Rightside refuses Donuts’ “opportunistic” $70m gTLD offer

Rightside has rebuffed Donuts’ semi-hostile takeover attempt for its portfolio of gTLD registry contracts.
The question now is: will Donuts up the offer from the $70 million already on the table?
In a pre-markets statement today, Rightside said the offer “undervalued” the assets.
CEO Taryn Naidu is quoted as saying:

After thoughtful evaluation, Rightside’s Board has determined that Donuts’ proposal significantly undervalues Rightside’s Registry assets. We believe Donuts’ proposal is an opportunistic attempt to acquire Rightside’s valuable portfolio of domain extensions with an undervalued price and in a manner that would not be in the best interests of Rightside shareholders.

The company reckons its gTLDs will be bringing in $50 million to $75 million in revenue a year in the next three two five years, which would represent substantial growth over current levels.
It made $2.6 million from the registry business in the first quarter this year.
Donuts’ offer could be considered “opportunistic” given that there’s some shareholder dissatisfaction with Rightside’s success rate with new gTLDs today.
Activist investor J Carlo Cannell and Uniregistry CEO Frank Schilling, both of whom own small but significant chunks of Rightside, have called on the company to get rid of some of its under-performers.
By announcing the offer publicly — apparently after months of private offers — Donuts might have been trying to capitalize on this unrest.
But pissed-off investors don’t necessarily want these gTLDs sold off cheap.
Rightside has 40 new gTLDs. A $70 million offer equals $1.75 million per gTLD. That’s fair way below the average sale price for gTLDs at ICANN auction, which is $7 million (or $3 million if you take the median).
Will Donuts now increase its offer, or back away?

.xyz tops 5 million domains as penny deals continue

XYZ.com became the first new gTLD operator to top five million domains in a single TLD last night, when .xyz added almost 1.5 million names.
According to our parse of today’s zone file, .xyz has 5,096,589 names, up 1,451,763 on yesterday’s 3,644,826.
On Monday, the number was just under 2.8 million.
The massive spike came after what was supposed to be the final day of a three-day discounting blitz, as registrars sold the names for $0.02, $0.01 or even nothing.
Uniregistry, which sold for a penny, seems to have claimed the lion’s share of the regs.
The company supplied DI with data showing it had processed over 1.16 million registrations on June 2, about 90% of which CEO Frank Schilling said were .xyz sales.
At its peak, Uniregistry created 95,793 new domains in an hour, this data shows.
Judging by the numbers published on its home page, the registrar has pretty much doubled its domains under management overnight.
The rapid growth of .xyz is very probably not over.
Some registrars said they will carry on with the penny giveaways for an extra day.
At least one popular registrar, NameCheap, told irritated customers that the popularity of its $0.02 offer meant it had a backlog of registration requests that would take 12 to 24 hours to process. Those may not have showed up in the zone file yet.
In addition, .xyz prices are expected to be dirt cheap — just $0.18 at Uniregistry, for example — for the rest of the month, at least at the 50-odd registrars XYZ says are participating in its promotion.

Registrars selling .xyz names for pennies

XYZ.com’s campaign to keep its volumes high as .xyz approaches its second anniversary seem to have resulted in basically free registrations.
Uniregistry said yesterday that it has started selling .xyz domains for just $0.01, and NameCheap is offering them for $0.02.
The prices, which apply to first-year registrations, kicked in yesterday and expire at midnight June 3.
Over in China, Xin Net and West.cn are both pricing the domains at a relatively huge CNY 2 ($0.30).
I expect there are similar offers at other registrars too.
West.cn. the largest .xyz registrar, said last week that it is also subsidizing renewals for the month of June, bringing the cost down to $2.73.
The aforementioned registrars have big splashes announcing the offers on their home pages.
XYZ said Friday that it has put aside “several million dollars” to advertise its birthday on registrar storefronts and elsewhere.
Uniregistry said that from June 3 to June 30 the price will be just $0.18.
Uniregistry’s current .xyz volume is measured in the tens of thousands. It’s ranked just behind Go Daddy, which does not appear to be participating in this promotion, by .xyz domains under management.
.xyz went into general availability June 2, 2014.
Since August 2015, not long after its anniversary deletes have been substantially outstripping renewals, but adds have been going nuts.
It has about 2.8 million domains in its zone file right now, two million of which have been added in the last 12 months.
Despite the anniversary hoopla this time around, there was not a big spike in .xyz registrations around its first birthday last year, when it added a fairly normal 50,000 or so domains.

Donuts quietly buys .shopping from Uniregistry (and .jetzt)

Just a few months after Uniregistry bought out Donuts to win .shopping, Donuts has bought the pre-launch gTLD back.
Donuts has also bought live gTLD .jetzt from a Swedish company.
The .shopping deal is a weird one.
Uniregistry and Donuts were the only two applicants for .shopping, until Uniregistry paid Donuts to withdraw its application back in January.
Uniregistry went on to sign its ICANN Registry Agreement in March, but less than a month later, April 27, transferred the contract to Donuts.
.shopping had been entangled in the .shop contention set, which was eventually resolved when GMO Registry paid $41.5 million at ICANN auction.
Despite the unusual circumstances, Uniregistry CEO Frank Schilling said today it was just the simple sale of a string. Donuts declined to comment. Neither revealed a price.
The second Donuts acquisition, closed April 26, was of .jetzt, which was applied for, delegated to and managed by New TLD Company AB of Sweden.
That gTLD, which is German for “.now”, has been in general availability for almost two years but has only 5,600 names in its zone file.
Donuts declined to comment, but it seems to me we’re looking at a failing gTLD looking for a white knight in this instance.

M+M turns $22m profit into $10m loss

Minds + Machines today reported a 2015 loss of $10 million and further outlined its “transformative” restructuring and China strategy.
It’s the second full year of operating results M+M has posted since its first new gTLDs went live, and they’re not encouraging.
Revenue for accounting purposes was $6.3 million, but the cost of sales was $6.2 million, leaving gross profit of just $101,000.
Factoring in $12.1 million of operating expenses, a $7.9 million gain from losing new gTLD auctions, and other expenses, the total loss before tax was $10 million.
That’s compared to the $22 million profit M+M reported for 2014, a number entirely reliant on $33.7 million of auction loss payments.
The company also reported its “billings”, a line item that does not use the accounting method of deferring revenue across the life of a domain and is therefore more in line with incoming cash.
Billings for 2015 were $7.9 million, compared to $5 million in 2014. Gross profit under that measure was $1.7 million, but the $12 million of operating costs still made the company very unprofitable.
Ignoring the auction benefits in 2015, which will not last forever, it’s pretty clear that M+M was a company spending much more operating new gTLDs than it was making from them.
COO/CFO Michael Salazar said in a statement:

However, billings of $7.9 million for the year were simply not of a sufficient scale to cover the associated cost of sales ($6.2 million) and operating expenses ($12.2 million), which combined reached $18.4 million for 2015. Similarly, the $0.6 million savings achieved in the period by the decisions mid-year to stream-line the existing operational set-up were not of a magnitude to have any material impact in the year under review. That said, forfeited cost of sales and operational expenses as a result of the 2015 cost-cutting decisions will amount to $2.7 million in 2016

It’s perhaps little wonder that activist shareholders, apparently not prepared to play the long game, threw out half of the board and key senior executives during the period.
Former PR man Toby Hall took over as CEO in February, replacing co-founder Anthony Van Couvering, and announced earlier this month that M+M is dumping its registrar and back-end registry businesses.
Its registrar customers have been sold to Uniregistry, and it will outsource its registry back-end to Nominet, to save costs.
Salazar said that the two deals will lead to $2 million in savings, but won’t be complete before the fourth quarter. It seems unlikely they’ll have a great impact on 2016 numbers.
Headcount has been reduced from a peak of 61 to 43 at the end of the year, and is expected to drop further to 25. Salazar said this will save it $4.7 million a year.
Even with these cost reductions, M+M will still need to essentially double its revenue in order to hit operating profitability, it seems.
The company is pinning some of its growth hopes on .vip, which it expects to do well in China. It launches May 18.
Hall said in a statement that M+M would not follow the lead of competitors (Famous Four Media springs to mind) by offering first-year registrations for free to build market share. He said:

Based on the enquiries received during Sunrise and feedback gained through our two recent marketing trips to China, it is clear that there is genuine interest in the domain both within and outside of China. As a result, we will not be using a year-one freemium approach to simply inflate year-one registrations. Instead, we intend to be keenly priced to ensure margin to ourselves — and registrations — as well as protect the integrity of the domain. The volume we anticipate to be generated through keen pricing will then support the sales of our premium names in this domain.

The company also plans to invest in its .law sales team, because billings for that gTLD have been behind expectations.
M+M had $34.6 million in the bank and eight outstanding contested new gTLD applications at the end of the year.

Schilling, Famous Four rubbish Spamhaus “worst TLD” league

Uniregistry and Famous Four Media have trashed claims by Spamhaus that their gTLDs are are much as 75% spam.
FFM says it is “appalled” by the “wholly inaccurate” claims, while Uniregistry boss Frank Schilling said Spamhaus has “totally jumped the shark here.”
In a statement to DI today, FFM chief legal officer Oliver Smith said the spam-fighting organization’s recently launched World’s Worst TLDs list is “reckless”, adding that the numbers are:

not only wholly inaccurate, but are misleading and, potentially, injurious to the reputation of Famous Four Media and those TLDs it manages. It is particularly worrisome that Spamhaus’s “findings” seem to have been taken as gospel within certain corners of the industry, despite not being proffered with any analytical methodology in support of the same.

The Spamhaus report, which is updated daily, presents the 10 TLDs that are more spam than not.
The rank is based on a percentage of domains seen by Spamhaus that Spamhaus considers to be “bad” — that is, are advertised in spam or carry malware.
Today, Uniregistry’s .diet tops the chart with “74.4% bad domains”, but the scores and ranks can and do shift significantly day by day.
Spamhaus describes its methodology like this:

This list shows the ratio of domains seen by the systems at Spamhaus versus the domains our systems profile as spamming or being used for botnet or malware abuse. This is also not a list that retains a long history, it is a one-month “snapshot” of our current view.

The words “seen by the systems at Spamhaus” are important. If a domain name never crosses Spamhaus’s systems, it isn’t counted as good or bad. The organization is not running the whole zone file against its block-list to check what the empirical numbers are.
In important ways, the Spamhaus report is similar to the discredited Blue Coat report into “shady” TLDs last September, which was challenged by myself and others.
However, in a blog post, Spamhaus said it believes its numbers are reflective of the TLDs as a whole:

In the last 18-years, Spamhaus has built its data gathering systems to have a view of most of the world’s domain traffic. We feel the numbers shown on this list are representative of the actual full totals.

I disagree.
In the case of .diet, for example, if 74% of the full 19,000-domain zone was being used in spam, that would equate to 14,000 “bad” domains.
But the .diet zone is dominated by domains owned by North Sound Names, the Frank Schilling vehicle through which Uniregistry markets its premium names.
NSN snapped up well over 13,000 .diet names at launch, and Schilling said today that NSN owns north of 70% of the .diet zone.
That would mean either Uniregistry is a spammer, or Spamhaus has no visibility into the NSN portfolio and its numbers are way the hell off.
“Spamhaus’ assertion that 74% of the registrations in the .diet space are spam is a numerical impossibility,” Schilling said. “They totally jumped the shark here.”
NSN’s domains don’t send mail, he said.
He added that diet-related products are quite likely to appear in spam, which may help account for Spamhaus’s systems identifying .diet emails as spam. He said:

Spamhaus is a high-minded organization and we applaud their efforts but this report is so factually inaccurate it casts into doubt the validity of everything they release. Spamhaus should be smarter than this and at a minimum consult with registries (our door is open) to gain a better understanding of the subject matter they wrongly profess to be expert in.

Similarly, FFM’s .review gTLD was briefly ranked last week as the “worst” gTLD at 75.1% badness. With 66,000 domains, that would mean almost 50,000 names are spammy.
Yet it appears that roughly 25,000 .review domains are long-tail geo names related to the hotels industry, registered by a Gibraltar company called A Domains Limited, which appears to be run by AlpNames, the registry with close ties to FFM itself.
Again, if Spamhaus’s numbers are accurate, that implies the registrar and/or registry are spamming links to content-free placeholder web sites.
FFM’s Smith says the registry has been using Spamhaus data as part of its internal Registry Abuse Monitoring tool, and that its own findings show significantly less spam. Referring to .review’s 75% score, he said:

This simply does not accord with FFM’s own research, which relies heavily on data made available by Spamhaus. The reality is that, in reviewing registration data for the period 8 February to 8 March 2016, only 4.8% of registered domains have been blacklisted by Spamhaus – further, it is questionable as whether every single such listing is wholly merited. When reviewing equivalent data for the period of 1 January to 8 March 2016 across ALL FFM managed TLDs this rate averages out to a mere 3.2%.

I actually conducted my own research into the claims.
Between March 8 and March 15, I ran the whole .review zone file through the Spamhaus DBL and found 6.9% of the names were flagged as spam.
My methodology did not take account of the fact that Spamhaus retires domains from its DBL after they stop appearing in spam, so it doesn’t present a perfect apples-to-apples comparison with Spamhaus, which bases its scoring on 30 days of data.
All told, it seems Spamhaus is painting a much bleaker picture of the amount of abuse in new gTLDs than is perhaps warranted.
During ICANN meetings last week and in recent blog comments, current and former executives of rival registries seemed happy to characterize new gTLD spam as a Famous Four problem rather than an industry problem.
That, despite the fact that Uniregistry, Minds + Machines and GMO also feature prominently on Spamhaus’s list.
I would say it’s more of a low prices problem.
It’s certainly true that FFM and AlpNames are attracting spammers by selling domains for $0.25 wholesale or free at retail, and that their reputations will suffer as a result.
We saw it with Afilias and .info in the early part of the last decade, we’ve see it with .tk this decade, and we’re seeing it again now.

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.

Pritz joins Allegravita and other industry movements

It’s been a busy week in the domain industry for executive changes.
Today, we hear that senior ICANN alum Kurt Pritz has joined Chinese domain marketing specialist Allegravita as a “new partner”.
Allegravita is the PR consultancy that’s made a bit of a splash in the industry over the last couple of years shepherding Western clients through the confusing but potentially lucrative Chinese market.
One of its clients is the Domain Name Association, where Pritz worked as executive director for a couple of years until last October. Prior to the DNA, he was head of ICANN’s new gTLD program.
Also today, Uniregistry announced a couple of new bods in its registrar team.
Sam Tseng and Alan Crowe join from Oversee.net and DomainNameSales (another Frank Schilling company) respectively.
They’ll be responsible for working with high-volume customers of Uniregistry’s registrar business.
Meanwhile, .tickets registry Accent Media said it has appointed Kristi Flax as its commercial operations director.
Flax was founder and COO of PPI Claimline, one of those UK companies that manages refund claims against banks that mis-sold payment protection insurance for people too simple to do it for themselves.
Thanks to relentless phone spamming by unscrupulous lead-gen affiliates, it’s one of the few industries with a worse reputation than domain name industry.
Earlier this week, Sedo announced several changes at the top of its ranks.
First, the Germany-based company has appointed telco industry alum Barbara Stolz as its new CFO. She replaces Torsten Hauschildt, who returns to parent United Internet as senior VP of finance and M&A
Its director of marketing, Christian Voss, has been promoted to chief marketing officer, and Dimo Beitzke has been moved up to chief sales officer. Solomon Amoako has left his job as North American CSO for personal reasons.

Cars gTLD launch clears $1 million in EAP

There was a small turn-out for the premium launch of .cars, .car and .auto gTLDs, but the registry says it cleared over $1 million in revenue.
The three gTLDs are run by Cars Registry, a venture between Uniregistry and XYZ.com.
They all finished their pricey Early Access Periods yesterday and are due to enter general availability today.
The EAP started January 12 with prices of $45,000 per domain. In GA, they won’t cost you less than $2,000.
While zone files show almost no new domains appearing between January 12 and today — three or four per domain at most — Uniregistry CEO Frank Schilling said EAP was a “success”.
“More than 100 dealers and brands took advantage of sunrise and EAP,” he said.
It appears there are a few dozen domains not appearing in zone files yet.
The three gTLDs combined have brought in over $1 million during EAP, Schilling said.

Uniregistry beats Donuts to .shopping, but .shop still in play

Uniregistry has emerged as the successful registry-to-be of .shopping from the convoluted .shop/.shopping new gTLD contention set.
Donuts, the only competing applicant for the string, withdrew its application late last week.
As we previously reported, the .shop/.shopping contention sets were joined at the hip due to a bizarre string similarity challenge, making the scheduled auction very complex.
But Donuts and Uniregistry seem to have come to a private arrangement about .shopping, outside of the ICANN auction process, making .shop a straightforward nine-way fight.
Donuts tells me the auction, in which it is participating, is still scheduled for January 27.