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MMX stung for $7.7 million by crappy .london contract?

Kevin Murphy, April 26, 2017, Domain Registries

Did MMX take a $7.7 million accounting hit to renegotiate a crappy .london gTLD contract? It looks a bit like that to me.

Found in the company’s full-year 2016 financial results yesterday is the disclosure that it had to pay off an undisclosed gTLD partner after originally making “overly ambitious” predictions about its likely popularity.

The deal apparently had MMX — then under previous management as Minds + Machines — making guaranteed payments to its partner on the assumption that it would sell a lot more domains than it eventually did.

.london currently has about 56,000 names in its zone file, down from a post-launch peak of about 65,000.

According to its statement to the markets, MMX recorded a 2016 one-time contract restructuring expense of $3.8 million and has added a $3.9 million intangible asset to its balance sheet in relation to the contract.

That’s a total of $7.7 million, but CEO Toby Hall told DI that the cash payment was nowhere near that amount. He said:

in reality we have paid no where near that amount and much of this is the accounting treatment of a new contract that we believe has the potential to deliver future economic value to the business and will be covered from future revenues.

The gTLD in question is not named in the statement, and Hall also declined to name it in response to a DI inquiry, but MMX says of the contract:

In very early 2012, at the time when ICANN was still accepting new generic Top Level Domain applications, the then Executive Team entered into an overly ambitious agreement that it believed would provide value to the overall profile of the Group. The agreement had very significant financial commitments over the life of the contract and did not include any clauses that could allow the Group to renegotiate those commitments should the specific top-level domain not perform to the agreed financial projections. The growth of this top-level domain has not come close to meeting those expectations and the agreement has proven – and would have continued proving – to be a significant drag on the Group’s ability to generate positive cashflow from the given TLD.

In late Q4 of 2016 the current Executive team was able to successfully conclude renegotiations of certain components of the agreement by either restructuring or buying out certain financial commitments thus making it more economically viable going forward. As a result of the renegotiation effort, the Group has revised its modeling and believes that it can derive future economic benefit from the renegotiated contract. Accordingly, based on Management’s review, a portion of the buy out ($3.8million) has been expensed as a one-off restructuring cost while the remaining portion ($3.9million) will be capitalized as an intangible asset with future economic benefit.

All the evidence points to .london being the gTLD in question.

First, MMX says that the deal was entered into in “very early 2012”, which ties up with the timing of the request for proposals by the Mayor’s marketing office, London & Partners.

Second, MMX doesn’t have any other partner-based gTLDs that would plausibly have such ambitious commitments.

Third, MMX has previously stated that it was renegotiating some “burdensome” contracts. Last year, without relating it to a renegotiation, it said in a trading update that it was “encouraging to see an increasingly commercial and flexible approach from London & Partners, our Dot London partners”.

Fourth, word on the street back in 2012 was that L&P (which remember is affiliated with the London Mayor, an elected political office) had gone with tax-haven-based MMX rather than UK-based non-profit Nominet because MMX (then Minds + Machines) had offered the best financial incentives.

The scrapping of the old deal is perhaps another indicator of the hubris that accompanied the opening of the new gTLD program five years ago.

While L&P is the “owner” of .london, for want of a better word, in practice I gather that MMX runs it pretty much as if the gTLD was part of its regular portfolio.

The news of the contract changes were made in MMX’s audited 2016 results, which showed its billings doubling to $15.8 million during the year.

Revenue was $15 million, up from $6.3 million in 2015. Less partner payments, revenue was $13.5 million versus $5.5 million a year earlier.

The statement has half a dozen or more bottom lines, depending on what costs you exclude, but the one MMX wants us to look at is “Billings Operating EBITDA before one off restructuring costs”, which was $4.2 million compared to a loss of $6.6 million in 2015.

That, in other words, means that an unprofitable company has become a profitable one.

A lot of that has to do with the revenue from hundreds of thousands of .vip domain sales in China and a swingeing restructuring that led to headcount being slashed from 43 people to 20 people.

The company also sold off its registrar business to Uniregistry and started outsourcing its back-end functions to Nominet.

For 2017, the company has already disclosed two huge sales that will boost domains under management considerably, but at the risk of concentrating a larger part of MMX’s business outlook in just a few hands.

UPDATE: This article was updated a few hours after publication to clarify what MMX has said in relation to .london in previous trading statements.

A third of mayoral candidates using .london domains

Londoners are going to the polls today to select a new mayor so, as a Londoner, I thought I’d check out how many of the candidates are supporting the local domain name.

Turns out four of the 12 candidates have registered .london domains for their campaign sites.

The four are favorite Sadiq Khan (Labour), Sian Berry (Green), Peter Whittle (UK Independence Party) and Prince John Zylinski (damned if I know).

The remaining candidates, if they have dedicated sites at all, use a mixture of .com, .org and .net domains. Not a .uk to be seen.

Will this influence anybody’s vote? No. Has it raised the profile of .london domains? Probably.

Whoever wins the election will find themselves with a degree of control over the future of .london.

While the registry is basically managed by Minds + Machines, the ICANN contract is held by London & Partners, a not-for-profit promotional agency funded by the mayor’s office. The mayor is also a partner in the endeavor.

The M+M outsourcing contract was recently renegotiated in light of M+M’s financial woes, but details have not been made available.

Dot London auctioning 50 registry-owned premium names

Kevin Murphy, July 13, 2015, Domain Sales

Dot London is to auction off 50 premium .london domains over the next two weeks.

The names are all currently registry-owned, and include the likes of dentist.london, flats.london and coffee.london. The full list can be viewed here.

The auctions are scheduled to end on July 30 and all have £100 ($155) starting bids.

According to the registry, it has sold over 3,000 names from its premium list since its launch last year. Some live examples include golf.london and catering.london.

The .london gTLD has a tad over 63,000 names in its zone file today.

.london launch day biggest yet for new gTLDs, but did it miss targets?

Kevin Murphy, September 10, 2014, Domain Registries

Dot London Domains’ .london had just shy of 35,000 domains in its zone file this morning, after its first partial day of general availability.

That’s an addition of 12,421 domains over yesterday’s number, making .london the 11th most-registered new gTLD.

This makes .london — which in my opinion has had one of the best launch marketing campaigns we’ve seen this year — the most-successful gTLD, in volume terms, after its first GA day.

It has beaten the 33,012 names that .在线 (“.online” in Chinese) and the 31,645 names that .berlin had in their zone files at the end of their respective GA days.

.london domains are not particularly cheap, either. Minds + Machines sells at £30 ($48) a year and Go Daddy (which lists .london at the top of its UK home page today) sells at $59.99.

UK-based Domainmonster, part of Host Europe Group, performed well with a £34.99 ($56) annual fee.

There were 22,547 .london names claimed during the “London Priority Period”, a combined sunrise/landrush phase that gave first dibs on names to trademark owners followed by London residents.

The registry has not broken down the mix between sunrise and landrush, but I believe based on the paltry sunrise performance of every other new gTLD to date that the vast majority were landrush names.

The full priority period queue has not yet been processed — domains with more than one applicant are currently in auction.

Back-end provider Minds + Machines, recently told the markets that it expects about a quarter of landrush/sunrise names to go to auction, so we could be looking at something like 7,500 applications (as opposed to domains) currently in the auction queue.

What this may mean is that .london had roughly 30,000 applications during its priority period, about 20,000 less than it had predicted back in July.

Dot London Domains is closely affiliated with London & Partners, the PR machine for the Mayor of London, so it had resources and access to throw at an effective marketing campaign.

Crazy housing market reflected in .london landrush

The world’s insatiable appetite for property in London is being reflected in applications for domain names during .london’s landrush, according to the registry.

Just a few days before the landrush ends, over 30 applications have been filed for properties.london, Dot London said, and apartments.london and houses.london “are among the most sought after” domains.

The registry said:

Trades that serve the property industry are also proving popular, with addresses such as removals.london and scaffolding.london receiving numerous applications, while there are three times as many applications for estateagent.london as for lettingagent.london.

The property market in London is utter madness right now. The average price of a house here is £567,392 ($963,275), up over 12% on a year ago, according to Zoopla.

I could buy a three-bedroom semi-detached house in the town of my birth for the price of a parking space in London.

Apartments literally smaller than a snooker table were selling for £90,000 ($152,000) two years ago.

It’s madness, I tell you, madness.

While much of the house price boom can be blamed on overseas investors, many of whom leave their properties vacant, Dot London is at least giving the city’s residents special treatment in .london.

The landrush is being carried out simultaneously with the sunrise period. Both commenced April 29 and end July 31.

Trademark owners get priority, followed by applicants with London addresses. In the event domains are contested by multiple applicants with the same priority, there’ll be a private auction.

Dot London says that the most-popular landrush domain is nightlife.london, completely unrelated to property. It has more than 40 applications.