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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.

.london disaster leads to mixed 2018 for MMX

New gTLD registry MMX, aka Minds + Machines, suffered a huge net loss in 2018, largely due to its disastrous .london contract, even while its operating fundamentals improved.

For the year, MMX reported a net loss of $12.6 million, compared to a 2017 profits of $3.8 million, on revenue up 5% to $15.1 million.

The loss was almost entirely attributable to charges related to an “onerous contract” with one of its partners.

MMX has never disclosed the identity of this partner, but the only outfit that fits the profile is London & Partners, the agency with which MMX partnered to launch .london several years ago.

The registry, expecting big things from the geo-TLD, promised to pay L&P millions over the term of the contract, which expires in 2021.

But it’s been a bit of a damp squib compared to former management’s expectations, peaking at about 86,000 regs last year and shrinking ever since.

MMX says the estimated gap between the minimum revenue guarantee payable to L&P and the expected revenue is expected to bring in before 2021, is $7.2 million.

It’s recorded this as a charge on its income statement accordingly, along with another $4.2 million impairment charge related to the same contract.

The company recorded a $7.7 million accounting charge related to this contract in 2016, too.

The company says that to date it has lost about $13.7 million on the deal.

These charges, along with a few other smaller one-off expenses, were enough to push the company into the black for 2018.

But other key performance indicators showed more promise, helped along by the acquisition last year of porn-themed registry operator ICM Register, best-known for .xxx.

Notably, renewal revenue almost doubled, up 97% to $9.4 million.

Domains under management was up 37% to 1.81 million.

Operating EBITDA was $3.6 million, up 12.5%.

Looking ahead, MMX said billings for the first quarter are expected to be up 246%, due to the first impact of the ICM acquisition.

It also said it closed $500,000 of sales in .law in China in March. That would work out to over 5,000 domains, based on the retail price of about $100 a year, but those domains have yet to show up in the .law zone file, which only grew by about 200 domains last month.

MMX said it is planning to launch “a high-value defensive registration product” for corporate registrars by the third quarter.

If I had to guess, I’d say that is probably a clone of Donuts’ Domain Protected Marks List service, which offers trademark owners deep discounts when they defensively block strings across the whole Donuts gTLD portfolio.

It’s a model copied by other registries, including recently Uniregistry.

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.

First .london anchor tenants named

Kevin Murphy, April 18, 2014, Domain Registries

The forthcoming .london gTLD has earmarked its first 28 domain names, most of which are going to some famous, and not-so-famous, local brands.

Judging by the list of names, registry Dot London Domains is going for a relatively classy bunch of anchor tenants, which is probably why I wasn’t invited to the launch event earlier this week.

Judging by newspaper reports, the registry managed to get a celebrity businesswoman, Deborah Meaden, to cut the ribbon, as well as a glowing endorsement from the mayor, Boris Johnson.

Dot London Domains is affiliated with London & Partners, the marketing arm of the mayor’s office.

The list of names, which come from the pool of up to 100 that the registry is allowed to set aside for promotional purposes before sunrise begins on April 29, was revealed by today’s .london zone file.

About half a dozen appear to be reserved for the use of the registry itself.

Three registrars also get their names — 1and1.london, fasthosts.london, godaddy.london — which seems to confirm that .london will get valuable Go Daddy distribution.

These are the others. I have to say, only a handful are household names over here. I had to Google about half of them.

absolutelymagazines.london — a publisher of the women’s magazine Absolutely, apparently.

dating.london — it’s going to be interesting to see who gets control of this, the only dictionary word so far on the list. Like all the others on this list, it currently belongs to the registry.

exterionmedia.london — an advertising company specializing in billboards and such, formerly CBS Outdoor. I’ve seen this brand quite a lot on public transport, which could be good news if it starts using a .london URL.

fortnumandmason.london — Fornum & Mason, an upmarket department store. Far too classy to let the oiks like me through the door.

londonlive.london — a TV station dedicated to London that I didn’t know existed.

meantime.london — probably the Greenwich-based brewing company called Meantime.

metrobank.london — a bank, currently using metrobankonline.co.uk.

penniblack.london — Penni Black, a catering company.

remoracleaning.london — a cleaning company that currently uses a .com.

scoffandbanter.london — a restaurant chain specializing in British food.

standard.london — the London Evening Standard, the capital’s widely-read free daily newspaper. When the paper announced its participation in .london on its Wednesday front page, pretty much every commuter in the city will have seen it.

symphonyorchestra.london — The London Symphony Orchestra.

techhub.london — a Google-backed shared work-space for tech start-ups, just down the street from DI HQ.

theallstars.london — Not sure. Possibly these musicians.

thecommitments.london — The Commitments, a West End musical based on the movie and novel of the same name.

westhamunited.london — West Ham United, one of London’s several Premier League football teams.

whufc.london — also West Ham.

wingstravel.london — a travel agency specializing in oil and gas industries. Interestingly, its current web site uses a .travel domain: wings.travel.

The .london gTLD goes to sunrise April 29, with general availability slated for September 9.

M+M sees 200,000 .london names in its future

Kevin Murphy, February 14, 2014, Domain Registries

Minds + Machines CEO Antony Van Couvering reckons the company’s forthcoming .london new gTLD could see as many as 200,000 domains under management, just from small businesses.

He told DI the target is realistic following the results of a YouGov survey of 1,001 London-based small businesses, which found that 26% were “likely” to buy a .london name.

From this, YouGov extrapolated that there are at least 218,140 companies ready to register a .london.

Van Couvering would not put a deadline on hitting the ambitious goal, but said that registry Dot London Domains and M+M as technical provider are “going to do our best to make the launch well-publicized and successful.”

Judging by the gTLD’s official web site, which carries quotes from the likes of Selfridges, the London Eye and Carnaby Street, there’s been a fair bit of outreach to recognizable London brands already.

Dot London backer London & Partners is the Mayor’s office’s official PR agency, so you can imagine there’s going to be some decent marketing resources thrown at marketing.

The .london gTLD is due to launch April 29 this year, according to the registry.

It’s been contracted with ICANN since November 14, so is running well over the average time to delegation of 70 days.

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