Neustar set to lose contract that provides HALF its revenue

Neustar has been devastated by the news that it is likely to lose a US government contract that provides almost half of its annual revenue.
The US Federal Communications Commission yesterday recommended that Telcordia Technologies take over the Local Number Portability Administrator contract, which Neustar has held since 1997.
The service is basically North America’s centralized phone number registry. It’s not directly related to its domain name businesses.
In 2014, the deal was worth $474.8 million to Neustar, or 49% of its annual revenue.
On the news, the company’s share price fell off a cliff, losing almost 20% of its value before recovering slightly to end the day almost 12% down.
Neustar expressed dismay and anger in a press release, saying the FCC was putting the security of the US phone system at risk:

Although apparently the LNPA is used to port numbers, it is also critical for technology migrations, mergers and acquisitions, disaster recovery, accurate 911 location, and is the only authoritative database for the proper call completion of 11 billion voice calls and text messages each day. The recommendation misunderstands the operating system and would harm public safety, law enforcement, fundamentally burden small carriers, and disrupt service for 12 million consumers — all in pursuit of theoretical savings for a few carriers, which Neustar believes will be dwarfed by the costs and risks of transition.

Switching to Telcordia is currently only a recommendation that FCC commissioners must approve, and Neustar said it will “review all of its options”.
The LNPA deal is due to expire June 30 this year.
Neustar’s domain business — or “security services” as the company calls it — comprises DNS resolution, the registries for .us, .biz and .co, and the back-end registry for many new gTLDs. It brought in revenue of $140.3 million in 2014.
According to Reuters, Neustar is currently talking to advisers about the potential sale of the company, which is currently listed on the New York Stock Exchange, to private equity.
The potential buyers are reportedly waiting for the award of the number portability contract before sealing the deal.

Tucows and Namecheap exit $14m .online deal

Tucows and Namecheap have both pulled out of their joint venture with Radix to run the .online registry.
Tucows revealed the move, which will see Radix run .online solo, in a press release yesterday.
Both Tucows and Namecheap are registrars, whereas Radix is pretty much focused on being a registry nowadays.
While financial terms have not been disclosed, Tucows CEO Elliot Noss had previously said that each of the three companies had funded the new venture to the tune of $4 million to $5 million.
I estimate that this puts the total investment in the deal — which includes the price of winning .online at auction — at $13 million to $14 million.
Noss has also hinted that the gTLD sold for much more than the $6.8 million paid for .tech.
.online has not yet been delegated.

Google buys .app for over $25 million

The fiercely competed new gTLD .app has sold to Google for a record-breaking $25 million.
The company’s Charleston Road Registry subsidiary beat out 12 other applicants for the string, including Donuts, Amazon, Famous Four Media, Radix and Afilias.
The auction lasted two days and fetched a winning bid of $25,001,000, more than any other new gTLD to date.
The previous high is believed to be .blog, which I estimate sold for less than $20 million.
Because it was an ICANN-run “last resort” auction, all of the money goes into ICANN’s special auction proceeds fund, which previously stood at just shy of $35 million.
Previous ICANN auctions have fetched prices between $600,000 and $6,760,000.
Google originally proposed .app as a closed registry in which only Google and its partners could register names.
However, after the Governmental Advisory Committee pressured ICANN to disallow “closed generics”, Google changed its application to enable anyone to register.

Verisign sues .xyz and Negari for “false advertising”

Handbags at dawn!
Verisign, the $7.5 billion .com domain gorilla, has sued upstart XYZ.com and CEO Daniel Negari for disparaging .com and allegedly misrepresenting how well .xyz is doing.
It’s the biggest legacy gTLD versus the biggest (allegedly) new gTLD.
The lawsuit focuses on some registrars’ habit of giving .xyz names to registrants of .com and other domains without their consent, enabling XYZ.com and Negari to use inflated numbers as a marketing tool.
The Lanham Act false advertising lawsuit was filed in Virginia last December, but I don’t believe it’s been reported before now.
Verisign’s beef is first with this video, which is published on the front page of xyz.com:

Verisign said that the claim that it’s “impossible” to find a .com domain (which isn’t quite what the ad says) is false.
The complaint goes on to say that interviews Negari did with NPR and VentureBeat last year have been twisted to characterize .xyz as “the next .com”, whereas neither outlet made such an endorsement. It states:

XYZ’s promotional statements, when viewed together and in context, reflect a strategy to create a deceptive message to the public that companies and individuals cannot get the .COM domain names they want from Verisign, and that XYZ is quickly becoming the preferred alternative.

As regular readers will be aware, .xyz’s zone file, which had almost 785,000 names in it yesterday, has been massively inflated by a campaign last year by Network Solutions to push free .xyz domains into customers’ accounts without their consent.
It turns out Verisign became the unwilling recipient of gtld-servers.xyz, due to it owning the equivalent .com.
According to Verisign, Negari has used these inflated numbers to falsely make it look like .xyz is a viable and thriving alternative to .com. The company claims:

Verisign is being injured as a result of XYZ and Negari’s false and/or misleading statements of fact including because XYZ and Negari’s statements undermine the equity and good will Verisign has developed in the .COM registry.
…
XYZ and Negari should be ordered to disgorge their profits and other ill-gotten gains received as a result of this deception on the consuming public.

The complaint makes reference to typosquatting lawsuits Negari’s old company, Cyber2Media, settled with Facebook and Goodwill Industries a few years ago, presumably just in order to frame Negari as a bad guy.
Verisign wants not only for XYZ to pay up, but also for the court to force the company to disclose its robo-registration numbers whenever it makes a claim about how successful .xyz is.
XYZ denies everything. Answering Verisign’s complaint in January, it also makes nine affirmative defenses citing among other things its first amendment rights and Verisign’s “unclean hands”.
While many of Verisign’s allegations appear to be factually true, I of course cannot comment on whether its legal case holds water.
But I do think the lawsuit makes the company looks rather petty — a former monopolist running to the courts on trivial grounds as soon as it sees a little competition.
I also wonder how the company is going to demonstrate harm, given that by its own admission .com continues to sell millions of new domains every quarter.
But the lesson here is for all new gTLD registries — if you’re going to compare yourselves to .com, you might want to get your facts straight first if you want to keep your legal fees down.
And perhaps that’s the point.
Read the complaint here and the answer here, both in PDF format.

.xxx boss says new gTLD registries need to “wake up”

ICM Registry president Stuart Lawley may be just weeks away from launching his second and third gTLD registries, but that doesn’t mean he has a positive outlook on new gTLDs in general.
“I think people need to wake up,” he told DI in a recent interview. “If you do the math on some of these numbers and prospective numbers, it just doesn’t stack up for a profitable business.”
“The new ‘Well Done!’ number seems to be a lot less than it was six months ago or 12 months ago,” he said.
Lawley said he’s among the most “bearish” in the industry when it comes to new gTLD prospects. And that goes for ICM’s own .porn, .sex and .adult, which are due to launch between March and September this year.
While he’s sure they’ll be profitable, and very bullish on the search engine optimization benefits that he says registrants could be able to achieve, he’s cautious about what kind of registration volumes can be expected. He said:

If you add up everybody that has ever bought a .xxx name, including the Sunrise B defensives, we have got a target market of about 250,000 names. People to go back to and say, “Look, you still have a .xxx or you had a .xxx at some stage. Therefore, we think you may be interested in buying .porn, .sex or .adult for exactly the same reasons.”
So, our expectations to sell to a whole new market outside of those quarter of a million names is probably quite limited.

Lawley said that he believes that the relatively poor volume performance of most new gTLDs over the last year will cause many registrars to question whether it’s worth their time and money to offer them.

I can see why registrars can’t be bothered. How many of these am I going to sell? Am I going to sell two hundred of them? Am I going to make five dollars per name? That’s one thousand dollars. It’s not worth it to me to put in ten thousand dollars worth of labor and effort to make one thousand dollars in revenue. So, I think that’s a challenge that many of the small lone player TLDs may face.

Lawley said he’s skeptical about the ability of major portfolio players, such as Donuts, to effectively market their hundreds of gTLDs, many of which are targeted at niche vertical markets.
He said in an ideal world a gTLD would need to spend $20 million to $30 million a year for a few years in order to do a proper PR job on a single TLD — ICM spent about $8 million to $9 million, $5.5 million of which was on US TV spots — and that’s just not economically viable given how many names are being sold.
But he added that he thinks it’s a good thing that some new gTLDs are seeing a steady and fairly linear number of daily additions, saying it might point to better long-term stability.

A lot of the TLDs that seem to be doing okay — .club for argument’s sake and several others in that ilk — seem to be doing their three hundred domains per day ADD, or 32 or 12 or whatever the number is, in a relatively linear fashion six or seven months after launch, which I think is potentially positive if one extrapolates that out.

The full interview, which also addresses SEO, dot-brands, registrar pay-for-placement and smart search, can be read by DI PRO subscribers here.

Renewals at 55% as first new gTLD junk drop begins

The first new gTLD to go live is seeing its first-year renewals at 55% one year after hitting general availability.
dotShabaka Registry’s شبكة. (or “.shabaka”, the Arabic for “.web”) has also seen its zone file shrink by about 27% over the last two weeks.
The zone peaked at 2,069 domains on February 1, 2015, but today stands at 1,521. Exactly one year ago, it was at 1,561 names.
The zone is smaller today than it was just two weeks after GA began, in other words.
“We can confirm we’re seeing renewal rates for names due in February at around 55%,” Adrian Kinderis, CEO of ARI Registry Services, which runs .shabaka’s back-end, told DI in a statement.
The registry added 1,608 domains in February 2014, 1,400 of those in the first half of the month.
The 55% is the number of domains that were renewed before their February expiry date. The full number for February will not be known until the grace period ends in mid-April.
“We have a handful of cancel renews and all other expired domains are in the auto-renew period,” he said. “It’s too early to examine the numbers for renews post-expiry date, but we expect this will increase the overall tally.”
“Given the market conditions we face in the region, the results align with our forecasts and we expect the numbers to improve for renewals due in the coming weeks and months,” he said.
In gTLDs, domains can enter a Auto Renew Grace Period for up to 45 days after expiration, during which they can still be renewed by their registrant and may or may not appear in the zone file.
It wouldn’t be fair on other new gTLD registries to read to much into these numbers, assuming they do not improve, as شبكة. is a bit of an unusual case.
It’s seen low registration volume, despite the apparently attractive string, largely because it’s restricted to Arabic script at the second level and the Arabic-speaking market is in its infancy.
When شبكة. launched there were no registrars offering an end-to-end Arabic shopping cart, Kinderis said. He added:

The most significant problem still remains demand and consumer awareness…
In regards to demand, the lack of awareness is a direct result of little to no marketing in the region. Apart from our own efforts, there has been little marketing or education programs deployed to increase awareness of new Top-Level Domains and Arabic script domain names.
We have even limited our marketing efforts because we identified early that market readiness is inadequate. Any large investment in marketing from dotShabaka Registry at the moment would be premature and wasteful until supply, demand and universal acceptance issues have been addressed.

He called on ICANN and its recently created Middle East Working Group to focus on ways to increase awareness and demand for domain names in the region. To date, it’s focused too much registrars and technical issues, he said.
شبكة. has its own set of issues and is probably not the best test case for new gTLDs in general.
That’s going to come soon. Donuts’ first batch of gTLDs — .guru, .bike, .holdings, .plumbing, .singles, .ventures and .clothing — had their base-price GA anniversary on February 4, and it appears that domains have already started to drop.
There’s little indication of anything amiss in the .guru zone file so far but the other six are down slightly — by maybe 100 or so names apiece, or less than 1% each — over the last two weeks.
Donuts executives have said they expect first-year renewals to be strong, but we’ve got a few weeks left before anyone will be in a position to know for sure.

Generics versus brands as two more gTLDs are sold

Two more new gTLD contention sets have been settled by auction, one a case of a portfolio applicant prevailing over a closed generic applicant, the other a case of a brand owner paying off a portfolio applicant.
Donuts has won the right to .jewelry over $10 billion-a-year jewelry firm Richemont, owner of brands including Cartier.
Richemont applied for several TLDs, some of which were generic terms. It was awarded .watches uncontested, but apparently didn’t want to fork out as much as Donuts for the matching .jewelry.
Google, meanwhile, won the two-horse race for .moto against Rightside. This one’s interesting because it’s basically a case of Rightside forcing Google to pay up to own one of its own brands.
Google owns a trademark on “Moto” due to its acquisition of Motorola Mobility a few years ago, but Rightside applied for it in its generic sense as an abbreviation of “motorcycle” or “motorbike”.
Google had filed a legal rights objection against its rival for .moto, but lost. Now it’s been forced to cough up at auction instead.
Prices, as usual, have not been disclosed.

Delays to two-letter domains after governments take a second bite at the apple

New gTLD registries will have to wait a bit longer before they’re allowed to start selling two-character domain names, after ICANN’s Governmental Advisory Committee controversially issued new guidelines on their release.
The registries for hundreds of gTLDs will be affected by the delays, which could last a few months and were put in place by the ICANN board of directors at the request of the GAC at the ICANN 52 meeting in Singapore last week.
The two-character domain issue was one of the most contentious topics discussed at ICANN 52.
Exasperated registries complained to ICANN’s board that their requests to release such domains had been placed on hold by ICANN staff, apparently based on a letter from GAC chair Thomas Schneider which highlighted concerns held by a small number of governments.
The requests were frozen without a formal resolution by the board, and despite the fact that the GAC had stated more than once that it did not have consensus advice to give.
Some governments don’t want any two-letter domains that match their own ccTLDs to be released.
Italy, for example, has made it clear that it wants it.example and 1t.example blocked from registration, to avoid confusion.
Others, such as the US, have stated publicly that they have no issue with any two-character names being sold.
The process for releasing the names went live in December, following an October board resolution. It calls for a 30-day comment period on each request, with official approval coming seven to 10 days later.
But despite hundreds of requests going through the pipe, ICANN has yet to approve any. That seems to be due to Schneider’s letter, which said some governments were worried the comment process was not transparent enough.
This looked like a case of ICANN staff putting an unreasonable delay on part of registries’ businesses, based on a non-consensus GAC position that was delivered months after everyone thought it was settled law.
Registries grilled the board and senior ICANN executives about this apparent breakdown in multi-stakeholder policy-making last Tuesday, but didn’t get much in the way of an explanation.
It seems the GAC chair made the request, and ICANN implemented a freeze on a live business process, without regard to the usual formal channels for GAC advice.
However, the GAC did issue formal advice on two-letter domains on Wednesday during the Singapore meeting. ICANN’s board adopted the advice wholesale the next day.
This means that the comment period on each request — even the ones that have already completed the 30-day period — will be extended to 60 days.
The delay will be longer than a month for those already in the pipe, however, as ICANN still has to implement the board-approved changes to the process.
One of those changes is to alert governments when a new registry request has been made, a potentially complex task given that not every government is a member of the GAC.
The board’s resolution says that all comments from governments “will be fully considered”, which probably means we won’t be seeing the string “it” released in any new gTLD.
The GAC has also said it will publish a list of governments that do not intend to object to any request, and a list of governments that intend to object to every request.

.blog won in eight-figure auction by Primer Nivel

A Colombian registrar has become the unlikely owner of the coveted .blog new gTLD, beating eight other applicants to the string at auction.
Winning bidder Primer Nivel is a Panamanian company affiliated with Bogota-based CCI REG, which runs my.co.
The company was the first to reveal its plans to apply for .blog, telling DI back in April 2012 about its ambitions of the gTLD.
Rival bidders Radix, Minds + Machines, Donuts, Afilias, Merchant Law Group, BET, Google and Top Level Design all withdrew their applications over the weekend.
We’re certainly looking at an eight-figure sale here.
Kieren McCarthy, writing at The Register, reckons it went for $30 million or more, based on the fact that M+M got $3.4 million for withdrawing from .blog and .store auctions, but his back-of-the-envelope calculations are off-target for a few reasons.
Knowledgeable DI sources say the sale price was considerably lower than $30 million.
My envelope puts it at somewhere in the range of $15 million to $18 million.
I’ve always said .blog is among my favorite new gTLD strings. The market opportunity is potentially huge, with hundreds of millions of blogs live on the web today.
Primer Nivel, which to the best of my knowledge is not (unlike some other applicants) affiliated with a particular blogging platform, plans to operate .blog as an open gTLD.
The separate auction for .store, meanwhile, was won by Radix, after withdrawals from M+M, Donuts, Amazon, Google, Dot Store and Uniregistry this weekend.

.reise to start at $400k in no-reserve auction

Applicant Auction has revealed the starting price of the first live new gTLD to be auctioned off.
Dotreise’s .reise will have a minimum starting bid of $400,000 when it hits the block on February 27, the company revealed.
There will be no reserve.
It seems quite possible that the registry is barely covering its costs, assuming the TLD sells. The application fee was $185,000, and no doubt the company has racked up many more expenses over the last three or four years.
The TLD, which is German for “.travel” has been in general availability since August but has fewer than 1,300 registrations, selling at up to $180 a year.
It competes with Donuts’ $25-a-year .reisen, which pretty much means the same thing.