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M+M makes $3.2 million in five days from .vip

Minds + Machines has billed $3.2 million in .vip domain names sales after the first five days of operation, the company said this morning.

It’s already managed to pay off the cost of acquiring the domain at the September 2014 auction, which was $3.1 million.

Between 1600 UTC May 17, when .vip went to general availability, and the same time May 22, the gTLD racked up 203,720 domains, the company said.

The $3.2 million is a “billings” number, which will convert to accounting revenue over the lifetime of the domains.

For comparison, billings in the whole of 2015 was $7.9 million.

M+M now has over half a million domains under management, a 64% increase from the start of the year, the company said.

Registrations from China, where presumably owning a .vip name does not make you look like a douchebag, accounted for over 80% of the registrations. Almost half of its registrars are Chinese.

Major Chinese registrars are currently selling .vip names for CNY 25-26 (about $4) apiece.

The discrepancy between that low price and the $3.2 million (which implies an average wholesale price of about $16) is due to the effects of premiums, sunrise and multi-year registrations, CEO Toby Hall told DI.

M+M, like the vast majority of TLD registries, is not currently licensed in China, so these names will not legally be allowed to be developed into sites until the company has gone through the full governmental approval process.

Hall said in a press release:

The Chinese market for top-level domains is real and we are delighted to have accessed this key region through the .vip launch… It is a major milestone for the Company, the new management team and our business model centred on working with best-in-class partners across every aspect of our business so as to best monetize our assets while maintaining a tight control on central overheads. It demonstrates that, when properly executed, how quickly the initial investment costs for a domain can be recovered and the potential for a strong recurring revenue established. The .vip launch equally illustrates how as a b2b business we do not have to burn funds on marketing to reach end-consumers and achieve outstanding results.

He’s referring there primarily to M+M’s ongoing restructuring, which has seen the company ditch its registrar business in favor of a more heavily channel-focused approach.

SpamHaus now publishing better TLD abuse data

SpamHaus has updated its “10 Most Abused Top Level Domains” list to provide a much more useful insight into abuse levels.

Rather than simply showing unexplained percentages of “badness” in each TLD, the spam-fighting organization’s daily report now exposes the hard numbers, in domain terms, underneath.

For example, on today’s list Famous Four Media’s .download is the most-abused TLD with 82% bad domains.

That percentage is based on SpamHaus categorizing 11,431 domains as abusive of the 13,945 .download domains that crossed its systems.

But the gTLD has 67,500 domains in its zone file, so the actual percentage of abusive domains could be as low as about 17%, much lower than SpamHaus’s 82%.

Whether you think the 82% metric is fair will depend on whether you think SpamHaus’s sample — about 20% of the full .download zone — is representative.

Some of the other TLDs on its list have even smaller sample sizes.

Minds + Machines’ .work is ranked #2 on the SpamHaus list with 73.3% badness, based on a SpamHaus-seen sample of 6,297 domains, something like 7% of the full .work zone.

Registries criticized SpamHaus for publishing misleading data when this list was first published in March, and I agreed with them.

Now that the group is publishing empirical data alongside its percentages, the conversation can now shift to something along the lines of:

“Is it okay that at least 17% of .download domains are abusive?”

To which the answer I believe is a clear: “Hell, no.”

The SpamHaus daily report can be found here.

Krueger’s suit against M+M dropped, for now

Former Minds + Machines chair Fred Krueger has dropped his lawsuit against the company, which concerned “missing” shares.

M+M announced today that the two parties have signed a “tolling agreement”, which apparently leave the door open for Krueger to re-file the suit at a later date.

If he does re-file, the company has agreed to the date of the original suit being filed if it deploys any statute of limitations defenses.

The company said in a statement to investors:

The Tolling Agreement provides that if the plaintiffs refile their suit, that any statute of limitation defenses of the defendants will be based on the date of the filing of the dismissed suit, 23 February 2016, but will not be deemed to revive any of the plaintiffs’ causes of action, claims, rights, legal positions, or defenses, at law or in equity, that were time-barred prior to 23 February 2016.

Krueger sued claiming M+M or its accountants had misplaced five million shares he was due.

He was looking for $1.5 million in damages.

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.

M+M turns $22m profit into $10m loss

Kevin Murphy, April 27, 2016, Domain Registries

Minds + Machines today reported a 2015 loss of $10 million and further outlined its “transformative” restructuring and China strategy.

It’s the second full year of operating results M+M has posted since its first new gTLDs went live, and they’re not encouraging.

Revenue for accounting purposes was $6.3 million, but the cost of sales was $6.2 million, leaving gross profit of just $101,000.

Factoring in $12.1 million of operating expenses, a $7.9 million gain from losing new gTLD auctions, and other expenses, the total loss before tax was $10 million.

That’s compared to the $22 million profit M+M reported for 2014, a number entirely reliant on $33.7 million of auction loss payments.

The company also reported its “billings”, a line item that does not use the accounting method of deferring revenue across the life of a domain and is therefore more in line with incoming cash.

Billings for 2015 were $7.9 million, compared to $5 million in 2014. Gross profit under that measure was $1.7 million, but the $12 million of operating costs still made the company very unprofitable.

Ignoring the auction benefits in 2015, which will not last forever, it’s pretty clear that M+M was a company spending much more operating new gTLDs than it was making from them.

COO/CFO Michael Salazar said in a statement:

However, billings of $7.9 million for the year were simply not of a sufficient scale to cover the associated cost of sales ($6.2 million) and operating expenses ($12.2 million), which combined reached $18.4 million for 2015. Similarly, the $0.6 million savings achieved in the period by the decisions mid-year to stream-line the existing operational set-up were not of a magnitude to have any material impact in the year under review. That said, forfeited cost of sales and operational expenses as a result of the 2015 cost-cutting decisions will amount to $2.7 million in 2016

It’s perhaps little wonder that activist shareholders, apparently not prepared to play the long game, threw out half of the board and key senior executives during the period.

Former PR man Toby Hall took over as CEO in February, replacing co-founder Anthony Van Couvering, and announced earlier this month that M+M is dumping its registrar and back-end registry businesses.

Its registrar customers have been sold to Uniregistry, and it will outsource its registry back-end to Nominet, to save costs.

Salazar said that the two deals will lead to $2 million in savings, but won’t be complete before the fourth quarter. It seems unlikely they’ll have a great impact on 2016 numbers.

Headcount has been reduced from a peak of 61 to 43 at the end of the year, and is expected to drop further to 25. Salazar said this will save it $4.7 million a year.

Even with these cost reductions, M+M will still need to essentially double its revenue in order to hit operating profitability, it seems.

The company is pinning some of its growth hopes on .vip, which it expects to do well in China. It launches May 18.

Hall said in a statement that M+M would not follow the lead of competitors (Famous Four Media springs to mind) by offering first-year registrations for free to build market share. He said:

Based on the enquiries received during Sunrise and feedback gained through our two recent marketing trips to China, it is clear that there is genuine interest in the domain both within and outside of China. As a result, we will not be using a year-one freemium approach to simply inflate year-one registrations. Instead, we intend to be keenly priced to ensure margin to ourselves — and registrations — as well as protect the integrity of the domain. The volume we anticipate to be generated through keen pricing will then support the sales of our premium names in this domain.

The company also plans to invest in its .law sales team, because billings for that gTLD have been behind expectations.

M+M had $34.6 million in the bank and eight outstanding contested new gTLD applications at the end of the year.