MMX’s year marked by terrible renewals
MMX saw its revenue dip in 2020, and it reported shocking renewal rates at two of its highest-volume gTLDs, according to the company’s annual financial results, published this morning.
The portfolio registry, which is in the process of selling off essentially its entire operating business to GoDaddy, reported revenue of $16.8 million for the year, down from $17.2 million in 2019.
Profit was up very slighty, to $2.9 million from $2.8 million.
The 2019 results included a few one-off gains, including $588,000 from losing a new gTLD auction, which accounted for most of the 2020 revenue decline.
But the company also reported a 19% decline in domains under management, from 2.46 million to 1.99 million, based on some terrible renewal rates in its .vip and .work gTLDs.
The DUM decline can be attributed mostly to .vip, a popular TLD among Chinese speculators, which started 2020 with around 1.4 million domains but finished the year with just over a million.
.work actually ended the year up on where it started, with around 709,000 names under management.
But MMX today disclosed that the renewal rates for .vip and .work were 36% and 18% respectively. In a business where 70%+ is considered healthy, these are some poor numbers indeed.
However, the company discontinued first-year promotions on these TLDs in 2020, focusing instead on selling domains likely to lead to recurring renewal revenue, which lead to 14% (.vip) and 19% (.work) increases in revenue.
Fewer domains. More money.
MMX said that it is seeing these trends continuing into 2021. Public transaction reports show both these TLDs losing 40-50,0000 names in January. The company expects revenue to fall 4% in the first quarter compared to Q1 2020.
One bright spot appears to be “The Great Relese”, the company’s move last month to mark down hundreds of thousands of premium-priced domains. That’s brought in $170,000 since its April 23 launch.
One basket where the company is placing a lot of its eggs is AdultBlock, the trademark protection service it inherited when it acquired ICM Registry a few years back. It enables customers to block their brands in .xxx, .porn, .adult and .sex without actually having to register the names.
The 10-year period ICM allowed brands to block when it launched in 2011 is coming to an end, so MMX is banking on renewals (which retail at $349 to $799 per year before multi-year discounts) to boost revenue.
“While it is early in the AdultBlock Sunrise B renewal period, we are encouraged by Registrar interest and some early sales of this product,” CEO Tony Farrow said in a statement.
This reliance on AdultBlock for short-term organic growth was one of the reasons MMX is selling up to GoDaddy.
The market-leading registrar and fast-emerging registry consolidator agreed to pay $120 million for MMX’s portfolio, which will leave MMX as a shell company only long enough to distribute the cash to investors before fading away quietly.
That deal has an August deadline to close and is dependent on approvals from business partners, ICANN and the Chinese government.
Ahead of GoDaddy acquisition, MMX to scrap premium fees on 725,000 domains
MMX plans to remove hundreds of thousands of domains from its premium list later this month, and reduce prices on a hundred thousand more.
Dubbed The Great Release, the April 23 adjustment will see 725,400 names currently reserved at premium prices released to the available pool at the usual wholesale fee for their respective gTLDs.
Another 102,000 names will keep a premium ticket, but will see their price reduced. MMX says it’s wiped $145 million from the list price of a total of 827,000 names.
The names are available in 26 of MMX’s portfolio of new gTLDs, which GoDaddy currently intends to buy for $120 million.
An MMX spokesperson said that the current pricing had been in place since 2014 and was up for review. He said:
Premium pricing is not something that had been looked at in great detail since it launched its TLDs, and MMX felt that its pricing was out of step with current market trends. MMX also saw that it had held back much of its inventory without ever releasing it, and following a large volume of enquiries over the last 12 months, MMX decided to release all reserved names to get them into the hands of users.
A searchable database of releasing names can be found here, but you’ll need to hand over your email address to access it.
China could block GoDaddy’s $120 million MMX swoop
GoDaddy’s proposed $120 million acquisition of essentially all the meaningful assets of portfolio gTLD player MMX will be subject to Chinese government approval, it emerged this morning.
Following GoDaddy’s bare-bones press release announcing the deal last night, this morning MMX added a whole bunch of flesh, including a list of closing conditions, in its statement to shareholders.
GoDaddy is proposing to buy essentially MMX’s entire operating business — the 28 gTLD registry agreements with ICANN, including the four porn-related strings belonging to subsidiary ICM Registry.
Not only do MMX shareholders have to approve the deal — and holders of 64% of the shares have already promised they will — but ICANN approval will be required for the registry contracts to be reassigned.
This may prove a hurdle or delay if third parties raise competition concerns, but ICANN’s pretty opaque approval process generally doesn’t frown too much on industry consolidation.
Another known unknown is China.
MMX told shareholders that it needs: “Approval of Chinese authorities for the change of control of MMX China (including change of control in respect of relevant licenses held by MMX China permitting it to distribute TLDs in China).”
The reason for this is quite straightforward: in volume terms, quite a lot of MMX’s business has been in China in recent years. Popular sellers such as .vip, with over 800,000 names today, have been driven primarily by Chinese investors.
A local presence (in this case MMX China) and approval from the Ministry of Industry and Information Technology is required to legally sell a TLD to Chinese registrants via Chinese registrars.
I’ve no particular reason to believe MIIT will withhold its approval for MMX China to move into GoDaddy’s ownership, but a failure to get the nod from China appears to be a deal-breaker.
MMX’s statement to the markets this morning also provided some clarity on what exactly it is that GoDaddy is proposing to buy.
The gTLDs to be acquired are: .vip,.nrw, .casa, .vodka, .xxx, .fit, .miami, .fishing, .porn, .beer, .surf, .boston, .adult, .yoga, .garden, .abogado, .work, .fashion, .horse, .rodeo, .sex, .wedding, .luxe, .dds, .law, .bayern, .cooking, and .country.
It seems that when Tony Farrow took over as MMX CEO last year, after his predecessor left due to an accounting snafu, he had the portfolio audited and came to the conclusion that it could expect only pretty crappy growth over the coming years.
It had banked on selling expensive defensive trademark blocks in its four porn-themed gTLDs to big brands to make up the shortfall, but then GoDaddy approached in December brandishing its rather large checkbook.
MMX reckons the deal values the company at a 92% premium over its closing share price Tuesday, and 87% and 78% premiums over its 20-day and 90-day average selling price.
.bayern, .nrw and the four porn gTLDs belong to subsidiaries that GoDaddy will acquire outright, but GoDaddy is not proposing to buy MMX itself.
Rather, MMX will likely stay alive and publicly traded long enough to redistribute its cash windfall to investors and sell or wind down about a dozen non-operating subsidiaries.
It has a transition services agreement to manage certain business functions of the registry until January next year, which sounds a bit like what fellow GoDaddy acquisition .CLUB Domains explained to me last night.
After that, London’s Alternative Investment Market rules will treat MMX as a “cash shell”, and it will either have to acquire an operating business from somewhere or make itself the subject of a reverse takeover by a company looking for a quick way to the public markets.
GoDaddy buys 30 new gTLDs for over $120 million
GoDaddy Registry has just announced it is acquiring 28 new gTLDs from rival MMX, along with the TLDs .club and .design.
The MMX deal is worth at least $120 million; the value of the other two deals was not disclosed.
GoDaddy is also taking over the back-ends for .rugby and .basketball, which had been contracted to MMX, and said it has won the back-end deal for the dot-brand, .ally.
It’s the most significant pieces of registry consolidation since Donuts and Afilias hooked up in December.
GoDaddy Registry will wind up being the contract holder or back-end for over 240 TLDs, with over 14 million domains under management, the company said.
It’s not entirely clear which gTLDs GoDaddy is acquiring right now, but it appears to be all of those listed on the MMX web site.
It’s currently listed by IANA as the sponsor for 21 gTLDs: .cooking, .fishing, .horse, .miami, .rodeo, .vodka, .beer, .luxe, .surf, .nrw, .work, .budapest, .casa, .abogado, .wedding, .yoga, .fashion, .garden, .fit, .vip and .dds.
MMX subsidiary ICM Registry runs .xxx, .porn, .adult and .sex, not an easy fit with the family-friendly image GoDaddy has attempted to cultivate in recent years.
MMX also manages geographic gTLDs .boston, .london and .bayern on behalf of their respective local governments.
The company hinted in January that it was considering selling off some of its under-performing registries, after a crappy 2020 that saw it forced to restate revenues, lay off staff and can its top executives.
MMX, which is publicly traded in London, has yet to make a statement on the deal but we should no doubt expect something in the morning before the markets open.
The deal appears to be bad news for Nominet, which runs the back-end for most MMX gTLDs. GoDaddy will very likely migrate them over to its own platform eventually.
MMX aside, GoDaddy is also buying .club from .CLUB Domains, according to its press release.
.CLUB is a bit of a rarity — a single-string new gTLD registry that done really rather well for itself without tarnishing its brand by becoming synonymous with cheap domains and spam.
.design, the other GoDaddy acquisition today, is run by Top Level Design, which also runs .ink, .wiki and .gay.
.design has over 120,000 domains in its zone file today, while .club has over 1 million. Both have been on a growth trajectory recently.
GoDaddy also said as part of the same announcement that it has signed Ally Financial’s dot-brand business for .ally, but as Ally was already a client of Neustar (which GoDaddy owns) I’m not entirely sure what it’s getting excited about.
MMX vows to refocus under new boss after crappy 2020
MMX says it plans to refocus its business on higher-margin products after a 2020 marred by plummeting registrations, product delays and financial irregularities that led to senior management being oustered.
The new gTLD registry also revealed that it laid off 20% of its staff in a “right-sizing” exercise last year. Due to its modest size, this means about four or five people lost their jobs.
The company said today that acting CEO Tony Farrow has been confirmed for the job full-time, and that he will join the board of directors after regulatory checks.
Farrow took over last October, when CEO Toby Hall and CFO Michael Salazar were both ejected after admitting to over-stating MMX’s revenue and profit in 2019.
Now, Farrow says MMX will spend 2021 focusing on “quality” regs — those with a higher chance of renewing or with higher-margin reg fees — and on its AdultBlock services, which block trademarks and typos across its four porn-themed gTLDs.
Overall domains under management declined 19% in 2020, which appears to be almost entirely down to .vip, a cheap gTLD that initially performed strongly with Chinese speculators, losing about half a million names.
AdultBlock, which covers the old ICM Registry portfolio, launched at the end of 2019 with a high price tag and a couple bulk sales, but stalled during 2020. MMX blames this for a 3% decline in overall billings last year.
The company also hinted that it may try to offload some of its crappier gTLDs, saying:
The new executive team is also reviewing the contribution received from each of its TLDs and the growth prospects for each from new sales initiatives to ensure the carrying values associated with each TLD is appropriate going forward.
Farrow said in a news release:
Our FY 2021 plan will focus on AdultBlock sales, extensive release of inventory to the market, quality registrations with the view of future renewal revenue and standardized promotions for our channel partners. It is a straightforward business where focus must remain on the quality of our domain registrations and promotions with our channel partners. We lost some of the momentum after the initial launch of AdultBlock in FY 2019. However, FY 2021 was always the target year for the full rollout of this new product, and I am encouraged by the dialogue with our channel partners to really move AdultBlock in FY 2021.
AdultBlock, which sets trademark-match domains aside as non-resolving reserved names, launched with a price tag of between $349 and $799 per trademark per year.
MMX separately announced today that it is paying ICM Registry’s investors, primarily founder Stuart Lawley, over alleged (and denied) breaches of unspecified warranties made at the time of the acquisition in May 2018.
Farrow was COO of ICM from the 2011 launch of .xxx until the MMX acquisition.
.forum sunrise period will cost less than half the regular reg fee
Trademark owners rejoice! There’s a new gTLD registry seemingly not bent on ripping you off during its sunrise period.
Those defensively registering their marks in .forum, which begins its sunrise period on Monday, in some cases could find themselves paying less than half the regular registration fee.
French registrar Gandi today said that its sunrise retail price is $452.13, versus a genera availability price of $1,042.08, and prices at other participating registrars appear to be roughly in line.
.forum’s is being managed by MMX, though the ICANN gTLD contract appears to still belong to original applicant Fegistry.
The first-come, first-served sunrise period will run until December 16. General availability is due to begin.March 2 next year.
I have to admit to finding the $1,000 base registry fee something of a head-scratcher.
I can just about see why gTLDs such as .cars, representing big-ticket niches, can command four-figure reg fees but, anecdotally, I’ve often heard that web forums can be quite expensive to run and difficult to monetize. Hardly obvious candidates for premium-tier recurring prices.
Blood on the boardroom floor after MMX admits revenue screwup
MMX’s top two execs are out, after the new gTLD registry admitted that the company misstated its revenue in 2019 and the first half of 2020.
CEO Toby Hall and CFO Michael Salazar both quit from the board and their executive roles with immediate effect, after a board probe concluded that its 2019 revenue was overstated to the tune of $1.7 million. Its 2019 net income was also overstated by $1.9 million.
In the first half of 2020, it understated revenue by about $80,000 and net income by about $200,000.
The screwups relate to not only the mystery $1.1 million contract MMX warned about earlier this month, but also two more contracts last year worth a total of $790,000.
The company received the cash from these unnamed partners and reported it as revenue immediately, when it should have recognized it only when the partners made sales to end users, MMX said.
Its revenue for 2019 should have been correctly reported as $17.2 million, and its net income should have been $2.8 million.
For the first half of 2020, revenue should have been $8.4 million and net income should have been $1.4 million.
The company said that Tony Farrow, an ICM Registry import who until recently worked as MMX’s COO, will return to the company as interim CEO.
Bryan Disher, an independent MMX director, will be interim CFO. Guy Elliott, currently non-executive chair, will become executive chair.
MMX probing accounting of mystery contract
New gTLD registry MMX says it’s looking into whether it incorrectly accounted for about $1 million of revenue last year.
The company told investors Friday that $938,000 of revenue from a single contract was recognized in 2019, but there’s a possibility it should have been classified as “a refundable deposit against future sales or deferred revenue”.
The same goes for $25,000 recognized in the first half of this year.
The contract generated cash of $1.125 million in 2019.
Regular domain sales are usually recognized over the course of the registration and show up on the balance sheet as deferred revenue.
It’s not known which contract MMX is referring to in its notice. I’m tempted to wonder whether it relates to AdultBlock, the defensive registration service available across the company’s four porn-themed gTLDs.
The company had previously reported $1.1 million in revenue (rather than cash) from the sale of 2,000 AdultBlock regs for 2019, which puts it in the right ball-park, but it seems unlikely that so many domains would be blocked under a single contract.
MMX said the worst that could happen is that it would be on the hook for $1 million if it turned out the cash was refundable, adding that it had $7.3 million in the bank at the end of June.
Its share price took a battering anyway, losing almost a fifth of its value on Friday.
MMX revenue down even as sales rise during pandemic
New gTLD registry MMX saw its revenue dip in the first half of the year, even as the number of domain names it sold increased.
The company today reported a net profit after tax of $1.2 million, down from $1.7 million a year ago, on revenue that was down 5% at $8.5 million.
But billings were up in the quarter were up 7%, with channel billings (ie, domains sold via third-party registrars) up 20%.
Billings is the measure of how much the company sold, which is largely deferred and recognized as revenue over the period of the registration.
Domains under management across the registry’s portfolio of 31 gTLDs increased 31% to 2.38 million.
The company blamed a lack of brokered premium sales for the top-line decline, saying that segment contributed $0.1 million in the half, compared to $0.8 million a year ago.
MMX said registrar partner sales were “unimpacted by COVID”, up 4% to $8.3 million, but two of its brand-protection partners had to delay the launch of its pricey AdultBlock porn domain blocks until Q4, so there was no revenue to be found in defensives in the half.
ICANN ordered to freeze .hotel after “serious questions” about trade secrets “theft”
ICANN has been instructed to place the proposed .hotel gTLD in limbo after four applicants for the string raised “sufficiently serious questions” that ICANN may have whitewashed the “theft” of trade secrets.
The order was handed down last month by the emergency panelist in the Independent Review Process case against ICANN by claimants Fegistry, MMX, Radix and Domain Ventures Partners.
Christopher Gibson told ICANN to “maintain the status quo” with regards the .hotel contention set, meaning currently winning applicant Hotel Top Level Domain, which is now owned by Afilias, won’t get contracted or delegated until the IRP is resolved.
At the core of the decision (pdf) is Gibson’s view that the claimants raised “sufficiently serious questions related to the merits” in allegations that ICANN mishandled and acted less than transparently in its investigation into a series of data breaches several years ago.
You may recall that ICANN seriously screwed up its new gTLD application portal, configuring in such a way that any applicant was able to search for and view the confidential data, including financial information such as revenue projections, of any other competing applicant.
Basically, ICANN was accidentally publishing applicants’ trade secrets on its web site for years.
ICANN discovered the glitch in 2015 and conducted an audit, which initially fingered Dirk Krischenowski — who at time was the half-owner of a company that owned almost half of HTLD as well as a lead consultant on the bid — as the person who appeared to have accessed the vast majority of the confidential data in March and April 2014.
ICANN did not initially go public with his identity, but it did inform the affected applicants and I managed to get a copy of the email, which said he’d downloaded about 200 records he shouldn’t have been able to access.
It later came to light that Krischenowski was not the only HTLD employee to use the misconfiguration to access data — according to ICANN, then-CEO of HTLD Katrin Ohlmer and lawyer Oliver Süme had too.
HTLD execs have always denied any wrongdoing, and as far as I know there’s never been any action against them in the proper courts. Krischenowski has maintained that he had no idea the portal was glitched, and he was using it in good faith.
Also, neither Ohlmer nor Krischenowski are still involved with HTLD, having been bought out by Afilias after the hacking claims emerged.
These claims of trade secret “theft” are being raised again now because the losing .hotel applicants think ICANN screwed up its probe and basically tried to make it go away out of embarrassment.
Back in August 2016, the ICANN board decided that demands to cancel the HTLD application were “not warranted”. Ohlmer barely gets a mention in the resolution’s rationale.
The losing applicants challenged this decision in a Request for Reconsideration in 2016, known as Request 16-11 (pdf). In that request, they argued that the ICANN board had basically ignored Ohlmer’s role.
Request 16-11 was finally rejected by the ICANN board in January last year, with the board saying it had in fact considered Ohlmer when making its decision.
But the IRP claimants now point to a baffling part of ICANN’s rationale for doing so: that it found “no evidence that any of the confidential information that Ms. Ohlmer (or Mr. Krischenowski) improperly accessed was provided to HTLD”.
In other words, ICANN said that the CEO of the company did not provide the information that she had obtained to the company of which she was CEO. Clear?
Another reason for brushing off the hacking claims has been that HTLD could have seen no benefit during the application process by having access to its rivals’ confidential data.
HTLD won the contention set, avoiding the need for an auction, in a Community Priority Evaluation. ICANN says the CPE was wholly based on information provided in its 2012 application, so any data obtained in 2014 would have been worthless.
But the losing applicants say that doesn’t matter, as HTLD/Afilias still have access to their trade secrets, which could make the company a more effective competitor should .hotel be delegated.
This all seems to have been important to Gibson’s determination. He wrote in his emergency ruling (pdf) last month:
The Emergency Panelist determines that Claimants have raised “sufficiently serious questions related to the merits” in in relation to the Board’s denial of Request 16-11, with respect to the allegations concerning the Portal Configuration issues in Request 16-11. This conclusion is made on the basis of all of the above information, and in view of Claimants’ IRP Request claim that ICANN subverted the investigation into HTLD’s alleged theft of trade secrets. In particular, Claimants claim that ICANN refused to produce key information underlying its reported conclusions in the investigation; that it violated the duty of transparency by withholding that information; that the Board’s action to ignore relevant facts and law was a violation of Bylaws; and further, to extent the BAMC and/or Board failed to have such information before deciding to disregard HTLD’s alleged breach, that violated their duty of due diligence upon reasonable investigation, and duty of independent judgment.
The Emergency Panelist echoes concerns that were raised initially by the Despegar IRP Panel regarding the Portal Configuration issues, where that Panel found that “serious allegations” had been made188 and referenced Article III(1) of ICANN’s Bylaws in effect at that time, but declined to make a finding on those issues, indicating “that it should remain open to be considered at a future IRP should one be commenced in respect of this issue.” Since that time, ICANN conducted an internal investigation of the Portal Configuration issues, as noted above; however, the alleged lack of disclosure, as well as certain inconsistencies in the decisions of the BAMC and the Board regarding the persons to whom the confidential information was disclosed and their relationship to, or position with HTLD, as well as ICANN’s decision to ultimately rely on a “no harm no foul” rationale when deciding to permit the HTLD application to proceed, all raise sufficiently serious questions related to the merits of whether the Board breached ICANN’s Article, Bylaws or other polices and commitments.
It’s important to note that this is not a final ruling that ICANN did anything wrong, it’s basically the ICANN equivalent of a ruling on a preliminary injunction and Gibson is saying the claimants’ allegations are worthy of further inquiry.
And the ruling did not go entirely the way of the claimants. Gibson in fact ruled against them on most of their demands.
For example, he said their was insufficient evidence to revisit claims that a review of the CPE process carried out by FTI Consulting was a whitewash, and he refused to order ICANN to preserve documentation relating to the case (though ICANN has said it will do so anyway).
He also ruled against the claimants on a few procedural issues, such as their demands for an Ombudsman review and for IRP administrator the International Center for Dispute Resolution to recuse itself.
Some of their claims were also time-barred under ICANN’s equivalent of the statute of limitations.
But ICANN will be prevented from contracting with HTLD/Afilias for now, which is a key strategic win.
ICANN reckons the claimants are just using the IRP to try to force deep-pocketed Afilias into a private auction they can be paid to lose, and I don’t doubt there’s more than a grain of truth in that claim.
But if it exposes another ICANN cover-up in the process, I for one can live with that.
The case continues…
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