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.com is shrinking but Verisign raises prices again anyway

Kevin Murphy, February 9, 2024, Domain Registries

Verisign has confirmed that it plans to exercise its fourth and final .com price-increasing power under its current registry contract, even as its domains under management continues to head south.

The company confirmed last night that it will increase the annual registration and renewal wholesale fee for a .com domain from $9.59 to $10.26 on September 1 this year. It’s the last of the four times it’s allowed to raise prices by up to 7% in its current contract with ICANN, which expires in November.

The news came as Verisign reported its fourth-quarter and full-year 2023 financial results, which were as profitable as we’ve come to expect.

But in terms of domains under management, .com and .net continued to decline, which CEO Jim Bidzos told analysts was all China’s fault. Domains managed by Chinese registrars shrank by 2.2 million in Q4, leading to an overall .com/.net shrinkage of 1.2 million names.

There were nine million new .com/.net registrations in Q4, down from 9.7 million in the same quarter in 2022.

Bidzos said the decline in China was due to factors such as stricter local regulations and a weaker economy, and said he expects those challenges to continue to hit Verisign’s numbers in 2024. He did not blamed higher prices for the drop.

Indeed, the .com zone file has been shrinking by about 1,500 domains per day on average since the start of the year. Zone numbers are usually a reliable predictor of DUM trends.

Revenue from China was down about $14.4 million, CFO George Kilguss said.

Bidzos said Verisign expects its DUM to be flat this year, with a possible 1% swing either way.

For Q4, the company reported revenue up 3% year over year at $380 million, with $265 million net income, up from $179 million a year earlier.

For the whole of 2023, revenue was up 4.8% at $1.49 billion and net income was $818 million, up from $674 million in 2022.

Domain universe grows despite .com drag

Kevin Murphy, November 16, 2023, Domain Registries

The number of registered domain names in the world grew by 2.7 million in the third quarter, despite market-leading .com shrinking, according to Verisign’s latest Domain Name Industry Brief.

There were 359.3 million domains across all TLDs at the end of September, according to the DNIB. up from 356.6 million at the end of June.

Over the same period, .com shrunk by half a million names as Verisign faces challenges from exposure to erratic demand from China.

New gTLD volumes were up by 2.1 million names to end the quarter at 30.2 million. Judging by zone files, at least half of these new names seem to be cheap, low-quality regs in the likes of .top and .cfd.

Total ccTLD names were 138.1 million at the end of the quarter, up by a million. All of the top 10 ccTLDs grew or were flat, except .uk, which lost about a hundred thousand names.

China has .com’s growth by the balls

Kevin Murphy, October 30, 2023, Domain Registries

Verisign has downgraded its expectations for .com/.net growth for the year into potentially negative territory, citing — not for the first time — low demand from China.

The registry expects its domain name base to grow at a maximum of 0.4% or shrink as much as 0.4% by the end of the year. That compares to a prediction of between 0% and 2.25% growth at the start of the year.

“Low demand from China remains the primary source of drag on the overall domain name base growth,” CEO Jim Bidzos told analysts on Thursday. “Excluding registrars based in China, both our domain name base and new registrations are up year-over-year”.

The company’s regulatory filing for Q3 shows that China revenue was down from $26.8 million to $22 million over the year. It was the only one of the four geographic reporting segments to show a shrinkage.

Verisign ended Q3 173.9 million .com/.net domains under management, down 0.1% over the year and down half a million names in the quarter.

While DUM growth may be on the decline, price hikes compensate and keep Verisign’s dollar-growth going.

The company reported year-over-year revenue growth up 5.4% at $376 million for the quarter of 2023. Net income was $188 million, up from $169 million a year ago.

Palage’s epic rant as he asks ICANN to cancel Verisign’s .net contract

Kevin Murphy, September 29, 2023, Domain Policy

ICANN is devolving into a trade association hiding under a thinning veneer of multistakeholderism and the domain industry is becoming a cartel.

Those are two of the conclusions reached by consultant Michael Palage, who’s been involved with ICANN since pretty much the start, in an epic Request for Reconsideration in which he asks the Org to unsign Verisign’s recently renewed .net registry contract.

ICANN’s equally intriguing response — denying, of course, Palage’s request — also raises worrying questions about how much power ICANN’s lawyers have over its board of directors.

The RfR paints a picture of a relationship where Verisign receives special privileges — such as exemptions from certain fees and obligations — in exchange for paying higher fees — contributing $55 million of ICANN’s budget — some of which is accounted for quite opaquely.

Palage claims the domain industry of being “on the precipice of becoming a cartel” due to recent consolidation, and says that is being enabled by ICANN’s failure to conduct an economic study of the market.

Verisign’s .net and .com contracts are the only registry agreements that do not oblige the registry to participate in economic studies, Palage says, reducing ICANN’s ability, per its bylaws, “to promote and sustain a competitive environment in the DNS market.”

Palage writes:

The failure of ICANN to have the contractual authority to undertake a full economic study to ensure a “competitive environment in the DNS market” undermines one of its core values. This failure is resulting in a growing consolidation within the industry which is on the precipice of becoming a cartel. ne needs to look no further than four US-based companies, Verisign, PIR, GoDaddy, and Identity Digital which currently control almost the entirety of the gTLD registry market based on domain names under management. This unchecked consolidation within the industry directly and materially impacts the ability of individual consultants to make a livelihood unless working for one of the dominant market players.

While Palage says he and other registrants are being harmed by increasing .net prices, and that an economic study would help lower them, he also asks ICANN to get Verisign to migrate to the Base Registry Agreement, which would enable Verisign to raise prices at will, without the current 10%-a-year cap.

He’s also concerned that ICANN’s volunteer community is shrinking as the domain industry becomes an increasingly dominant percentage of public meeting attendance.

Figures published by ICANN show that, at the last count, 39% of attendees were from the domain industry. ICANN stopped breaking down attendee allegiance in 2020 during the pandemic and did not resume publication of this data afterwards.

“ICANN has started down the slippery slope of becoming a trade association,” Palage writes.

While his RfR was going through the process of being considered by ICANN and its Board Accountability Mechanisms Committee, Palage separately wrote to ICANN general counsel John Jeffrey to express concerns that ICANN policy-making might be risking falling foul of antitrust law.

It seems a recent meeting of the working group discussing updates to ICANN’s Transfers Policy debated whether to cap the amount registries are allowed to charge registrars for bulk transfers. Dollar amounts were discussed.

Palage suggested ICANN might want to develop a formal antitrust policy statement that could be referred to whenever ICANN policy-makers meet, in much the same way as its Expected Standards of Behavior are deployed.

If the RfR as published by ICANN lacks some coherence, it may be because ICANN’s lawyers have redacted huge chunks of text as “privileged and confidential”. That’s something that hardly ever happens in RfRs.

It seems Palage knows some things about the .net contract and Verisign’s relationship with ICANN from his term on the ICANN board, which ran from April 2003 to April 2006, a time when Verisign and ICANN were basically at war.

Because the information Palage is privy to is still considered privileged by ICANN, it was redacted not only from the published version of the RfR but also it seems from the version supplied to the BAMC for consideration.

ICANN cited this part of its bylaws to justify the redactions:

The Board Accountability Mechanisms Committee shall act on a Reconsideration Request on the basis of the public written record, including information submitted by the Requestor, by the ICANN Staff, and by any third party.

Reading between the lines, it seems most of the redactions likely refer to the Verisign v ICANN lawsuit of 2004-2005.

Fellow greybeards will recall that Verisign sued ICANN for blocking its Site Finder service, which put a wildcard in the .com zone and essentially parked and monetized all unregistered domains while destabilizing software that relied on NXDOMAIN replies.

The October 2005 settlement (pdf) forced Verisign to acknowledge ICANN as king of the internet. In exchange, it got to keep .com forever. The deal gave Verisign financial security and ICANN legitimacy and was probably the most important of ICANN’s foundational documents before the IANA transition.

So what did the board of 2005 know that’s apparently too sensitive for the board of 2023? Dunno. I asked Palage if he’d be willing to share and he politely declined.

In any event, his RfR (pdf), which among other things asked for ICANN to reopen .net contract negotiations, was dismissed summarily (pdf) by BAMC last week on the grounds that he had not sufficiently shown how he was injured by ICANN’s actions.

Verisign narrows domain growth guidance

Verisign cast a slightly more optimistic light on the potential for .com and .net growth last week, as it reported a modest improvement in first-quarter sales.

Management told analysts that it’s now expecting domain growth of between 0.5% and 2.25% for the year — a boost to the low-end but a lowering of the high-end.

In February, it had predicted growth of between 0% and 2.5%.

For Q1, the company reported domain growth of just 0.1% There were 174.8 million .com and .net domains at the end of the quarter, up by a million from the start of the year.

Verisign reported net income of $179 million, up from $158 million a year ago, on revenue that increased 5.1% at $364 million.

Worried about governments seizing .com domains? Too late

Kevin Murphy, April 20, 2023, Domain Policy

Language proposed for Verisign’s .net registry contract that some say would give governments the ability to arbitrarily seize domains is already present in the company’s .com contract.

As I reported earlier this month, the .net Registry Agreement is up for renewal and ICANN has opened up some largely uncontroversial proposed changes for public comment.

ICANN has received two comments so far, both of which refer to what one commenter called the “outrageous and dangerous” proposed changes to Verisign’s .net Registry-Registrar Agreement.

The RRA is the contract all accredited registrars must agree to when they sign up to sell domains in a given TLD. For ICANN, it’s a way to vicariously enforce policy on registrants via registrars via registries.

Unsimply put, the RA instructs Verisign to have an RRA with its registrars that tells them what rules their registrants have to agree to when they buy a domain name.

The new language causing the consternation is:

Verisign reserves the right to deny, cancel, redirect or transfer any registration or transaction, or place any domain name(s) on registry lock, hold or similar status, as it deems necessary, in its unlimited and sole discretion:

to ensure compliance with applicable law, government rules or regulations, or pursuant to any legal order or subpoena of any government, administrative or governmental authority, or court of competent jurisdiction

One commenter states “this proposed agreement would allow any government in the world to cancel, redirect or transfer to their control applicable domain names”, adding “presumably ICANN staff and Verisign would want to also apply it to other extensions like .COM as those contracts come up for renewal”.

In fact, it’s the other way around. The exact same language has been present in Verisign’s .com contract for over three years, a change to Appendix 8a (pdf) that went largely unnoticed when thousands of commenters were instead complaining about the removal of price caps and fretting about the rise of Covid-19 around the world.

For those worried about the new .net language making it into the .com contract one day — worry not! It’s already there.

.com was a drag on the industry in Q4

Kevin Murphy, March 15, 2023, Domain Registries

The .com gTLD was a growth drag on domain name registrations in the fourth quarter, if the latest figures in Verisign’s Domain Name Industry Brief are to be believed.

The industry closed out 2022 with 350.4 million domains all TLDs that the DNIB tracks (which excludes Freenom’s free ccTLDs), up half a million in the quarter and 8.7 million over the year.

But that was despite Verisign’s own .com, rather than due to it. The DNIB has .com down from 160.9 million to 160.5 million. Sister TLD .net was flat at 13.2 million.

It was left to new gTLDs and ccTLDs to pick up the slack.

ccTLDs accounted for 133.1 million names, up 700,000 sequentially and 5.7 million over the year. New gTLD registrations were up 100,000 sequentially and 2.7 million over the year.

A big driver in ccTLDs was Australia’s .au, where the launch of direct second-level registrations added hundreds of thousands of domains and let the ccTLD kick .xyz out of the top 10 TLDs by volume.

But the report has a pretty big discrepancy that could throw out the ccTLDs number, I believe. For some reason the DNIB has .eu increasing by 300,000 names to 4 million in Q4, which flies in the face of the registry’s own numbers, which have it basically flat at 3.7 million.

.com shrinks again, but prices to go up again

Kevin Murphy, February 13, 2023, Domain Registries

Verisign plans to increase .com prices again this year, as its latest quarterly results show its top line and margins swelling despite renewals and overall domains under management shrinking.

The company ended 2022 with 173.8 million .com and .net regs in the domain name base, only up 0.2% from the start of the year. Only a quarter ago, it had predicted growth of between 0.25% and 1%.

A year ago, it had predicted that metric to grow between 2.5% and 4.5%, but it reduced its outlook every quarter and eventually missed even its barrel-bottom estimate. The two TLDs shrank by about 400,000 names in Q4.

For 2023, the company expects domain growth of between no growth at all and 2.5%.

The poor performance in volume terms came about as result of post-pandemic effects and China volatility, CEO Jim Bidzos told analysts. He did not blame the last few years of price increases for the dip.

The preliminary renewal rate for Q4 was 73.2% compared to 74.8% in the same quarter of 2021, but new regs were down across the two TLDs also — 9.7 million compared to 10.6 million over the same periods.

But of course domains under management alone is a poor way to measure Verisign’s cash-printing machine.

The company reported 2022 net income of $674 million which was down from $785 million a year earlier when it had benefited from a one off tax-related boost of $165.5 million.

Annual revenue was up 7.3% at $1.42 billion, a touch ahead of the 7% .com price increase it imposed during the year. Operating margin for 2022 was 66.2%, up from 65.3%.

For the quarter, net income was $179 million compared to $330 million (with the aforementioned tax benefit) on revenue that was up 8.5% at $369 million. Margin was 66.5% compared to 65.3% for Q4 2021.

The company said .com prices will go up again in September 1, from $8.97 to $9.59 per year.

New gTLDs grow in China as .cn regs slide

Kevin Murphy, January 5, 2023, Domain Registries

China-based registrations of .cn domains decreased in the first half of last year, while new gTLD swelled to pick up the slack, according to the local registry’s semi-annual report.

CNNIC published the English translation of its first-half 2022 statistical report in December, showing a steep decline in .cn regs, from 20,410,139 at the end of 2021 to 17,861,269 at the end of June last year.

These appear to be registrations made by registrants based in China. Verisign’s Domain Name Industry Brief for Q2 2022 shows .cn at 20.6 million.

While .cn slumped, new gTLDs saw an uptick of almost a million names in China, from 3,615,751 domains to 4,590,705 over the six months. New gTLDs accounted for 13.6% of all China-registered domains, the CNNIC report says.

The report also shows that the number of Chinese-registered .com names dropped by about half a million, to 10,093,729 from 10,649,851, over the period.

The full report can be viewed here (pdf).

Drop-catcher adds 100 more registrars after rapid growth

Kevin Murphy, December 9, 2022, Domain Registrars

Drop-catcher Gname has added 100 new ICANN shell registrar accreditations, according to ICANN records.

The Singapore-based company has created companies with the names Gname 051 through Gname 150 for the new accreditations, which are used to increase its number of concurrent EPP connections to the .com registry and therefore its chance of catching a valuable deleting domain.

Each accreditation costs a minimum of $4,000 in ICANN fees per year.

The latest ICANN registry reports show that the parent Gname accreditation had 1,864,283 .com domains under management at the end of August, when it had only 50 active accreditations.

That was a huge increase on the 354,644 domains it had a year earlier, when it had just 10 active registrars. It seems the company is testing how far this up-scaling strategy can go.

The move means ICANN now has 2,655 accredited registrars on its books, far ahead of the 2,447 predicted for the end of June 2023 by ICANN’s current fiscal-year budget.