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MMX profitable as acquisition talks drag on

Kevin Murphy, January 29, 2018, Domain Registries

New gTLD registry Minds + Machines became profitable as an operating company for the first time in 2017, the company announced on Friday.

MMX saw billings of $10 million in the second half of the year, compared to $5.6 million in the first half, as domains under management grew 67% to 1.32 million.

Billings is a measure of sales, rather than the more formal measure of revenue for accounting purposes.

Renewals accounted for $5.6 million of billings in the year, which “for the first-time has exceeded fixed operating costs which have been reduced to below $5.5 million for 2017”.

The company’s bottom line will also boosted by $2.1 million due to MMX losing the .inc and .llc new gTLD auctions.

MMX also provided an update on its “strategic review”, a code word for the “acquisition by or sale/merger of the Company” that it announced last May.

The company said “the longevity of the discussions has been at times frustrating” but that it hopes to have something to announce by the time it reports its formal 2017 results in April.

MMX had originally hoped to have concluded these talks before last September.

This is who won the .inc, .llc and .llp gTLD auctions

Kevin Murphy, October 19, 2017, Domain Registries

The winners of the auctions to run the gTLD registries for company identifiers .inc, .llc and .llp have emerged due to ICANN application withdrawals.

All three contested gTLDs had been held up for years by appeals to ICANN by Dot Registry — an applicant with the support of US states attorneys general — but went to private auction in September after the company gave up its protests for reasons its CEO doesn’t so far want to talk about.

The only auction won by Dot Registry was .llp. That stands for Limited Liability Partnership, a legal construct most often used by law firms in the US and probably the least frequently used company identifier of the three.

Google was the applicant with the most cash in all three auctions, but it declined to win any of them.

.inc seems to have been won by a Hong Kong company called GTLD Limited, run by DotAsia CEO Edmon Chong. DotAsia runs .asia, the gTLD granted by ICANN in the 2003 application round.

My understanding is that the winning bid for .inc was over $15 million.

If that’s correct, my guess is that the quickest, easiest way to make that kind of money back would be to build a business model around defensive registrations at high prices, along the lines of .sucks or .feedback.

My feedback would be that that business model would suck, so I hope I’m wrong.

There were 11 original applicants for .inc, but two companies withdrew their applications years ago.

Dot Registry, Uniregisty, Afilias, GMO, MMX, Nu Dot Co, Google and Donuts stuck around for the auction but have all now withdrawn their applications, meaning they all likely shared in the lovely big prize fund.

MMX gained $2.4 million by losing the .inc and .llc auctions, according to a recent disclosure.

.llc, a US company nomenclature with more potential customers of lower net worth, went to Afilias.

Dot Registry, MMX, Donuts, LLC Registry, Top Level Design, myLLC and Google were also in the .llc auction and have since withdrawn their applications.

Eight more gTLDs get Chinese licenses

Kevin Murphy, October 12, 2017, Domain Registries

Radix and MMX have had four new gTLDs each approved for use in China.

MMX has had .work, .law, .beer and .购物 (Chinese for “shopping”) approved by the Ministry of Industry and Information Technology.

Radix gained approval for .fun, .online, .store and .tech.

The approvals mean that Chinese customers of Chinese registrars will be able to actually use domains in these TLDs rather than just registering them and leaving them barren.

It also means the respective registries have to apply more stringent controls on Chinese registrants.

They’re the first new gTLDs to get the nod from MIIT since April.

Only a couple dozen Latin-script new gTLDs have been given regulatory approval to operate fully in China.

MMX’s biggest success story to date, .vip, is almost entirely beholden to the Chinese market. Before today, it was also the only gTLD in its portfolio to pass the MIIT test.

The company said in a statement it has another four strings going through the approval process.

Radix already had .site on sale in China with government approval.

Millions spent as three more new gTLDs auctioned

Kevin Murphy, September 26, 2017, Domain Registries

Two or three new gTLDs have been sold in a private auction that may well have seen over $20 million spent.

The not-yet-delegated strings .inc, .llc and (I think) .llp hit the block at some point this month.

They are the first new gTLDs to be auctioned since Verisign paid $135 million for .web a little over a year ago.

At this point, nobody wants to talk about which applicant(s) won which of the newly sold strings, but it seems that the proceeds ran into many millions.

MMX, which applied for .inc and .llc, said this morning that it has benefited from a $2.4 million windfall by losing both auctions.

The auctions evidently took place in September, but CEO Toby Hall declined to comment any further, citing non-disclosure agreements.

There were nine remaining applicants for .inc and eight for .llc.

I don’t think it’s possible to work out which sold for how much using just MMX’s disclosure.

But private auctions typically see the winning bid divided equally between the losers.

I believe .llp was probably sold off by auction at the same time.

The reason for this is that .llc, .inc and .llp were contention sets all being held up by one applicant’s dispute with ICANN.

Dot Registry LLC had applied for all three as “community” gTLDs, which meant it had to go through the Community Evaluation Process.

While it failed the CPE on all three counts, the company subsequently filed an Independent Review Process complaint against ICANN, which it won last August.

You may recall that this was the IRP that found disturbing levels of ICANN meddling in the drafting of the CPE panel’s findings.

Ever since then, ICANN has been conducting an internal review, assisted by outside experts, into how the CPE process worked (or didn’t).

Lawyers for Dot Registry and other affected applications (for .music and .gay) have been haranguing ICANN all year to get a move on and resolve the issue.

And yet, just as the end appeared to be in sight, Dot Registry seems to have decided to give up (or, possibly, cash out) and allow the strings to go to auction.

CEO Shaul Jolles declined to comment on the auctions today.

All I can currently tell you is that at least two of the Dot Registry holdout strings have been sold and that MMX did not win either of them.

The applicants for .inc were: Uniregistry, Dot Registry, Afilias, GMO, GTLD Limited, MMX, Nu Dot Co (now a known Verisign front), Donuts and Google.

The applicants for .llc were: MMX, Dot Registry, Nu Dot Co, Donuts, Afilias, Top Level Design, myLLC and Google.

MMX revenue slips despite domain growth

Kevin Murphy, September 26, 2017, Domain Registries

MMX today posted a smaller loss for the first half of the year, despite managing to grow domains under management and hit some important financial milestones.

The new gTLD registry formerly known as Mind + Machines, which announced a few months ago that it’s looking to be acquired, reported an H1 loss of $526,000 compared to a loss of $1.9 million a year earlier.

Revenue and billings were both down due to the lack of any big launches in the period; H1 2016 had benefited from the strong launch of .vip in China.

Revenue, which is recognized over the duration of the domain registrations, was $5.3 million compared to $7.4 million in 2016. Billings, a measure of cash sales, were $5.6 million compared to $8.1 million.

Despite these dips, MMX is happy enough that the “quality” of its revenue is getting better.

The company said that revenue from domain renewals more than doubled to $2.4 million and represented 45% of revenue. A year ago, it was 15%.

As another measure of the health of its business, it also said that its renewal billings was greater than its operating expenditure for the first time, after cost-cutting.

Domains under management went into seven figures for the first time, to 1.1 million. That was up from 821,000 at the start of the year.

It processed 318,000 new registrations in the six months, compared to 452,000 a year earlier (when .vip’s launch provided a boost).

MMX sells 7,000 domains for $3.4 million

Kevin Murphy, September 12, 2017, Domain Registries

New gTLD registry MMX said it has sold $3.4 million in “premium” .vip domains names to Chinese domainers in the last few months.

In what is believed to be a small number of deals to a limited number of investors, “over 7,000” domains changed hands since they became available in late June.

MMX said that $2.8 million of the deals closed in the last 10 days.

While we don’t have the exact number of domains, it looks to work out in the ball-park of $485 per domain.

As $3.4 million is a materially significant number — the company’s entire revenue for 2016 was $15.6 million — it was disclosed to the financial markets this morning.

.vip has been MMX’s cash cow, so far amassing a zone file with more than 600,000 domains names in it.

For some reason it has been hugely popular in China — the vast majority of its registrations have been through Chinese registrars and 59% of its overall revenue was from China in 2016.

In April, the company sold 200,000 .vip names to a single Chinese investor for $1.3 million.

MMX has also said that renewal rates for .vip, which only launched last year, have been over 75%.

MMX: three gTLDs approved for sale in Beijing

Kevin Murphy, August 31, 2017, Domain Registries

Three foreign new gTLDs have been approved for sale and resolution in Chinese capital Beijing, according to MMX.

The portfolio registry said today that its .vip is among the first to receive approval from the Beijing Communications Administration, one of China’s many regional authorities.

According to MMX, while many gTLDs have managed to pass through the Ministry of Industry and Information Technology’s stringent vetting process, the Beijing local authority has so far been slow to follow the national regulator’s lead.

But BCA approved .vip, along with GMO’s .shop and Donuts’ .ltd on August 16, the registry said in a market update.

This gives .vip national coverage in China, adding Beijing’s 22 million inhabitants.

MMX added that 188,764 different .vip sites, of the over 600,000 in its zone file, are currently indexed by Chinese search engine Baidu.

It also said that it plans to start selling Chinese-script internationalized domain names in .vip (in IDN.ascii format) in November.

MMX says .vip renewals running at 75%

MMX has revealed that its renewal rate for first-month .vip registrations in China were over 75%.

The portfolio gTLD registry, also known as Minds + Machines, said that 317,000 domains that were registered during .vip’s first month of availability have now been renewed.

The news follows a June announcement that the renewal rate would be over 70%.

The large majority of .vip names registered are registered via Chinese registrars, where prices can be around the $3 to $4 mark.

MMX CEO Toby Hall said in a statement that the company now plans to release some of its reserved “premium” .vip names.

He added that the company is confident that its recurring revenue from renewals will soon be high enough to cover its fixed overhead costs, one of its key performance benchmarks.

MMX says .vip renewals to be at 70%+

MMX believes the biggest money-spinner in its new gTLD portfolio, .vip, will see first-year renewals in excess of 70%.

The company said this morning that it is projecting renewals towards the top end of industry norms based on manual renewals to date.

.vip was a bit of a hit in China, topping a quarter-million domains in its first month of general availability a year ago. It peaked at around 750,000 domains a month ago.

MMX said in a statement:

To date, actual deletions for the first 31 days of registrations for .vip from China are currently less than 1%, with manually confirmed renewals for the same period already at over 60%, with the remainder being placed on auto-renew by registrars on behalf of their customers.

Whilst not all of those placed on auto-renew will be renewed, MMX expects the overall renewal rate for the first month of .vip registrations, which will be published in late July, to place .vip in-line with the best-in-class renewal rates of leading western facing top-level domains (i.e. c. 70% and above).

While MMX has made much of the fact that it has not sold .vip names for almost nothing, unlike some competitors, they’re still pretty cheap in China.

.vip names sell for the CNY equivalent of $3 to $4 at the major Chinese registrars. GoDaddy prices them at $20.

CEO Toby Hall said that there had been some volume-based discounts available to registrars, but “nothing which took the pricing below our general availability pricing”.

Its actual renewal rate will become clear at the end of July, MMX said.

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.