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New gTLD revenue projections revealed in leaked Famous Four presentation

Kevin Murphy, August 1, 2013, 14:17:12 (UTC), Domain Registries

Famous Four Media expects to make an average of almost $30 million revenue in year one from each of the new gTLDs it secures.
That’s according to a PowerPoint presentation (pdf), written for potential investors, that was provided by an anonymous source (I suspect not a fan of the company) to DI this week.
According to the presentation, “potential year 1 revenues for an average Registry” could amount to $28.4 million, the vast majority of which would come from sunrise, landrush and premium domain sales.
The presentation, dated June 2013, was prepared by Domain Venture Partners, the immediate parent of the 60 shell companies that Famous Four is using to apply for its 60 gTLDs.
The company was unable to provide an executive to discuss this story until August 14.
But according to the PowerPoint, the Domain Venture Partners II fund is an investment vehicle set up to “bridge the gap” in Famous Four’s funding requirements:

Domain Venture Partners II shall provide a unique structured regulated investment opportunity to participate in the new gTLD programme to provide secured fixed annual returns along with additional venture type returns at a time in the process where most of the major risks have been removed.

DVP is looking to raise up to $400 million, having raised £48.3 million ($73.2 million) in 2011 via the Domain Venture Partners I fund, it says. The current round opened in March and is expected to close in November.
Famous Four has applied for 60 gTLDs — mostly highly sought-after strings such as .poker, .music, .shop, .search and .buy — 10 of which were initially uncontested.
According to the presentation, landrush period auctions would account for about a third of year-one revenue in each gTLD: $9.7 million. That’s based on selling 45,697 domains for an average price of $213.34.
Revenue from trademark owners is the second-largest chunk. An average sunrise period could raise $6.9 million, assuming 39,679 domains at an average of $173.5 each, according to the PowerPoint.
Sales of regular domains during the first first year of general availability could raise $4.1 million, based on 225,759 registrations at $18.47 apiece, the presentation says.
Here’s the full slide, one of 33 in the deck:
Domain Venture Partners II presentation
The presentation says that the projections are “based on historical data points established by the existing operational gTLD Registries”, adding:

The figures are averages and therefore would represent projections for a standard gTLD Registry. Potential year 1 revenues for specific Registries may be below or above this average.

Some of the numbers strike me as optimistic. While the likes of .asia and .mobi may have seen these registration volumes due to the novelty and scarcity of new gTLD namespaces, my feeling is that those days are over.
The new gTLD program is likely to see scores of overlapping sunrise and landrush periods; it’s difficult to see registries benefiting from the same focus and excitement as their predecessors.
There’s a limited amount of domainer capital to spread around landrush sales and trademark owners are likely to be much more selective about where they defensively register their brands in a world of 1,300 gTLDs.
That said, Famous Four has applied for some of the nicest strings in the round so I may be wrong.
An appendix to the presentation discussing the first DVP funding round says that while Famous Four hopes to sign contracts for 30 new gTLDs, it has only secured 32% of the money it is looking for.
Securing investment appears to have been tough due in part to the complexity of the ICANN process and investors’ lack of familiarity with it, which looks like risk. It also says:

The costs associated with applications in the new gTLD have increased, the financial strength of most applicants has been reduced and the knowledge barrier to entry is too high to interest large standard venture investors.

Famous Four’s business model is based around consolidation and keeping costs down, according to the pitch. For the most part, this is due to the economies of scale of running a large number of TLDs.
With Neustar as its back-end provider, Famous Four says it has found the “lowest fees in the industry”.
But the model also involves keeping tax to a minimum. Famous Four is based in Gibraltar, where it says it will pay no tax on domain sales:

FFM is operating in a fiscal environment that has multiple advantages over others in the industry. Domain names sales are treated as royalty income which is currently zero rated in Gibraltar. This would result in an instant bottom line gain.

There’s a strong suggestion in the presentation that DVPII is not limiting its ambitions to the new gTLDs it has applied for.
It also seems to discuss acquiring other applicants and ccTLD rights, then bringing them into the Famous Four fold, but the plan was not completely clear to me and executives were unavailable for clarification.

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Comments (2)

  1. MarkA says:
    August 1, 2013 at 8:52 pm

    The sunrise is wayyyyy overvalued. Sunrise will largely go away as would-be purchasers leap to get their own G’s in round II. Also nobody is going to be selling anything for more than 10 bucks after some of the major applicants start giving names away for free. Sad for the bag holders but FF should do okay

    Reply
  2. zack says:
    August 5, 2013 at 9:16 pm

    Kevin,
    So…out of curiousity, I wonder what DVP projected to ICANN for its COIs? Presumably it matches what they have in this marketing plan – thus I would expect that they would have $18M in COIs? I hope ICANN is checking this against DVPs applications to confirm the numbers….otherwise DVP is providing false information in their applications and ICANN wouldn’t be doing their diligence.

    Reply

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