MMX waving goodbye to .london? Boss puts focus on renewal profits, China
MMX’s revenue from domain renewals could cover all of its expenses within the next 24 months, if everything goes to plan, according to CEO Toby Hall.
Hall was speaking to DI this evening after the company reported its first-half financial results, which saw revenue up 22% to $6.4 million and a net loss of $14.7 million, which compared to a loss of $526,000 a year earlier.
MMX’s huge loss for the period was largely — to the tune of $11.8 million — attributable to the restructuring of an “onerous” contract with one of its gTLD partners.
Hall refuses point blank to name that partner, but for reasons I discussed last year, I believe it is .london sponsor London & Partners, which is affiliated with the office of the Mayor of London.
When L&P selected MMX to be its registry partner for .london back in 2012, I understand a key reason was MMX’s promise to pay L&P a fixed annual fee and commit to a certain amount of marketing spend.
But two years ago, after it became clear that .london sales were coming in waaaay below previous management’s expectations, MMX renegotiated the deal.
Under the new deal, instead of committing to spend $10.8 million on marketing the TLD itself, MMX agreed to give half that amount to L&P for L&P to do its own marketing.
It appears that L&P has already spunked much of that cash ineffectively, or, as MMX put it:
a significant portion of that marketing budget has been spent by the partner with minimal impact on revenues in the current year and no expectation of any material uplift in future periods
MMX seems to have basically written off the .london deal as a bad call, and now that MMX is no longer in the registry back-end or registrar businesses, it seems unlikely that the .london partnership will be extended when it expires in three years.
Again, Hall would not confirm this bad contract was for .london — I’m making an informed guess — but the alternatives are limited. The only other TLDs MMX runs in partnership currently are .review and .country, and not even 2012 MMX management would have bet the farm on those turkeys.
Another $2.1 million of the company’s H1 net loss is for “bad debt provisions” relating the possibility that certain US-based registrar partners may not pay their dues, but this provision is apparently related to a new accounting standard rather than known deadbeats threatening to withhold payments.
If you throw aside all of this accountancy and look at the “operating EBITDA” line, profit was up 176% to $661,000 compared to H1 2017.
While the loss may have cast a cloud over the first half, Hall is upbeat about MMX’s prospects, and it’s all about the renewals.
“Renewal revenue will be more than all the costs of business within 24 months,” he said. To get there, it needs to cross the $12 million mark.
He told DI tonight that “an increasing percentage of our business is based on renewals… just on renewal revenue alone we’ll be over $10 million this year”.
Renewal revenue was $4.7 million in 2017 and $2.4 million in 2016, he said. In the first half, it was was up 40% to $3.4 million.
MMX’s acquisition of porn domain specialist ICM Registry, which has renewal fees of over $60 per year, will certainly help the company towards its 2018 goal in the second half. ICM only contributed two weeks of revenue — $250,000 — in H1.
Remarkably, and somewhat counter-intuitively, the company is also seeing renewal strength in China.
Its .vip gTLD, which sells almost exclusively in China, saw extremely respectable renewals of 76% in the first half, which runs against the conventional wisdom that China is a volatile market
Hall said that .vip renewals run in the $5 to $10 range, so apparently TLD volume is not being propped up by cheap wholesale renewal fees. The TLD accounts for about 30% of MMX’s renewal revenue, Hall said.
About 60% of .vip’s domains under management are with Chinese registrar Alibaba. The biggest non-Chinese registrar is GoDaddy, with about 3% of the namespace.
More exposure to China, and specifically Alibaba, is expected to come soon due to MMX’s repurposing of the 2012-logic gTLD .luxe, which is being integrated into the Ethereum blockchain.
MMX said last week that some six million (mostly Chinese) users of the imToken Ethereum wallet will in November get the ability to register .luxe domains via imToken and easily integrate them with their Ethereum assets.
The announcement was made at the Alibaba Cloud Computing Conference in China last week, so you can probably guess imToken’s registrar of choice.
MMX rejected three takeover bids before buying .xxx
MMX talked to three other domain name companies about potentially selling itself before deciding instead to go on the offensive, picking up ICM Registry for about $41 million.
The company came out of a year-long strategic review on Friday with the shock news that it had agreed to buy the .xxx, .adult, .porn and .sex registry, for $10 million cash and about $31 million in stock.
CEO Toby Hall told DI today that informal talks about MMX being sold or merged via reverse takeover had gone on with numerous companies over the last 11 months, but that they only proceeded to formal negotiations in three cases.
Hall said he’d been chatting to ICM president and majority owner Stuart Lawley about a possible combination for over two years.
ICM itself talked to four potential buyers before going with MMX’s offer, according to ICM.
Lawley, who’s quitting the company, will become MMX’s largest shareholder following the deal, with about 15% of the company’s shares. Five other senior managers, as well as ICM investor and back-end provider Afilias, will also get stock.
Combined, ICM-related entities will own roughly a quarter of MMX after the deal closes, Hall said.
ICM, with its high-price domains and pre-2012 early-mover advantage, is the much more profitable company.
It had sales of $7.3 million and net income of $3.5 million in 2017, on approximately 100,000 registrations.
Compared to MMX, that’s about the same amount of profit on about half the revenue. It just reported 2017 profit of $3.8 million on revenue of $14.3 million.
There’s doesn’t seem to be much need or desire to start swinging the cost-cutting axe at ICM, in other words. Jobs appear safe.
“This isn’t a business in any way that is in need of restructuring,” Hall said.
He added that he has no plans to ditch Afilias as back-end registry provider for the four gTLDs. MMX’s default back-end for the years since it ditched its self-hosted infrastructure has been Nominet.
The deal reduces MMX’s exposure to the volatile Chinese market, where its .vip TLD has proved popular, accounting for over half of the registry’s domains under management.
It also gives MMX ownership of ICM’s potentially lucrative portfolio of reserved premium names.
There are over 9,700 of these, with a combined buy-now price of just shy of $135 million.
I asked Hall whether he had any plans to get these names sold. He laughed, said “the answer is yes”, and declined to elaborate.
ICM currently has a sales staff of three people, he said.
“It’s a small team, but their track record is exceptional,” he said.
The company’s record, I believe, is sex.xxx, which sold for $3 million. It has many six-figure sales on record. Premiums renew at standard reg fee, around $60.
With the ICM deal, MMX has recast itself after a year of uncertainty as an acquirer rather than an acquisition target.
While many observers — including yours truly — had assumed a sale or merger were on the cards, MMX has gone the other route instead.
It’s secured a $3 million line of credit from its current largest shareholder, London and Capital Asset Management Ltd, “to support future innovation and acquisition orientated activity”.
That’s not a hell of a lot of money to run around snapping up rival gTLDs, but Hall said that it showed that investors are supportive of MMX’s new strategy.
So does this mean MMX is going to start devouring failing gTLDs for peanuts? Not necessarily, but Hall wouldn’t rule anything out.
“Our long-term strategy is ultimately based around being an annuity-based business,” he said. He’s looking at companies with a “strong recurring revenue model”.
About 78% of ICM’s revenue last year came from domain renewals. The remainder was premium sales. For MMX, renewal revenue doubled to $4.8 million in 2017, but that’s still only a third of its overall revenue (though MMX is of course a less-mature business).
So while Hall refused to rule out looking at buying up “struggling” gTLDs, I get the impression he’s not particularly interested in taking risks on unproven strings.
“You can never say never to any opportunity,” he said. “If we come across and asset and for whatever reason we believe we can monetize it, it could become an acquisition target.”
The acquisition is dependent on ICANN approving the handover of registry contracts, something that doesn’t usually present a problem in this kind of M&A.
Google’s .app gTLD beats .porn to biggest sunrise yet
The sunrise period for Google Registry’s .app gTLD closed today and it looks like it might be the biggest sunrise of the 2012 round to date.
.app had 3,068 domains in its zone file this morning.
While not all will be sunrise registrations, it seems very likely that the new domain has comfortably beaten the previous sunrise record, which according to ICANN records was 2,091, set by ICM Registry’s .porn back in 2015.
One might imagine that the proportion of purely defensive registrations in .app is smaller than .porn; there are already a couple dozen live .app sites indexed by Google.
The median number of sunrise registrations for a new gTLD launch is 77, according to ICANN records.
The .app zone file today is a mash of big app brands such as Uber and Instagram, among a strong showing from software vendors and other industries such as banking and retail.
There are also plenty of entries that can only be defensive, the names of celebrities such as Taylor Swift and Miley Cyrus, and a bunch of dictionary-word domains that look like clear cases of Trademark Clearinghouse gaming.
Now that sunrise is done, .app has entered an Early Access Period modeled on the original Donuts EAP. It lasts seven days and sees the price of retail registration fall from well over $10,000 today to a couple hundred bucks a week from now.
After the EAP is over, retail prices will settle around the $20 mark on May 8.
Google paid $25 million for .app at an ICANN auction, a record at the time since beaten by still-contested .web.
.xxx has its ICANN fees slashed and adopts URS
ICM Registry is to see its .xxx ICANN registry fees hugely reduced in contractual amendments approved by ICANN last week.
The changes also mean that .xxx will now become subject to the Uniform Rapid Suspension anti-cybersquatting mechanism, despite it being a pre-2012 gTLD.
.xxx becomes the latest pre-2012 gTLD to move to a contract more closely aligned with the standard Registry Agreement from the new gTLD program.
Under the complex new deal, its per-transaction fee could be reduced from $2 to $0.25 by mid-2018.
Its quarterly fixed fee will go up from $2,500 to $6,250.
ICM has also agreed to take on many aspects of the standard new gTLD Registry Agreement, the most controversial of which is the URS.
The domainer group the Internet Commerce Association was fiercely critical of this addition to the contract, as it has been when URS was brought to .jobs, .travel, .cat, .pro and .mobi.
ICA is largely concerned that URS will also be pushed upon Verisign’s .net, which is up for contract renewal this year, and eventually .com.
.xxx to get lower ICANN fees, accept the URS
ICM Registry has negotiated lower ICANN transaction fees as part of a broad amendment to its Registry Agreement that also includes new trademark protection measures.
The company’s uniquely high $2 per-transaction fee could be reduced to the industry standard $0.25 by mid-2018.
As part of the renegotiated contract, ICM has also agreed to impose the Uniform Rapid Suspension policy on its registrants.
URS is the faster, cheaper version of UDRP that allows trademark owners to have domain names suspended in more clear-cut cases of cybersquatting.
The $2 fee was demanded by ICANN when ICM first signed its RA in 2011.
At the time, ICANN said the higher fee, which had doubled from a 2010 draft of the contract, was to “account for anticipated risks and compliance activities”.
The organization seemed to have bought into the fears that .xxx would lead to widespread misuse — something that has noticeably failed to materialize — and was expecting higher legal costs as a result.
The companion TLDs .adult, .porn and .sex, all also managed by ICM, only pay $0.25 per transaction.
The overall effects on registrants, ICANN and ICM will likely be relatively trivial.
With .xxx holding at roughly 170,000 domains and a minimal amount of inter-registrar transfer activity, ICM seems to be paying ICANN under $400,000 a year in transaction fees at the moment.
Its registry fee is usually $62, though a substantial number of domains have been sold at lower promotional pricing, so the cost to registrants is not likely to change a great deal.
The reduction to $0.25 would have to be carried out in stages, with the earliest coming this quarter, and be reliant on ICM keeping a clean sheet with regards contract compliance.
Under the deal, ICM has agreed to adopt many of the provisions of the standard Registry Agreement for 2012-round gTLDs.
One of those is the URS, which may cause consternation among domainers fearful that the rights protection mechanism may one day also find its way into the .com registry contract.
ICM has also agreed to implement its existing policies on, for example, child abuse material prevention, into the contract as Public Interest Commitments.
The RA amendment is currently open for public comment at ICANN.
Priced to sell: $46m of two-letter .xxx names
ICM Registry has added over 1,200 two-character .xxx names to its catalog of priced premiums.
With prices ranging from $100,000 to $37,500, the newly offered domains carry a total ticket price of over $46 million.
The only six-figure name on the list is vr.xxx. ICM said in a press release today it has already sold vr.porn and vr.sex for $100,000 apiece.
There are seven names with adult connotations (such as 69.xxx and bj.xxx) priced at $75,000, eight more at $50,000 and two at $40,000.
The rest of the list of 1,227 names are being offered at $37,500, which is roughly 10 times the prices on the equivalent .porn, .sex and .adult domains.
While ICM noted the interest in domain investing from China recently, it does not appear to have valued its numeric-only domains (such as 88.xxx) any more highly than less attractive-looking combinations (such as 0o.xxx).
Judging by the list published on ICM’s web site, it has already sold well over 300 two-character domains in its newest three gTLDs.
Had those sold at the buy-now prices it would have raised over $1.1 million in revenue.
But ICM since September has been offering an option to register premium names for premium annual fees that are lower than the one-off price. A $37,500 domain costs $3,000 a year to register, under this model.
The total value of ICM’s premium list, including all the longer domains, is roughly $115 million.
Third ICM windfall due as .sex hits sunrise
If we’ve learned one thing about new gTLD sunrise periods, it’s that adult-oriented TLDs sell quite well.
ICM Registry started its third such period yesterday, as .sex went into its “TMCH Sunrise” phase.
Until October 1, any company with a trademark in the Trademark Clearinghouse will be able to buy a matching .sex domain on a first-come, first-served basis.
From October 5 to October 30, anyone with a .xxx domain name or current .xxx “Sunrise B” block will be able to buy the matching .sex during the Domain Matching phase.
Anyone who buys a .xxx before October 1 will be able to participate in this second sunrise.
ICM reported in May that .porn received 3,995 sunrise registrations while .adult sold 3,902 — both via a combination of TMCH Sunrise sales and blocks.
At ICM’s prices, that’s enough to comfortably cover its ICANN application fees.
Every other new gTLD with the exception of .sucks has sold fewer than 1,000 sunrise names.
General availability for .sex starts November 4.
ICM claws back 68 .porn names it accidentally released
ICM Registry has recovered nine .porn and .adult domain names from their registrants after they were accidentally released into the market.
Domains such as ads.porn, hosting.adult and buy.porn were among those snapped up by registrants, despite the fact that they were supposed to be registry-reserved.
ICM CEO Stuart Lawley told DI that a list of 68 .porn/.adult names (34 strings in each of the two gTLDs) have been brought back into the registry’s portfolio.
Only nine had been registered in the less than 24 hours the names were in the available pool, he said.
Lawley said it was his own personal fault for not sending the reserved list to back-end provider Afilias.
The affected registrants have been offered a domain from ICM’s premium list up to the value of $2,500 for each of the names ICM took back, he said.
Only one registrant has so far declined the offer, Lawley said.
Konstantinos Zournas of OnlineDomain, who broke the news about ads.porn yesterday, identifies this former registrant as “James” and reported that he is taking legal advice.
This is not the first time that a registry has accidentally released reserved names into the pool, where they were subsequently snapped up by domainers.
In January, .CLUB Domains accidentally sold credit.club, a name it had planned to keep on its premium reserved list for $200,000, for $10.99.
In that case, .CLUB honored the purchase after the buyer agreed to develop the site, scoring many brownie points in the domain investor community.
Both .CLUB and ICM have terms in their agreements allowing domains accidentally released to be recovered.
In ICM’s case, the names it accidentally released were not premiums, but rather domains that the registry plans to use as part of its own business — not to be sold at any price.
It used buy.xxx as a cornerstone of its .xxx marketing, for example, and it plans to use buy.porn and buy.adult for the exact same purpose.
ICM beats own annual projections with .porn on day one
ICM Registry says it managed to comfortably beat its own expectations for annual sales within the first eight hours of .porn and .adult going into general availability yesterday.
CEO Stuart Lawley said that there were 10,038 .porn domains and 8,277 .adult domains in its registry at the end of yesterday.
The company’s new gTLD applications with ICANN had predicted 10,000 .porn domains and 3,000 .adult domains at the end of the first year of availability, he said.
“We are therefore delighted to have exceeded those numbers on day one of GA,” he said. “We are particularly pleased with the high numbers from .adult.”
The majority of the names were registered either during the sunrise periods (ICM had two per TLD) or the recently ended “domain matching” program, which gave .xxx owners first dibs on matching .porn and .adult names.
A month ago, the company said .porn received 3,995 registrations while .adult had 3,902 at the end of the sunrises.
Earlier this week, after domain matching ended, Lawley said that .porn had almost 7,500 names while .adult had almost 7,000.
ICM will launch .sex in September.
.porn and .adult sunrises net around 8,000 sales
The sunrise periods for .porn and .adult netted just shy of 4,000 domains per TLD, according to ICM Registry.
The company said .porn received 3,995 registrations while .adult trailed slightly with 3,902.
Those numbers are a combination of regular Trademark Clearinghouse sunrise registrations and Sunrise B registrations.
The ICANN-mandated sunrise periods ended April 1 and were followed by unique Sunrise B periods, during which anyone who bought a .xxx block in 2011 could register the matching new gTLD names.
This time, however, Sunrise B domains actually do resolve.
I believe the the Sunrise B phases accounted for something like 1,500 names apiece.
The previous high bar for 2012-round new gTLD sunrises was .london, with just over 800 registrations.
While .porn and .adult may be record breakers for this round, sales were just a twentieth of the levels seen when .xxx launched in 2011 — about 80,000 names were defensively registered back then.
Later this week, ICM will kick off another launch phase — Domain Matching — during which anyone who owned a .xxx domain prior to April 30 can get their matching .porn and .adult names.
General availability is scheduled for June 4.
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