Rightside refuses Donuts’ “opportunistic” $70m gTLD offer

Rightside has rebuffed Donuts’ semi-hostile takeover attempt for its portfolio of gTLD registry contracts.
The question now is: will Donuts up the offer from the $70 million already on the table?
In a pre-markets statement today, Rightside said the offer “undervalued” the assets.
CEO Taryn Naidu is quoted as saying:

After thoughtful evaluation, Rightside’s Board has determined that Donuts’ proposal significantly undervalues Rightside’s Registry assets. We believe Donuts’ proposal is an opportunistic attempt to acquire Rightside’s valuable portfolio of domain extensions with an undervalued price and in a manner that would not be in the best interests of Rightside shareholders.

The company reckons its gTLDs will be bringing in $50 million to $75 million in revenue a year in the next three two five years, which would represent substantial growth over current levels.
It made $2.6 million from the registry business in the first quarter this year.
Donuts’ offer could be considered “opportunistic” given that there’s some shareholder dissatisfaction with Rightside’s success rate with new gTLDs today.
Activist investor J Carlo Cannell and Uniregistry CEO Frank Schilling, both of whom own small but significant chunks of Rightside, have called on the company to get rid of some of its under-performers.
By announcing the offer publicly — apparently after months of private offers — Donuts might have been trying to capitalize on this unrest.
But pissed-off investors don’t necessarily want these gTLDs sold off cheap.
Rightside has 40 new gTLDs. A $70 million offer equals $1.75 million per gTLD. That’s fair way below the average sale price for gTLDs at ICANN auction, which is $7 million (or $3 million if you take the median).
Will Donuts now increase its offer, or back away?

dotgay loses third .gay appeal

Death warrant or portent of impending legal action?
dotgay LLC has lost its third attempt to get ICANN to reconsider tossing its application for community priority status in the fight for the .gay gTLD.
According to ICANN, on Sunday its Board Governance Committee threw out dotgay’s third Request for Reconsideration, an attempt to give the company an unprecedented third go at the Community Priority Evaluation process.
CPEs allow community gTLD applicants to avoid expensive auctions, but dotgay has lost two primarily on the grounds that its definition of community includes people who are not gay.
Its latest RfR was pretty weak, based on a technicality about which staffers at the Economist Intelligence Unit (which carries out the CPEs) were in charge of verifying its letters of community support.
The rationale for the BGC’s determination, which still needs to be rubber-stamped by the full ICANN board, has not been published yet.
But it seems from a blog post that ICANN now expects .gay to go to auction, where there are four competing applicants in total.
ICANN does not usually publish blog posts on RfR decisions, but in the .gay case it has been keen to avoid being accused of any motivation beyond a dogged pursuit of correct procedure.
So will dotgay go quietly? It remains to be seen.
While all new gTLD applicants had to sign a release promising not to sue ICANN, .africa applicant DotConnectAfrica sued earlier this year and managed to get a sympathetic judge who seems bent on allowing the case to go to trial.

Fight as ICANN “backtracks” on piracy policing

ICANN has clarified that it will not terminate new gTLD registries that have piracy web sites in their zones, potentially inflaming an ongoing fight between domain companies and intellectual property interests.
This week’s ICANN 56 policy meeting in Helsinki saw registries and the Intellectual Property Constituency clash over whether an ICANN rule means that registries breach their contract if they don’t suspend piracy domains.
Both sides have different interpretation of the rule, found in the so-called “Public Interest Commitments” or PICs that can be found in Specification 11 of every new gTLD Registry Agreement.
But ICANN chair Steve Crocker, in a letter to the IPC last night, seemed to side strongly with the registries’ interpretation.
Spec 11 states, among other things, that:

Registry Operator will include a provision in its Registry-Registrar Agreement that requires Registrars to include in their Registration Agreements a provision prohibiting Registered Name Holders from distributing malware, abusively operating botnets, phishing, piracy, trademark or copyright infringement, fraudulent or deceptive practices, counterfeiting or otherwise engaging in activity contrary to applicable law, and providing (consistent with applicable law and any related procedures) consequences for such activities including suspension of the domain name.

A literal reading of this, and the reading favored by registries, is that all registries have to do to be in compliance is to include the piracy prohibitions in their Registry-Registrar Agreement, essentially passing off responsibility for piracy to registrars (which in turn pass of responsibility to registrants).
Registries believe that the phrase “consistent with applicable law and related procedures” means they only have to suspend a domain name when they receive a court order.
Members of the IPC, on the other hand, say this reading is ridiculous.
“We don’t know what this clause means,” Marc Trachtenberg of the IPC said during a session in Helsinki on Tuesday. “It’s got to mean something. It can’t just mean you have to put a provision into a contract, that’s pointless.”
“To put a provision into a contract that you’re not going to enforce, has no meaning,” he added. “And to have a clause that a registry operator or registrar has to comply with a court order, that’s meaningless also. Clearly a registry operator has to comply with a court order.”
Some IPC members think ICANN has “backtracked” by introducing the PICs concept then failing to enforce it.
IPC members in general believe that registries are supposed to not only require their registrars to ban piracy sites, but also to suspend piracy domains when they’re told about them.
Registries including Donuts have started doing this recently on a voluntary basis with partners such as the Motion Picture Association of America, but believe that ICANN should not be in the business of content policing.
“[Spec 11] doesn’t say what some members of the IPC think it says,” Donuts VP Jon Nevett said during the Helsinki session. “To say we’re in blatant violation of that PIC and that ICANN is not enforcing that PIC is problematic.”
The fight kicked off face-to-face in Helsinki, but it has been happening behind the scenes for several months.
The IPC got mad back in February when Crocker, responding to Governmental Advisory Committee concerns about intellectual property abuse, said the issue “appears to be outside of our mandate” (pdf).
That’s a reference to ICANN’s strengthening resolve that it is not and should not be the internet’s “content police”.
In April (pdf) and June (pdf) letters, IPC president Greg Shatan and the Coalition for Online Accountability’s Steve Metalitz called on Crocker to clarify this statement.
Last night, he did, and the clarification is unlikely to make the IPC happy.
Crocker wrote (pdf):

ICANN will bring enforcement actions against Registries that fail to include the required prohibitions and reservations in its end-user agreements and against Registrars that fail to main the required abuse point of contact…
This does not mean, however, that ICANN is required or qualified to make factual and legal determinations as to whether a Registered Name Holder or website operator is violating applicable laws and governmental regulations, and to assess what would constitute an appropriate remedy in any particular situation.

This seems pretty clear — new gTLD registries are not going to be held accountable for domains used for content piracy.
The debate may not be over however.
During Helsinki there was a smaller, semi-private (recorded but not webcast live) meeting of the some registries, IPC and GAC members, hosted by ICANN board member Bruce Tonkin, which evidently concluded that more discussion is needed to reach a common understanding of just what the hell these PICs mean.

Survey: more people know about new gTLDs but fewer trust them

People are becoming more aware that new gTLDs exist, but there’s less trust in them that there was a year ago, according to an ICANN-sponsored survey.
The second annual Global Consumer Survey, which was published late last week, shows that 16% of respondents had heard of specific new gTLDs, on average.
That’s up 2% on last year’s survey.
The number for TLDs added in the last year was 20%, with .news leading the pack with 33% awareness.
However, fewer people were actually visiting these sites: 12% on average, compared to 15% a year ago. For TLDs added in the last year, visitation averaged 15%.
And the amount of trust placed on new gTLDs added prior to the 2015 survey was down from 49% to 45% — half the level of .com, .org and .net.
For TLDs added since last year’s survey, trust was at 52% on average.
The 2015 survey looked only at .email, .photography, .link, .guru, .realtor, .club and .xyz. For this year’s survey, respondents were also asked about .news, .online, .website, .site, .space, .pics, .top, .bank, .pharmacy, and .builder.
The number of registered domains did not seem to have an impact on how aware respondents were on individual extensions.
.xyz, for example, had the lowest awareness of those used in the survey — 9% versus 5% in 2015 — despite being the runaway volume market leader and having scored PR coups such as Google’s adoption of abc.xyz for its new parent company, Alphabet.
Likewise, .top, second only to .xyz in the size league table, could only muster up 11% awareness.
.news, .email and .online topped the awareness list — with 33%, 32% and 30% respectively — despite having only about 500,000 names between them.
I’m not sure I buy much of this data to be honest. There’s some weirdness.
For example, the survey found that 28% of respondents claim to have visited a .email web site.
That’s a gTLD at least partially if not primarily designed for non-web use, with roughly 20,000 names that are not parked.
If over a quarter of the population were visiting .email sites, you might expect some of those sites to show up prominently in Alexa rankings, but they don’t.
But perhaps, if we take this survey as a measure of consumers perceptions, it doesn’t matter so much whether it reflects the reality of internet use.
The survey, conducted by Nielsen for ICANN, covered dozens of other aspects of internet use, including feelings on cybersecurity, navigation and such, and weighs in at 160 pages. Read it all over here.

One in seven new gTLD domain names are actually just numbers

Roughly one out of every seven new gTLD domain names active today is numbers-only before the dot, according to DI research.
It might be surprising to some that the DNS, designed to turn immemorable numbers into memorable names, is actually being used to register millions of numeric domains.
Using the almost 1,000 new gTLD zone files we had access to on July 19*, DI counted 20,933,637 unique domain names of which 3,259,684 were purely numeric.
In other words, 15.57% of new gTLD domain names only contain numbers before the dot.
Fourteen gTLDs have a third or more of their zones fully numeric. One is two-thirds numeric.
The reason for this, of course, is China.
Numeric domains are said to be popular in China due to the fact that digits are the only 10 characters permissible in DNS that Chinese speakers natively understand.
Many popular web sites in China use short, numeric .com or .cn domain names. Some short numeric domains have sold for six or seven figures to end-user companies.
So there’s a thirst for numerics among Chinese domainers, as well as domainers elsewhere who want to exploit the Chinese market.
I talked to a successful domainer recently who acquired thousands of numeric domain names purely to flip to Chinese investors.
Personally, I think the market is overblown. Data suggests there’s a limited appetite for numerics among actual end users.
Fewer than 2,700 of top one million most-visited domains, as ranked by Amazon’s Alexa service, are numeric. A quarter of a percent. Even if Alexa is wrong by a factor of 10, that’s still only 2.7% of the internet’s biggest sites using numeric domain names.
So which gTLDs are most exposed to the numeric market?
Surprisingly, given the registry’s reluctance to deeply discount its domains, two Donuts gTLDs — .gold and .run, both relatively small TLDs — top the table with 66.32% and 54.65% respectively.
I think these are anomalies. The majority of Donuts’ portfolio have far smaller percentages of numerics.
Fellow portfolio players Afilias (.bet, .kim) and Uniregistry (.lol, .mom) also feature prominently on the list.
Here’s the top 30 new gTLDs, ranked by the percentage of their zones that are numeric. It includes every gTLD over 20%.
[table id=43 /]
In absolute terms, the larger-volume registries naturally have the larger number of numeric domains in their zones.
XYZ.com’s .xyz alone has over 867,000 numeric domains in its zone. That’s a lot of names, but in percentage terms it’s below the industry mean.
.top, .wang, .win and club, all heavily marketed in China, fill out the top five in volume terms.
Here’s the top 30 gTLDs with the largest absolute number of numerics. They account for 3,099,981 numeric domains of the 3,259,684 industry total.
[table id=44 /]
While short domains are more attractive to investors and end users, the vast majority of numeric domains in new gTLDs are of course longer than five digits.
.xyz, for example, has over 757,000 numeric domains of six or more characters. .top, .wang and .win are also measured in the hundreds of thousands in this regard.
Four gTLDs — .club, .wang, .top and .xyz — are over 99% full when it comes to five-digit numeric domains (that is, they have over 99,000 numeric domains in their zones).
.win is over 95% full on that basis, after which the numbers drop sharply to 65% and below.
In terms of four-number domains, there are 10 gTLDs that are over 99% full and 16 over 90% full.
There are 36 new gTLDs over 90% full in terms of three-digit numeric domains. More than a dozen appear to be completely full (giving myself some wriggle-room for reserved names and those that otherwise don’t appear in the zone files).
So what to make of all this?
I’m not a domainer, but I’ve sometimes heard domainers compare domains to baseball cards.
Going with that analogy, I’d say that if the typical numeric domain name collection contains the odd vintage Babe Ruth**, he’s far outnumbered by cards depicting some guy’s kid playing catch in the park.
That may be true of all domain portfolios, numeric or otherwise, but I feel numerics exist primarily right now to be traded between domainers.
As long as this continues, new gTLD registries — at least the ones actually charging for their names — will continue to benefit.
* A note on methodology. Due to the way access to zone files via ICANN works (ie, sporadically) we were missing some zone files on July 19. Including the missing gTLD may alter the league tables presented above, but I don’t believe the missing data was significant to the overall totals. Only one of the top 100 gTLDs, a zone of about 28,000 names, was missing.
** I know nothing about baseball.

Judge throws out DotConnectAfrica’s case against ZACR

South African registry ZACR did not engage in a fraudulent conspiracy with ICANN to get its .africa gTLD application approved, a court ruled yesterday.
The California judge in the case of DotConnectAfrica vs ICANN and ZACR threw out all of DCA’s claims against ZACR, approving ZACR’s motion to dismiss.
The judge said DCA had failed to make claims for fraud, contract intereference and unfair competition.
He also threw out DCA’s demand for ZACR’s .africa Registry Agreement to be scrapped.
The case is not over, however.
DCA’s claims against ICANN still stand and ICANN, perhaps regrettably, withdrew its own motion to dismiss the case weeks ago. The case still looks like heading to trial.
DCA reckons ICANN, ZACR, independent evaluator InterConnect Communications, and the Governmental Advisory Committee improperly ganged up on it, in breach of its new gTLD application contract.
The judge has already ruled that the litigation waiver DCA signed when it applied for .dotafrica .africa may be unenforceable.
He also based a decision to give DCA’s claims the benefit of the doubt on a huge misunderstanding of the facts, which he has yet to address publicly.
You can read the judge’s latest order here (pdf).
Under an injunction DCA won, .africa cannot be delegated until the case is resolved.

At least one in 10 new gTLDs are shrinking

While the universe of new gTLDs is growing at a rapid clip, DI research shows that at least one in 10 individual new gTLDs are shrinking.
Using zone file data, I’ve also established that almost a third of new gTLDs were smaller June 1 than they were 90 days earlier, and that more than one in five shrunk over a 12-month period.
There’s been a lot written recently, here and elsewhere, about the volume boom at the top-end of the new gTLD league tables, driven by the inexplicable hunger in China for worthless domain names, so I thought I’d try to balance it out by looking at those not benefiting from the budget land-grab madness.
It’s been about two and a half years since the first new gTLDs of the 2012 round were delegated. A few hundred were in general availability by the end of 2014.
These are the ones I chose to look at for this article.
Taking the full list of delegated 2012-round gTLDs, I first disregarded any dot-brands. For me, that’s any gTLD that has Specifications 9 or 13 in its ICANN Registry Agreement.
Volume is not a measure of success for dot-brands in general, where only the registry can own names, so we’re not interested in their growth rates.
Then I disregarded any gTLD that had a general availability date after March 14, 2015.
That date was selected because it’s 445 days before June 1, 2016 — enough time for a gTLD to go through its first renewal/deletion cycle.
There’s no point looking at TLDs less than a year old as they can only be growing.
This whittling process left me with 334 gTLDs.
Counting the domains in those gTLDs’ zone files, I found that:

• 96 (28.7%) were smaller June 1 than they were 30 days earlier.
• 104 (31.1%) were smaller June 1 than they were 90 days earlier.
• 76 (22.7%) were smaller June 1 than they were 366 days earlier.
• 35 (10.4%) were smaller on a monthly, quarterly and annual basis.

Zone files don’t include all registered domains, of course, but the proportion of those excluded tends to be broadly similar between gTLDs. Apples-to-apples comparisons are, I believe, fair.
And I think it’s fair to say that if a gTLD has gotten smaller over the previous month, quarter and year, that gTLD is “shrinking”.
There are the TLDs.
[table id=42 /]
Concerning those 35 shrinking gTLDs:

• The average size of the zones, as of June 1, was 17,299 domains.
• Combined, they accounted for 605,472 domains, down 34,412 on the year. That’s a small portion of the gTLD universe, which is currently over 20 million.
• The smallest was .wed, with 144 domains and annual shrinkage of 12. The largest was .网址 (Chinese for “.website”) which had 330,554 domains and annual shrinkage of 7,487.
• The mean shrinkage over the year was 983 domains per gTLD. Over the quarter it was 1,025. Over the month it was 400.

Sixteen of the 35 domains belong to Donuts, which is perhaps to be expected given that it has the largest stable and was the most aggressive early mover.
Of its first batch of seven domains to go to GA, way back in February 2014, only three — .guru, .singles, and .plumbing — are on our list of shrinkers.
A Donuts spokesperson told DI today that its overall number of registrations is on the increase and that “too much focus on individual TLDs doesn’t accurately indicate the overall health of the TLD program in general and of our portfolio specifically.”
He pointed out that Donuts has not pursued the domainer market with aggressive promotions, targeting instead small and medium businesses that are more likely to actually use their domains.
“As initial domainer investors shake out, you’re likely to see some degradation in the size of the zone,” he said.
He added that Donuts has seen second-year renewal rates of 72%, which were higher than the first year.
“That indicates that there’s more steadiness in the registration base today than there was when first-year renewals were due,” he said.

China conference leads to 49% .vip spike

The Global Domain Industry Conference, held in China over the weekend, has led to a huge boost in .vip domain sales.
Registry Minds + Machines told the markets this morning that the recently launched gTLD hit 404,892 as of 1600 UTC yesterday, up 49% from Friday.
CEO Toby Hall confirmed to DI that China is very much behind the spike, and that the conference helped raise the profile of .vip.
Billings and orders have now hit $5.5 million, up from $3.2 million on May 22, M+M said. That number includes sunrise and premium sales.
At GDS, M+M sold eight .vip domains auction for a total of $232,000 before auction commissions, which very likely inspired the spike in base-fee registrations.
Photos of GDS published on social media yesterday show a packed auditorium, with hundreds of attendees.

what did they say on 2016 Global Domain Industry Summit? what did you care? find it : https://t.co/wTRKX1Fbxq pic.twitter.com/xQNMZNGUxl

— 西部数码 (@westdotcn) June 6, 2016

While M+M makes much of the fact that it has not used a “freenium” strategy for .vip — which it says may lead to better renewal rates than competitors — retail prices are still pretty damn cheap.
At West.cn, its leading Chinese registrar, a .vip can be had today for about $3. It’s closer to $10 at GoDaddy.
Today’s batch of zone files have not yet been published by ICANN for verification, but yesterday there were 245,872 names in .vip.

.xyz tops 5 million domains as penny deals continue

XYZ.com became the first new gTLD operator to top five million domains in a single TLD last night, when .xyz added almost 1.5 million names.
According to our parse of today’s zone file, .xyz has 5,096,589 names, up 1,451,763 on yesterday’s 3,644,826.
On Monday, the number was just under 2.8 million.
The massive spike came after what was supposed to be the final day of a three-day discounting blitz, as registrars sold the names for $0.02, $0.01 or even nothing.
Uniregistry, which sold for a penny, seems to have claimed the lion’s share of the regs.
The company supplied DI with data showing it had processed over 1.16 million registrations on June 2, about 90% of which CEO Frank Schilling said were .xyz sales.
At its peak, Uniregistry created 95,793 new domains in an hour, this data shows.
Judging by the numbers published on its home page, the registrar has pretty much doubled its domains under management overnight.
The rapid growth of .xyz is very probably not over.
Some registrars said they will carry on with the penny giveaways for an extra day.
At least one popular registrar, NameCheap, told irritated customers that the popularity of its $0.02 offer meant it had a backlog of registration requests that would take 12 to 24 hours to process. Those may not have showed up in the zone file yet.
In addition, .xyz prices are expected to be dirt cheap — just $0.18 at Uniregistry, for example — for the rest of the month, at least at the 50-odd registrars XYZ says are participating in its promotion.

Amazingly, .blockbuster will soon be a gTLD

Video rental chain Blockbuster may have gone the way of the the 8-track, the VCR, and the Nokia cell phone, but it will soon have a gTLD of its own.
The .blockbuster gTLD application completed its pre-delegation testing with ICANN this week and is now with IANA/Verisign, ready to go live on the internet in the coming week or so.
It’s a fairly straightforward dot-brand application, even though the brand itself is pretty much dead.
Blockbuster, which at its peak in 2004 had 9,000 rental stores in its chain, was rescued from its Netflix-induced bankruptcy by TV company Dish Network back in 2011.
Dish applied for .blockbuster in 2012 when the brand was still, if only barely, a going concern.
However, since that time all of its remaining Blockbuster stores have been closed down and the Blockbuster-branded streaming service has been renamed Sling.
The web site at blockbuster.com is a husk that hasn’t been updated since 2014.
And yet the brand will shortly be at the cutting edge of online branding by having its own new gTLD.
A dot-brand without a brand? Surely this will be among the most useless new gTLDs to hit the ‘net.