New gTLDs pummel .net below 15 million domains

Verisign’s .net gTLD has had a disappointing start to 2015, as its zone file dipped below 15 million domains for the first time since achieving the milestone.
As of last night, .net had 14,998,404 names in its zone, a daily dip of over 10,000 domains.
That’s down by about 200,000 names from the roughly 15.2 million it had in March 2014, the earliest count for which I have records.
The gTLD first passed 15 million in August 2013, according to a celebratory blog post at the time.
Verisign has previously blamed the “confusion” created by the launch of new gTLDs for the decline, which was inexorable in 2014.
In October, CEO James Bidzos told financial analysts that “.net may be more susceptible to that confusion that swirls around new gTLDs.”
My similar view is that the existence of new gTLDs is causing people to wake up to the fact that defensive or shopping cart up-sell .net registrations are now superfluous, and that the days of .net riding on big brother .com’s coat-tails may be numbered.
There are still about 31,000 dark .net domains — registered names not present in its zone file — according to Verisign.
At the end of August 2014, .net had 15,569,398 registered names, according to the most recent available ICANN registry report.

Is the free ride over for Verisign’s .net?

Verisign’s .net is on the rocks due to new gTLDs, executives have confirmed.
Speaking to investors and analysts on the company’s third-quarter earnings call last week, CFO George Kilguss said that .net “is experiencing some headwinds from the launch of the new gTLD program”.
Further comments from Kilguss and CEO Jim Bidzos seem to confirm what DI reported a month ago: .net is in trouble.
Latest stats collated by DI show that the .net zone file shrunk by over 121,000 domains in the seven months between March 26 and October 26 this year.
Executives said on the call that .net stood at 15.1 million names at the end of September. That compares to 15.2 million at the end of the previous quarter.
“It’s been relatively flat,” Kilguss said. “I actually think .net has held up pretty well over the year with all these new names coming on… So I don’t view .net’s performance as anything negative.”
Bidzos told analysts that “confusion” around the new gTLDs was to blame.
“I think generally, .net may be more susceptible to that confusion that swirls around new gTLDs,” he said.
He characterized .net as being like new gTLDs, falling into “that category of ‘different'”.
In my view, this is an implicit acknowledgement that .net has been getting a free ride for the last 20 years.
Asked whether the .net weakness could spill over to .com, Bidzos said that .com is a “trusted brand” because it’s almost 30 years old and has a 17-year record of uninterrupted up-time.
While there’s no doubt that .com is a trusted brand, it’s not because of its up-time or longevity, in my view — .net has the same stability record and is actually fractionally older than .com.
The reason .net is suffering now is that that for the last two decades it’s been essentially a defensive play.
People buy the .net when they buy the .com because they’ve been marketed as a bundle — the only two truly generic TLDs out there. Unlike .org, .net lost its semantic differentiation a long time ago.
As .com buyers start to see more and more options for duplicative or defensive registrations in their shopping carts, they’re going to be less likely to grab the .net to match their .com, in my opinion.
And it’s likely to get worse.
“It’s going to continue,” Bidzos said. “We’re seeing hundreds of more new gTLDs coming, and they’re coming at the rate of many every single week. So that confusion is likely to get worse.”

Two new gTLD confusion decisions thrown out

ICANN has reopened the contention sets for .cam and .通販 after deciding that two String Confusion Objection panels may have been wrong to reject certain applications.
Two rulings — that .cam is confusingly similar to .com and that .通販 is confusingly similar to .shop (really) — will now head to an appeals panel for a “final” determination.
The decision was made by the ICANN board’s New gTLD Program Committee this week at the ICANN 51 public meeting in Los Angeles.
The first case being reopened for scrutiny is Verisign versus Rightside, where the original SCO panel found that .cam and .com were too similar to coexist on the internet.
But a different panelist found that the two strings were not confusingly similar in objections filed by Verisign against two other applicants — Dot Agency and AC Webconnecting.
The opposing rulings meant that Rightside’s application would have been kicked out of the .cam contention set, which hardly seems fair.
This and many other “perceived inconsistencies” led to the ICANN board being pressured to come up with some kind of appeals process, which it agreed to do in February.
Verisign, unfairly in my view, was not given the opportunity to appeal the two .cam decisions that went against it, even though they were made by the same panelist for the same reasons.
The second, altogether more peculiar, case was .shop applicant Commercial Connect versus .通販 applicant Amazon.
The panelist in that case seemed to have checked his brain at the door that day, concluding that the two strings are confusingly similar simply because 通販 means “online shopping” in Japanese.
Another panelist, in a different case also involving Commercial Connect, had found that .购物 (Chinese for “shopping”) was not confusingly similar to .shop because duh.
ICANN’s NGPC has now decided that the two controversial decisions are “not being in the best interest of the New gTLD Program and the Internet community”.
Both .cam and .通販 will now be referred to a three-person panel at the International Center for Dispute Resolution, the same body that processed the original objections, for a final determination.

Is Verisign’s .net in trouble?

The zone file for Verisign’s .net gTLD has shrunk by almost 100,000 domains in the last few months.
I’ve been tracking .com and .net’s zone numbers since mid-March, shortly after the current wave of new gTLDs started going live, and while .com seems to be still growing strong, .net is definitely trending down.
The bulk of .net’s decline seems to have happened of the last three months. Its zone file count has decreased by 95,590 domains in the last 90 days, according to my numbers.
Here’s a chart, which you can click to enlarge, to illustrate what I’m talking about:

I don’t have comparable figures from previous years, so I can’t be certain that the downturn is not related to summer seasonality.
But if there is seasonality, it doesn’t appear to have affected .com, which has added over a million names to its zone over the last 90 days.

The last formal registry transactions report we have from Verisign for .net shows a decline of a little over 7,000 names under management in May.
Are these the early signs of trouble ahead for .net?
The TLD has always been a bit of an oddity. Originally designed for network operators, it was opened up and pitched in the 1990s by Network Solutions as a catch-all that should be acquired alongside .com.
That “Oh, I may as well buy the .net while I’m here” mentality stuck in the primary market, and I’ve often encountered the “I’ll throw in the .net for free” mentality in the secondary market.
But in a world of hundreds of new gTLDs I wonder whether .net’s brand caché will shrink.
If a registrant decides they can clearly do without defensively registering the .guru, the .pics, the .horse and the .wtf, perhaps they’ll start wondering why they bother to register the .net too.
Is .net on the verge of an unprecedented drop-off in registrations?
I’ll have to reserve judgement — that last 90 days might be a blip, and it only represents 0.63% of the .net business — but it’s going to be worth keeping an eye on, I think.
With 15 million names, the .net business is worth about $93 million a year in registry fees to Verisign.

Verisign plans TLD standards group

Verisign is trying to form a new industry standards-setting association for domain name registries and registrars.
To be called the Registration Operations Association^TM (yes, according to its web site it is apparently already trademarked), Verisign wants potential members of the group to meet in October to figure out whether such an association is needed and what its remit would be.
But the Domain Name Association apparently has other ideas, suggesting in a recent blog post that the DNA would be the best place for these kinds of technical discussions to take place.
In the second of a series of three blog posts revealing the ROA plan, Verisign senior director Scott Hollenbeck said:

The primary purpose of an association would be to facilitate communication and technical coordination among implementers and operators of the EPP protocol and its current extensions to address interoperability and efficiency obstacles.

EPP is the Extensible Provisioning Protocol used by registrars to transact with all gTLD and many ccTLD registries. It’s an IETF standard written by Hollenbeck over a decade ago.
One of the problems with it is that it is “extensible” by design, so every time a registry extends it to deal with a peculiarity of a particular TLD, partner registrars have to code new connectors.
In a world of hundreds of new gTLDs, that becomes burdensome, Hollenbeck explained in his posts.
An industry association such as the formative ROA could help registries with common requirements standardize on a single EPP extension, streamlining interoperability.
That would be good for new gTLDs.
It’s no secret that many registrars are struggling to keep up with new gTLD launches while providing a good customer experience, as Andrew Allemann pointed out last week.
The need for cooperation seems plain; the question now is what is the correct forum.
While Verisign is pushing for a new group, the DNA reckons the task could be best-performed under its own umbrella.
Executive director Kurt Pritz blogged:

Given its multi-functional and global diversity, the DNA will be an effective place to coordinate discussion of these issues and to involve broader domain name industry involvement.

Verisign isn’t a DNA member. In fact, it appears to be the only significant back-end registry provider in the western world not to have purchased a membership.
But Pritz said in his post that technical discussions would not be limited to DNA members only — anyone would be able to participate without coughing up the $5,000 to $50,000 a year the group charges:

Recognizing that industry-wide issues are… well … industry wide, the DNA Board determined that this work must include those inside and outside the DNA, welcoming all domain name industry members. Scott and others from Verisign and other firms are invited regardless of whether they join the DNA.

So is the industry going to have to deal with two rival standards-setting groups?
In the many years I was a general Silicon Valley tech reporter, I must have written scores of articles about new technologies spurring the creation of competing “standards” organizations.
Usually, this involved pitting an incumbent monopolist such as Microsoft against a coalition of smaller rivals.
It makes for great headlines, but I’m not sure the domain name industry is big enough to support or require multiple groups tackling the same problems.
With resource-strapped registries and registrars already struggling to make new gTLDs work in any meaningful way, I doubt their geeks would appreciate duplicating their efforts.
I don’t know whether the DNA or ROA would be the best venue for the work, but I strongly suspect the work itself, which almost certainly needs to be done, only needs to be done once.
Verisign wants interested parties to meet in Los Angeles on October 16, just as the ICANN meeting there concludes. The meeting may also be webcast for those unable to attend in person.

Reported mass exodus from .com explained

Did Verisign suffer from a massive 2,600% increase in the number of deleted .com domain names this April?
Not quite, although the bizarre spike in deletes may have highlighted an area where the company was previously out of compliance with its ICANN Registry Agreements.
April’s .com registry report, filed with ICANN and published last week, shows 2.4 million domains were deleted, compared to just 108,000 in March and 90,000 in April 2013.

The spike looks surprising, and you may be tempted to think it is in some way related to the arrival of new gTLDs.
But look again. Could .com, a registry with over 116 million domains under management, really only see roughly 100,000 deletes every month? Clearly that number is far too low.
So what’s going on? I asked Verisign.
The company said that it has implemented “voluntary” changes to its reporting of deleted domains, based on the standard new gTLD Registry Agreement, which specifies what must be reported by new gTLD registries.
It said:

Prior to the April 2014 monthly reports, and per the ICANN gTLD registry reporting guidelines, Verisign reported on only deleted domains outside of any grace period.

There are five “grace periods” permitted by ICANN contracts: the Add Grace Period, Renew/Extend Grace Period, Auto-Renew Grace Period, Transfer Grace Period, and Redemption Grace Period.
The familiar Add Grace Period allows registrars to cancel registrations within a week of registration if the registrant made a typo, for example, and asked for a refund.
The Redemption Grace Period covers domains that have expired and do not resolve, but can still be restored for 30 days at the request of the registrant.
According to Verisign, before April, domains that were deleted outside of any of the five grace periods were reported as “deleted-domains-nograce”.
From April, the company is reporting domains only as “deleted-domains-nograce” if they delete outside of the Add Grace Period.
According to my reading of the .com contract, that’s what Verisign should have been doing all along.
The contract, which Verisign and ICANN signed in late 2012, defines “deleted-domains-nograce” only as “domains deleted outside the add grace period”. There’s no mention of other grace periods.
The same definition can be found in the 2006 contract.
It appears to me that Verisign may have been under-reporting its deletes for quite some time.
Verisign said in response that it does not believe it has a compliance issue. A spokesperson said: “[We] voluntarily updated our reporting of deleting domain names so that our reporting is aligned with ICANN’s reporting clarifications for the new gTLDs.”

Verisign: 41% of new gTLD sites are parked

As much as 41% of domains registered in new gTLDs are parked with pay-per-click advertising, according to research carried out by Verisign.
That works out to over 540,000 domains, judging by the 1.3 million total I have on record from June 29, the day Verisign carried out the survey.
Domains classified as carrying “business” web sites — defined as “a website that shows commercial activity” — accounted for just 3% of the total, according to Verisign.
There are some big caveats, of course, not least of which is .xyz, which tends to skew any surveys based on “registered” names appearing in the zone file. Verisign noted:

XYZ.COM LLC (.xyz) has a high concentration of PPC websites as a result of a campaign that reportedly automatically registered XYZ domains to domain registrants in other TLDs unless they opted out of receiving the free domain name. After registration, these free names forward to a PPC site unless reconfigured by the end user registrant.

On June 29, .xyz had 225,159 domains in its zone file. I estimate somewhat over 200,000 of those names were most likely freebies and most likely parked.
The practice of registry parking, carried out most aggressively by Uniregistry and its affiliate North Sound, also threw off Verisign’s numbers.
Whereas most new gTLD registries reserve their premium names without adding them to the zone files, Uniregistry registers them via North Sound to park and promote them.
Tens of thousands of names have been registered in this way.
Coupled with the .xyz effect, this leads me to conclude that the number of domains registered by real registrants and parked with PPC is probably close to half of Verisign’s number.
That’s still one out of every five domains in new gTLDs, however.
Judging by a chart on Verisign’s blog, .photography appears to have the highest percentage of “business” use among the top 10 new gTLDs so far.
Verisign also found that 10% of the names it scanned redirect to a different domain. It classified these as redirects, rather than according to the content of their final destination.

ICANN says Verisign should stay in charge of root zone

Verisign should stay in its key role in root zone management after the IANA transition process is complete, according to ICANN CEO Fadi Chehade.
The company currently acts as “maintainer”, alongside the US government as “administrator” and ICANN/IANA as “operator”.
This means Verisign is responsible for actually making changes — adding, deleting or amending the records for TLDs — in the root zone file.
In a blog post yesterday, Chehade said that ICANN will “establish a relationship directly with the third-party Maintainer”, adding:

As a means to help ensure stability, ICANN’s recommended implementation option is to have Verisign continue its role as the Maintainer. However, we will be working closely with all relevant parties including the Root Zone Operators to ensure there are contingency options in place to meet our absolute commitment to the stability, security and resiliency of the Domain Name System.

I wholeheartedly agree that Verisign should stay in its role, or at the very least that ICANN should not take over.
As we’ve learned over the last couple of years of software glitches in the new gTLD program, some of them security-related, ICANN would be a poor choice today to maintain this critical resource.
Chehade noted that the US National Telecommunications and Information Administration would be replaced in its “administrator” role by whatever mechanism the ICANN community comes up with during the transition process.

Verisign stock punished after US move from root control

Verisign’s share price is down around 8% in early trading today, after analysts speculated that the US government’s planned move away from control of the DNS root put .com at risk.
The analyst firm Cowan & Co cut its rating on VRSN and reportedly told investors:

With less US control and without knowledge of what entity or entities will ultimately have power, we believe there is increased risk that VRSN may not be able to renew its .com and .net contracts in their current form.

It’s complete nonsense, of course.
The US announced on Friday it’s intention to step away from the trilateral agreements that govern control of the root between itself, ICANN and Verisign. But that deal has no dollar value to anyone.
What’s not affected, as ICANN CEO Fadi Chehade laboriously explained during his press conference Friday, are the contracts under which Verisign operates .com and .net.
The .com contract, through which Verisign derives most of its revenue, is slightly different to regular gTLD contracts in that the US has the right to veto terms if they’re considered anti-competitive.
The current contract, which runs through 2018, was originally going to retain Verisign’s right to increase its prices in most years, but it was vetoed by the US, freezing Verisign’s registry fee.
So not only has the US not said it will step away from .com oversight, but if it did it would be excellent news for Verisign, which would only have to strong-arm ICANN into letting it raise prices again.
Renewal of the .com and .net contracts shouldn’t be an issue either. The main rationale for putting .com up for rebid was to improve competition, but the new gTLD program is supposed to be doing that.
If new gTLDs, as a whole, are considered successful, I can’t see Verisign ever losing .com.
Verisign issued a statement before the markets opened today, saying:

The announcement by NTIA on Friday, March 14, 2014, does not affect Verisign’s operation of the .com and .net registries. The announcement does not impact Verisign’s .com or .net domain name business nor impact its .com or .net revenue or those agreements, which have presumptive rights of renewal.

ICANN reveals gTLD objections appeals process

Two new gTLD applicants would get the opportunity to formally appeal String Confusion Objection decisions that went against them, under plans laid out by ICANN today.
DERCars and United TLD (Rightside), which lost SCOs for their .cars and .cam applications respectively, would be the only parties able to appeal “inconsistent” objection rulings.
DERCars was told that its .cars was too similar to Google’s .car, forcing the two bids into a contention set. But Google lost similar SCO cases against two other .cars applicants.
Likewise, Rightside’s .cam application was killed off by a Verisign SCO that stated .cam and .com were too similar, despite two other .cam applicants prevailing in virtually identical cases.
Now ICANN plans to give both losing applicants the right to appeal these decisions to a three-person panel of “Last Resort” operated by the International Centre for Dispute Resolution.
ICDR was the body overseeing the original SCO process too.
Notably, ICANN’s new plan would not give Verisign and Google the right to appeal the two .cars/.cam cases they lost.

Only the applicant for the application that was objected to in the underlying SCO and lost (“Losing Applicant”) would have the option of whether to have the Expert Determination from that SCO reviewed.

There seems to be a presumption by ICANN already that what you might call the “minority” decision — ie, the one decision that disagreed with the other two — was the inconsistent one.
I wonder if that’s fair on Verisign.
Verisign lost two .cam SCO cases but won one, and only the one it won is open for appeal. But the two cases it lost were both decided by the same ICDR panelist, Murray Lorne Smith, on the same grounds. The decisions on .cam were really more 50-50 than they look.
According to the ICANN plan, there are two ways an appeal could go: the panel could decide that the original ruling should be reversed, or not. The standard of the review is:

Could the Expert Panel have reasonably come to the decision reached on the underlying SCO through an appropriate application of the standard of review as set forth in the Applicant Guidebook and procedural rules?

The appeals panelists would basically be asked to decide whether the original panelists are competent or not.
If the rulings were not reversed, the inconsistency would remain in place, making the contention sets for .car, .cars and .cam stay rather confusing.
ICANN said it would pay the appeals panel’s costs.
The plan (pdf) is now open for public comment.