How many defensive registrations is too many?

How will ICANN measure the success of its new top-level domains program, and how many defensive registrations is too many?
These questions are now firmly on the ICANN agenda, following the publication of 37 draft recommendations for how to measure the success or otherwise of new gTLDs.
The advice of the Consumer Trust Working Group, published last night and now open for public comment, is a must-read for anyone interested in the emerging new gTLD market.
The recommendations describe myriad ways ICANN could benchmark the performance of new gTLDs three years from now, to fulfill its promise to the US Department of Commerce to study the effect of the program on consumer choice and competition.
While it’s a broad document covering a lot of bases, I’m going to be disappointingly predictable here and immediately zero in on the headline wedge issue that I think will get most tongues wagging over the coming weeks and months:
Defensive registrations.
The working group decided to recommend that, as a measure of success, domain name registrations in new gTLDs should be no more than 15% defensive* three years after launch.
Defensive in this case would mean they were registered during the mandatory Sunrise period.
The idea is that consumer choice can be demonstrated by lots of registrations in new gTLDs, but that defensive registrations should not count toward that goal.
The 15%-Sunrise baseline number was chosen fairly arbitrarily – other suggestions were 20% and 12% – and is designed to spur community discussion. It’s not final.
Still it’s interesting.
It implies that if a registry has 15,000 Sunrise registrations, it needs to sell another 85,000 domains in three years to be seen as having made a successful contribution to consumer choice.
By way of an example, if it were to be retroactively applied to .xxx, the most recent gTLD to launch, ICM Registry would have to get its total registrations up to 533,000 by the end of 2014.
Is 15% too low? Too high? Is it even a useful metric? ICANN wants to know.
Whatever the ultimate number turns out to be, it’s going to be handy for plugging into spreadsheets – something opponents of new gTLDs will find very useful when they try to make the case that ICANN endorses a certain dollar value of trademark extortion.
Because many registries will also accept defensive registrations after Sunrise, two more metrics are proposed.
The group recommends that domains in new gTLDs that redirect to identical domains in legacy TLDs – strongly implying a defensive registration – should be no more than 15% after three years.
It also recommends that ICANN should carry out a survey to see how many registrants own matching second-level domains in legacy TLDs, and that this should also be lower than 15%.
I’ve only outlined three of the working group’s recommendations here. Many of the other 34 are also interesting and will be much-debated as the new gTLD program continues.
This is vitally important stuff for the future of new gTLDs, and applicants would be well advised to have a good read — to see what might be expected of them in future — before finalizing their applications.
* It should be noted that the recommendation as published confusingly reads “Post-Sunrise registrations > 15% of total registrations”, which I think is a typo. The > operator implies that non-defensive registrations only need to be over 15% of total registrations, which I’m certain is not what the working group intended to say.
(UPDATE: this typo has now been corrected).

YouPorn owner acquires fellow .xxx plaintiff

Manwin, the porn company currently suing ICANN and ICM Registry over the .xxx launch, has acquired co-plaintiff Digital Playground.
“To me this deal is no different than the acquisition of Pixar by Disney,” Digital Playground CEO Ali Joone said, according to Xbiz.
Terms of the deal were not disclosed.
While Digital Playground was named as a plaintiff on the .xxx lawsuit, Manwin was clearly the lead. Manwin has also launched a solo Independent Review Process arbitration case against ICANN.
The company is one of the biggest porn producers on the internet, owning YouPorn as well as managing Playboy’s web presence under license.
Manwin claims that ICM’s launch amounted to “extortion”, and that it gave away its lack of respect for the porn industry by selling premium names to domainers including Frank Schilling and Mike Berkens.
ICM’s response to the lawsuit is due later this week.

CADNA calls for mandatory .xxx-style sunrises

The Coalition Against Domain Name Abuse has asked ICANN to make one-time trademark blocks, much like those offered by .xxx operator ICM Registry, mandatory in most new top-level domains.
In a letter to ICANN bosses (pdf) sent last week, CADNA president Josh Bourne wrote:

ICANN should consider including a requirement in the Applicant Guidebook that all new gTLD registries that choose to sell second-level domains to registrants adopt a low-cost, one-time block for trademark owners to protect their marks in perpetuity.
…
ICANN should require registries to give brand owners the option to buy low-cost blocks on their trademarks before any registration period (Sunrise or Landrush) opens. This can be offered at a lower cost than sunrise registrations have been priced at in the past – this precedent has been set with the blocks offered in .XXX, where the blocks are made in perpetuity for a single, nonrecurring fee.

The recommendation is one of several. CADNA also reckons ICANN needs to name the date for its second round of new gTLD applications, and that “.brand” applicants should get discounts for multiple gTLD applications.
The letter comes as opposition to the new gTLD program in the US becomes deafening and ICANN’s board of directors have reportedly scheduled an impromptu meeting next week to determine whether the January 12 launch is still a good idea.
CADNA is no longer opposed to the program itself. Fairwinds Partners, the company that runs the lobbyist, recently restyled itself as a new gTLD consultancy.
But there’s a virtually zero chance the letter will come to anything, unless ICANN were to decide to open up the Applicant Guidebook for public comments again.
I also doubt the call for a mandatory ICM-style “block” service would be well-received by anyone other than ICANN’s intellectual property constituency.
The problem with such systems is that trademarks do not grant exclusive rights to strings, despite what some organizations would like to think.
It’s quite possible for ABC the taxi company to live alongside ABC television in the trademark world. Is it a good idea to allow the TV station to perpetually block abc.taxi from registration?
Some would say yes. The Better Business Bureau and Meetup.com, to name two examples, both recently went before Congress to bemoan the fact that they could not block bbb.xxx and meetup.xxx – both of which have meaning in the adult entertainment context and were reserved as premium names – using ICM’s Sunrise B.
With that all said, there’s nothing stopping new gTLD applicants from voluntarily offering .xxx-style blocking services, or indeed any form of novel IP rights protection mechanisms.
Some applicants may have even looked at the recent .xxx sunrise with envious eyes – with something like 80,000 defensive registrations at about $160 a pop, ICM made over $12 million in revenue and profit well into seven figures.

Was .xxx’s launch disappointing?

The weekend box office numbers are in, and .xxx didn’t put as many bums on seats as might have been expected.
ICM Registry sold 55,367 new .xxx domain names in its first 24 hours of general availability, giving it a total of almost 159,351 registrations, according to the company.
That’s pretty good going for a TLD which, despite the spin in ICM’s recent TV commercials, is intended for a limited customer base, and which is selling for $80 to $100 a year.
Given its $60 registry fee, ICM will have taken over $3.3 million in revenue yesterday, over $550,000 of which will be given to its sponsoring organization, IFFOR.
However, the 159,351 total includes non-resolving domains, ICM has confirmed.
Due to the unique trademark protection mechanisms put in place for non-porn companies, it’s possible to pay for a .xxx domain that will only ever resolve to a standard registry placeholder.
ICM has previously said that it took almost 80,000 sunrise applications, and that the landrush phase put its total “comfortably over 100,000”.
It did not, however, break out the mix of Sunrise A (resolving) and Sunrise B (non-resolving) domains.
That’s an important distinction, both for ICM’s ongoing revenue and for gauging demand for .xxx among registrants.
Each Sunrise B domain gave ICM a $161 windfall but, unlike every other TLD launched to date, has the sale had no recurring revenue component.
I think it’s possible that 50,000 to 60,000 sunrise domains were non-resolvers, which would give .xxx a total of roughly 100,000 active domains under management after one day of GA.
(My assumptions are that all 80,000 sunrise applications were unique and approved, and that roughly two thirds were for Sunrise B non-resolving domains).
Assuming all the active domains are renewed, it’s a $6 million a year business (or $5 million, if you exclude the mandatory IFFOR donation) for ICM already.
The .xxx zone is already bigger than .travel, .pro, .jobs, .aero, .coop, .museum and .cat. It will likely be bigger than .name, .tel and .asia by the end of the month.
So why suggest that it’s a disappointing result?
Pre-reservations
First, for a few years ICM was accepting no-cost .xxx “pre-reservations” through its web site, while its gTLD application was in ICANN limbo.
It racked up over 900,000 such reservations for roughly 650,000 unique .xxx domain names before shutting the offer down in July this year.
One might expect that most people interested enough in .xxx to pre-register a domain months or years in advance might also be interested in grabbing that domain during landrush, sunrise or at the moment of GA. That apparently didn’t happen.
.CO
Let’s also compare .xxx to the launch of .co by .CO Internet last year.
While .CO did not have anything like the long-term media exposure as .xxx, it did of course have the advantage of offering a completely generic string priced at a third of .xxx.
Within its first 24 hours of general availability, .CO said that it had 233,000 domains under management, about 39,000 of which were landrush or sunrise registrations.
Even at the cheaper registry fee (about $20 a year) .CO still made more money in day one than ICM (although ICM wins hands-down in terms of premium domain sales).
.CO, incidentally, also only had 10 accredited registrars at launch (not counting resellers) compared to ICM’s over 70.
Go Daddy
Go Daddy is responsible for roughly half of all new .com registrations, with similar numbers in other TLDs including .co, but it does not appear to be promoting .xxx very heavily.
For the last few days, its homepage has contained only one small below-the-fold reference to .xxx domains. Its TLD drop-down menu has .xxx in tenth place, between .biz and .ca.
Conversely, ICM has been promoting Go Daddy (and DomainMonster) more heavily in its own marketing – notably on gavin.xxx, the site “owned” by its TV commercial character.
Expectations
So is .xxx on track to meet expectations at this early stage?
ICM CEO Stuart Lawley has previously predicted 300,000 to 500,000 registrations in the first few months, and that’s still an achievable goal given its day-one performance.
.CO Internet, for example, more than doubled its 233,000 first-day take within two months of going into general availability.
The new Russian ccTLD .рф registered 200,000 domains in its first six hours when it launched in November 2010, and hit 800,000 by April this year.
While .xxx clearly hasn’t yet smashed estimates in the same way as its sunrise did, I think early indications are that it’s looking pretty healthy.

One in five .рф domains have web sites

The .рф registry celebrated its first launch anniversary last week, with almost one million .рф names registered and apparently almost one in five domains with an active web site.
According to RU-Center, which says it is the registrar of record for 40% of .рф (.rf) names, about 18% of the Cyrillic domains registered in the last year resolve to full web sites.
The registrar said in a press release:

18% of names have website, 16% do redirect, 4% are on parking, 15% are just delegated but not available, and 15% have a plug webpage. 29% of .RF names are unused.

That compares to the 18.7% use penetration of .info, which has been around for over a decade, assuming RU-Center and Afilias compiled their numbers using a similar methodology.
RU-Center also said that 94% of .рф sunrise registrations have been renewed. The rate of landrush registration renewals, which give an indication of what speculators think of the space, will not be clear until December, it said.
It is apparently now also possible for non-Russians to obtain .рф domains.

.xxx faces big test as landrush kicks off

The landrush phase for ICM Registry’s .xxx domain is scheduled to begin today, following the oversubscribed sunrise period that closed last week.
Given the inherently defensive nature of sunrise periods – most of the almost 80,000 applications were for non-resolving domains – landrush is the first big test of public demand for working .xxx names.
I expect healthy interest from domainers, despite the relatively high price of landrush registrations.
High-profile investors including Frank Schilling and Mike Berkens have already invested seven figures in .xxx via its Founders Program, which may set the tone for the rest of the community.
The landrush period runs until November 25. Contested domains will go to auction in December. General availability is currently scheduled to begin December 7.
Domain Name Wire has compiled a handy guide to the best-priced landrush registrars.

.xxx sunrise auctions delayed after 80k applications

ICM Registry has apparently delayed the results of its just-closed .xxx sunrise period until December to give it a chance to clear its backlog of unverified applications.
Corporation Services Company, a major brand-protection registrar, is reporting tonight that ICM and its validation firm, IProta, does not expect to finish validating trademark claims until November 28.
That’s a week later than ICM had planned to kick off the auction phase of the sunrise period, during which contested domains will be awarded to the highest bidder.
“The results of the applications that were submitted during the Sunrise phase will therefore not be available until the first week of December,” CSC said on its blog.
ICM announced yesterday that it has received almost 80,000 sunrise applications from trademark owners and porn companies seeking .xxx domains to match their .coms.
Almost half of those applications were filed during the last week of sunrise. Each trademark claim needs to be individually validated against government databases by IProta.
The plan, according to ICM’s web site, was to start auctioning contested sunrise domains November 21 and to take .xxx into general availability December 6.
Landrush kicks off next Tuesday, running for 17 days. Landrush auctions are scheduled to commence December 12, according to ICM’s web site.

ICM extends .xxx sunrise

ICM Registry, which has evidently seen a last-minute rush of defensive registration applications this week, has extended its sunrise period until Monday.
It had been due to end at 4pm UTC today.
The company just issued this statement:

Due to unprecedented demand in the last week and following several requests from major registrars for more processing time for their backlogs, ICM Registry has extended the Sunrise A and Sunrise B registration periods for an additional three days to conclude Monday, October 31, 2011 at 16:00 UTC (Noon ET). This extension provides prospective registrants valuable time to secure their domains and protect their brands.

Sunrise A is for people in the porn business, B is the “block” for companies outside the “biz” that want to make sure their brands do not become associated with porn.
Guess which has been most popular. (It’s B.)
ICM originally said it expected 10,000 sunrise registrations, but it blew through that estimate weeks ago. The last published count was 42,000, on Monday, with “thousands” coming in daily,
If it hits 70,000 by Monday I will not be surprised.

.xxx sunrise on track for 50,000 domains

ICM Registry has seen over 42,000 sunrise applications since September 7, with “thousands more pouring in each day”, according to the company.
With a last-minute rush possible by porn-scared brand owners before the process closes this Friday, .xxx may well hit 50,000 sunrise applications.
The 42,000 number seems to cover all three sunrise phases – the ‘B’ process for non-porn companies and the AT and AD processes for pornographers.
Sunrise B applications cost $162 at the registry level and over $200 from registrars. ICM’s breakeven point was 10,000 applications, so it will be profitable to the tune of several million dollars.
Because Sunrise B applications incur a one-time fee, ICM has essentially made a windfall now at the expense of recurring revenues from renewals.

How much money will ICM make from .xxx blocks?

There’s a pretty ludicrous report in the Australian media today, claiming that Aussie businesses are being forced to pay AUD $400 million to ICM Registry to protect their brands in .xxx.
The laughable number ($411 million) appears to have been fabricated from whole cloth. The report in the Murdoch-owned Herald Sun does not even bother trying to source or justify it.
But it’s becoming increasingly clear that ICM is going to make some money out of its .xxx sunrise, including from Sunrise B – the one-time defensive “blocks” that do not result in a domain registration.
The company priced Sunrise B at $162 per domain based on an assumption that it would see 10,000 of them. Any fewer and it would lose money, any more and it would profit.
According to official registry reports, no TLD launched in the last five years – .asia, .co, .jobs, .mobi – saw more than about 10,000 domains defensively registered during its sunrise period.
But my hunch is that .xxx will blow those out of the water. I would not be at all surprised if the final number tops 20,000 names.
It’s just a hunch at this point, based on a comparison to the .co launch – which had a reported 11,000 sunrise applications last year – and four main assumptions:
First, that 10,000 was a conservative estimate. I don’t think ICM would have risked making a big loss.
Second, based on a very small number of conversations, I think that some companies are not taking any chances. They’re applying for blocks in more second-tier brands that maybe they strictly need to.
Third, ICM has a much larger registrar channel than .co enjoyed, and much more aggressively FUDdy registrar marketing tactics.
ICM has approved about 70 registrars, compared to the 10 that .CO Internet had at launch, and a lot of registrar promotion has focused on the “Protect Your Brand!” angle, which was discouraged by .co.
Fourth, the vast amount of mainstream media attention the .xxx sunrise has been receiving, most which has doggedly followed the same line as the registrar FUD.
While the value of defending against typosquatting during the .co sunrise last year was probably more important to trademark holders from a security and traffic loss perspective, the brand protection angle did not receive nearly the same amount of press as .xxx has.
ICM president Stuart Lawley has done dozens of media interviews since the sunrise kicked off last week. I even heard him on a UK radio news show aimed at teenagers.
And this press has been going on for over six years, remember. ICANN first approved .xxx in 2005, and the story has been in and out of the media ever since.
It’s worth noting that a Sunrise B block, with its one-time fee, basically denies ICM Registry a bunch of recurring revenue events forever.
Nike is going to be paying $20 to .CO Internet for its defensively registered nike.co domain name every year until the end of time, in addition to the up-front sunrise fee.
If it blocks nike.xxx, it will pay $162 to ICM now but it will also deny the registry its $60 fee for every year it could have been a renewing domain. In three years, ICM’s losing revenue.
But Sunrise B is very probably going to be profitable for ICM. At 20,000 applications, its top line would be $3.24 million, with profit probably pushing seven figures.
Nowhere near $411 million, obviously, but not a bad payday for selling domain names that will never resolve.