubt valuable (I probably use it two or three times per week on average), it’s perhaps not straightforward to quantify that value.

Even if the funding is cut, I would not expect ICANNWiki the web site to disappear, given the level of corporate sponsorship and in-kind services it receives and the low overheads suggested by its modest traffic numbers, but perhaps its growth and outreach ambitions would be curtailed.

UPDATE: This post was updated at 2307 UTC with a quote from ICANN.

ICANN, with $143 million budget, running out of cash

Kevin Murphy, December 19, 2017, Domain Policy

ICANN is to tighten its belt over the coming year as lower than expected revenue from domain name registrations has caused a budget shortfall and dwindling reserves.

The organization is $1 million short so far in its fiscal 2018, which CEO Goran Marby says is forcing him to look at making cuts to staffing costs, travel expenses, and community-requested projects.

Meanwhile, chair Cherine Chalaby says the board of directors is worried that ICANN’s reserve fund is $80 million shy of where it ideally should be.

Both men outlined their priorities in separate end-of-year blog posts this week.

It does not yet appear that anyone’s job is on the line.

Marby indicated that headcount would be reduced through attrition — sometimes not replacing staff who leave — rather than lay-offs.

“The reality is, ICANN has a significant budget but not an infinite budget. We need to make some changes, and can’t do everything we are asked,” he wrote, before explaining some areas where “efficiencies” could be found.

For example, when someone leaves ICANN org, we are taking a close look at the vacancy, the team’s needs and other people’s availability and skills before deciding if we are going to fill the role. We are also looking at our staff travel practices for ICANN meetings and other ICANN org commitments, reviewing our language services support levels and offering, and trying to consolidate our collateral and the volume of reports. We are looking at what projects we could delay or stop

Some might say that this renewed focus on how ICANN manages its money is overdue. The organization has bloated fast over the last several years, as over 1,200 new gTLD registries became contracted parties and interest in ICANN’s work grew globally.

In its financial year ending June 2012, it budgeted for revenue of $69.7 million and expenses of $67 million.

For FY2017, which ended this June, it was up to revenue of $132.4 million and expenses of $126.5 million.

Over the same period, headcount swelled from 158 full-time equivalents to 365. That was anticipated to grow to 413 by next June.

For the financial year ending next June, ICANN had budgeted for $142.8 million revenue, growing from $135.9 million, but Marby said in his blog post today that it might actually be flat instead.

As much as 64% of ICANN’s revenue is driven by transaction volumes — registrations, renewals and transfers — in gTLDs. In the quarter to September, revenue was $1 million behind plan due to lower than expected transactions, Marby said.

The message is to expect cuts, possibly to projects you care about.

Adding complexity, the ICANN board has decided following public consultation at 12 months funding is the appropriate amount ICANN should be keeping in reserve — so it can continue to function for a year should its contracted parties all abruptly decide not to pay their dues.

Unfortunately, as Chalaby outlined in his post today, this reserve pool is currently at about $60 million — just five months’ worth — so the organization is going to have to figure out how to replenish it.

Building up reserves to the tune of an extra $80 million is likely to put more pressure on the regular annual budget, leeching cash from other projects.

Chalaby said that the board will discuss its options at its February 2018 workshop.

Marby, meanwhile, said that a new budget will be out for public comment in mid-January.

Anger as ICANN splashes out $160,000 on travel

Kevin Murphy, March 15, 2016, Domain Policy

Should representatives of Facebook, Orange, Thomson Reuters, BT and the movie industry have thousands of ICANN dollars spent on their travel to policy meetings?

Angry registrars are saying “no”, after it emerged that ICANN last month spent $80,000 flying 38 community members to LA for a three-day intersessional meeting of the Non-Contracted Parties House.

It spent roughly the same on the 2015 meeting, newly released data shows.

ICANN paid for fewer than 10 registries and registrars — possibly as few as two — to attend the equivalent Global Domains Division Summit last year, a few registrars told DI.

The numbers were released after a Documentary Information Disclosure Policy request by the Registrars Stakeholder Group a month ago, and published on Friday (pdf).

It appears from the DIDP release that every one of the 38 people who showed up in person was reimbursed for their expenses to the tune of, on average, $2,051 each.

The price tag covers flights, hotels, visa costs and a cash per diem allowance that worked out to an average of $265 per person.

ICANN also recorded travel expenses for another two people who ultimately couldn’t make it to the event.

The NCPH is made up of both commercial and non-commercial participants. Many are academics or work for non-profits.

However, representatives of huge corporations such as Facebook and BT also work in the NCPH and let ICANN pick up their expenses for the February meeting.

Lawyers from influential IP-focused trade groups such as the Motion Picture Association of America and International Trademark Association were also happy for ICANN to pay.

One oddity on the list is the CEO of .sucks registry Vox Populi, who is still inexplicably a member of the Business Constituency.

MarkMonitor, a corporate registrar and Thomson Reuters subsidiary that attends the Intellectual Property Constituency, also appears.

Despite $80,000 being a relatively piddling amount in terms of ICANN’s overall budget, members of the Contracted Parties House — registries and registrars — are not happy about this state of affairs as a matter of principle.

ICANN’s budget is, after all, primarily funded by the ICANN fees registries and registrars — ultimately registrants — must pay.

“CPH pays the bills and the non-CPH travels on our dime,” one registrar told DI today.

One RrSG member said only two registrars were reimbursed for their GDD Summit travel last year. Another put the number at five. Another said it was fewer than 10.

In any event, it seems to be far fewer than those in the NCPH letting ICANN pick up the tab.

It’s not entirely clear why the discrepancy exists — it might be just because fewer contracted parties apply for a free ride, rather than evidence of a defect in ICANN expenses policy.

The NCPH intersessional series was designed to give stakeholders “the opportunity, outside of the pressures and schedule strains of an ICANN Public Meeting to discuss longer-range substantial community issues and to collaborate with Senior ICANN Staff on strategic and operational issues that impact the community”, according to ICANN.