Virgin territory as GoDaddy pushes $30 million porn domain renewals

Brand owners big and small are in for a potential surprise December 1, as their 10-year-old .xxx domain blocks expire and registrars bill their customers to convert them into a new annually-renewing GoDaddy service.

GoDaddy confirmed to DI today that it will “auto-convert” the old Sunrise B blocks, first sold by ICM Registry in 2011, to its new AdultBlock service, which provides essentially the same functionality but across four TLDs rather than one.

Tony Kirsch, head of professional services at GoDaddy Registry, said:

Registrars have been contacting all the Sunrise B owners and advising them that as of December 1 they will be grandfathered and automatically converted into an AdultBlock service, but they have a choice to expire that or stop that happening prior to December 1.

And if it is that they don’t do that before December 1, we’ll still give them a grace period of at least 45 days. If that happens they can then, as you’d normally do, just turn around to the registrar and say “We don’t want that” and we will of course refund the money.

This means that GoDaddy, which acquired .xxx and ICM from MMX earlier this year, is billing its .xxx registrar partners to convert and renew what could be as many as 81,000 Sunrise B blocks.

While the registry fee for AdultBlock has not been published, retail registrars I checked have priced the service at $370 to $400 per year, which we can probably assume is low-end pricing. Most .xxx domains are sold via the specialist brand-protection registrars like CSC and Markmonitor, which sometimes have more complex pricing.

So that’s something in the ballpark of $30 million worth of renewal invoices being sent out in the coming weeks, for something in many cases brand owners may have institutionally forgot about.

Kirsch said that AdultBlock was introduced by MMX about 18 months ago and that registrars have been preparing their customers for the Sunrise B expiration for some time.

Sunrise B was a program, unprecedented in the industry at the time, whereby trademark owners could pay a one-off fee — ICM charged its registrars about $160 wholesale — to have their brands removed from the available pool.

The domains exist in the .xxx zone file and resolve to a black page bearing the words “This domain has been reserved from registration”, but they’re not registered and usable like normal defensive or sunrise registrations would be.

Companies got to avoid not only the potential embarrassment of being porn-squatted, but also the hassle of having to explain to a tabloid reporter why they “owned” the .xxx domain in question.

The term of the Sunrise B block was 10 years. ICM told me at the time that this was because the company’s initial registry contract with ICANN only lasted for 10 years, so it was legally unable to sell longer-term blocks, but I’ve never been sure how much I buy that explanation.

Regardless, that 10 year period comes to an end in two weeks.

Because Sunrise B was unprecedented, this first renewal phase is also unprecedented. We’re in virgin territory (pun, of course, very much intended) here.

Will we see the industry’s first public “block junk drop”?

There are a number of reasons to believe trademark owners, assuming they don’t just blindly pay their registrar’s invoices, would choose to allow their blocks to expire or to ask for a refund after the fact.

First, the price has gone up — a lot.

While ICM charged $160 for a 10-year Sunrise B block (maybe marked up by registrars to a few hundred bucks) brand owners can expect to pay something like $3,000 retail for a single string blocked for 10 years.

But buyers do get a bit more bang for their buck. Unlike Sunrise B, AdultBlock also blocks the trademark in three additional GoDaddy-owned TLDs — .porn, .sex and .adult — as standard.

Kirsch said he expects buyers to see a 40% to 50% saving compared to the cost of defensively registering each domain individually.

Second, the appetite for defensive registrations has waned over the past 10 years, with trademark owners employing more nuanced approaches to brand protection, largely due to the flood of new gTLDs since 2013.

When .adult, .sex and .porn launched, without the possibility of Sunrise B blocks, they got about 2,000 regular sunrise registrations each. And that’s extraordinarily high — for most new gTLDs a couple hundred was a good turnout.

Third, the .xxx launch attracted a whole lot of controversy and overreaction, and the .xxx zone file today contains a lot of Sunrise B crap.

When I scrolled a little through the zone, cherry-picking silly-looking blocks in 2019, I found these examples:

100percentwholewheatthatkidslovetoeat.xxx, 101waystoleaveagameshow.xxx, 1firstnationalmergersandacquisitions.xxx, 1stchoiceliquorsuperstore.xxx, 2bupushingalltherightbuttons.xxx, 247claimsservicethesupportyouneed30minutesguaranteed.xxx, 3pathpowerdeliverysystembypioneermagneticsinc.xxx

Is it worth $400 a year to block the trademark “100 Percent Whole Wheat That Kids Love To Eat”? Is there any real danger of a cybersquatter going after that particular brand (apart from the fact that I’ve now written about it twice)?

Kirsch said a “small percentage” of Sunrise B owners have already said they don’t want to convert, but given that the rest will auto-convert, and that the registrars are doing all the customer-facing stuff, the company has limited visibility into likely uptake.

Brian King, director of policy at MarkMonitor, told us: “We generally encourage our clients to consider blocks. They can be cost effective and a lot of times clients would rather have their brand be unavailable without having to register in TLDs where they don’t want to own domain registrations for any number of reasons.”

One reason brand owners may want to consider converting to AdultBlock — it’s rumored that GoDaddy will be relaxing its eligibility criteria for .xxx next year, removing the requirement for registrants to have a nexus to the porn industry.

It’s always been kind of a bullshit rule, basically a hack to allow ICM to run a “sponsored” TLD under ICANN’s rules from the 2003 application round, but doing away with it would potentially make it easier for cybersquatters to get their hands on .xxx domains.

CSC told customers in a recent webinar that the rules are likely to be changed next year, increasing the risk of cybersquatting.

There’s some circumstantial evidence to suggest that CSC might be on to something — pretty much every “sponsored” gTLD from the same 2003 application round as .xxx has relaxed their reg rules to some extent, sometimes when their contracts come up for renewal and ICANN tries to normalize them with the text of the standard 2012-round agreement.

And GoDaddy’s .xxx contract with ICANN is being renegotiated right now. It was due to expire in March, but it was extended in February until December 15, a little under a month from now. We may soon see ICANN open up the new text for public comment.

Kirsch, who’s not part of the negotiations, could not confirm that the eligibility relaxation is going to happen or that it’s something GoDaddy is pushing for.

If it were to happen, it wouldn’t be for some time, and it wouldn’t necessarily impact on the December 1 deadline for Sunrise B conversions, which is going to be interesting to watch in its own right.

“There are registrations that are protecting people’s trademarks that are expiring and our primary objective here is to ensure that that protection continues, and that’s what we’ll do,” GoDaddy’s Kirsch said.

“If we just let them expire, it would create a lot of opportunity for brand infringement. Faced with that choice, our primary objective is to protect trademark owners,” he said.

GoDaddy says it turned around Neustar, and .biz numbers seem to confirm that

GoDaddy is pleased with how its new registry division is doing, with CEO Aman Bhutani claiming last night that it’s managed to turn around the fortunes of Neustar, which became part of GoDaddy Registry a year ago.

Reporting a strong third quarter of domains revenue growth, Bhutani highlighted the secondary market and the registry as drivers. In prepared remarks, he said:

On Registry, we are continuing to prove our ability to acquire, integrate, and accelerate. A great example is the cohort performance within GoDaddy Registry. When we acquired Neustar’s registry assets in Q3 last year, its new cohorts were shrinking, with new unit registrations down 4% year over year. We are now one year into the acquisition, and we’re pleased to report that within that first year, we have been able to accelerate new business significantly. We are now seeing new unit registrations increase nearly 20% year over year — all organically.

If you’re wondering what a “cohort” is, it appears to refer to GoDaddy’s way of, for analysis purposes, slicing up its customers, how much they spend and how profitable they are, into tranches according to the years in which they became customers.

So GoDaddy’s saying here that Neustar’s number of new customers was going down, and it was selling 4% fewer new domains, at the time of the acquisition last year, but that that trend has now been reversed, with new regs up 20%.

The numbers are not really possible to verify. Neustar’s main three TLDs for volume purposes were .us, .co and .biz, and of those only .biz is contractually obliged to publish its zone file and registry numbers.

But look at .biz!

That’s .biz’s daily zone file numbers for the last two years, with the August 2020 acquisition highlighted by a subtle arrow. It’s only added about 50,000 net names since the deal, but it’s reversing an otherwise negative trend.

Monthly transaction reports show .biz had been on a general downward, if spiky, line since its early 2014 peak of 2.7 million names. It’s now at about 1.4 million.

When asked how the company achieved such a feat, Bhutani credited “execution” and left it at that. Perhaps this means something to financial analysts.

When asked by an analyst whether GoDaddy was giving its own TLDs preferential treatment, promoting its owned strings on the registrar in order to better compete with .com at the registry, Bhutani denied such frowned-upon behavior:

We don’t do that. All TLDs work on our registrar side in terms of their merit. It’s about value to the customer — whatever works best irrespective of whether we own the registry side or not. That’s what we’ll sell in front of the customer.

The company reported domains revenue up 17% at $453.2 million for the third quarter, with overall revenue up 14% at $964 million compared to year-ago numbers. Net income was up to $97.7 million from $65.1 million a year ago.

GoDaddy expects domains revenue to grow in the low double digits percent-wise in the current quarter.

.basketball domain emerges under GoDaddy with fewer hoops

The .basketball gTLD has finally had its coming-out party, with the registry announcing general availability this week.

Fédération Internationale de Basketball has outsourced management of the gTLD to sports marketing agency Roar Domains, doing business here as Roar.Basketball, which in turn is using GoDaddy Registry for the technical registry functions.

The domain has been in a seemingly interminable series of qualified launch programs, community priority registration phases and sunrise periods for the last four years, but FIBA said yesterday .basketball is now open to all-comers.

Technically, it’s been in general availability for a few months, but the broader marketing effort only began this week.

Right now, it’s being marketed via Roar’s site at be.basketball, where the base registration price is $50 a year. Premiums are available at higher prices.

Roar appears to be using Australian registrar Bombora Technologies, which GoDaddy acquired as part of its Neustar deal last year, as its primary — possibly exclusive — registrar.

Roar’s FAQ states that be.basketball “is the only site where you can register and manage a .basketball domain name”.

Other registrars are accredited, and almost 20 have a handful of presumed sunrise regs, but currently Bombora holds 80% of the 600 domains currently under management.

Weirdly, GoDaddy itself does not appear to currently sell .basketball names through its primary storefront.

Roar/FIBA originally had MMX as its partner, with CentralNic as its back-end, but that changed earlier this year when GoDaddy acquired most of MMX’s assets, including the .basketball relationship.

Man with broken shift key sues ICANN and GoDaddy over Bitcoin domain

Sometimes I wonder if all they teach you at American law schools is how to correctly use upper-case letters.

A Georgia man who lost a cybersquatting case with Sotheby’s, concerning his registration of sothebysauctionbitcoin.com, has taken the auction house, along with ICANN, GoDaddy, and ADR Forum to court.

Harris’ case is filed pro se, which is Latin for “he doesn’t have a lawyer, his complaint makes no sense, and the case is going to get thrown out of court”.

He claims a UDRP decision that went against him recently was incorrect, that ADR Forum is corrupt and biased, and that the UDRP itself is flawed.

The domain was registered with GoDaddy, and ADR Forum was the UDRP provider.

He wants his domain back, along with root-and-branch reform of the UDRP and “self-regulating lumbering Monopolistic Behemoth” ICANN, which is apparently still working under the auspices of the US Department of Commerce.

Here’s a flavor of the filing (pdf), which was filed in a Georgia District Court yesterday:

We are ASKING THE Court to find the UDRP (Uniform Dispute Resolution Procedure) #FA2108001961598 (Sotheby’s and SPTC v Harris) Arbitration process and resulting ruling was Fatally Flawed; whereas ICANN failed to properly parse the “Provider” and we believe allowed Sotheby’s Counsel of Record in those proceeding to have specifically chosen ADR Form ADR FORUM whose history is tainted by a Consent Decree in their previous corporate iteration as an arbitration Provider for bad behavior and is also known to be a pro Claimant Provider.

In the version published to PACER, the complaint ends abruptly mid-sentence and seems to have one or more pages missing.

The decision in the original UDRP case is equally enlightening. Harris apparently sent nine responses to the complaint, many of which seemed to argue that Sotheby’s should have made an offer for the domain instead of “intimidating and bullying” him.

Harris apparently argued that the registration was a “legitimate investment”, thereby conferring rights to the domain.

Sole panelist Neil Anthony Brown seems to have taken pity on Harris, who had declared that Sotheby’s citation of previous UDRP cases was “irrelevant”, by deciding the case (against him, of course) without direct reference to prior precedent.

It was basically a slam-dunk decision, as I expect this lawsuit will also be.

.club — the whole TLD just went down

GoDaddy Registry’s .club gTLD appears to have been down for the last few hours.

At time of writing, no .club domain names are resolving, instead returning NXDOMAIN errors to browsers, and the registry is reportedly working on fixing whatever ails it.

The .club registry accounts for over a million domains, so the problem is affecting a lot of people.

At 1107 UTC, the registrar Namecheap wrote that “the DNS information cannot be queried for the domains”, updating half an hour later to say the registry is “working to resolve the issue within the nearest time possible.”

Cloudflare, also alerted by its customers, said on Twitter that it had “identified the name resolution problem on upstream Registry.”

Tucows confirmed that the problem is preventing customers from registering or managing their .club domains.

It appears to be a DNS issue. The gTLD’s name servers, which are all found at get.club, are not currently responding. All six official names servers use the same IPv4 and IPv6 addresses.

It appears that .hsbc, the dot-brand for the global bank HSBC, is suffering identical problems. It also runs on the GoDaddy back-end. Other gTLDs on the same infrastructure I checked appear to be working normally.

This is highly unusual. Entire TLDs do not typically just drop off the internet like this.

Like all gTLDs, .club has a DNS availability service level agreement of 100% uptime baked into its ICANN Registry Agreement, which it clearly has failed to meet this month.

The .club gTLD was acquired by GoDaddy from .CLUB Domains earlier this year, raising the possibility of some kind of handover-related problem. However, .club was already running on the old Neustar back-end, which GoDaddy acquired last year.

UPDATE: As of 1325 UTC, domains in .club and .hsbc appear to be resolving again (at least from where I’m sitting in the UK) after at least two and a half hours of downtime.

After the incident was resolved, the registry tweeted:

This morning there was a DNS service disruption impacting .Club websites. The issue has now been resolved. We apologize for any inconvenience this may have caused.

— .CLUB Domains (@getDotClub) October 7, 2021

GoDaddy Registry tweeted:

This morning there was a DNS service disruption impacting .club websites. The issue has now been resolved. We apologize for any inconvenience this may have caused.

— GoDaddy Registry (@GoDaddyRegistry) October 7, 2021

UltraDNS, the massively redundant DNS resolution service still owned by Neustar, identified the problem starting at 1030 UTC and being fixed by 1415 UTC. It did not specify what caused it, and suggested (contrary to the experience of some internet users) that it was restricted to Asia and Europe.

I’ve reached out for comment, and will update as we discover more…

Tucows buys UNR’s registry business as Schilling bows out

Tucows has acquired UNR’s registry business, the latest in the piecemeal sale of the old Uniregistry by founder Frank Schilling.

The Canadian registrar said it is taking on the technology platform as well as 10 UNR staffers.

Not many details of the deal, not even the purchase price, have been revealed.

“While I am slowly getting out of the industry, it’s important to me to know that my businesses are being left in the best hands,” Schilling said in a brief Tucows press release.

The deal gives Tucows a registry component to match rival GoDaddy, which acquired Neustar’s registry business last year, and makes the company the latest to throw itself into the vertically integrated domain space.

GoDaddy acquired Uniregistry’s registrar business last year also.

The UNR registry was originally Internet Systems Consortium’s but was acquired by UNR towards the beginning of the current new gTLD cycle.

It’s not currently clear which TLDs, if any, continue to run on the UNR platform. The company auctioned off 20 gTLDs in May, making $40 million, but did not disclose the buyers and none of the ICANN contracts have yet changed hands.

Certain ICANN approvals are needed before the deal closes, Tucows said.

Neither company answered DI’s questions about which TLDs are making the move, but Tucows VP Dave Woroch told us:

We are purchasing their registry platform and technology/intellectual property. In addition to servicing a number of registry operators, this platform will be applicable or beneficial to our broader registrar business, and we are looking at how we can implement some of that technology into our registrar platform. Along with this purchase of the registry platform, we have the unique opportunity to bring on a very experienced team of software engineers with specific expertise, and that will benefit our domain business at a time when it has been particularly challenging to add talent…

Tucows will be actively marketing itself as a backend registry provider, both for gTLDs and ccTLDs, and if there is another round of new gTLDs, we would fully expect to participate there as well.

Nothing but losses ahead for MMX

Former new gTLD registry MMX has delivered its latest set of financial results and warned that, without any operating business, it will be loss-making for the foreseeable future.

The company today reported a first-half loss of $783,000, compared to a loss of $1.25 million in the year-ago period.

That’s calculated from its ongoing operations, which since the $120 million sale of its registry business to GoDaddy comprises no revenue-generating activities but substantial costs keeping the company running and maintaining its listing on the AIM stock market.

Profit from discontinued operations was $3.38 million, compared to $2.68 million.

It still has small “RSP” business, providing non-technical back-office management services to a few former gTLD partners, but this will be wound down or sold off.

CEO Tony Farrow said in a statement:

We are now in the process of delivering the transition services agreed with GoDaddy Registry and disposing of, or otherwise winding down, our RSP Business. Whilst the transition services are being provided on a cost recovery basis, the Company’s ongoing administrative and other public company costs will result in operating losses for the Group going forward.

When the winding down of existing businesses is done, MMX will look for acquisition opportunities or act as a vessel for a reverse takeover.

It’s currently returning $80 million of its GoDaddy cash to investors with a buyback, but this is not enough to clear all of its shares.

MMX to return GoDaddy cash to investors

Former new gTLD portfolio registry Minds + Machines (MMX) said Friday that it has started returning most of its recent GoDaddy windfall to shareholders.

It has launched a tender offer to buy back £58 million ($80 million) worth of shares, after selling off its wedge of 20-odd ICANN contracts to the registrar giant.

The offer price is 9.6p ($0.13) per share. MMX said that’s a premium of 12.9% on its September 8 closing price and 13.1% over the average between August 11 and September 8.

It’s roughly the same price shares were trading for at the start of 2012, when ICANN opened the last new gTLD application window, but substantially lower than its peak when it started making new gTLD money a couple years later.

The proposal does not cover all of its shares; over 31% will remain in shareholder hands after the tender offer expires October 1.

The company has about $110 million in cash right now, and expects to spend $24 million of that on the GoDaddy transition, taxes, employee payments, professional services and the like, as it winds down over the fourth quarter.

MMX will retain its listing on AIM in London after the wind-down of operations, making it a vessel for a potential reverse-takeover, in which another company (not necessarily in the domains business) could back into it for an easier way into the public markets.

The company sold its registry portfolio to GoDaddy for about $120 million, and has wound down its registrars.

MMX drops two registrars

MMX has dumped two registrar contracts with ICANN, as the company’s asset-sale to GoDaddy nears completion.

ICANN records show that Minds and Machines LLC and Minds and Machines Registrar UK Limited both entered “terminated” status over the last few days, meaning they’re no longer accredited to sell gTLD domains.

But they weren’t doing any selling of domains anyway. The UK company had 108 domains under management and the US on had none at the last count.

The US accreditation was the one used primarily by the company under its original business model of a “triple-play” registry/registrar/back-end, when it was still going by Minds + Machines, which was abandoned five years ago.

The registrar peaked at about 50,000 names, which were then transferred over to Uniregistry. The back-end business was also abandoned, with Nominet taking over technical management of most of its gTLDs.

MMX is currently in the process of getting out of its sole remaining third business, that of gTLD registry.

GoDaddy has already taken over most of its 27 gTLDs under a $120 million deal announced earlier this year. Four TLDs remain, and will be transferred subject to approval from government partners.

GoDaddy and MMX delay closure of $120 million gTLD deal

GoDaddy and MMX have extended the deadline for final closure of their $120 million gTLD acquisition deal by a couple weeks.

MMX said this week the delay is to give them more time to seek approvals from business partners in the four gTLDs that have not already made the move, believed to be .bayern, .boston, .miami and .nrw.

These are all geographic strings that require local government sign-off to complete the transfers.

The deadline had been August 7. It’s now August 23.

GoDaddy Registry has already taken control of 23 of MMX’s gTLDS.