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New gTLDs continue growth trend, but can it last?

Kevin Murphy, December 10, 2018, Domain Registries

New gTLDs continued to bounce back following a year-long slump in registration volumes, according to Verisign data.

The company’s latest Domain Name Industry Brief, covering the third quarter, shows new gTLDs growing from 21.8 million names to 23.4 million names, a 1.6 million name increase.

New gTLDs also saw a 1.6 million-name sequential increase in the second quarter, which reversed five quarters of declines.

The sector has yet to surpass its peak of 25.6 million, which it reached in the fourth quarter of 2016.

It think it will take some time to get there, and that we’ll may well see a decline in next couple quarters.

The mid-point of the third quarter marked the end of deep discounting across the former Famous Four Media (now GRS Domains) portfolio (.men, .science, .loan, etc), but the expected downward pressure on volumes wasn’t greatly felt by the end of the period.

With GRS’s portfolio generally on the decline so far in Q4, we might expect it to have a tempering effect on gains elsewhere when the next DNIB is published.

Verisign’s data showed also that ccTLDs shrunk for the first time in a couple years, down by half a million names to 149.3 million. Both .uk and .de suffered six-figure losses.

Its own .net was flat at 14.1 million, showing no signs of recovery after several quarters of shrinkage, while .com increased by two million names to finish September with 137.6 under management.

No .web until 2021 after Afilias files ICANN appeal

Kevin Murphy, December 6, 2018, Domain Registries

Afilias has taken ICANN to arbitration to prevent .web being delegated to Verisign.

The company, which came second in the $135 million auction that Verisign won in 2016, filed Independent Review Process documents in late November.

The upshot of the filing is that .web, considered by many the best potential competitor for .com — Afilias describes it as “crown jewels of the New gTLD Program” — is very probably not going to hit the market for at least a couple more years.

Afilias says in in its filing that:

ICANN is enabling VeriSign to acquire the .WEB gTLD, the next closest competitor to VeriSign’s monopoly, and in so doing has eviscerated one of the central pillars of the New gTLD Program: to introduce and promote competition in the Internet namespace in order to break VeriSign’s monopoly

Its beef is that Verisign acquired the rights to .web by hiding behind a third-party proxy, Nu Dot Co, the shell corporation linked to the co-founders of .CO Internet that appears to have been set up in 2012 purely to make money by losing new gTLD auctions.

Afilias says NDC broke the rules of the new gTLD program by failing to notify ICANN that it had made an agreement with Verisign to sign over its rights to .web in advance of the auction.

The company says that NDC’s “obligation to immediately assign .WEB to VeriSign fundamentally changed the nature of NDC’s application” and that ICANN and the other .web applicants should have been told.

NDC’s application had stated that .web was going to compete with .com, and Verisign’s acquisition of the contract would make that claim false, Afilias says.

This means ICANN broke its bylaws commitment to apply its policies, “neutrally, objectively, and fairly”, Afilias claims.

Allowing Verisign to acquire its most significant potential competitor also breaks ICANN’s commitment to introduce competition to the gTLD market, the company reckons.

It will be up to a three-person panel of retired judges to decide whether these claims holds water.

The IRP filing was not unexpected. I noted that it seemed likely after a court threw out a Donuts lawsuit against ICANN which attempted to overturn the auction result for pretty much the same reasons.

The judge in that case ruled that new gTLD applicants’ covenant not to sue ICANN was valid, largely because alternatives such as IRP are available.

ICANN has a recent track record of performing poorly under IRP scrutiny, but this case is by no means a slam-dunk for Afilias.

ICANN could argue that the .web case was not unique, for starters.

The .blog contention set was won by an affiliate of WordPress maker Automattic under almost identical circumstances earlier in 2016, with Colombian-linked applicant Primer Nivel paying $19 million at private auction, secretly bankrolled by WordPress.

Nobody complained about that outcome, probably because it was a private auction so all the other .blog applicants got an even split of the winning bid.

Afilias wants the .web IRP panel to declare NDC’s bid invalid and award .web to Afilias at its final bid price.

For those champing at the bit to register .web domains, and there are some, the filing means they’ve likely got another couple years to wait.

I’ve never known an IRP to take under a year to complete, from filing to final declaration. We’re likely looking at something closer to 18 months.

Even after the declaration, we’d be looking at more months for ICANN’s board to figure out how to implement the decision, and more months still for the implementation itself.

Barring further appeals, I’d say it’s very unlikely .web will start being sold until 2021 at the very earliest, assuming the winning registry is actually motivated to bring it to market as quickly as possible.

The IRP is no skin off Verisign’s nose, of course. Its acquisition of .web was, in my opinion, more about restricting competition than expanding its revenue streams, so a delay simply plays into its hands.

ICANN urged to reject .com price increases

Kevin Murphy, November 21, 2018, Domain Registries

The Internet Commerce Association has asked ICANN to refuse to allow Verisign to raise its wholesale prices for .com domain names.

The domainer trade group wrote to ICANN last week to point out that just because the Trump administration has dropped the US government objection to controlled price increases, that doesn’t necessarily mean ICANN has to agree.

Verisign’s deal with the National Telecommunications and Information Administration “does not of course, compel ICANN to agree to any such increases. Any such decision regarding .com pricing
remains with ICANN” ICA general counsel Zak Muscovitch wrote.

The deal allows Verisign to increase the price of .com registrations, renewals and transfers by 7% per year in four of the next six years, leading to a compound 30% increase by the time it concludes.

The arguments put forth Muscovitch’s letter are pretty much the same as the arguments ICA made when it was lobbying NTIA to maintain the price freeze.

Namely: Verisign already makes a tonne of money from .com, it has a captive audience, it cannot claim credit for .com’s success, and .com is not constrained by competition.

“As NTIA makes clear, it is up to Verisign to request a fee increase and ICANN that may agree or disagree. ICANN should not agree. Indeed, it would be a dereliction of ICANN’s responsibilities to the ICANN community if Verisign were permitted to raise its fees when it is already very well paid for the services which it provides,” Muscovitch’s letter (pdf) concludes.

For many years ICANN has been reluctant to get involved in price regulation. It remains to be seen whether it will make an exception for .com.

Hebrew .com off to a slow start

Kevin Murphy, November 21, 2018, Domain Registries

The Hebrew transliteration of .com has only sold a couple hundred domains since it went into general availability.

Verisign took the new gTLD קום. (Hebrew is a right-to-left script, so the dot comes after the string) to market November 5, when it had about 3,200 domains in its zone file. It now stands around the 3,400 mark.

The pre-GA domains are a combination of a few hundred sunrise regs and a few thousand exact-match .coms that were grandfathered in during a special registration period.

It’s not a stellar performance out of the gates, but Hebrew is not a widely-spoken language and most of its speakers are also very familiar with the Latin script.

There are between seven and nine million Hebrew speakers in the world, according to Wikipedia. It doesn’t make the top 100 languages in the world.

The ccTLD for Israel, where most of these speakers live, reports that it currently has 246,795 .il domains under management. That’s a middling amount when compared to similarly sized countries such as Serbia (about 100,000 names) and Switzerland (over 2 million).

Verisign’s original application for this transliteration had to be corrected, from קום. to קוֹם. If you can tell the difference, you have better eyesight than me.

In the root, the gTLD is Punycoded as .xn--9dbq2a.

Wagner takes dig at Verisign as GoDaddy reports $310 million domain revenue

Kevin Murphy, November 7, 2018, Domain Registrars

GoDaddy CEO Scott Wagner ducked a question about how the company will react to future .com price increases during its third-quarter earnings call yesterday, but used the opportunity to take a gentle swipe at Verisign.

Asked by an analyst whether the first 7% price increase, almost certainly coming in 2020, would have any effect on GoDaddy’s gross margins (ie, will they shrink as the company swallows increased costs, or swell as it increases its own prices above 7%), Wagner said:

the last time VeriSign took a price increase the industry passed that through to the end registrant.

.com and more importantly the software around bringing somebody’s .com to life is valuable and, modestly, we’re providing the value in that relationship around taking a domain name and actually turning it into something that somebody cares about.

I’m interpreting that as a pop at the idea that Verisign enjoys the fat registration margins while GoDaddy is the one that actually has to market domains, up-sell, innovate, deal with customers, and so on.

The remarks came just a few days after Verisign, in a blog post, branded GoDaddy and other secondary-market players “scalpers”, infuriating domainers.

Wagner was talking to analysts as the market-leading registrar reported revenue for Q3 of $679.5 million, up 16.7% year over year.

Revenue from domains, still the biggest of its three reporting business segments, was $309.5 million, up 14.0% compared to the year-ago quarter. GoDaddy now has 18 million customers and over 77 million domains under management.

Overall net income was down to $13.2 million from $22.4 million, as operating expenses rose over 16% to hit $642 million, after the company invested more in marketing, development and so on. Its operating income was $37.5 million.

Contrast this with Verisign’s performance for the same quarter, reported two weeks ago.

It saw revenue about the same as GoDaddy’s domains revenue — $306 million — but net income of $138 million and operating income of $195 million.

GoDaddy and Verisign could find themselves competing before long. As part of its deal with the US government to allow it to raise .com wholesale prices once more, the government also lifted its objection to Verisign becoming a registrar, just as long as it does not deal in .com names.