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MMX switches porn TLDs from Afilias to Uniregistry

Kevin Murphy, September 18, 2019, Domain Registries

Minds + Machines is moving its four porn-themed gTLDs to a new back-end provider.

MMX CEO Toby Hall confirmed to DI today that the company is ditching Afilias, which had been providing registry services for .xxx since 2011.

“We’re in the process of switching the back-ends from Afilias to Uni for the ICM portfolio,” he said.

This portfolio, which MMX acquired last year, also includes .porn, .adult and .sex. There are roughly 170,000 domains under management in total, but about half of these are sunrise-period blocks in .xxx, which could add a wrinkle to the transition.

It appears that Afilias is still providing DNS for the TLDs, but Uniregistry has been named the official tech contact.

It’s not currently clear when the handover will be complete. Hall was not immediately available for further comment.

It’s also not currently clear why Uniregistry was selected. All of MMX’s 27 other gTLDs — the likes of .vip, .work and .law — have been running on Nominet’s platform since MMX dropped its own self-hosted infrastructure a few years back.

During the same restructuring, Uniregistry took on MMX’s registrar business.

Uniregistry has also been working closely with MMX on its recently launched AdultBlock trademark blocking services, which could wind up accounting for a big chunk of MMX’s porn-related revenue.

These latest four gTLDs to switch providers are merely the latest in a game of musical chairs that has been playing out for the last several months, five years after the first new gTLDs started going live and registries shop around for better back-end deals.

Nominet picked up most of Amazon’s portfolio, replacing Neustar, earlier this year.

But Nominet has lost high-profile .blog to CentralNic, and Afilias lost a Brazilian dot-brand to Nic.br

Porn blocks could be worth millions to MMX

Minds + Machines could find itself making millions of dollars a year out of non-resolving defensive registrations in its recently acquired portfolio of porn-themed gTLDs.

The company recently announced the launch of AdultBlock and AdultBlock Plus, which will enable trademark owners to prevent anyone else registering their marks, and variants thereof, for up to 10 years.

Running the numbers, and taking into account MMX’s already substantial established client base for such services, AdultBlock could bring in as much as $11 million a year. But it’s almost certainly going to be much less than that.

The company won’t disclose it’s exact pricing for AdultBlock, or its revenue estimates, but it’s possible to do some back-of-the-envelope calculations and come to some ball-park guesses.

MMX has said that it’s pricing the service such that customers should be able to see a 35% saving compared to the cost of registering a single string across all four of its porn TLDs

The company acquired .xxx, .porn, .adult and .sex when it bought ICM Registry last year.

The wholesale fee for each of the four is believed to be about $68 a year. From this, we can calculate that the wholesale price of AdultBlock may well be around the $175-a-year mark.

There’s some room for error here, as MMX hasn’t revealed precisely how it came to its 35% number, but I think we can safely say we’re looking at $150 to $200 a year. For the purposes of this envelope, let’s split the difference and assume it’s $175.

It’s quite a high number, a bit like a recurring sunrise fee for a domain that you don’t even get to use.

But how many domains can MMX expect to be blocked?

A low-ball estimate could be modeled on the .porn/.adult/.sex sunrise periods.

.porn launched in 2015 and gathered 2,091 sunrise registrations, according to ICANN records, making it one of the largest new gTLD sunrise periods. The other two TLDs weren’t far behind.

If that’s a good guide for AdultBlock uptake, we’re talking about a piddling $360,000-a-year business.

But MMX has a secret weapon that it inherited from .xxx.

When .xxx launched back in 2011, it kicked off with two sunrise periods. Sunrise A was for trademark owners in the porn business who wanted to use their .xxx names. Sunrise B was for everyone else, who didn’t.

In Sunrise B, brand owners paid $162 (plus their registrar’s markup) to block their domains for a flat period of 10 years.

Customers couldn’t use their domains. They were registered to ICM and used specially designated ICM name servers to resolve to a standard, non-monetized placeholder page stating “This domain has been reserved from registration.”

There are over 80,000 domains using these name servers, but about 15,000 of those represent names of celebrities, cities, and religiously and culturally sensitive terms that ICM culled from Wikipedia and unilaterally reserved to help avoid a tabloid crucifixion if mileycyrus.xxx ever started bouncing children to something pornographic, such as one of her music videos.

(As an aside, I think it’s worth mentioning that the .xxx zone file only has 93,000 names in it. These means about nine out of 10 live .xxx domains are reserved by the registry.)

So we’ve got 65,000 trademarks that are currently blocked in .xxx, and they’re all going to expire in 2021 because ICM only sold blocks for the duration of its original 10-year ICANN contract.

If all 65,000 domains are upgraded to AdultBlock, the service would be worth over $11 million a year, to a company currently reporting annual revenue around $15 million.

But they won’t.

You don’t have to scroll too far down the .xxx zone file (and I didn’t) to discover some absolute garbage, no doubt the result of scaremongering around the 2011 .xxx launch.

I mean, seriously, look at some of this Sunrise B guff:

100percentwholewheatthatkidslovetoeat.xxx, 101waystoleaveagameshow.xxx, 1firstnationalmergersandacquisitions.xxx, 1stchoiceliquorsuperstore.xxx, 2bupushingalltherightbuttons.xxx, 247claimsservicethesupportyouneed30minutesguaranteed.xxx, 3pathpowerdeliverysystembypioneermagneticsinc.xxx

I think we’re going to be looking at a significant junk drop of blocked domains come 2021.

That said, I think MMX may have a psychological advantage here, when it comes to persuading Sunrise B users to “renew”.

Who hasn’t renewed a domain name they strongly suspect they will never use or sell, simply because they couldn’t bear the thought of somebody else owning “their” domain?

An additional consideration for brand owners is that these Sunrise B names are going to show up on drop-lists when they are eventually deleted from the .xxx zone file, perhaps giving inspiration to cybersquatters.

This is a fantastic opportunity for MMX and brand protection registrars to put the hard sell on its Sunrise B customers to “renew” their blocks by upgrading to the new and improved AdultBlock service, which could cost literally 10 times more than what they originally signed up for.

AdultBlock is of course more comprehensive than Sunrise B. It covers three additional TLDs, for starters, and customers can pay a little more for potentially thousands of potential homographs (non-Latin-script domains that look almost identical to the original) to also be blocked.

MMX isn’t waiting until 2021, however. It’s currently offering companies that buy a 10-year-block before the end of 2019 the AdultBlock+ service for the price of the vanilla, no-variants offering.

Existing Sunrise B customers have until the same deadline to purchase the new service without having to have their trademarks re-verified, which carries an additional fee.

For those that miss this early-bird offer, come December 2021, the holders of up 65,000 trademarks are going to face a stark choice: sign up to pay a couple hundred bucks a year, or risk their brands being snapped up by pornsquatters.

MMX to pay $5.1 million to get out of terrible .london deal

Minds + Machines will pay its partner on .london roughly $5.1 million in order to put the catastrophic deal to bed for good.

That’s a reduction from the $7.9 million liability it had previously estimated.

The company said last week that it will pay an unspecified partner the $5.1 million “as full and final settlement for any further liability or contractual spend” after renegotiating the contract.

In April, MMX said that the deal had cost it $13.7 million since the outset.

While MMX has never publicly fingered the contract in question, which has been a pair of concrete boots for years, its deal with .london’s London & Partners is the only one that fits the bill.

The registry secured L&P, the marketing arm of the London Mayor’s office, as a client during the mayoral reign of Boris Johnson, the man set to be anointed the UK’s next prime minister this week.

It agreed to make millions of dollars in guaranteed payments over the duration of the contract, because it expected to sell a shedload of .london domains.

That never happened. The gTLD peaked at 86,000 names in March 2018 and was down to 54,000 a year later, evidently a fraction of what MMX had planned for.

The renegotiated deal — I believe at least the second time the deal has been amended — is “in principle” for now, with formal approval expected soon.

In its trading statement last week, MMX also said that the first half of the year ended with a 19% increase in regs, ending June at about 1.82 million.

It said it has “stabilised” declining billings in its acquired ICM Registry portfolio of porn-themed TLDs at $2.8 million, and that it has a “clear pathway” to growth from the four zones.

It’s hoping “further new initiatives” — likely a reference to a new trademark-blocking service — will help out in the current half.

MMX also said that it’s spending $1 million of its cash reserves on a stock buyback.

MMX sees better profits than expected

Kevin Murphy, January 29, 2019, Domain Registries

Portfolio registry MMX saw 2018 financial results slightly ahead of expectations, the company told investors yesterday.

It now expects revenue to be over $15.5 million for the year, compared to $14.3 million in 2017. Operating EBITDA, its preferred profitability indicator, will be “marginally ahead of market expectations”.

It expects revenue from renewals — which MMX has been trumpeting as a key indicator of stability — to be $9.4 million, compared to $4.8 million in the prior year.

That’s mainly due to the $3.4 million contribution of recently acquired porn TLD specialist ICM Registry. Without ICM, renewal revenue was still up 20% though.

The company’s exposure to the Chinese market has also been reduced. It now contributes 36% of sales, compared to 50% in 2017.

Volatile one-off premium domain sales are also on the decrease in terms of revenue share — 15% in 2018 compared to 38% in 2017.

Its full audited results will be published later in the quarter.

MMX waving goodbye to .london? Boss puts focus on renewal profits, China

Kevin Murphy, September 26, 2018, Domain Registries

MMX’s revenue from domain renewals could cover all of its expenses within the next 24 months, if everything goes to plan, according to CEO Toby Hall.

Hall was speaking to DI this evening after the company reported its first-half financial results, which saw revenue up 22% to $6.4 million and a net loss of $14.7 million, which compared to a loss of $526,000 a year earlier.

MMX’s huge loss for the period was largely — to the tune of $11.8 million — attributable to the restructuring of an “onerous” contract with one of its gTLD partners.

Hall refuses point blank to name that partner, but for reasons I discussed last year, I believe it is .london sponsor London & Partners, which is affiliated with the office of the Mayor of London.

When L&P selected MMX to be its registry partner for .london back in 2012, I understand a key reason was MMX’s promise to pay L&P a fixed annual fee and commit to a certain amount of marketing spend.

But two years ago, after it became clear that .london sales were coming in waaaay below previous management’s expectations, MMX renegotiated the deal.

Under the new deal, instead of committing to spend $10.8 million on marketing the TLD itself, MMX agreed to give half that amount to L&P for L&P to do its own marketing.

It appears that L&P has already spunked much of that cash ineffectively, or, as MMX put it:

a significant portion of that marketing budget has been spent by the partner with minimal impact on revenues in the current year and no expectation of any material uplift in future periods

MMX seems to have basically written off the .london deal as a bad call, and now that MMX is no longer in the registry back-end or registrar businesses, it seems unlikely that the .london partnership will be extended when it expires in three years.

Again, Hall would not confirm this bad contract was for .london — I’m making an informed guess — but the alternatives are limited. The only other TLDs MMX runs in partnership currently are .review and .country, and not even 2012 MMX management would have bet the farm on those turkeys.

Another $2.1 million of the company’s H1 net loss is for “bad debt provisions” relating the possibility that certain US-based registrar partners may not pay their dues, but this provision is apparently related to a new accounting standard rather than known deadbeats threatening to withhold payments.

If you throw aside all of this accountancy and look at the “operating EBITDA” line, profit was up 176% to $661,000 compared to H1 2017.

While the loss may have cast a cloud over the first half, Hall is upbeat about MMX’s prospects, and it’s all about the renewals.

“Renewal revenue will be more than all the costs of business within 24 months,” he said. To get there, it needs to cross the $12 million mark.

He told DI tonight that “an increasing percentage of our business is based on renewals… just on renewal revenue alone we’ll be over $10 million this year”.

Renewal revenue was $4.7 million in 2017 and $2.4 million in 2016, he said. In the first half, it was was up 40% to $3.4 million.

MMX’s acquisition of porn domain specialist ICM Registry, which has renewal fees of over $60 per year, will certainly help the company towards its 2018 goal in the second half. ICM only contributed two weeks of revenue — $250,000 — in H1.

Remarkably, and somewhat counter-intuitively, the company is also seeing renewal strength in China.

Its .vip gTLD, which sells almost exclusively in China, saw extremely respectable renewals of 76% in the first half, which runs against the conventional wisdom that China is a volatile market

Hall said that .vip renewals run in the $5 to $10 range, so apparently TLD volume is not being propped up by cheap wholesale renewal fees. The TLD accounts for about 30% of MMX’s renewal revenue, Hall said.

About 60% of .vip’s domains under management are with Chinese registrar Alibaba. The biggest non-Chinese registrar is GoDaddy, with about 3% of the namespace.

More exposure to China, and specifically Alibaba, is expected to come soon due to MMX’s repurposing of the 2012-logic gTLD .luxe, which is being integrated into the Ethereum blockchain.

MMX said last week that some six million (mostly Chinese) users of the imToken Ethereum wallet will in November get the ability to register .luxe domains via imToken and easily integrate them with their Ethereum assets.

The announcement was made at the Alibaba Cloud Computing Conference in China last week, so you can probably guess imToken’s registrar of choice.