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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.

$55 billion bank not paying its $6,250 ICANN fees

Kevin Murphy, April 30, 2018, Domain Registries

Kuwait Finance House has become the latest new gTLD registry to get slapped with an ICANN breach notice for not paying its quarterly fees.

The company is a 40-year-old, Sharia-compliant Kuwaiti bank managing assets of $55.52 billion, according to Wikipedia. It has annual revenue in excess of $700 million.

But apparently it has not paid its fixed ICANN dues — $6,250 per quarter — for at least six months, according to ICANN’s breach letter (pdf).

KFH runs .kfh and the Arabic internationalized domain name equivalent .بيتك (.xn--ngbe9e0a) as closed, dot-brand domains.

Neither appears to have any live sites, but both appear to be in their launch ramp-up phase.

ICANN has been nagging the company to pay overdue fees since November, without success, according to its letter.

They’re the third and fourth new gTLD registries to get deadbeat breach notices this month, after .qpon and .fan and .fans.

Muslim world still thinks .islam isn’t kosher

Kevin Murphy, April 23, 2018, Domain Policy

The Organization of Islamic Cooperation has repeated its objection to the gTLDs .islam and .halal ever seeing the light of day.

OIC Secretary General Yousef Al-Othaimeen wrote to ICANN earlier this month to declare that its position on the two controversial applications has not changed since it initially objected to them in 2013.

The OIC comprises the foreign ministers from 57 majority-Muslim countries and these ministers recently voted unanimously to re-adopt the 2013 objection, Al-Othaimeen said (pdf).

The group “maintain the position that the new gTLDs with Islamic identity are extremely sensitive in nature as they concern the entire Muslim nature” he wrote.

He reiterated “official opposition of the OIC Member states towards the probable authorization that might allow the use of these gTLDs .islam and .halal by any entity.”

This puts ICANN between a rock an a hard place.

The applicant for both strings, Turkish outfit Asia-Green IT Systems (AGIT), won an Independent Review Process case against ICANN last November.

The IRP panel ruled that ICANN broke its own bylaws when it placed .islam and .halal into permanent limbo — an “On Hold” status pending withdrawal of the applications or OIC approval — in 2014.

ICANN’s board accepted the ruling and bounced the decision on whether to finally approve or reject the bids to its Board Accountability Mechanisms Committee, which is currently mulling over the problem.

Technically, it’s “non-consensus Governmental Advisory Committee advice”, which means the board has some wriggle room to simply accept the advice and reject the applications.

But AGIT’s lawyer disagrees, recently telling ICANN (pdf) its options are to approve the bids or facilitate dialogue towards their approval, rather like ICANN is doing with .amazon right now.

Child abuse becoming big problem for new gTLDs

Kevin Murphy, April 18, 2018, Domain Policy

There were 3,791 domain names used to host child sexual abuse imagery in 2017, up 57%, according to the latest annual report from the Internet Watch Foundation.

While .com was the by far the worst TLD for such material in terms of URLs, over a quarter of the domains were registered in new gTLDs.

Abuse imagery was found on 78,589 URLs on 3,791 domains in 152 TLDs, the IWF said in its report.

.com accounted for 39,937 of these URLs, a little over half of the total, with .net, .org, .ru and .co also in the top five TLDs. Together they accounted for 85% of all the abuse URLs found. The 2016 top five TLDs included .se, .io and .cc.

New gTLDs accounted for a small portion of the abuse URLs — just over 5,000, up 221% on 2016 — but a disproportionate number of domains.

The number of new gTLD domains used for abuse content was 1,063, spread over 50 new gTLDs. Equivalent numbers were not available in the 2016 report and IWF does not break down which TLDs were most-abused.

According to Verisign’s Q4 Domain Name Industry Brief (pdf), new gTLDs account for just 6.2% of all existing domain names, and yet they account for over 28% of the domains where IWF found child abuse imagery.

IWF said that the increasing number of domains registered to host abuse imagery can be linked to what it calls “disguised websites”.

These are sites “where the child sexual abuse imagery will only be revealed to someone who has followed a pre-set digital pathway — to anyone else, they will be shown legal content.”

Presumably this means that registries and registrars spot-checking domains they have under management could be unaware of their true intended use.

Cybersquatting cases up because of .com

Kevin Murphy, March 23, 2018, Domain Services

The World Intellectual Property Organization handled cybersquatting cases covering almost a thousand extra domain names in 2017 over the previous year, but almost all of the growth came from complaints about .com names, according to the latest WIPO stats.

There were 3,074 UDRP cases filed with WIPO in 2017, up about 1.2% from the 3,036 cases heard in 2016, WIPO said in its annual roundup last week.

That’s slower growth than 2016, which saw a 10% increase in cases over the previous year.

But the number domains complained about in UDRP was up more sharply — 6,370 domains versus 5,374 in 2016.

WIPO graph

WIPO said that 12% of its 2017 cases covered domains registered in new gTLDs, down from 16% in 2016.

If you drill into its numbers, you see that 3,997 .com domains were complained about in 2017, up by 862 domains or 27% from the 3,135 seen in 2016.

.com accounted for 66% of UDRP’d domains in 2016 and 70% in 2017. The top four domains in WIPO’s table are all legacy gTLDs.

As usual when looking at stats for basically anything in the domain business in the last few years, the tumescent rise and meteoric fall of .xyz and .top have a lot to say about the numbers.

In 2016, they accounted for 321 and 153 of WIPO’s UDRP domains respectively, but they were down to 66 and 24 domains in 2017.

Instead, three Radix TLDs — .store, .site and .online — took the honors as the most complained-about new gTLDs, with 98, 79, and 74 domains respectively. Each of those three TLDs saw dozens more complained-about domains in 2017 than in 2016.

As usual, interpreting WIPO’s annual numbers requires caution for a number of reasons, among them: WIPO is not the only dispute resolution provider to handle UDRP cases, rises and falls in UDRP filings do not necessarily equate to rises and falls in cybersquatting, and comparisons between .com and new gTLDs do not take into account that new gTLDs also have the URS as an alternative dispute mechanism.

Three more dot-brands throw in the towel

Kevin Murphy, March 21, 2018, Domain Registries

Two companies have told ICANN they no longer wish to operate some of their dot-brand gTLDs.

First, Sony has decided to junk its .xperia TLD.

Xperia is a brand of mobile phones the company sells. The matching gTLD, which entered the DNS root mid-2015, only ever had the contractually mandated nic.xperia delegated.

Sony still has .sony and .playstation active. The latter doesn’t seem to have any live web sites, but .sony is seeing some light usage with sites such as pro.sony and lostinmusic.sony.

The next dot-brand to get ditched is .meo, owned by leading Portuguese mobile telco MEO.

MEO has also dumped .sapo, which is its ISP brand.

Again, neither gTLD had never seen any action beyond their nic. sites, despite being delegated over three years ago.

Both companies told ICANN in January that they wish to end the Registry Agreement contracts.

ICANN last week decided not to open any of the strings for redelegation and opened up its decision for comments.

After long fight, Donuts adds .charity to its gTLD stable

Kevin Murphy, March 13, 2018, Domain Registries

Snatching victory from the jaws of defeat, Donuts has prevailed in the two-horse race for the .charity gTLD.

The company appears to have privately resolved its contention set, paying off rival bidder Famous Four Media, judging by updates to ICANN’s web site today.

The gTLD had been scheduled for an ICANN “last resort” auction in April, but that’s now off.

Famous Four has also withdrawn its application, leaving Donuts the only remaining applicant.

I believe it will be Donuts’ 239th 240th gTLD.

But for a while it looked like Famous Four had a slam-dunk on its hands.

Back in 2014, the Independent Objector of the new gTLD program had filed an Community Objection against Donuts’ application, saying it was too risky to unleash a .charity domain onto the world without registration eligibility restrictions.

The fear was (and probably still is) that fraudsters could use the domains to lend an air of credibility to their online scams.

The IO prevailed, pretty much gifting Famous Four — which had proposed restrictions — the TLD.

But Donuts embarked upon an arduous set of appeals, including an Independent Review Process case, that culminated, last December, in a ruling (pdf) that reversed the original Community Objection decision.

That cleared the way for Donuts back into the application process and, now, the private auction it seems to have won.

Due to ICANN’s adoption of Governmental Advisory Committee advice on sensitive strings, Donuts will be obliged to put some Public Interest Commitments into its .charity contract, with the aim of reducing abuse.

Next new gTLD round unlikely before 2022

Kevin Murphy, March 13, 2018, Domain Policy

ICANN is unlikely to accept any more new gTLD applications until a full decade has passed since the last round was open.

That’s the conclusion of some ICANN community members working on rules for the next round.

Speaking at ICANN 61 in Puerto Rico this weekend, Jeff Neuman, co-chair of the New gTLD Subsequent Procedures Working group, presented a “best case” timetable for the next round.

The timetable would see the next new gTLD application window opening in the first quarter of 2021, nine years after the 2012 round.

But Neuman acknowledged that the timeline would require all parts of the ICANN community — working groups, GNSO Council, board of directors, staff — to work at their most efficient.

With that in mind, 2021 seems optimistic.

“Even if we hit the 2021 date, that’s still a decade after the launch of the last round, which is crazy,” Neuman said.

Slide

The timetable assumes the GNSO wraps up its policy development a year from now, with the ICANN board approving the policy mid-2019.

It then gives the ICANN staff about six months to publish an updated Applicant Guidebook, and assumes whatever is produced is approved within about six months, after the first pass of public comments.

It’s worth noting that the 2012 round’s AGB hit its first draft in 2008 and went through half a dozen revisions over three years before it was finalized, though one imagines there would be less wheel-reinventing required next time around.

After the board gives the AGB the final nod, the timeline assumes ICANN staff about six months to “operationalize” the program.

But one unidentified ICANN staffer, who said she was “the person that will be ultimately responsible for the implementation” of whatever the GNSO comes up with, said during this weekend’s session that she doubted this was realistic.

She said ICANN the organization would need “at least 12 months” between the ICANN board approving the AGB and the application window opening. That would push the window to late 2021.

The Subsequent Procedures policy work is of course not the only gating factor to the next round.

There’s also a potential bottleneck in work being carried out to review rights protection mechanisms, where fears of filibustering have emerged in an already fractious working group.

All things considered, I wouldn’t place any bets on an application window opening as early as 2021.

Donuts scraps 200 companies, consolidates under Binky Moon

Kevin Murphy, March 11, 2018, Domain Registries

Donuts has consolidated all of its original portfolio of new gTLD contracts under a single LLC, scrapping almost 200 shell companies in the process.

At least 196 contracts, each of which were originally allocated to a unique LLC, have been assigned now to Binky Moon LLC.

This seems to have happened back in late November, but ICANN only added the transfers to its published list of reassignments last week.

When Donuts applied for over 300 gTLDs back in 2012, each application belonged to a different shell company. Apparently randomly generated names — such as New Sky LLC, Sand Shadow LLC and Bitter Fields LLC — were chosen for each.

This was for “tax and other purposes” that made sense when Donuts was a new company, I’m told.

Now, with Donuts by one measure the fastest-growing tech company in the world, it made more sense to “retire” the old LLCs and realize the “operational efficiencies” of consolidation, a spokesperson said.

Not all of Donuts’ contracts belong to Binky Moon. When the company acquired 2003-round .travel last month it assigned the Registry Agreement to Dog Beach LLC.