ICANN and Verisign have agreed to extend their .com registry contract for another six years, but there are no big changes in store for .com owners.
Verisign will now get to run the gTLD until November 30, 2024.
The contract was not due to expire until 2018, but the two parties have agreed to renew it now in order to synchronize it with Verisign’s new contract to run the root zone.
Separately, ICANN and Verisign have signed a Root Zone Maintainer Agreement, which gives Verisign the responsibility to make updates to the DNS root zone when told to do so by ICANN’s IANA department.
That’s part of the IANA transition process, which will (assuming it isn’t scuppered by US Republicans) see the US government’s role in root zone maintenance disappear later this year.
Cunningly, Verisign’s operation of the root zone is technically intermingled with its .com infrastructure, using many of the same security and redundancy features, which makes the two difficult to untangle.
There are no other substantial changes to the .com agreement.
Verisign has not agreed to take on any of the rules that applies to new gTLDs, for example.
It also means wholesale .com prices will be frozen at $7.85 for the foreseeable future.
The deal only gives Verisign the right to raise prices if it can come up with a plausible security/stability reason, which for one of the most profitable tech companies in the world seems highly unlikely.
Pricing is also regulated by Verisign’s side deal (pdf) with the US Department of Commerce, which requires government approval for any price increases until such time as .com no longer has dominant “market power”.
The .com extension is now open for public comment.
Predictably, it’s already attracted a couple of comments saying that the contract should instead be put out to tender, so a rival registry can run the show for cheaper.
That’s never, ever, ever, ever going to happen.
Verisign beat its sales expectations in the first quarter of the year, but leadership said rapid growth from Chinese registrants will now “normalize”.
The .com/.net registry last night reported net income up 21% at $107 million, on revenue that was up 9.1% to $282 million.
That’s based primarily on it selling 2.65 million net new .com/.net names during the quarter, at 7.1% increase on the Q1 2014 level baseline. It said it sold 10 million new names in the quarter, up from 8.7 million a year ago.
For comparison, Q1 2015 saw 1.51 million net adds across the two TLDs. Three months ago, the company had predicted net adds to be 1.5 to 2 million names.
It had 142.5 million names at the end of the quarter, 126.6 million of which were .com.
CEO James Bidzos told analysts: “We again saw activity coming from registrars in China that exceeded our expectations.”
However, he added: “At this point, we expect activity from registrars in China to normalize as we continue through the second quarter.”
When pressed, CFO George KIlguss elaborated (according to the SeekingAlpha earnings call transcript):
as we look at the trends, we’ve seen the demand that happened in the second half of the first quarter kind of ebb and flow. So we saw it come. It was pretty strong for a few weeks and then it came back to more than normalized path. So we don’t have a perfect crystal ball, but based on the trends that we’ve seen that we’ve been tracking, it seems to be back on the normalized path for that particular region, at least as what we’ve seen historically.
Verisign is currently negotiating for the renewal of its .com contract with ICANN, which may or may not enable it to raise its government-frozen registry prices in future.
Verisign has warned investors that the current boom in .com sales is largely coming from Chinese domainers and may not be sustainable.
The company has added an unprecedented 4.1 million domain in .com and .net so far during the fourth quarter.
“While there continues to be demand for domain names globally, the recent increased volume for Verisign’s top level domains, as well as top level domains of other registries, during the fourth quarter is coming largely through registrars in China,” the company said in a Securities and Exchange Commission filing.
It listed several factors that are likely responsible for the sudden uptick, but warned that renewal rates are typically not great.
In the past, Verisign has discussed many factors that affect the demand for domain names, including, but not limited to economic, social, and regulatory conditions, Internet adoption, Internet penetration, and increasing e-commerce. In addition to these factors affecting demand, Verisign is also evaluating additional potential factors unique to China that may also be responsible for the recent increased volume of new registrations in China.
In no particular order, these potential factors, or combination of factors, could include, but may not be limited to, government initiatives in China to develop their online economy such as ‘Internet Plus;’ registry and registrar regulatory requirements; cultural influences such as the popularity of numeric domain names; increasing competition amongst Chinese registrars; potential increases in domain name investment activity; and recent capital markets volatility and access to capital in China.
Verisign cannot predict if or how long this increased pace of gross additions will continue and we cannot at this time predict what the renewal rate for these domain names will be. Verisign has noted in the past that renewal rates for domain names registered in emerging markets, such as China, have historically been lower than those registered in more developed markets.
It’s difficult to imagine that Chinese investors have managed to find four million unregistered domains worth keeping.
There are currently 123,497,852 domains in the .com zone file, according to Verisign’s web site.
Verisign is not the only registry that appears to be benefiting from a deluge of registrations from China.
XYZ.com has seen over 440,000 domains added to its .xyz zone file in the last three weeks, bringing its total to over 1.5 million, which appear to be largely coming through Chinese registrars.
Verisign has admitted it “sponsors” an analyst who has written more than a dozen articles singing the praises of .com and questioning the value of new gTLDs over the last few years.
Zeus Kerravala is the founder and principal analyst at ZK Research. He writes a regular column for Network World called Network Intelligence.
Last week, domain industry eyebrows were raised by the latest in a series of pro-.com articles — all of which seem to have been removed by Network World in the last 24 hours — to appear in the column.
The latest article was entitled “Why more companies are ditching new domain names and reverting to .com“.
Kerravala basically mined domain industry blogs, including this one, for examples of companies preferring .com over ccTLDs and new gTLDS, to support a view that .com is awesome and other TLDs are not.
He could have quite easily have used the same method to reach the opposite conclusion, in my view.
The Halloween-themed article concluded:
The good news is that .com will be here now and into the future, just like it has been for the past 30 years to provide treats to businesses after they have been “tricked” by other TLDs.
The article, and 12 more before it dating back to August 2012, looked to some like Verisign spin.
Other headlines include “Why .com is still the domain of choice for businesses” and “New generic top-level domain names do more harm than good” and “Companies are movin’ on up to .com domain names”.
They’re all basically opinion pieces with a strongly pro-.com slant.
The opinion that .com is better than the alternatives is not uncommon, especially among domainers who have lots of money tied up in .com investments.
The fact that Kerravala, who doesn’t usually touch the domain industry in his column, has written a dozen stories saying essentially the same thing about .com over the last couple of years looked a bit odd to some in the domain industry.
And it turns out that he is actually on the Verisign payroll.
A Verisign spokesperson told DI: “ZK Research is a sponsored industry analyst and blogger.”
The company declined to answer a follow-up question asking whether this meant he was paid to blog.
Kerravala told DI that Verisign is one of his clients, but denied blogging on its behalf. He said in an email:
they are a client like many of the other large technology firms. Although I blog, like many analysts, I am first an foremost an analyst. I have paid relationships with tech vendors, service providers, end user firms, resellers and the financial community.
Verisign pays me for inquiry time and to have access to my research. Verisign has many relationships like this with many analyst firms and I have this type of relationship with many other technology firms.
In no way do vendors pay me to write blogs nor do they influence my research or my opinions. Sometimes, I may choose to interview a vendor on a certain topic and include them in the article.
Kerravala had not disclosed in his Network World articles or boilerplate biography that Verisign is one of his clients.
In a January 2014 article published on SeekingAlpha, “New Generic Top Level Domain Names Pose No Threat To VeriSign“, contains a disclosure that reads in part “I have no business relationship with any company whose stock is mentioned in this article.”
Kerravala said in an email that although his relationship with Verisign started in 2013, the company was not a client at the time the SeekingAlpha article appeared.
The relationship came to light after new gTLD registry Donuts emailed Kerravala via a third party — and Kerravala says under false pretenses — claiming to have liked his most recent article and asking for a contact name at Verisign.
He would have responded honestly to just being asked directly by Donuts, he said.
In a telephone conversation yesterday, he said that his articles about .com represent his genuinely held beliefs which, as we agree, are not particularly unusual.
He observed that DI has a generally pro-TLD-competition point of view, and that many of my advertisers are drawn from the new gTLD industry, and said that his relationship with Verisign is not dissimilar to DI’s relationship to its advertisers.
New gTLDs grew faster than .com in the last 12 months.
That seems to be one of the conclusions that can be drawn from Verisign’s Q2 Domain Name Industry Brief, which was published (pdf) yesterday, if you dig into the numbers a little.
The headline number is that the number of all domains across all TLDs was 296 million, up sequentially by 2.2 million domains. That’s annual growth of 16.4 million domains, Verisign said.
I thought it might be interesting to see where that growth came from, so I plugged the numbers from Verisign’s last five DNIB reports into a spreadsheet, reproduced in this table.
From these numbers, we can calculate the quarterly sequential growth, measured in domains, for the whole DNS, for .com, for new gTLDs and for ccTLDs.
That table looks like this:
It appears from this table that .com grew by more domains than new gTLDs over the last year — 4.8 million versus 4.36 million — but the numbers are a bit misleading due to the way Verisign sources its data.
For most ccTLDs, Verisign has always used the third-party research outfit ZookNic, which has its own way of estimating registration volumes.
For new gTLDs, Verisign uses the zone files as published daily by ICANN — the same source DI and others use to measure volume.
However, for .com Verisign uses its own in-house data source. It is, after all, the .com registry.
The numbers for .com you find in the DNIB reports are exactly the same as the numbers Verisign gives financial analysts and investors when it reports its quarterly earnings.
And the company changed the way it reports those numbers in Q1 this year.
See that unusually high addition of 2.2 million names in .com in Q1 in the above table? That reflects the addition of very nearly 750,000 hidden .com names in March this year.
At that time, Verisign started counting domains that are on “hold” statuses, largely due to new ICANN policies on unverified Whois information.
The last two DNIB reports have sourced .com numbers with this disclosure:
The domain name base is the active zone plus the number of domain names that are registered but not configured for use in the respective Top-Level Domain zone file plus the number of domain names that are in a client or server hold status.
The actual Q1 growth number for .com should in the 1.4 million to 1.5 million range, which would bring .com’s total growth over the last four quarters down to roughly 4.1 million names.
An apples-to-apples comparison of extant zone-file domain growth would show new gTLDs beating .com, in other words.
But is this a fair measure of demand?
No. It’s fairer to say that .com still outsells its competition by a long way.
New gTLDs had yet to experience any significant churn by Q2 this year, as most had been on the market for under a year, so the growth numbers are more or less untempered by the renewal cycle.
While Verisign’s .com growth is net, for new gTLDs it’s almost all gross.
Verisign says in the latest DNIB has it had 8.7 million new registrations across .com and .net in the second quarter, which would be roughly eight times as many as new gTLDs — all several hundred of them combined — managed to move.