$2 million Christmas bonus for ICANN

The domain industry performed better than expected in the back half of last year — well, better at least than ICANN had predicted.

The Org today said it took in $2 million more in revenue than it expected in the second half of 2024 — ICANN’s fiscal first half — because the gTLD registries and registrars that primarily fund it processed more transactions than it had planned for.

Registry and registrar transaction fees — paid on registrations, renewals and transfers — were both a million bucks ahead of budget at $29 million and $20 million respectively

Its FY25 takings to the end of December totaled $74 million, ahead of its $72 million estimate but flat on its FY24 budget.

Operating costs were in-line with expectations and down on FY24 numbers due to fewer people having their flights and hotels paid for at ICANN 82 in Istanbul last October.

ICANN eyes more price hikes as it predicts dismal year for industry

The domain industry may not be set to shrink, but it’s not set to grow either, according to predictions in ICANN’s newest draft budget, published this week.

The Org’s bean-counters have also confirmed that the recently announced fee increases for registries, registrars and registrants may become a “repeatable” occurence.

ICANN says its budget for fiscal 2026, which starts next July, sees funding and expenditure both at $142 million, down $3 million on its adopted 2025 budget.

It’s predicting a pretty flat domain industry for FY26, with no growth in transactions from legacy gTLDs (mainly .com) and 1% growth from new gTLDs. Legacy would stay at $83.1 million and new would grow to $12 million.

ICANN reckons it will lose 17 contracted gTLD registries by the end of FY26, going from 1,109 to 1,092. It reckons it will accredit just three new registrars over the same period.

The estimates are all mid-points. ICANN has also given high and low estimates that vary from transactions growing by 9% or shrinking by as much as 14%.

The financial predictions are also probably going to get revised, as they don’t include the impact of ICANN’s planned fee increases, which have not yet been given final approval.

The Org said in October that it plans to raise the per-transaction fee for registrars, which buyers usually added on at the check-out, from $0.18 to $0.20.

The registry transaction fee will go up from $0.25 to $0.258. Fixed fees for registries and registrars will also go up.

The draft budget calls the increases “equitable, contractually efficient, pragmatic, and repeatable”.

“Inflationary increases can continue at ICANN’s discretion as contemplated by the Base gTLD Registry Agreement,” suggesting they could become an annual inflation-linked event.

The budget us currently open for public comment.

ICANN says it WILL raise its domain taxes soon

Prices in all gTLDs will go up after ICANN told registries and registrars last week that it plans to increase the fees it charges them, sometimes called its “tax”, next year.

The extra fee ICANN takes from registrars for each new domain registration and renewal will increase from $0.18 to $0.20, according to an email sent from ICANN VP Russ Weinstein to registrars Thursday evening.

This fee is typically passed on explicitly and directly to registrants in their registrar’s shopping cart.

Less-visible charges on registries will also go up. The fixed quarterly fee will go from $6,250 per quarter ($25,000 per year) to $6,450 per quarter ($25,800 per year) and the per-transaction fee will go up from $0.25 per year to $0.258 per year.

The registry fee changes will take effect January 1, but the registrar fee changes will not take effect until July 1, 2025, the start of ICANN’s next fiscal year, according to ICANN.

“After more than a decade of no changes to registry-level and registrar-level fees, ICANN would like to increase the fees it charges to both parties,” Weinstein wrote.

The two cents tax increase is big in percentage terms — about 11% — while the registry fee is more in line with US inflation at 3.20%.

The fixed registrar accreditation fee is to stay the same at $4,000 per year, while the variable accreditation fee, which is divided between registrars based on their transaction volume, is going up from a total of $3.42 million to $3.8 million per year.

The increases come as ICANN struggles to fill a $10 million hole in its budget — a situation that has already led to layoffs — and some back-of-the-envelope calculations suggest the combined fee increases are designed to raise annual revenue in that ball-park.

Due to the differences between the standard Registry Agreement and Registrar Accreditation Agreement, ICANN can push through the registry fee increases fairly quickly and unilaterally, while the registrar changes have some red tape.

The two-cent tax increase will be part of ICANN’s usual budget process, which includes a public comment period and consideration by the board of directors, while the variable fee increase will be subject to a registrar vote.

Note: an early, unfinished draft of this post was inadvertently published on Friday, for which I can only apologize.

UK and Israel cut ICANN funding

The ccTLD registries for UK and Israel cut their funding to ICANN by the largest amounts in the Org’s last financial year, according to the latest numbers.

ICANN received mostly voluntary ccTLD contributions totaling $2,135,937 in its fiscal 2024, which ended June 30, according to its report, which was published (pdf) a couple weeks ago. That’s down $80,302 from the $2,216,240 it received in FY23.

The biggest single reason for the decline is that Nominet, the .uk registry, slashed its contribution from its usual $225,000 tribute by $75,000 to $150,000 in FY24.

Under ICANN guidelines (pdf) for ccTLDs, registries with over five million domains under management should contribute the maximum $225,000 a year. While .uk has been in decline for a while, it still has well over 10 million DUM.

But Nominet was the only ccTLD still paying the $225,000. All the other ccTLDs with over five million domains were already paying substantially less.

The Netherlands reduced its contribution from $225,000 to $180,000 in FY23. Germany has not given ICANN more than $130,000 a year in the last five years. China always pays $45,000. Brazil pays $100,000.

Nick Wenban-Smith, Nominet’s general counsel told us: “Our relationship with ICANN has not changed. We are a long-standing supporter of the organisation in many ways, lending our resources to policy work and other community efforts alongside our annual financial contribution.”

Israel is the second big funding-cutter in the latest report. It had been giving the recommended $15,000 for its 250,000+ domains, but reduced that to just $5,000 in FY24, despite its DUM being up slightly over the period.

Registries from nine territories that contributed $1,000 or less every year from FY20 to FY23 did not contribute at all in FY24. These include Nigeria, Antigua and Barbuda, Malawi, Guernsey, Jersey, Saint Lucia, Tokelau, and the US Virgin Islands.

The lack of any money from Tokelau’s .tk is expected given the death of the registry. Jersey and Guernsey are perhaps more surprising, given the registries are run by a former ICANN director.

A handful of other ccTLDs from small territories that have only sporadically given in the past did not contribute in FY24.

Fourteen registries contributed more in FY24 than they did in FY23, but the difference amounted to just $13,000 extra cash in ICANN’s coffers. South Africa, Slovenia, Vietnam, Tanzania, and Mongolia all paid $1,000 or more over FY23.

Russia, which stopped providing funding in FY23 despite its almost six million DUM, also did not give any money in FY24.

Smaller, more intense ICANN meetings with no free cocktails?

ICANN has floated the idea of hosting smaller, more focused meetings that eschew tedious PowerPoint presentations and do away with the free cocktail receptions.

Seeking to eliminate $10 million from its annual budget, management recently reached out to community leaders to see if they can put their heads together to make ICANN’s public meetings less expensive.

Ideas include scrapping one of the thrice-yearly in-person meetings entirely and replacing it with a virtual-only event, along the lines of the seven that were held over Zoom during the recent coronavirus pandemic.

The suggestions appear in a “How We Meet” discussion paper (pdf), presented as a jumping-off point for community discussions rather than a top-down edict.

Straight to the important stuff: ICANN is proposing to “reduce or eliminate ICANN-hosted or ICANN-sponsored social and outreach events” such as receptions, group dinners and other social networking events.

ICANN could seek third-party sponsors for these kind of events or, horror of horrors, operate a “cash bar”, the document states.

No more free booze!

If cost-conscious alcoholics have a reason to be concerned, it’s arguably worse news for community time vampires who enjoy nothing more than sucking up 45 minutes of their hour plodding through a PowerPoint explaining what their group has been up to since the last meeting.

The document suggests focusing meetings on “timely topics”, such as those with upcoming deadlines, that require “interactive dialogue in a hybrid format”, and cutting some of the extraneous nonsense.

Therefore, “extensive slide presentations, updates, and meetings (including between ICANN staff and community groups) that do not clearly require in-person or hybrid interactions will not be scheduled”, the document suggests.

Speaking as a remote participant in recent years, I’ve often chose to wait for session recordings to become available, rather than listening live, precisely so I can fast-forward through that kind of thing. That’s obviously not an option for an in-person attendee, many of whom are there on ICANN’s dime.

The document also suggests getting rid of “informational and training” events, such as the “How It Works” sessions, which it says “incur significant costs” but have “limited participation”.

ICANN is also floating the idea of reducing the number of sessions overall, and grouping constituency-specific sessions into a tighter schedule over fewer days (presumably in order to slash the hotel bill).

But the biggest shake-up of them all is arguably the idea of reducing the number of full in-person community meetings from three to two, with the cut meeting replaced with a virtual one.

Given the shared experiences from seven, consecutive Virtual Public Meetings during the pandemic and the costs of a hybrid ICANN Public Meeting, it may be timely to discuss whether there is, in fact, a current need to have three in-person/hybrid ICANN Public Meetings each year, or whether the community can work just as effectively if at least one of these meetings is conducted virtually.

It does not say which meeting could be cut, but points out that reducing the number of public meetings may increase the need for smaller, intersessional events that focus on individual constituencies or topics.

The discussion document will inform a series of calls interim CEO Sally Costerton will hold with community leaders over the next month or so. Any consensus reached could be acted up as early as September.

ICANN slashes staff and domain prices could rise

ICANN has laid off 33 people, about 7% of its 485 staff, and has raised the specter of increased domain name prices, as it struggles to balance its budget.

The job losses are effective today and come “across all functional areas and regions”, acting CEO Sally Costerton wrote.

The Org said this evening that it made the decision to lose the employees as part of a broader cost-cutting effort that it hopes will help close a $10 million hole in its budget. At the end of April, it had said it was looking for $8 million in savings.

Costerton said ICANN will also look at reducing travel expenses and doing more work from its cheaper regional offices, as well as finding other efficiencies.

But it is also “evaluating ICANN’s fee structure to ensure it scales realistically with inflation”, Costeron wrote.

This will be of great interest to domain registrants, particularly those on a tight budget or with large portfolios, as any increases in the transaction fees ICANN charges registries and registrars will inevitably be passed on to their customers.

Registrars currently add a $0.18 per-domain-per-year ICANN fee at their checkouts, and registries pay $0.25 for every add-year, renew-year and transfer. The fees have not changed in at least the 15 years I’ve been writing this blog.

For ICANN community members and the domain name industry, the cuts will selfishly beg the questions of which services ICANN provides could suffer as a result, and whether it means delays to already overdue projects such as the new gTLD program.

The budget shortfall has arisen due to inflation and sluggish domain sales from the likes of Verisign, ICANN’s biggest funding source. Verisign’s outlook for the year is pretty bearish, with a low estimate of a 1.75% decline in domains under management.

I believe it’s the first time ICANN has been forced into a mass layoff, having reliably swollen its ranks almost every year until quite recently.

Travel expenses push ICANN into the red again

ICANN is spending millions of dollars more than expected in its current financial year, which it blames mainly on inflation pushing up the price of flights and hotels.

The latest quarterly financial report, for the nine months to March 31, shows ICANN operations spent $112 million in the period, which was $6 million more than it had budgeted for. Funding was $113 million, $3 million more than expected, leading to a total deficit of $3 million.

ICANN said the costs were “driven by higher than planned costs for ICANN78, ICANN 79, community programs, and support of meetings other than ICANN Public meetings… primarily due to inflationary increases to travel and venue costs”.

ICANN 79, which took place in Puerto Rico in March, cost $600,000 more than budget. This was due to higher flight and hotel prices and more sessions than had been planned. ICANN said in February that October’s meeting in Hamburg had come in $900,000 over budget.

Funding for the nine months came in ahead of budget largely due to better-than-expected registrar fees, most likely related to drop-catching registrar Gname’s decision to buy 150 more registrar accreditations last December.

The report, which covers the third quarter of ICANN’s fiscal 2024, also breaks out how much some of the Org’s important projects have cost.

The Grant Program, which launched at the end of the quarter, has cost almost $1.4 million in development and operating expenses since July 2022, about $18,000 over budget. That’s obviously a big chunk of the $10 million ICANN intends to hand out this year, but nothing compared to the auction proceeds fund that the grants come from — that was up $9 million to $226 million since last July based on investment gains.

The Registration Data Request Service, which launched last November, has cost just shy of $2 million to develop and run since December 2022. Compare this to the $100 million a year ICANN had predicted before the ambitions of the original proposed project were massively scaled back.

Overall, ICANN’s financial position is still incredibly healthy. Its total funds under management was up $11 million to $529 million over the nine months due to investment gains.

ICANN to slash costs as Verisign’s magic money tree dries up

ICANN is looking for $8 million of cost savings, $3 million more than it expected a quarter ago, amid gloomy predictions about the domain industry’s likely performance this year.

The Org last week told community members that it’s having to revise its expected revenue down by $3 million to $145 million after it became clear domain sales won’t be as good as previously thought. The new budget is due to be approved by the board this coming weekend.

“ICANN faces an inflation of its costs and also happens to face a lack of inflation of its funding,” CFO Xavier Calvez said on one of two conference calls explaining the changes.

ICANN’s bean counters are now predicting a 4% decline in transaction fees from legacy gTLDs — a line item mostly comprising .com — for ICANN’s fiscal 2025, which begins this July. Back in December, when the first draft of the budget was published, the prediction was for 0% growth.

The grim numbers match Verisign’s own growth story for the rest of the calendar year. Company bosses last week predicted .com/.net to grow at between 0.25% and negative 1.75%, a downwards revision on its guidance in February.

Talking to Verisign and other registries and registrars and looking at the monthly transaction data they file is the main way ICANN formulates its budget predictions.

“We gauged very strong expectations of a contraction in domain name registrations,” ICANN programs director Mukesh Chulani said.

Meanwhile, ICANN estimates transaction fees for new gTLDs will increase 7% in FY25, obviously from a much lower base then legacy, compared to the December estimate of 2% growth.

ICANN was already expecting its funding to miss its spending requirements by $5 million, but that figure is now $8 million. But rather than run ops at a loss, ICANN has instead put this number on a line labelled “Cost Savings Initiatives” in order to present a balanced bottom line.

Where these cost savings might come from doesn’t seem to have been figured out yet, and there’s some community worry that services might be affected by cuts.

There was some talk of finding efficiencies in the travel budget or with contractors, but those budgets are $13 million and $24 million respectively, so any cuts there could be swingeing.

By far the largest expenditure line item is staff, which costs $90 million. But there’s been no change to the expected number of ICANN full-timers in the budget, so layoffs don’t seem to be on the cards just yet.

ICANN spends $5 million more than planned in first fiscal half

ICANN published its second fiscal quarter financials yesterday, revealing a roughly $5 million overspend in the second half of 2023.

The Org spent $72 million of its $74 million revenue in the six months to December 31, more than the $67 million spend it had budgeted for.

ICANN said the overspend came mainly in its Community and Engagement reporting segment, with the $4 million excess “driven by higher than planned costs for ICANN78, community programs, and meetings support”.

The same report shows that ICANN 78, which took place in Hamburg last October, cost about $900,000 more than expected largely because it spent more on air fares and had to put on more sessions than it originally expected.

It also spent about $100,000 on its 25th anniversary celebration, a line item that had not appeared in its budget. Because who can predict an anniversary, right?

Hamburg was the most-expensive meeting since the pandemic ended, costing about $5.4 million and attracting over 2,500 attendees. The Kuala Lumpur meeting a year earlier had cost $4.7 million.

ICANN’s revenue was described as “flat”, but a breakdown shows a roughly $1 million (rounded) shortfall in both registry and registrar transaction fees compared to the budget. This is likely linked to shrinkages in Verisign’s .com sales over the period.

ICANN predicts flattish 2025 for domain industry

The gTLD domain industry will be pretty much flat in terms of sales next year, according to the predictions in ICANN’s latest budget.

The bean counters reckon the Org will make $89 million from transactions in legacy gTLDs (mainly .com) in its fiscal 2025, up from the $88.9 million it expects to make in fiscal 2024, which ends next June 30.

Meanwhile, it expects transactions in new gTLDs to bring in $10.1 million, up from the $9.9 million it expects in FY24.

Both of the updated FY24 estimates are actually a bit ahead of ICANN’s current budget, written in April and approved in May, which predicted $87.1 million from legacy and $9.2 million from new.

ICANN expects to lose 22 registries (presumably unused dot-brands, of which there are still plenty, with a couple hundred contracts up for renewal in 2025) and gain 40 new registrars.

This will lead to revenue from registry fixed fees to dip to $27.6 million from a predicted $28.1 million, and registrar fixed fees going up from $10.4 million from a predicted $10.1 million.

The FY24 registrar numbers are a little healthier than ICANN predicted back in April, when it expected 2,447 accredited registrars at the end of the financial year versus the 2,575 it’s expecting now. Gname’s decision to buy 150 new accreditations will have played a big role in moving this number up. ICANN expects 2,615 registrars at the end of FY25.

But ICANN is losing registries faster than it predicted back in April. Then, it had expected to end FY24 with 1,127 registries; now it thinks it will have 1,118. It expects that to drop to 1,089 by the end of June 2025.

Overall, ICANN is budgeting for funding of $148 million and the same level of expenses in FY25, the same as FY24.