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Is the free ride over for Verisign’s .net?

Kevin Murphy, October 27, 2014, Domain Services

Verisign’s .net is on the rocks due to new gTLDs, executives have confirmed.

Speaking to investors and analysts on the company’s third-quarter earnings call last week, CFO George Kilguss said that .net “is experiencing some headwinds from the launch of the new gTLD program”.

Further comments from Kilguss and CEO Jim Bidzos seem to confirm what DI reported a month ago: .net is in trouble.

Latest stats collated by DI show that the .net zone file shrunk by over 121,000 domains in the seven months between March 26 and October 26 this year.

Executives said on the call that .net stood at 15.1 million names at the end of September. That compares to 15.2 million at the end of the previous quarter.

“It’s been relatively flat,” Kilguss said. “I actually think .net has held up pretty well over the year with all these new names coming on… So I don’t view .net’s performance as anything negative.”

Bidzos told analysts that “confusion” around the new gTLDs was to blame.

“I think generally, .net may be more susceptible to that confusion that swirls around new gTLDs,” he said.

He characterized .net as being like new gTLDs, falling into “that category of ‘different'”.

In my view, this is an implicit acknowledgement that .net has been getting a free ride for the last 20 years.

Asked whether the .net weakness could spill over to .com, Bidzos said that .com is a “trusted brand” because it’s almost 30 years old and has a 17-year record of uninterrupted up-time.

While there’s no doubt that .com is a trusted brand, it’s not because of its up-time or longevity, in my view — .net has the same stability record and is actually fractionally older than .com.

The reason .net is suffering now is that that for the last two decades it’s been essentially a defensive play.

People buy the .net when they buy the .com because they’ve been marketed as a bundle — the only two truly generic TLDs out there. Unlike .org, .net lost its semantic differentiation a long time ago.

As .com buyers start to see more and more options for duplicative or defensive registrations in their shopping carts, they’re going to be less likely to grab the .net to match their .com, in my opinion.

And it’s likely to get worse.

“It’s going to continue,” Bidzos said. “We’re seeing hundreds of more new gTLDs coming, and they’re coming at the rate of many every single week. So that confusion is likely to get worse.”

Is Verisign’s .net in trouble?

Kevin Murphy, September 24, 2014, Domain Registries

The zone file for Verisign’s .net gTLD has shrunk by almost 100,000 domains in the last few months.

I’ve been tracking .com and .net’s zone numbers since mid-March, shortly after the current wave of new gTLDs started going live, and while .com seems to be still growing strong, .net is definitely trending down.

The bulk of .net’s decline seems to have happened of the last three months. Its zone file count has decreased by 95,590 domains in the last 90 days, according to my numbers.

Here’s a chart, which you can click to enlarge, to illustrate what I’m talking about:

.net

I don’t have comparable figures from previous years, so I can’t be certain that the downturn is not related to summer seasonality.

But if there is seasonality, it doesn’t appear to have affected .com, which has added over a million names to its zone over the last 90 days.

.net

The last formal registry transactions report we have from Verisign for .net shows a decline of a little over 7,000 names under management in May.

Are these the early signs of trouble ahead for .net?

The TLD has always been a bit of an oddity. Originally designed for network operators, it was opened up and pitched in the 1990s by Network Solutions as a catch-all that should be acquired alongside .com.

That “Oh, I may as well buy the .net while I’m here” mentality stuck in the primary market, and I’ve often encountered the “I’ll throw in the .net for free” mentality in the secondary market.

But in a world of hundreds of new gTLDs I wonder whether .net’s brand caché will shrink.

If a registrant decides they can clearly do without defensively registering the .guru, the .pics, the .horse and the .wtf, perhaps they’ll start wondering why they bother to register the .net too.

Is .net on the verge of an unprecedented drop-off in registrations?

I’ll have to reserve judgement — that last 90 days might be a blip, and it only represents 0.63% of the .net business — but it’s going to be worth keeping an eye on, I think.

With 15 million names, the .net business is worth about $93 million a year in registry fees to Verisign.

Verisign lays out ‘buy once’ IDN gTLD plans

Verisign has finally clarified how it proposes to let existing registrants of internationalized domain names grab the matching domains in its 12 forthcoming IDN gTLDs.

The company has applied for transliterations of .com in nine non-Latin scripts and .net in three, but its applications were light on details about existing registrants’ rights.

But today Verisign senior vice president Pat Kane outlined precisely how name allocations will be handled.

At first glance it sounds like good news for existing IDN registrants, particularly domainers whose investments in IDN .com and .net domains are about to become much more valuable.

If you already own a .com domain that is an IDN at the second level, you will have exclusive rights to that IDN string in all other .com transliterations, but not .net transliterations.

That works the other way around too: if you own the IDN .net domain, you get the matching second level in all of Verisign’s .net transliterations.

Owning the Chinese word for “beer” in Latin .com would not give you rights to the Thai word for “beer” in the Thai transliteration of .com, but you could buy the Chinese equivalent.

The rules seem to apply to future registrations too.

You could register the Hebrew for “beer” in the Hebrew transliteration of .com and you would also get the exclusive right to that Hebrew string in Latin .com.

There would be no obligation, and you wouldn’t lose your right to register matching domains if you chose not to immediately exercise it, Kane said. He wrote:

Two primary objectives in our strategy to implement new IDN gTLDs are, where feasible, to avoid costs to consumers and businesses from purely defensive registrations in these new TLDs, as well as to avoid end-user confusion.

It all sounds pretty fair to me, based on Kane’s blog post.

There’s a hint that trademark rights protection mechanisms may complicate matters, which has apparently been discussed in a letter to ICANN, but if it’s been published anywhere I’ve been unable to find a copy.

In major snub, Verisign refuses to let ICANN audit .net

Kevin Murphy, January 11, 2013, Domain Registries

Verisign has delivered a significant blow to ICANN’s authority by refusing to take part in its contractual compliance audit program.

The snub runs a risk of scuppering ICANN’s plans to make compliance a cornerstone of its new management’s strategy.

In a letter to ICANN’s compliance department this week, Verisign senior vice president Pat Kane said that the company has no obligation to submit to an audit of .net under its ICANN contract.

Kane wrote:

Verisign has no contractual obligations under its .net Registry Agreement with ICANN to comply with the proposed audit. Absent such express contractual obligations, Verisign will not submit itself to an audit by or at the direction of ICANN of its books and records.

The company is basically refusing to take part in ICANN’s Contractual Compliance Audit Program, a proactive three-year plan to make sure all gTLD registries and accredited registrars are sticking to their contracts.

For registries, the plan calls for ICANN to look at things like compliance with Whois, zone file access, data escrow, monthly reporting, and other policies outlined in the registry agreements.

Verisign isn’t necessarily admitting that it thinks it would not pass the .net audit, but it is sending a strong signal that it believes ICANN’s authority over it has limits.

In the program’s FAQ, ICANN admits that it does not have explicit audit rights over all contracted parties, stating:

What’s the basis for including all contracted parties, when the ‘Right to Audit’ clause isn’t present in 2001 RAA and Registry Agreements?

One of ICANN’s responsibilities is to conduct audits of its agreements in order to ensure that all contracted parties are in compliance with those agreements.

If Verisign is refusing to participate, other registries may decide they don’t want to cooperate either. That wouldn’t look good for ICANN, which has made compliance a key strategic priority.

When Fadi Chehade started as CEO last September, one of his first moves was to promote compliance boss Maguy Serad to vice president, reporting directly to him.

He told DI that he would be “bringing a lot more weight and a lot more independent management from my office to the compliance function”.

At his inaugural address to the community in Prague last June, he spoke of how he planned to bring IBM-style contract management prowess to ICANN.

Compliance is also a frequently raised concern of the Governmental Advisory Committee (though generally geared toward rogue registrars rather than registries).

Surprise! Verisign to increase .net fees

Kevin Murphy, December 19, 2012, Domain Registries

Verisign has just announced that it will increase its .net registry fee by 10% next year.

The changes, which will become effective July 1, 2013, see the charge for a one-year registration increase from $5.11 to $5.62.

The increase, which is permitted under Verisign’s contract with ICANN, was inevitable given the fact that the company has just lost the right to increase .com prices.

US Department of Commerce intervention in .com means that prices there are frozen for the next six years, so Verisign can be relied upon to seize every alternative growth opportunity available to it.

The last time .net’s fee was increased was January 2012, when it went up by 10% to the current $5.11.