MMX gets four more gTLDs approved for China use

MMX’s Chinese subsidiary has received the government nod for four more of its new gTLDs to operate in the country.
The approved strings are the lifestyle-oriented .fashion, .luxe, .yoga and .fit.
Getting the nod from the Ministry of Industry and Information Technology means Chinese registrants will be able to use domains in the the four gTLDs, albeit subject to China’s much more stringent censorship regime.
MIIT this week also approved .时尚, which is the Chinese version of .fashion, managed by Rise Victory, a subsidiary of Yuwei Registry.
.fashion, .fit and .yoga have about 40,000 domains in their zone files, combined, while .luxe does not yet have a launch date.
MMX has had some success in China with its flagship .vip TLD, which had over 884,000 domains under management at the last public count. It recently said preliminary second-quarter renewals there were a very respectable 75%.
It also recently that that .购物 (.shopping) and .law both went on sale in China, and “will be marketed by in-country specialists as high-value domain names”. Investors were advised not to expect high volumes.

After ICANN nod, MMX buys .xxx

MMX has closed the acquisition of porn-focused ICM Registry, after receiving the all-clear from ICANN for the contract transfers.
The deal is worth roughly $41 million — $10 million cash and about $31 million in stock.
ICM runs .xxx from the 2003 gTLD application round (though it didn’t go live until 2011) and .porn, .adult and .sex from the 2012 round.
MMX, which now has 29 fully-owned TLDs and another five in partnerships, will now become roughly a quarter-owned by former ICM employees and its back-end provider, Afilias.
ICM president Stuart Lawley now owns 15% of MMX and is its largest shareholder.
CEO Toby Hall said in a statement to the markets that he has “identified a number areas of potential growth and synergy”.
The company noted that the deal increases the share of its revenue coming from the US and Europe, implicitly highlighting the reduction of its exposure to the volatile Chinese market, where .vip has been its biggest money-spinner to date.
ICM had something like 152,000 .xxx domains under management at the last count, but over 80,000 of those are reservations. It has about 92,000 names in its zone file currently.
The three 2012-round names are faring less well, with about 8,000 to 10,000 names apiece in their zones.
Somebody once jokingly told me that ICM stood for “Internet Cash Machine”, due to the perception that porn-focused names would sell like, well, porn. Just thought I’d mention that.

MMX rejected three takeover bids before buying .xxx

MMX talked to three other domain name companies about potentially selling itself before deciding instead to go on the offensive, picking up ICM Registry for about $41 million.
The company came out of a year-long strategic review on Friday with the shock news that it had agreed to buy the .xxx, .adult, .porn and .sex registry, for $10 million cash and about $31 million in stock.
CEO Toby Hall told DI today that informal talks about MMX being sold or merged via reverse takeover had gone on with numerous companies over the last 11 months, but that they only proceeded to formal negotiations in three cases.
Hall said he’d been chatting to ICM president and majority owner Stuart Lawley about a possible combination for over two years.
ICM itself talked to four potential buyers before going with MMX’s offer, according to ICM.
Lawley, who’s quitting the company, will become MMX’s largest shareholder following the deal, with about 15% of the company’s shares. Five other senior managers, as well as ICM investor and back-end provider Afilias, will also get stock.
Combined, ICM-related entities will own roughly a quarter of MMX after the deal closes, Hall said.
ICM, with its high-price domains and pre-2012 early-mover advantage, is the much more profitable company.
It had sales of $7.3 million and net income of $3.5 million in 2017, on approximately 100,000 registrations.
Compared to MMX, that’s about the same amount of profit on about half the revenue. It just reported 2017 profit of $3.8 million on revenue of $14.3 million.
There’s doesn’t seem to be much need or desire to start swinging the cost-cutting axe at ICM, in other words. Jobs appear safe.
“This isn’t a business in any way that is in need of restructuring,” Hall said.
He added that he has no plans to ditch Afilias as back-end registry provider for the four gTLDs. MMX’s default back-end for the years since it ditched its self-hosted infrastructure has been Nominet.
The deal reduces MMX’s exposure to the volatile Chinese market, where its .vip TLD has proved popular, accounting for over half of the registry’s domains under management.
It also gives MMX ownership of ICM’s potentially lucrative portfolio of reserved premium names.
There are over 9,700 of these, with a combined buy-now price of just shy of $135 million.
I asked Hall whether he had any plans to get these names sold. He laughed, said “the answer is yes”, and declined to elaborate.
ICM currently has a sales staff of three people, he said.
“It’s a small team, but their track record is exceptional,” he said.
The company’s record, I believe, is sex.xxx, which sold for $3 million. It has many six-figure sales on record. Premiums renew at standard reg fee, around $60.
With the ICM deal, MMX has recast itself after a year of uncertainty as an acquirer rather than an acquisition target.
While many observers — including yours truly — had assumed a sale or merger were on the cards, MMX has gone the other route instead.
It’s secured a $3 million line of credit from its current largest shareholder, London and Capital Asset Management Ltd, “to support future innovation and acquisition orientated activity”.
That’s not a hell of a lot of money to run around snapping up rival gTLDs, but Hall said that it showed that investors are supportive of MMX’s new strategy.
So does this mean MMX is going to start devouring failing gTLDs for peanuts? Not necessarily, but Hall wouldn’t rule anything out.
“Our long-term strategy is ultimately based around being an annuity-based business,” he said. He’s looking at companies with a “strong recurring revenue model”.
About 78% of ICM’s revenue last year came from domain renewals. The remainder was premium sales. For MMX, renewal revenue doubled to $4.8 million in 2017, but that’s still only a third of its overall revenue (though MMX is of course a less-mature business).
So while Hall refused to rule out looking at buying up “struggling” gTLDs, I get the impression he’s not particularly interested in taking risks on unproven strings.
“You can never say never to any opportunity,” he said. “If we come across and asset and for whatever reason we believe we can monetize it, it could become an acquisition target.”
The acquisition is dependent on ICANN approving the handover of registry contracts, something that doesn’t usually present a problem in this kind of M&A.

MMX could announce acquisition this week

New gTLD registry MMX could announce plans to be acquired as early as this week.
The company told the markets last week that its delayed 2017 financial results would be announced in “early May”, along with the “conclusion of the strategic review” it has been teasing investors about for almost a year.
The “strategic review”, announced last May, is exploring “how MMX can participate in a broader industry consolidation” including acquisition or merger.
MMX said last week that “constructive discussions continue to progress”.
It has previously described the duration of the negotiations, initially slated to close last September, as “frustrating”.
Unlike AIM-listed rival CentralNic, which has confirmed it is in reverse-takeover talks with KeyDrive, MMX has not revealed which potential buyer(s) it has been talking to.
MMX, also listed on AIM, has a market cap of £69.3 million ($94.3 million) today.
In January, it informally reported that its 2017 billings are expected to be around the $15.6 million mark, allowing the company to hit operating profitability for the first time.
The company runs 25 new gTLDs solo and five more in partnerships with other companies, but by far and a way the best volume performer is .vip, which accounts for well over half of its registrations largely due to its resonance in China.

dotgay lawyer insists it is gay enough for .gay gTLD

What do Airbnb, the Stonewall riots and the 2016 Orlando nightclub shooting have in common?
They’re all cited in a lengthy, somewhat compelling memo from a Yale law professor in support of dotgay LLC’s argument that it should be allowed to proceed with its .gay gTLD application unopposed by rival applicants.
The document (pdf), written by William Eskridge, who has decades of publications on gay rights under his belt, argues that dotgay’s Community Priority Evaluation and the subsequent review of that evaluation were both flawed.
At the crux of the dispute is whether the word “gay” can also be used to describe people who are transgender, intersex, and “allied” straight — dotgay says it can, but the Economist Intelligence Unit, which carried out the CPE, disagreed.
dotgay scored 10 out of 16 points on its CPE, four shy of a passing grade. An acceptance of dotgay’s definition of the “gay” community could have added 1 to 4 extra points to its score.
The company also lost a point due to an objection from a gay community center, despite otherwise broad support from gay-oriented organizations.
Eskridge spends quite a lot of time on the history of the word “gay”, from Gertrude Stein and Cary Grant using it as a wink-wink code-word in less-tolerant times, via the 1969 Stonewall riots, to today’s use in the media.
The argument gets a bit grisly when it is pointed out that some of the 49 people killed in the 2016 mass shooting at the Pulse nightclub in Orlando, Florida — routinely described as a “gay” club in the media — were either transgender or straight.

My research associates and I read dozens of press and Internet accounts of this then-unprecedented mass assault by a single person on American soil. Almost all of them described Pulse as a “gay bar,” the situs for the gay community. But, like the Stonewall thirty-seven years earlier, Pulse was a “gay bar” and a “gay community” that included lesbians, bisexual men and women, transgender persons, queer persons, and allies, as well as many gay men.

Eskridge argues that EIU erred by applying an overly strict definition of the applied-for string with dotgay, but not with successful community applicants for other strings.
For example, he argues, a manufacturer of facial scrubs would qualify for a “.spa” domain, and Airbnb and the Orient Express train line would qualify for “.hotel” domains under that applicant’s definition of its community, even though it could be argued that they do not fit into the narrow categories of “spas” and “hotels”.
Similarly, a transgender person may not consider themselves “gay” and a straight person certainly would not, but both might feel a part of the broader “gay community” when they get shot at a gay nightclub.
It’s an unpleasant way to frame the argument, but in my view it’s compelling nevertheless.
Eskridge also thinks that dotgay should have picked up an extra point or two in the part of the CPE dealing with community support.
It dropped one point there because the Q Center, a community center for LGBTQ people in Portland, Oregon, sent a letter objecting to the dotgay application (an objection apparently later revoked, then reinstated).
Eskridge spend some time questioning the Q Center’s bona fides as a big-enough organization to warrant costing dotgay a point, noting that it was the only member of a 200-strong umbrella organization, CenterLink, to object. CenterLink itself backed the bid.
He then goes on to cite articles seemingly showing that Q Center was in the midst of some kind of liberal paranoia meltdown — accused of racial insensibility and “transphobia” — and allegations of mismanagement at about the same time as it was objecting to dotgay’s application.
He also insinuates that Q’s base in Portland is suspicious because it’s also where rival applicant Top Level Design is based.
In summary, Eskridge reckons the EIU CPE and FTI Consulting’s subsequent investigation were both flimsy in their research, unfairly applying criteria to .gay that they did not apply to other strings, and that dotgay should have picked up enough points to pass the CPE.
It’s important to remember that this is not a case of ICANN getting decide whether the gTLD .gay gets to exist — it’s going to exist one way or the other — but rather whether the winning registry is selected by auction or not.
If dotgay wins either by getting another CPE or winning the auction then .gay will be restricted to only vetted members of the “gay” community. This could mean less homophobic abuse in .gay domains but probably also less opportunity for self expression.
If it goes to Top Level Design, MMX or Donuts, it will be open to all comers. That could increase cyber-bulling with .gay domains, but would remove barriers to entry to those who would otherwise be excluded from registering a domain.
ICANN has had .gay on hold for years while the dispute over the CPE has worked itself out, and it now has a piece of paper from FTI declaring the result hunky-dory. I doubt there’s any appetite to reopen old wounds.
My feeling is that we’re looking at an auction here.

MMX profitable as acquisition talks drag on

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

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

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

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

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).