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Web.com acquires dozens of registrars from Rightside

Kevin Murphy, May 11, 2016, Domain Services

Web.com has acquired dozens of registrars from rival/partner Rightside, seemingly to boost the success rate of its SnapNames domain drop-catching business.

I’ve established that at least 44 registrars once managed by Rightside/eNom have moved to the Web.com stable in recent weeks, and that might not even be the half of it.

All of the registrars in question are shell companies used exclusively to register pre-ordered names as they are deleted by registries, usually Verisign.

The more registrars you have, the more EPP connections you have to the Verisign registry and the better your chance at catching a domain.

Web.com runs SnapNames, and is in a 50-50 partnership with Rightside on rival drop-catcher NameJet.

The two compete primarily with NameBright’s DropCatch.com, which obtained hundreds of fresh ICANN accreditations last year, bringing its total pool to over 750.

Web.com has fewer than 400 accreditations right now. Rightside has even fewer.

It’s usually quicker to buy a registrar than to obtain a new accreditation from ICANN.

If Web.com finds itself in need of more accreditations in order to compete, and Rightside is happy to let them go, it could be possible to infer that SnapNames is doing rather better in terms of customer acquisition than NameJet.

But the two services recently announced a partnership under which names grabbed by either network would be placed in an auction in which customers of either site could participate.

This would have the effect of increasing the number of caught names going to auction due to there being multiple bidders, and thus the eventual sales prices.

Rightside to modernize eNom, predicts $75m new gTLD revs

Rightside used its first quarter earnings call yesterday to address, albeit indirectly, some of the criticisms recently leveled at it by activist investors and competitors.

CEO Taryn Naidu revealed for the first time how the company sees the new gTLD market playing out in the longer term.

He said than in three to five years, Rightside expects annual revenue from its registry business to come it at $50 million to $75 million.

That’s a hell of a lot more than it makes today.

In the first quarter, registry revenue was $2.6 million, compared to $1.6 million a year ago. Annualized, that’s a shade over $10 million.

On the back of an envelope, Rightside seems to need roughly 50% growth per year over five years to hit the low end of its target.

Naidu told analysts that one factor built into this projection is that third-party registrars will start to sell just as many new gTLD domains as Rightside’s registrars do.

Currently, Rightside sees 15% to 20% new gTLD, but with others it’s 3% to 5%, he said.

Naidu said he expects margins to be 20% at the EBITDA level.

The revelation of these targets may go some way to address investor concerns that Rightside is putting too much effort into its new gTLD business at the expense of its cash-generating registrars.

J Carlo Cannell of Cannell Capital expressed these views and others in March, and was supported by fellow investor Frank Schilling, CEO of Uniregistry.

Naidu last night also addressed concerns about eNom, which Cannell had called a “time capsule” due to its aging user experience.

He admitted that eNom is “encumbered by some older technology” but said it was being fixed.

“Later this quarter we will be rolling out the first phase of our development efforts, which include a dramatically revamped user interface, a new suite of software development tools and a new developer hub to help our partners learn, develop and test faster,” he said.

The registrar business brought in $44 million in the quarter, up from $41.9 million. Aftermarket revenue was $9.3 million compared to $7.3 million.

Overall, revenue was up 9% at $55.1 million, with a net loss of $5.1 million. That compared to income of $1.9 million a year ago.

Naidu also seemed to obliquely address the criticism that a lot of Rightside’s new gTLDs are shit — .democrat, .dance, .army, .navy, and .airforce have been singled out by Cannell and others — by talking about how the company doesn’t necessarily put the same amount of effort into marketing its whole stable.

Some gTLDs will be marketed more heavily later, he said, comparing it to a real estate owner holding on to parcels of land for later development.

Naidu also talked up Rightside’s prospects in China, where apparently .pub is doing quite well because registrants think it means “public” rather than “drinking establishment”.

Rightside rejects Negari’s $5m new gTLD offer

Rightside has turned down Daniel Negari’s $5 million offer to acquire four of its new gTLDs, according to Negari.

The XYZ.com CEO told DI via email tonight:

I was looking forward to operating .Army, .Dance, .Dentist, and .Vet under the XYZ umbrella. I’m disappointed that Rightside didn’t entertain my offer, especially since I believe $5MM was more than fair. I believe these and other new TLDs are worth more to me than any other registry operator due to my growing enterprise. However, it’s understandable for Rightside to want to monetize on these assets.

Rightside has told him it had reviewed the offer and was not interested, he said.

The offer was made in a March 30 open letter to the company and Securities and Exchange Commission filing and expired last night, April 7.

There was some speculation about whether it was a genuine offer, just an attempt to boost Rightside’s share price, or both.

Negari and his COO, Mike Ambrose, own about 5% of Rightside between them, following an $8.5 million investment.

Rightside’s ability to grow revenue from its new gTLD portfolio has become the focus of attention due to the intervention of activist investor J Carlo Cannell of Cannell Capital, who reckons the company is paying too much attention to rubbish TLDs at the expense of its profitable registrar businesses.

Negari thinks he would be able to grow .army, .dance, .dentist, and .vet.

The largest of those gTLDs is .vet, with about 5,200 names in its zone file. It grew by 794 names in the last 90 days.

The other three are below 3,000 names, and are either shrinking or adding fewer than 10 names per day.

XYZ.com’s second-tier portfolio strings, such as .college, .rent and .theatre, are faring a little better, at least in terms of growth. But they are a little younger, and none are over 10,000 names.

Rightside offers $10 renewals on premium names

Rightside is to run a promotion that will discount renewals on premium names down to .com prices.

From May 16 to June 30, if you buy any of the domains that Rightside has marked as premium — except the super-premium “Platinum” names — the wholesale renewal fee will be just $10.

Registrars will mark this up according to their own pricing models.

Normally, the price you pay at the checkout is the price you pay every year after that.

The deal is overtly targeted at domainers.

Rightside said: “At these reduced prices, you’ll have more time to find the right buyer for any domains you register, and incur lower fees to transfer to them once you do. If you’re looking to add high-quality domains to your portfolio, this will be the time to do it.”

The reduced renewals only apply to names registered during the six-week window, but they do pass on to subsequent registrants if the domain is sold.

Rightside is calling it a “first-of-its-kind” promo, but in reality it’s just a temporary regression to the once-standard industry model.

Remember, prior to the 2012-round gTLDs, only exceptions like .tv charged premium rates for renewals.

Premium renewals are now very commonplace, but are by no means the rule, in the new gTLD industry.

For Rightside, the offer means the company may experience a brief cash windfall as domainers, who generally hate premium renewals, take a chance on the registry’s names.

There’s also a potential marketing benefit to be gained from having more domainers on board as unpaid salespeople.

But it does rather suggest the premiums are not flying off the shelves at the rate Rightside wants.

The company recently disclosed that in the first few months of the year it made revenue of $674,610 selling 1,820 premium names, leading to an average price of $372. Twelve five-figure names had been sold.

Over its portfolio of 39 gTLDs, Rightside has flagged over 964,000 as premium, or about 25,000 per TLD.

Schilling agrees with activist Rightside investor

Uniregistry boss Frank Schilling agrees to a large extent with the fellow Rightside investor who was revealed today to be threatening a boardroom coup at Rightside.

Schilling, who is believed to have paid $8.4 million for 6.1% of Rightside, told DI tonight that he believes Rightside’s management has not done a good job over the last few years.

He said he agrees with 7.32% shareholder J Carlo Cannell, who says that Rightside should get rid of some of its weaker new gTLDs.

Cannell, of Cannell Capital, is demanding Rightside lay off one in five of its staff, dump its weakest new gTLDs, and refocus the company on its eNom registrar business.

He’s threatening to launch a proxy fight at the company in order to replace the Rightside board of directors with his own slate if management does not do what he wants.

Cannell’s letter called out .democrat, .dance, .army, .navy, and .airforce as “irrelevant” or “garbage” gTLDs in Rightside’s portfolio that should be sold or simply “abandoned” in order to focus on its better gTLDs, such as .news, and its cash-generating registrar business.

Schilling told DI tonight that he agrees with Cannell, at least partly.

He said that if Cannell’s proposal for the company is good for shareholders and the company he would support it.

It may sound counter-intuitive for Schilling, one of the most ardent proponents of new gTLDs, to support somebody encouraging Rightside to invest less in marketing its new gTLD portfolio.

After all, Uniregistry has a couple dozen new gTLDs — including .sexy, .christmas, .pics and .link — in its stable

But Schilling has form when it comes to advocating portfolio rationalization.

Today he pointed to comments he made on a DI article in December

“Operators may make the decision to give away or sunset unprofitable strings,” he said in those comments. “I don’t view that as such a bad thing.”

Schilling said that weaker strings should be “bootstrapped” rather than aggressively invested in.

One of Cannell’s beefs with Rightside is that the company is focusing too much on new gTLDs. He’s not opposed to new gTLDs in general — in fact, he likes them — but he wants Rightside to put money only into those gTLDs he considers worthwhile.

Cannell also wants Name.com rebranded to eNom and moved to Rightside’s Seattle headquarters, for two of its directors to be replaced and for 20% of Rightside’s “weakest” staff to be laid off.

I asked Schilling whether he agreed with Cannell that that 20% of Rightside’s staff should be let go.

He said: “I do not think it is healthy to name arbitrary numbers but I do think some wrong people are in the wrong seats.”

Schilling also said that he believes Rightside has been “subservient” to Donuts, and has given Donuts too much for too little.

Donuts is the portfolio gTLD registry play that uses Rightside as its back-end registry provider.

Donuts has a much better portfolio, in my irrelevant opinion.

Another notable investor in Rightside is XYZ.com CEO Daniel Negari and his COO Michael Ambrose, who collectively invested roughly $8.5 million in Rightside at around the same time as Schilling and Cannell bought their stakes.

Like Schilling, they’re an obviously pro-new-gTLD play. I’ve asked Negari for his opinion on Cannell’s letter and will update should I ever receive a response.

Activist investor slams Rightside over “garbage” new gTLDs, looking for blood

A hedge fund manager known for causing trouble at the companies he invests in has savaged Rightside, saying its focus on new gTLDs at the expense of its registrar business is ruining the company.

J Carlo Cannell of Cannell Capital is looking for some serious bloodletting.

He wants Rightside to cut 20% of its staff, close offices, unify its products under the eNom brand and replace two of its directors.

He’s threatening to wage a proxy war to replace the Rightside board if he doesn’t get what he wants.

He wrote a scathing letter to Rightside chair Dave Panos last month, which was published in a Securities and Exchange Commission filing today.

NAME’s registrar has become like a crazy aunt kept in the basement, one that you refuse to adequately clothe or feed, but who steadfastly spins straw into gold used to subsidize a stable of largely substandard new GTLDs such as .democrat, .dance, .army, .navy, and .airforce. Most of these new GTLDs are irrelevant and will never be sold in material volumes. NAME is holding back the growth potential of your registrar by pushing garbage extensions to a user base that quietly knows better.

NAME is Rightside’s Nasdaq ticker symbol.

Cannell revealed he owned a 7% share of Rightside last month — paying reportedly just shy of $11 million for 1,389,953 shares.

He wants Rightside to sell off “or even abandon” some of its weaker gTLDs, which “should not consume all the resources of our Company at the expense of the assets that are currently profitable”, while keeping “gems” such as .news.

His letter doesn’t pull any punches.

Cannell is perhaps best known for his widely publicized tussle with Jim Cramer, TV show host and co-founder of financial news site TheStreet.

Rightside moves into China too

Kevin Murphy, February 15, 2016, Domain Registries

Rightside has become the latest gTLD registry to open up in China.

The company said today it has created a Wholly Foreign-Owned Enterprise, basically a local subsidiary, in the country.

This is the same beachhead in China taken by Minds + Machines and Famous Four Media recently.

Draconian Chinese government regulations on domain registries and registrars require formal accreditation before domain names can be used by Chinese citizens.

Opening up a local office or working with a local proxy appear to be requirements to obtain this accreditation.

Rightside points out that 45% of new gTLD domain names — 5.4 million — are registered in China. Its own portfolio has seen 90,000 of these.

Rightside to auction “xyz” domains at NamesCon

Kevin Murphy, January 5, 2016, Domain Sales

.xyz made a bit of a splash with domain investors in 2015, but is the meaningless string “xyz” inherently attractive? Even at the second level?

Rightside seems to think so.

The registry, which does not operate .xyz, is planning to auction at least four “xyz” domains during next Monday’s live auction at the NamesCon conference in Las Vegas.

Rightside today disclosed that xyz.sale, xyz.market, xyz.news and xyz.live will be among about a dozen registry-reserved short domain names– such as q.sale and z.pub — it will attempt to sell.

The only meaningful domain on its list is the absolutely fantastic, category-killing viral.video.

It’s difficult to see the “xyz” names as anything other than attempt to cash in on the popularity of .xyz domains among the investors, many of them Chinese, currently pumping money into the domain market.

XYZ.com’s .xyz gTLD has over 1.7 million domains in its zone file today, making it the largest-volume new gTLD by a considerable margin.

I’m not sure there’s any causal connection here, but it should probably be noted that Daniel Negari and Michael Ambrose, XYZ.com’s CEO and COO respectively, recently acquired a substantial chunk of Rightside.

The two men disclosed November 30 that they had paid over $8.5 million to buy almost 10 million shares — or roughly 5.2% of the company — on the open market.

The NamesCon auction kicks off at 1400 Pacific (2200 UTC) on Monday at the Tropicana in Vegas. It’s being managed by RightOfTheDot and Namejet.

Apple using apple.news as (yawn) redirect service

Kevin Murphy, September 22, 2015, Domain Registries

Apple has become the latest famous brand to deploy a new gTLD domain in the wild.

The domain apple.news has been observed this week being used as a URL redirection service by its Apple News app.

It seems that when somebody shares a link to a news site via social media, using Apple News, the app automatically shares an apple.news redirect link instead.

The domains apple.news and www.apple.news do not resolve to web sites (for me at least) but Google has already indexed over a thousand apple.news URLs. Clicking on these links transparently punts the surfer to the original news source.

UPDATE: Thanks to Gavin Brown for pointing out in the comments that apple.news does resolve if you specify “https://” rather than “http://” in the URL. The secured domain bounces visitors to apple.com/news.

It puts me in mind of .co’s original flagship anchor tenant, Twitter, which obtained t.co five years ago and continues to use it as its core URL redirection service.

It’s impossible to tell what impact t.co had on the success of .co — the domain was in use from .co’s launch — but it surely had some impact.

.news, a Rightside TLD, had just over 24,400 domains in its zone file yesterday. We’ll have to see whether Apple’s move has an impact on sales.

Taryn Naidu, Rightside’s CEO, said in a press release:

This is just the start, but Apple.NEWS is the most significant use of a new top-level domain (TLD) yet, and I am very excited at the promise and potential that this development signals. Whether they’re used as a complementary domain, content-sharing links (bit.ly, but with branding) or a simple re-direct, new domain extensions have a real and important place in every company’s overarching brand strategy today.

There’s no denying that having popular software automatically generating links for your gTLD is a great way to raise awareness.

But is this as significant as Apple actually launching a web site at apple.news, or switching from .com to .apple, and encouraging people with marketing and branding to actually type those domains into their browsers? I’m skeptical.

.cam given the nod as Rightside wins confusion appeal

Kevin Murphy, September 4, 2015, Domain Registries

Rightside’s application for .cam will be un-rejected after the company beat Verisign in an appeal against a 2013 String Confusion Objection decision.

That’s right, .cam is officially no longer too confusingly similar to .com.

In a just-published August 26 decision (pdf) a three-person International Centre for Dispute Resolution panel overruled the original SCO panelist’s decision.

The new panel wrote:

Based on the average, reasonable Internet’s user’s experience, and the importance of search engines, in the [Final Review Panel]’s view, confusion, if any, between .COM and .CAM is highly likely to be fleeting. While a fleeting association may create some “possibility of confusion” or evoke an “association in the sense that the string brings another string to mind,” both such reactions are insufficient under the ICANN SCO standard to support a finding that confusion is probable.

It’s not quite as clear-cut a ruling as the .shop versus .通販 ruling last week, relying on the appeals panel essentially just disagreeing with some of the finer points of the original panel’s interpretation of the evidence.

Relating to one piece of evidence, the appeals panel found that the original panelist “improperly shifted the burden of proof” to Rightside to show that .cam was intended for camera-related uses.

Rightside was one of two applicants given the opportunity to appeal its SCO decision by ICANN last year, largely because two other .cam applicants managed to pass their Verisign objections with flying colors, creating obvious inconsistency.

Taryn Naidu, Rightside’s CEO, said in a statement:

We always felt strongly that the first panel’s decision was seriously flawed. How can .CAM in one application be different from the .CAM in another application when evaluated on the basis of string similarity? The fact is, it can’t.

It’s always struck me as unfair that Verisign did not get the chance to appeal the two SCOs it lost, given that the panelist in both cases was the same guy using the same thought processes.

The question now is: is the appeals panel correct?

I suppose we’ll find out after .cam goes on sale and unscrupulous domainers attempt to sell .cam names for inflated prices, hoping their would-be buyers don’t notice the difference.

The other two .cam applicants are AC Webconnecting and Famous Four Media. All three will now go to auction.