New gTLDs steal $5 million from Web.com’s top line

Top registrar Web.com is seeing disappointing revenue from its domain business due to new gTLDs.
The “increased availability” of names has taken a chunk out of the company’s premium domain sales, CEO David Brown told analysts on the company’s third-quarter earnings call yesterday.

While we continue to expect the recently expanded top-level domain environment to increase our ability to sell domains over the medium to long term, the increased availability of names has had a near-term negative impact on domain-related revenue. This is primarily associated with non-core domain-related revenue such as sales of premium domain names and bulk domain sales.

As a result, the company has reduced its full-year 2014 revenue guidance from between $576 million and $579 million to between $566.7 million and $568.7 million
The company blamed about half of the reduction — about $5 million — on softness in its domain name business.
Brown explained that the new gTLD environment has seen domain investors exercise much more caution when it comes to buying premium names and buying names in bulk:

We’ve seen that market get soft…. The reason the softness is occurring is that this marketplace is looking at all of these new gTLDs coming into place, there are more options available for people and they’re kind of stepping back away, at least temporarily, to see how things settle out.

He said the company expects the market to come back after the uncertainty has passed.
Web.com yesterday reported third-quarter net income of $33.9 million, up from $29.3 million a year ago, on revenue that was up to $137.4 million from $125.2 million in 2013.
The company, which owns brands including Register.com and Network Solutions, announced a $100 million share repurchase at the same time, to prop up the inevitable hit its stock was to take.
Its shares are trading down 25% at time of publication.

.xyz launch inflated by massive NetSol giveaway

Network Solutions gave away thousands of .xyz domain names for free to people who hadn’t requested them, artificially inflating the new gTLD’s launch day numbers.
As of last night, there were 36,335 domains in the .xyz zone, with something like 27,000 listed as having name servers belonging to NetSol and its parent, Web.com.
Before .xyz launched, only 1,287 new gTLD domains used NetSol name servers.
What this means is that for some reason thousands upon thousands of .xyz domain names were registered via one of the industry’s more expensive registrars.
That reason, as Mike Berkens at The Domains scooped, is that many names were given away for free to existing NetSol customers.
Not only that, but the giveaway was opt-out — if you were selected for the promotion you had to click a link in an email in order to prevent NetSol registering the .xyz that matches your .com.
So not only did the registrants of a significant portion of .xyz’s new registrations not pay for their names, they didn’t even request them.
A lot of garbage strings — some of which have matching .coms I suspect are being used for nefarious purposes — have therefore made it into .xyz’s zone alongside many decent-enough names.
When I asked NetSol, a spokesperson refused to confirm the giveaway, calling it a “market rumor”. This is apparently the kind of promotion you don’t want anyone hearing about.
It’s not clear how many of these 27,000 names were genuine registrations and which were part of the promotion, but I suspect, given NetSol’s prior performance in new gTLDs, that the vast majority were freebies.
This has happened before.
About 10 years ago, Afilias temporarily dropped its first-year price for .info to zero dollars, hoping to attract more registrations and paying renewals.
Instead, eNom decided to register a million .info names matching its customers’ .com names, put them in its customers’ accounts, and park the lot.
A year later, over 99% of those names were allowed to expire by registrants who hadn’t requested them in the first place.
The difference in this case seems to be that .xyz itself is still getting paid its registry fee for each of the names NetSol gave away.
But if history is any guide, .xyz’s numbers could be in for a big drop 15 months from now.

SnapNames acquired by Web.com

Web.com has acquired domain name dropcatcher SnapNames for an undisclosed sum, according to press releases from it and former owner KeyDrive, confirming reports from Friday.
Web.com said the deal will be “immaterial” to its 2014 financial results.
The Nasdaq-listed company already owns leading registrars Network Solutions and Register.com. It’s also a new gTLD applicant, one of many companies having applied for .web.
KeyDrive acquired SnapNames, along with the registrar Moniker, from Oversee.net in 2012.
Just last week KeyDrive announced that Moniker, which with SnapNames had been managed by Craig Snyder, was getting a new CEO in the form of Key-Systems exec Bonnie Wittenberg.

Register.com hit by breach notice over 62,232 domains

Register.com, a Web.com business that is one of the top ten registrars by domains under management, has been hit by an ICANN compliance notice covering 62,232 domain names.
It’s a weird one.
ICANN says that the company has failed to provide records documenting the ownership trail of the domains in question, which all currently belong to Register.com itself.
The notice names 000123.net, 0011pp.com, 00h4.com, 010fang.net, 01rabota.com, 02071988.com and 020tong.com, but it seems that these are merely the first in a alphabetical list that is much, much longer.
Judging by DomainTools’ Whois history, these domains all appear to have been originally registered at various times by individuals in China and India, then allowed to expire, then registered by Register.com to itself.
The only common link appears to be that they were kept by Register.com after they expired, for whatever reasons registrars usually hoard their customers’ expired domains.
According to the compliance notice, ICANN wants the registrar to:

Provide a detailed explanation to ICANN how 62,232 domains in which Register.com itself is the registrant are used for the purposes of Registrar Services, as defined by Section 1.11 of the RAA;

The Registrar Accreditation Agreement says registrars have to keep registrant agreement records, except for a limited class of cases where the domain is owned by the registrar itself and used for registrar-related stuff.
Register.com, one of the original five oldest competitive registrars, has been given until October 2 to come up with the requested information for face losing its accreditation.
The registrar has almost three million gTLD domains under management. Combined with its Web.com sister registrars, which include Network Solutions, the number is closer to 10 million.

Web.com CEO talks “defensive” .web strategy

Number-three registrar Web.com applied for the new gTLD .web in order to protect a trademark, but it’s open to partnerships to secure and manage the string, according to its CEO.
But the .web contention set will take a “considerable amount of time to be resolved”, David Brown told analysts during the company’s first-quarter earnings conference call last night.
“The way we’ve always thought about .web is that given that we have a trademark on the name Web.com, we really needed to apply for .web in order to protect our trademark,” he said.
“In order to protect our trademark globally, we needed to basically defend ourselves by applying for .web, and we’re certainly interested in getting it, but it’s not our core business,” he added.
Web.com, which also owns Network Solutions and Register.com, is one of seven applicants for .web.
But the company did not file any Legal Rights Objections against its competitors, as its trademark may have permitted, reflecting a slightly relaxed attitude to the string that also came across in the yesterday’s call.
Brown said, according to the Seeking Alpha transcript:

We’ll be perfectly content if anyone gets .web because they’re going to distribute it through us, and it’s our name, and we’re advertising and building a brand in the marketplace, and we’re going to be a great deliverer of .web extensions, whoever gets it, whether it’s us or someone else.

He indicated that the ultimate winner of .web is likely to be some kind of cooperative arrangement between applicants. He said:

Our strategy has always been to cooperate. And so we’ve looked at the people who have applied, and we certainly are talking to all of them about who would benefit from this and which team would be the best team to provide services, and so that would be our strategy… We won’t bear the full load of the economics of acquisition ourselves likely. It’ll likely be shared.

To me, this screams “joint venture”, which has always been the way I’ve seen .web pan out. If you recall, when Afilias was formed to apply for .web in 2000, it was a joint venture of many leading registrars of the time.
Brown also said on the call that he expects to see the first new gTLDs get approved in the fourth quarter, but they’ll be the uncontested ones and therefore not particularly lucrative.
Web.com could also be the beneficiary of marketing dollars spent by new gTLDs to secure shelf space, he said.

As new gTLDs enter a new phase, the first wave of announcements crashes

Go Daddy, Web.com and the Public Interest Registry were among the first to reveal their new generic top-level domain plans as ICANN’s new gTLD program enters the “reveal” phase.
Announcements from several companies were timed to closely coincide with the closure of ICANN’s TLD Application System at a minute before midnight UTC last night.
After a false start (false end?) on April 12, and weeks of subsequent procrastination, the end of the new gTLD application window seems to have gone off without a hitch.
We’re now entering a new phase of the program, one which is expected to hold far fewer secrets.
Between now and the official Big Reveal, currently targeted for June 13, I’m expecting a deluge of announcements from new gTLD applicants, no longer scared of encouraging competitive bids.
Any company with any hope of standing out from the crowd of almost 2,000 applications needs to make its presence felt as loudly and as early as possible.
.web
The first to do so was number-three registrar Web.com, owner of Network Solutions and Register.com, which confirmed its long-expected bid for .web shortly before midnight.
It’s one of many companies with a claim to the gTLD, in what is certain to be a fiercely fought contention set.
The firm reckons, dubiously, that it has rights due to its trademark on Web.com, which I predict will be anything but a slam dunk argument when it comes to a Legal Rights Objection.
“We believe we possess the natural platform from which to successfully market the new .WEB top level domain since we are the sole owner of the Web.com trademark as issued by the U.S. Patent and Trademark office,” CEO David Brown said.
I wonder what the other 300 or so owners of web.[tld] domain names think about that.
.bank and .insurance
The Association of National Bankers and the Financial Services Roundtable, both US trade groups for the banking industry, provided the first post-TAS announcement to hit my inbox, at 0006 UTC.
The groups have confirmed their joint bids for .bank and .insurance, having wisely decided against the less SEO-friendly, less intuitive .banking, .invest, .investment, and .insure.
These proposed gTLDs will be secured and restricted, but they still face the substantial risk of objections from European banking regulators.
There’s also one other unconfirmed .bank applicant.
.home and .casa
Go Daddy has also revealed its two applications, giving the scoop to Domain Name Wire. It’s applied for .home and the Spanish translation, .casa, in addition to the previously announced .godaddy.
While they look benign on the face of it, I’m expecting .home to face opposition on technical grounds.
It’s on DI PRO’s list of frequently requested invalid TLDs, due to the amount of traffic it already gets from misconfigured routers.
Go Daddy may also face competition scrutiny if it wants to act as a registry and registrar, given its overwhelming dominance of the registrar market.
Both applications are also likely to find themselves in contention sets.
.ngo and .ong
The Public Interest Registry cleverly got its .ngo and .ong bids some big-readership attention a few hours ago by letting Mashable think it was getting a scoop. Ahem.
To be fair, the .ong application – a translation of .ngo for Spanish, French and Italian markets – was news. Both will target non-governmental organizations, of which there are millions.
The .ong bid stands a reasonable chance of being challenged due to its visual similarity with .org – which PIR already manages – but ICANN’s similarity tool only gives it a score of 63%.
.cloud and .global
Finally this morning, CloudNames announced applications for .cloud and .global, two unrestricted gTLDs being pitched explicitly as alternatives to .com, .biz and .info.
“A .cloud domain will allow businesses and individuals to have their own cloud on the Internet. Likewise, a .global domain will allow businesses to secure a position on an international level,” CEO Rolf Larsen said in a statement.
They’re the first examples of both strings to be announced, but CloudNames expects them both to be contested. I suspect the buzzy .cloud will be the harder to obtain.

More layoffs planned at NetSol

Web.com plans to lay off more people than previously expected at recently acquired domain name registrar Network Solutions, according to a report.
“There is significantly more overlap than we originally estimated, and so it’s likely going to be more headcount reduction,” CEO David Brown said in a Reuters interview.
He named marketing, development, and engineering as areas where the merged company plans to cut more than $30 million in costs.
If there was any doubt about it, he confirmed that NetSol’s incumbent CEO faces the chop. Lower-level staff appear to have safer positions.
At least two senior NetSol executives have already jumped shipped since the acquisition was announced.
Senior director of policy Statton Hammock left to form his own consulting business a month ago, and last week senior policy manager Paul Diaz joined the Public Interest Registry.
Web.com announced its $561 million acquisition of NetSol in early August. It had already acquired the company’s old rival, Register.com.

NBT agrees to $236m buy-out

Following in the footsteps of larger rival Go Daddy, the UK-based registrar Group NBT has agreed to be bought out by private investors for £153 million ($236m).
NBT owns registrars including NetNames, Ascio and Indom.
The all-cash offer comes from investors led by HgCapital and represents a 22.5% premium on the company’s closing share price yesterday.
At 550p a share, the offer stands to make a profit for anybody who has bought NBT shares in the last ten years, according to the company.
The news came as NBT reported an annual profit, excluding certain items, up organically 9% at £8.9 million ($13.8m) on revenue that was up 4% at £45.7 million ($70.6m).
Including the results from French registrar Indom, which the company acquired last December, profit was up 18% at £9.6 million ($14.8m) on revenue up 13% to £49.5 million ($76.5m)
The NBT deal is merely the latest in a series of buyouts and mergers to hit the registrar market this year.
As well as Go Daddy’s $2 billion+ change of control, Network Solutions recently sold out to Web.com for $561 million in cash and stock, and Tucows acquired EPAG Domainservices for $2.5 million.
At least one city analyst thinks the buyout timing relates to ICANN’s forthcoming new generic top-level domains program, and is bullish on Top Level Domain Holdings shares as a result.
Will the wave of consolidation continue? Who’s next?

Together at last: NetSol merges with Register.com

The first-ever .com domain name registrar and its first-ever competitor are to merge as part of Web.com’s strategy to scale up and better compete with Go Daddy.
Web.com, which bought Register.com a little over a year ago, has now turned its attention to bigger fish. It’s agreed to buy Network Solutions for $561 million in cash and stock.
The combined company will have three million customers, revenue of over $450 million, and over nine million domains under management.
By my reckoning, this means Web.com becomes the fourth-largest registrar by domain count, a position already held by NetSol, a couple of million domains behind Tucows.
NetSol was of course the original .com registrar/registry and Register.com was the first competitor to start selling domains after ICANN introduced competition to the market.
Both registrars were briefly public companies in their own right, before being re-privatized around the same time it became apparent Go Daddy and the other discount registrars were eating their lunch.
This shared history is still evident today – both companies still sell domain names for 1999 prices, and they’re both still losing customers as a result.
CEO David Brown said on a conference call announcing the deal that Register.com is currently losing 13,000 subscribers, net, per quarter.
This is not as bad as the 20,000 per quarter at the time of the acquisition, but it’s still over 140 customers jumping ship, on average, every day.
Brown said that NetSol’s churn is similar; its customer base is “declining very slowly”, albeit from a stronger starting position.
When VeriSign sold NetSol in 2003, it said the unit had about four million customers. Today, according to Web.com’s announcement, it’s closer to two million.
The NetSol deal will enable Web.com to expand its focus from small businesses, Register.com’s core market, to medium-sized businesses too, Brown said.
“This is a unique chance for Web.com to quickly gain major scale in our sweet spot – the small and mid-size business market,” he told analysts.
The larger scale will also enable the company to ramp up its marketing efforts, he said, helping it to gain mindshare from “another company” (cough–Go Daddy–cough).
Both the NetSol and Register.com brands will stay, but the primary brand in its advertising campaigns will be Web.com
Both NetSol and Register.com still operate at very much the high-end of the pricing spectrum, having stubbornly resisted pricing pressures for the last decade.
Register.com currently sells .com domain names for $38 a year, NetSol sells them for $35.
However, on the analysts’ call, Brown discussed the success of a recent marketing campaign at Register.com, which offered domains at cheaper prices than usual.
“We discovered marketing a lower-price domain name was driving a total order value that was more than ten times higher due to additional offerings,” he said.
I wonder where they got that idea from.

Register.com sold at a $65 million loss

Register.com has been acquired by web hosting company Web.com for $135 million, substantially less than the $200 million Vector Capital paid for it five years ago.
Web.com said the acquisition will help it access new small business customers for lead generation, to cross-sell its existing products.
The company’s customer base will increase by over 400% to more than one million customers, Web.com said. The combined firm will have annual revenue of $180 million.
Register.com was one of the first five ICANN-accredited registrars. It failed as a public company, and after years of financial wrangling was finally taken private by Vector in 2005.
Vector specializes in buying up troubled companies and turning them around, but it doesn’t appear to have increased the value of this particular asset over the last five years.