Verisign has warned investors that the current boom in .com sales is largely coming from Chinese domainers and may not be sustainable.
The company has added an unprecedented 4.1 million domain in .com and .net so far during the fourth quarter.
“While there continues to be demand for domain names globally, the recent increased volume for Verisign’s top level domains, as well as top level domains of other registries, during the fourth quarter is coming largely through registrars in China,” the company said in a Securities and Exchange Commission filing.
It listed several factors that are likely responsible for the sudden uptick, but warned that renewal rates are typically not great.
In the past, Verisign has discussed many factors that affect the demand for domain names, including, but not limited to economic, social, and regulatory conditions, Internet adoption, Internet penetration, and increasing e-commerce. In addition to these factors affecting demand, Verisign is also evaluating additional potential factors unique to China that may also be responsible for the recent increased volume of new registrations in China.
In no particular order, these potential factors, or combination of factors, could include, but may not be limited to, government initiatives in China to develop their online economy such as ‘Internet Plus;’ registry and registrar regulatory requirements; cultural influences such as the popularity of numeric domain names; increasing competition amongst Chinese registrars; potential increases in domain name investment activity; and recent capital markets volatility and access to capital in China.
Verisign cannot predict if or how long this increased pace of gross additions will continue and we cannot at this time predict what the renewal rate for these domain names will be. Verisign has noted in the past that renewal rates for domain names registered in emerging markets, such as China, have historically been lower than those registered in more developed markets.
It’s difficult to imagine that Chinese investors have managed to find four million unregistered domains worth keeping.
There are currently 123,497,852 domains in the .com zone file, according to Verisign’s web site.
Verisign is not the only registry that appears to be benefiting from a deluge of registrations from China.
XYZ.com has seen over 440,000 domains added to its .xyz zone file in the last three weeks, bringing its total to over 1.5 million, which appear to be largely coming through Chinese registrars.
Verisign has admitted it “sponsors” an analyst who has written more than a dozen articles singing the praises of .com and questioning the value of new gTLDs over the last few years.
Zeus Kerravala is the founder and principal analyst at ZK Research. He writes a regular column for Network World called Network Intelligence.
Last week, domain industry eyebrows were raised by the latest in a series of pro-.com articles — all of which seem to have been removed by Network World in the last 24 hours — to appear in the column.
The latest article was entitled “Why more companies are ditching new domain names and reverting to .com“.
Kerravala basically mined domain industry blogs, including this one, for examples of companies preferring .com over ccTLDs and new gTLDS, to support a view that .com is awesome and other TLDs are not.
He could have quite easily have used the same method to reach the opposite conclusion, in my view.
The Halloween-themed article concluded:
The good news is that .com will be here now and into the future, just like it has been for the past 30 years to provide treats to businesses after they have been “tricked” by other TLDs.
The article, and 12 more before it dating back to August 2012, looked to some like Verisign spin.
Other headlines include “Why .com is still the domain of choice for businesses” and “New generic top-level domain names do more harm than good” and “Companies are movin’ on up to .com domain names”.
They’re all basically opinion pieces with a strongly pro-.com slant.
The opinion that .com is better than the alternatives is not uncommon, especially among domainers who have lots of money tied up in .com investments.
The fact that Kerravala, who doesn’t usually touch the domain industry in his column, has written a dozen stories saying essentially the same thing about .com over the last couple of years looked a bit odd to some in the domain industry.
And it turns out that he is actually on the Verisign payroll.
A Verisign spokesperson told DI: “ZK Research is a sponsored industry analyst and blogger.”
The company declined to answer a follow-up question asking whether this meant he was paid to blog.
Kerravala told DI that Verisign is one of his clients, but denied blogging on its behalf. He said in an email:
they are a client like many of the other large technology firms. Although I blog, like many analysts, I am first an foremost an analyst. I have paid relationships with tech vendors, service providers, end user firms, resellers and the financial community.
Verisign pays me for inquiry time and to have access to my research. Verisign has many relationships like this with many analyst firms and I have this type of relationship with many other technology firms.
In no way do vendors pay me to write blogs nor do they influence my research or my opinions. Sometimes, I may choose to interview a vendor on a certain topic and include them in the article.
Kerravala had not disclosed in his Network World articles or boilerplate biography that Verisign is one of his clients.
In a January 2014 article published on SeekingAlpha, “New Generic Top Level Domain Names Pose No Threat To VeriSign“, contains a disclosure that reads in part “I have no business relationship with any company whose stock is mentioned in this article.”
Kerravala said in an email that although his relationship with Verisign started in 2013, the company was not a client at the time the SeekingAlpha article appeared.
The relationship came to light after new gTLD registry Donuts emailed Kerravala via a third party — and Kerravala says under false pretenses — claiming to have liked his most recent article and asking for a contact name at Verisign.
He would have responded honestly to just being asked directly by Donuts, he said.
In a telephone conversation yesterday, he said that his articles about .com represent his genuinely held beliefs which, as we agree, are not particularly unusual.
He observed that DI has a generally pro-TLD-competition point of view, and that many of my advertisers are drawn from the new gTLD industry, and said that his relationship with Verisign is not dissimilar to DI’s relationship to its advertisers.
Verisign has had its false advertising lawsuit against the .xyz gTLD registry thrown out of court.
XYZ.com this week won a summary judgement, ahead of a trial that was due to start next Monday.
“By granting XYZ a victory on summary judgement, the court found that XYZ won the case as a matter of law because there were no triable issues for a jury,” the company said in a statement.
The judge’s ruling does not go into details about the court’s rationale. XYZ’s motion to dismiss has also not been published.
So it’s difficult to know for sure exactly why the case has been thrown out.
Verisign sued in December, claiming XYZ and CEO Daniel Negari had lied in advertising and media interviews by saying there are no good .com domain names left.
Many of its claims centered on this video:
XYZ said its ads were merely hyperbolic “puffery” rather than lies.
Verisign also claimed that XYZ had massively inflated its purported registration numbers by making a shady $3 million reciprocal domains-for-advertising deal with Network Solutions.
XYZ general counsel Grant Carpenter said in a statement: “These tactics appear to be part of a coordinated anti-competitive scheme by Verisign to stunt competition and maintain its competitive advantage in the industry.”
While Verisign has lost the case, it could be seen to have succeeded in some respects.
XYZ had to pay legal fees in “the seven-figure range”, as well as disclose hundreds of internal company documents — including emails between Negari and me — during the discovery phase.
Through discovery, Verisign has obtained unprecedented insight into how its newest large competitor conducts its business.
While I’ve always thought the lawsuit was silly, I’m now a little disappointed that more details about the XYZ-NetSol deal are now unlikely to emerge in court.
Verisign has launched a free recursive DNS service aimed at the consumer market.
Public DNS, as the service is called, is being positioned as a way to avoid having your browsing history collated and sold for marketing purposes by your ISP.
There’s no charge, and the company is promising not to sell your data. It also does not plan to monetize NXDOMAIN traffic.
So what’s in it for Verisign? According to a FAQ:
One of Verisign’s core operating principles is to be a good steward of the Internet. Providing the Verisign Public DNS service supports the overall ecosystem of DNS and solidifies end-user trust in the critical navigation that they have come to depend upon for their everyday interactions.
Verisign also offers paid-for recursive DNS services to enterprises, so there may be an up-sell opportunity here.
The market for free public DNS currently has big players including Cisco’s OpenDNS and Google.
If you want to use the Verisign service, the IP addresses to switch to are 220.127.116.11 and 18.104.22.168.
New gTLDs grew faster than .com in the last 12 months.
That seems to be one of the conclusions that can be drawn from Verisign’s Q2 Domain Name Industry Brief, which was published (pdf) yesterday, if you dig into the numbers a little.
The headline number is that the number of all domains across all TLDs was 296 million, up sequentially by 2.2 million domains. That’s annual growth of 16.4 million domains, Verisign said.
I thought it might be interesting to see where that growth came from, so I plugged the numbers from Verisign’s last five DNIB reports into a spreadsheet, reproduced in this table.
From these numbers, we can calculate the quarterly sequential growth, measured in domains, for the whole DNS, for .com, for new gTLDs and for ccTLDs.
That table looks like this:
It appears from this table that .com grew by more domains than new gTLDs over the last year — 4.8 million versus 4.36 million — but the numbers are a bit misleading due to the way Verisign sources its data.
For most ccTLDs, Verisign has always used the third-party research outfit ZookNic, which has its own way of estimating registration volumes.
For new gTLDs, Verisign uses the zone files as published daily by ICANN — the same source DI and others use to measure volume.
However, for .com Verisign uses its own in-house data source. It is, after all, the .com registry.
The numbers for .com you find in the DNIB reports are exactly the same as the numbers Verisign gives financial analysts and investors when it reports its quarterly earnings.
And the company changed the way it reports those numbers in Q1 this year.
See that unusually high addition of 2.2 million names in .com in Q1 in the above table? That reflects the addition of very nearly 750,000 hidden .com names in March this year.
At that time, Verisign started counting domains that are on “hold” statuses, largely due to new ICANN policies on unverified Whois information.
The last two DNIB reports have sourced .com numbers with this disclosure:
The domain name base is the active zone plus the number of domain names that are registered but not configured for use in the respective Top-Level Domain zone file plus the number of domain names that are in a client or server hold status.
The actual Q1 growth number for .com should in the 1.4 million to 1.5 million range, which would bring .com’s total growth over the last four quarters down to roughly 4.1 million names.
An apples-to-apples comparison of extant zone-file domain growth would show new gTLDs beating .com, in other words.
But is this a fair measure of demand?
No. It’s fairer to say that .com still outsells its competition by a long way.
New gTLDs had yet to experience any significant churn by Q2 this year, as most had been on the market for under a year, so the growth numbers are more or less untempered by the renewal cycle.
While Verisign’s .com growth is net, for new gTLDs it’s almost all gross.
Verisign says in the latest DNIB has it had 8.7 million new registrations across .com and .net in the second quarter, which would be roughly eight times as many as new gTLDs — all several hundred of them combined — managed to move.