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Uniregistry wins .gift and AOL yanks .patch bid

Kevin Murphy, August 16, 2013, Domain Registries

Three more new gTLD applications were withdrawn today, only one of which was related to this week’s previously reported batch of private auctions.

First, Famous Four Media has pulled out of the .gift race with Uniregistry, presumably after some kind of deal. They were the only two applicants, meaning Uniregistry wins the contention set.

Potentially complicating matters, there are also two applicants for .gifts — if the plural/singular debate is reopened, which seems possible after today’s events, it might not be over yet.

Second, AOL withdrew its application for .patch, which was to be a single-registrant space for its Patch-branded network of local web sites.

This seems to be connected to cost-cutting at AOL.

Last week, the company fired Patch’s creative director in front of 1,000 colleagues and announced it was cutting the number of sites in the network.

Today, it started laying off almost half of Patch’s 1,100 employees, according to the Wall Street Journal.

Third, Top Level Domain Holdings withdrew from the .guide contention set, leaving Donuts the winner — a formality following this week’s Innovative Auctions auction, which it lost.

Donuts, Uniregistry and Famous Four respond to ICANN’s new gTLD security bombshell

Kevin Murphy, August 6, 2013, Domain Registries

Following the shock news this morning that ICANN wants to delay hundreds of new gTLD applications due to potential security risks, we pinged a few of the biggest applicants for their initial reactions.

Donuts, Uniregistry and Famous Four Media, which combined are responsible for over a fifth of all applications, have all responded so far, so we’re printing their statements here in full.

As a reminder, two reports published by ICANN today a) strongly warn against delegating so-called “dotless” domains and b) present significant evidence that “internal name collisions” are a real and present danger to the security and stability of many private networks.

ICANN, in response to the internal name collision issue, proposed to delay 20% of all new gTLD applications for three to six more months while more research is carried out.

It also wants to ask new gTLD registries to conduct outreach to internet users potentially affected by their delegated gTLD strings.

Of the three, Donuts seems most upset. It sent us the following statement:

One has to wonder about the timing of these reports and the motivations behind them. Donuts believes, and our own research confirms satisfactorily to us, that dotless domains and name collision are not threatening to the stability and security of the domain name system.

Name collisions, such as the NxD (in the technical parlance) collisions studied in this report, happen every day in .com, yet the study did not quantify those and Verisign does not block those names from being registered.

We’re concerned about false impressions being deliberately created and believe the reports are commercially or competitively motivated.

There is little reason to pre-empt dotless domains now when there are ICANN processes in place to evaluate them in due course. We don’t believe that ICANN resources need to be deployed at this point on understanding the potential innovations of possible uses nor any security harms.

We also think that name collision is an overstated issue. Rather than take the overdone step of halting or delaying these TLDs, if the issue really is such a concern, it would be wiser to focus on the second-level names where a conflict could occur.

As the NTIA recently wrote, Verisign’s inconsistencies on technical issues are very troubling. These issues have been thoroughly studied for some time. It’s far past due to conclude this eight-year process an move to delegation

As I haven’t previously heard any reason to doubt Interisle Consulting’s impartiality or question its motivation in writing the name collisions report I asked Donuts for clarification, but the company declined to elaborate.

Interisle has been working with ICANN for some time on various technical studies and is also one of the new gTLD program’s independent evaluators, responsible for registry services evaluations.

Uniregistry CEO Frank Schilling was also unhappy with the report. He sent the following statement:

We are deeply dismayed by this new report, both by its substance and its timing. On the substance, the concerns addressed by the report relate, primarily if not solely, to solvable problems created by third-parties using the DNS in non-standard ways. We expect that any problems will be addressed quickly by the companies and individuals that caused them in the first place.

On ICANN’s timing, it is, come just as the first new gTLDs are prepared to launch, very late and, quite obviously, highly disruptive to the long-standing business plans of the companies that relied on ICANN’s guidebook and stated timelines. Uniregistry believes that the best approach is to move forward with the launch of all new gTLDs on the existing schedule.

Finally, Famous Four Media is slightly more relaxed about the situation, judging by the statement it sent us:

Famous Four Media’s primary concern is the security and stability of the Internet. Since this is in the interest of all parties involved in the new gTLD program from registries to registrants and all in between Famous Four Media welcomes these proposals.

Whilst the latest report, and the consequent ICANN proposals, will inevitably cause delays and additional costs in the launches of new gTLDs, Famous Four Media does not believe it will impact its go-to-market plans significantly. The majority of our TLD strings are considered “low risk” and see this in a very positive light although other applicants might not afford to be as sanguine.

According to the DI PRO New gTLD Application Tracker, which has been updated with the risk levels ICANN says each applied-for gTLD poses, 18 of Famous Four’s 60 original applications are in the riskiest two categories, compared to 23 of Uniregistry’s 54 and 102 of Donuts’ of 307.

New gTLD revenue projections revealed in leaked Famous Four presentation

Kevin Murphy, August 1, 2013, Domain Registries

Famous Four Media expects to make an average of almost $30 million revenue in year one from each of the new gTLDs it secures.

That’s according to a PowerPoint presentation (pdf), written for potential investors, that was provided by an anonymous source (I suspect not a fan of the company) to DI this week.

According to the presentation, “potential year 1 revenues for an average Registry” could amount to $28.4 million, the vast majority of which would come from sunrise, landrush and premium domain sales.

The presentation, dated June 2013, was prepared by Domain Venture Partners, the immediate parent of the 60 shell companies that Famous Four is using to apply for its 60 gTLDs.

The company was unable to provide an executive to discuss this story until August 14.

But according to the PowerPoint, the Domain Venture Partners II fund is an investment vehicle set up to “bridge the gap” in Famous Four’s funding requirements:

Domain Venture Partners II shall provide a unique structured regulated investment opportunity to participate in the new gTLD programme to provide secured fixed annual returns along with additional venture type returns at a time in the process where most of the major risks have been removed.

DVP is looking to raise up to $400 million, having raised £48.3 million ($73.2 million) in 2011 via the Domain Venture Partners I fund, it says. The current round opened in March and is expected to close in November.

Famous Four has applied for 60 gTLDs — mostly highly sought-after strings such as .poker, .music, .shop, .search and .buy — 10 of which were initially uncontested.

According to the presentation, landrush period auctions would account for about a third of year-one revenue in each gTLD: $9.7 million. That’s based on selling 45,697 domains for an average price of $213.34.

Revenue from trademark owners is the second-largest chunk. An average sunrise period could raise $6.9 million, assuming 39,679 domains at an average of $173.5 each, according to the PowerPoint.

Sales of regular domains during the first first year of general availability could raise $4.1 million, based on 225,759 registrations at $18.47 apiece, the presentation says.

Here’s the full slide, one of 33 in the deck:

Domain Venture Partners II presentation

The presentation says that the projections are “based on historical data points established by the existing operational gTLD Registries”, adding:

The figures are averages and therefore would represent projections for a standard gTLD Registry. Potential year 1 revenues for specific Registries may be below or above this average.

Some of the numbers strike me as optimistic. While the likes of .asia and .mobi may have seen these registration volumes due to the novelty and scarcity of new gTLD namespaces, my feeling is that those days are over.

The new gTLD program is likely to see scores of overlapping sunrise and landrush periods; it’s difficult to see registries benefiting from the same focus and excitement as their predecessors.

There’s a limited amount of domainer capital to spread around landrush sales and trademark owners are likely to be much more selective about where they defensively register their brands in a world of 1,300 gTLDs.

That said, Famous Four has applied for some of the nicest strings in the round so I may be wrong.

An appendix to the presentation discussing the first DVP funding round says that while Famous Four hopes to sign contracts for 30 new gTLDs, it has only secured 32% of the money it is looking for.

Securing investment appears to have been tough due in part to the complexity of the ICANN process and investors’ lack of familiarity with it, which looks like risk. It also says:

The costs associated with applications in the new gTLD have increased, the financial strength of most applicants has been reduced and the knowledge barrier to entry is too high to interest large standard venture investors.

Famous Four’s business model is based around consolidation and keeping costs down, according to the pitch. For the most part, this is due to the economies of scale of running a large number of TLDs.

With Neustar as its back-end provider, Famous Four says it has found the “lowest fees in the industry”.

But the model also involves keeping tax to a minimum. Famous Four is based in Gibraltar, where it says it will pay no tax on domain sales:

FFM is operating in a fiscal environment that has multiple advantages over others in the industry. Domain names sales are treated as royalty income which is currently zero rated in Gibraltar. This would result in an instant bottom line gain.

There’s a strong suggestion in the presentation that DVPII is not limiting its ambitions to the new gTLDs it has applied for.

It also seems to discuss acquiring other applicants and ccTLD rights, then bringing them into the Famous Four fold, but the plan was not completely clear to me and executives were unavailable for clarification.

100th new gTLD application withdrawn

Former London mayor Ken Livingstone, rejoice!

L’Oreal has withdrawn its gTLD application for .redken, a dot-brand for one of its hair care products that I am reliably informed is not named after the balding socialist politician.

It’s the seventh of the company’s 14 new gTLD bids to be withdrawn.

Also today, it emerged that portfolio applicant Famous Four Media has withdrawn its application for .health, the only one of the four bids for that string yet to pass Initial Evaluation.

The string is one of the most controversial, being the subject of multiple very expensive to defend objections as well as strong Governmental Advisory Committee advice.

As of today, 100 new gTLD applications have been withdrawn, 53 of which were for uncontested strings.

TLDH and Famous Four ink new gTLD revenue sharing deal

New gTLD portfolio applicants Top Level Domain Holdings and Famous Four Media did in fact make a deal to resolve three contention sets, as suspected.

TLDH has just confirmed that it withdrew its applications for .science and .review in exchange for Famous Four withdrawing its application for .fit.

But the deal also includes a revenue-sharing component — TLDH will get a cut of whatever revenue Famous Four makes selling .review domain names after it goes live.

All three of the gTLDs in question were in two-way contention sets between the two companies, as we reported yesterday.

TLDH gave the following update:

TLDH now has interests in 23 uncontested applications, including 15 wholly/majority owned applications, 6 where it is acting as the registry service provider for client applications, 1 equal joint venture, and 1 where it will receive a minority revenue share. Of the remaining 63 applications which TLDH either wholly-owns, is a joint-venture partner, or is acting as the registry service provider, 7 are in contention with a single other applicant, 17 with two other applicants and 39 are in contention with three or more applicants.

While the dollar amounts concerned were not disclosed, I can’t help but feel TLDH got a good deal with .review.

For the cost of an ICANN application fee*, much of which was recouped in refunds, it seems to be getting an ongoing revenue stream with no ongoing costs and little future risk.

* Of course, in TLDH’s case it has also been burning cash for the best part of five years waiting for new gTLDs to come to life, but you get the point.