Greimann wins Nominet board seat

Key-Systems general counsel Volker Greimann has been elected to Nominet’s board as a non-executive director, beating two rival candidates.
Nominated by Blacknight and EuroDNS, he got 1,169,785 of the 2,144,612 votes cast, beating Dot Advice CEO Phil Buckingham and Namesco domain development manager Kelly Salter.
Nominet uses a somewhat complex single transferable vote system in its elections, in which members votes are weighted according to how many .uk domains they have under management.
Voting power is capped at 3% of the total pool for each member, so no one registrar or small group of registrars can capture the election.
Salter, who had been nominated by top-ten registrars Go Daddy and LCN.com, was defeated in the first round of voting, with Greimann picking up the majority of the votes as a second preference, enabling him to win.
Buckingham was essentially the “domainer candidate”, backed by Netistrar and Namedropper, who’d promised to address the controversial issue of Nominet’s 50% price increase.
The price increases are arguably less important to registrars which can pass the increase on to their customers, than they are to domainers, which have to swallow the added costs themselves.
Buckingham secured about 34% of the votes in the second round.
Only 15% of the members eligible to vote did so, though that’s up from 12% last year.
The full results can be found here.
Nominet will hold its Annual General Meeting in London tomorrow.

M+M turns $22m profit into $10m loss

Minds + Machines today reported a 2015 loss of $10 million and further outlined its “transformative” restructuring and China strategy.
It’s the second full year of operating results M+M has posted since its first new gTLDs went live, and they’re not encouraging.
Revenue for accounting purposes was $6.3 million, but the cost of sales was $6.2 million, leaving gross profit of just $101,000.
Factoring in $12.1 million of operating expenses, a $7.9 million gain from losing new gTLD auctions, and other expenses, the total loss before tax was $10 million.
That’s compared to the $22 million profit M+M reported for 2014, a number entirely reliant on $33.7 million of auction loss payments.
The company also reported its “billings”, a line item that does not use the accounting method of deferring revenue across the life of a domain and is therefore more in line with incoming cash.
Billings for 2015 were $7.9 million, compared to $5 million in 2014. Gross profit under that measure was $1.7 million, but the $12 million of operating costs still made the company very unprofitable.
Ignoring the auction benefits in 2015, which will not last forever, it’s pretty clear that M+M was a company spending much more operating new gTLDs than it was making from them.
COO/CFO Michael Salazar said in a statement:

However, billings of $7.9 million for the year were simply not of a sufficient scale to cover the associated cost of sales ($6.2 million) and operating expenses ($12.2 million), which combined reached $18.4 million for 2015. Similarly, the $0.6 million savings achieved in the period by the decisions mid-year to stream-line the existing operational set-up were not of a magnitude to have any material impact in the year under review. That said, forfeited cost of sales and operational expenses as a result of the 2015 cost-cutting decisions will amount to $2.7 million in 2016

It’s perhaps little wonder that activist shareholders, apparently not prepared to play the long game, threw out half of the board and key senior executives during the period.
Former PR man Toby Hall took over as CEO in February, replacing co-founder Anthony Van Couvering, and announced earlier this month that M+M is dumping its registrar and back-end registry businesses.
Its registrar customers have been sold to Uniregistry, and it will outsource its registry back-end to Nominet, to save costs.
Salazar said that the two deals will lead to $2 million in savings, but won’t be complete before the fourth quarter. It seems unlikely they’ll have a great impact on 2016 numbers.
Headcount has been reduced from a peak of 61 to 43 at the end of the year, and is expected to drop further to 25. Salazar said this will save it $4.7 million a year.
Even with these cost reductions, M+M will still need to essentially double its revenue in order to hit operating profitability, it seems.
The company is pinning some of its growth hopes on .vip, which it expects to do well in China. It launches May 18.
Hall said in a statement that M+M would not follow the lead of competitors (Famous Four Media springs to mind) by offering first-year registrations for free to build market share. He said:

Based on the enquiries received during Sunrise and feedback gained through our two recent marketing trips to China, it is clear that there is genuine interest in the domain both within and outside of China. As a result, we will not be using a year-one freemium approach to simply inflate year-one registrations. Instead, we intend to be keenly priced to ensure margin to ourselves — and registrations — as well as protect the integrity of the domain. The volume we anticipate to be generated through keen pricing will then support the sales of our premium names in this domain.

The company also plans to invest in its .law sales team, because billings for that gTLD have been behind expectations.
M+M had $34.6 million in the bank and eight outstanding contested new gTLD applications at the end of the year.

Nominet has sights set on .org after M+M deal

Nominet chief Russell Haworth is hopeful that its new outsourcing deal with Minds + Machines will help it win a much more lucrative back-end contract — .org.
The company is among the 20-plus companies that have responded to Public Interest Registry’s request for proposals, as its back-end deal with Afilias comes to an end.
Nominet is one of a handful of companies — which would also include Verisign, Afilias, CNNIC and DENIC — that currently handles zones the size or larger than .org, which at over 10 million names is about the same size as .uk.
It, like PIR, is also a not-for-profit entity that donates excess funds to good causes, which could count in its favor.
But Haworth told DI today that showing the ability to handle a complex TLD migration may help its bid.
“I personally think that it would stand us in good stead, but we’ll have to see how the process plays out,” he told DI today. “With .org there’s 19-odd players pitching for that, so it’s a fairly competitive field.”
If the migration were to happen today, we’d be looking at around 300,000 domains changing hands. It’s likely to be a somewhat larger number by the time it actually happens.
Collectively, it will be one of the largest back-end transitions to date, though the largest individual affected gTLD, .work, currently has fewer than 100,000 names in its zone.
Haworth said that the plan is to migrate M+M’s portfolio over to Nominet’s systems one at a time.
He was hesitant to characterize the migration process as “easy”, but said Nominet already has such systems in place due to its role as one of ICANN’s Emergency Back-End Registry Operators.
Earlier this year, Nominet temporarily took over defunct dot-brand .doosan, in order to test the EBERO process.
A back-end migration primarily covers DNS resolution and EPP systems.
It sounds like the EPP portion may be the more complex. Some of M+M’s gTLDs have restrictions and tiered pricing that may require EPP extensions Nominet does not currently use in its TLDs.
But the DNS piece may hold the most risk — if something breaks, registrants names stop resolving and web sites go dark.
Haworth said Nominet is also talking to other new gTLD registries about taking over back-end operations. Registries signed three, five or seven-year contracts with their RSPs when the 2012 application round opened, and some are coming up for renewal soon, he said.
Nominet says it will become a top ten back-end after the M+M migration is done.

Minds + Machines dumps back-end and registrar in Nominet, Uniregistry deals

Minds + Machines is to get out of the registrar and back-end registry services markets in separate deals with Nominet and Uniregistry.
The cost-saving shake-up will lead to about 10 job losses, or about 25% to 30% of its current headcount, CEO Toby Hall told DI this morning.
Under the Nominet deal, M+M will outsource the back-end registry functions for 28 new gTLDs, currently managed in-house, to the .uk ccTLD manager.
The deal covers all the gTLDs for which M+M is the contracted party (such as .law, .cooking and .fashion), as well as the four it runs in partnership (eg .london) and the five where it currently acts as back-end for a third party registry (eg .broadway).
The company also plans to dump its “unprofitable” registrar entirely, migrating its existing customers to Uniregistry’s Uniregistrar business.
About 49,000 domains will be affected by this move, Hall said.
Uniregistry will pay M+M a commission over the lifetime of the accounts.
Focusing on the registry business was the plan from the moment Hall took over M+M, following a shareholder coup that kicked out founding CEO Antony Van Couvering in January.
Hall told DI:

It [previously] had a very ambitious plan. It wanted to be vertically integrated, but the considered view is there are people out there who are far better able to run parts of the exercise than ourselves, both on the RSP piece and likewise the registrar piece. The strategy from day one was to rapidly evolve into becoming a business-to-business marketing-led registry business and radically overhauling our cost structure at the same time.

The company is currently in a financial quiet period and will not yet disclose the amount of savings it expects to reap, Hall said. He added:

Reducing cost isn’t a strategy for growth, and as a business that will be where we will be judged. Growing our portfolio, growing our domains under management, growing our revenue within those domains. That’s what the business has to be focused on. We see within the industry that the highest value is in the [TLD] ownership part.

The job losses are expected to be largely on the technical side of the house.
The RSP outsourcing means that Nominet significantly boosts its stable of managed TLDs. While it’s in the top five back-ends in terms of DUM (due to the 11 million in .uk) its portfolio of clients there is relatively small, largely limited to a handful of dot-brands.
Nominet CEO Russell Haworth said in a statement:

This partnership takes us into the top tier of registry operators globally by volume of TLDs and compliments the brands we currently manage, such as .BBC, .Bentley and .Comcast. It also underlines our long-term strategy to provide a more diversified range of services to gTLDs and registrars.”

With the Uniregistry registrar deal, Hall said that competing with its own channel “was just not right for us”.
It might be worth noting that Uniregistry is actually a vertically integrated triple-play along the lines of M+M, also, managing its own back-end, registry and registrar businesses.
Hall said that the M+M registrar had sold mainly to domain investors with little interest in buying value-added services such as email and hosting, which is often where much of the profit lies.
Both deals are subject to ICANN approvals, and client approval in case of the back-end transition, will be phased in over many months, and are expected to be finalized by the end of the year.
UPDATE: M+M said later this morning that it is changing its official company domain to mmx.co from mindsandmachines.com.

Rape ban results in just one .uk takedown, but piracy suspensions soar

Nominet’s controversial policy of suspending domain names that appear to condone rape resulted in one .uk domain being taken down last year.
That’s according to a summary of take-downs published by Nominet yesterday.
The report (pdf) reveals that 3,889 .uk names were taken down in the 12 months to October 31, 2015.
That’s up on the the 948 domains suspended in the six months to October 31, 2014.
The vast majority — 3,610 — were as a result of complaints from the Police Intellectual Property Crime Unit. In the October 2014 period, that unit was responsible for 839 suspensions.
Unlike these types of suspensions, which deal with the allegedly illegal content of web sites, the “offensive names” ban deals purely with the words in the domain names.
Nominet’s systems automatically flagged 2,407 names as potentially in breach of the policy — most likely because they contained the string “rape” or similar — in the 12 months.
But only one of those was judged, upon human perusal, in breach.
In the previous 12 months period, 11 domains were suspended based on this policy, but nine of those had been registered prior to the implementation of the policy early in 2014.
The policy, which bans domains that “promote or incite serious sexual violence”, was put in place following an independent review by Lord Macdonald.
He was recruited for advice due to government pressure following a couple of lazy anti-porn articles, both based on questionable research by a single anti-porn campaigner, in the right-wing press.
Assuming it takes a Nominet employee five minutes to manually review a .uk domain for breach, it seems the company is paying for 200 person-hours per year, or 25 working days, to take down one or two domain names that probably wouldn’t have caused any actual harm anyway.
Great policy.

ICANN tests emergency registry with dead dot-brand

ICANN is running a test of its Emergency Back-End Registry Operator program, using the dead dot-brand gTLD .doosan as its guinea pig.
Doosan Group, a large Korean conglomerate, decided to kill off its gTLD, .doosan, last September. ICANN revealed the news in October.
The dot-brand had never been put to productive use and really only ever had nic.doosan live.
As it’s a dot-brand, it’s protected by the part of the Registry Agreement that prevents it being transferred to another registry operator.
Rather than letting the gTLD slip away into the night, however, ICANN is taking it as an opportunity to test out its EBERO system instead. ICANN says:

Simulating an emergency registry operator transition will provide valuable insight into the effectiveness of procedures for addressing potential gTLD service interruptions. Lessons learned will be used to support ICANN’s efforts to ensure the security, stability and resiliency of the Internet and the Domain Name System.

EBERO is the process that is supposed to kick in when (or if, I guess) a gTLD with a significant number of third-party registrations goes out of business and no other registry wants to take it over.
The EBERO provider takes over the running of the TLD’s critical functions for a few years so it can be wound down in an orderly fashion, giving registrants enough time to migrate to other TLDs.
Nominet, one of the designated EBERO operators, has taken over .doosan for this test, which is only a temporary measure.
Its IANA record was updated today with Nominet named as the technical contact and ICANN as the sponsor and administrator. Its name servers have switched over to Nominet’s.
Right now, www.nic.doosan resolves to ICANN’s EBERO web page. The non-www. version doesn’t seem to do anything.
ICANN said it will provide updates when the test is over.

Complaints over 50% .uk price hike

.uk registrars are petitioning Nominet to complain about plans to increase the price of a .uk domain name by up to 50%.
The registry announced the price increase, which will come into effect March 1 next year, on Wednesday.
A one-year registration will go up to £3.75 ($5.65) wholesale, still cheaper than any gTLD I can think of.
Currently, Nominet charges £3.50 for a one-year reg and £2.50 per year for multi-year registrations.
The company heavily hinted, in an email, that some of this extra cash will wind up in registrars’ pockets, due to promotional spending:

Our new pricing strategy aims to accomplish three things. Firstly, as with any business the price we charge is linked to our ability to deliver a fantastic service. Secondly, we want to invest in the .UK namespace to ensure we can differentiate over the long-term. Thirdly, we want to be able to invest in marketing and promotions in order to secure prominence at point of sale – which our current pricing levels cannot support.

The price of a .uk domain has not increased since 1999, Nominet said.
Increasing the price from a posh coffee to a London beer is presumably not a big deal for most registrants, but domainer-registrars are unhappy.
Andrew Bennett of Netistrar has set up a web site at egm.uk to call for “outraged” registrants and Nominet members to voice their opposition to the changes.
The site points out that Nominet has said it will review its pricing annually.
It calls on Nominet to have a three-month public consultation then a member vote before introducing the changes.
At time of publication, 77 registrants and 47 Nominet members have signed the petition.
On its web site, Nominet lists 2,048 members.

Dot-brand gTLD guilty of domain name hijacking

Fashion retailer Mango, which owns its own dot-brand gTLD, has been found guilty of Reverse Domain Name Hijacking after allegedly doctoring evidence in a .uk cybersquatting case.
The company, which runs .mango, lost a Nominet Dispute Resolution Service complaint against New Zealand-based domain investor Garth Piesse over mango.co.uk and mango.uk.
It’s only the sixth RDNH finding in 13 years of DRS history.
Mango tried to buy the domain using a pseudonym and, when Piesse asked for “six figures”, filed the DRS instead.
Piesse claimed in what appears to have been a well-argued defense that the person attempting to buy the domain on Mango’s behalf did not identify Mango as the would-be buyer.
Further, he claimed that Mango deliberately tried to hide this fact from the DRS panel by scrubbing its negotiator’s email address from evidence it submitted.
While DRS panelist Tim Brown did not agree that this omission alone was enough to find RNDH, he agreed that Mango did not have “entirely clean hands”. He ruled:

The sequence of events in the present case appears to show that the Complainant attempted to buy from the Respondent. When these negotiations failed the Complainant started proceedings under the DRS. As I have noted, the Complainant has relied on bare assertion and has provided a paucity of evidence to support its arguments.
Even a cursory reading of the Policy, Procedure and extensive guidance on Nominet’s website would quickly show that a matter concerning a clearly generic, dictionary term would require a higher standard of argument and evidence than is perhaps common. That the Complainant has failed to come anywhere close to providing sufficient argument or evidence is, in my view, strongly indicative that the Complainant pursued this dispute in frustration at the Respondent’s unwillingness to sell for a price it was willing to pay, rather than because of the merits of its position in terms of the Policy’s requirements.
I conclude that the Complainant brought a speculative complaint in bad faith in an attempt to deprive the Respondent of the Domain Names. I therefore determine that the Complainant has engaged in Reverse Domain Name Hijacking.

Spain-based Mango has owned its trademarks for well over a decade, and Piesse only got his hands on the domains in question in 2013 and 2014.
Piesse, who owns about 18,000 domains, was able to show that Mango the brand is unheard of in New Zealand and that he has a track record of buying fruit-based .uk domain names.

Nominet to give nod to .uk privacy services

Nominet plans to start accrediting proxy/privacy services in .uk domain names, and to make it easier to opt-out of having your full contact details published in Whois.
The proposed policy changes are outlined in a consultation opened this morning.
“We’ve never recognized privacy services,” director of policy Eleanor Bradley told DI. “If you’ve registered a .uk with a privacy service, we consider the privacy service to be the registrant of that domain name.”
“We’ve been pretending almost that they didn’t exist,” she said.
Under the proposed new regime, registrars would submit a customer’s full contact details to Nominet, but Nominet would publish the privacy service’s information in the domain’s Whois output.
Nominet, getting its hands on the customer data for the first time, would therefore start treating the end customer as the true registrant of the domain.
The company says that introducing the service would require minimal work and that it does not intend to charge registrars an additional fee.
Currently, use of privacy services in .uk is pretty low — just 0.7% of its domains, up from 0.09% a year ago.
Bradley said such services are becoming increasingly popular due to some large UK registrars beginning to offer them.
One of the reasons for low penetration is that quite a lot of privacy is already baked in to the .uk Whois database.
If you’re an individual, as opposed to a “trading” business, you’re allowed to opt-out of having any personal details other than your name published in Whois.
A second proposed reform would make that opt-out available to a broader spectrum of registrants, Nominet says.
“We’ve found over the last few years that it’s quite a hard distinction to draw,” Bradley said. “We’ve had some criticisms for our overly strict application of that.”
In future, the opt-out would be available according to these criteria:

i. The registrant must be an individual; and,
ii. The domain name must not be used:
a) to transact with customers (merchant websites);
b) to collect personal data from subjects (ie data controllers as defined in the Data Protection Act);
c) to primarily advertise or promote goods, services, or facilities.

The changes would allow an individual blogger to monetize her site with advertising without being considered a “trading” entity, according to Nominet.
But a line would be drawn where an individual collected personal data on users, such as email addresses for a mailing list, Bradley said.
Nominet says in its consultation documents:

Our continued commitment to Nominet’s role as the central register of data will enable us to properly protect registrants’ rights, release contact data where necessary under the existing exemptions, and maintain public confidence in the register. It acknowledges that some registrants may desire privacy, whilst prioritising the core function of the registry in holding accurate records.

The proposals are open for comments until June 3, which means they could potentially become policy later this year.

.uk suspension problems worse than I thought

Problems validating the addresses of .uk domain registrants, which caused one registrar to dump the TLD entirely, are broader than I reported yesterday.
Cronon, which does business as Strato, announced last week that it has stopped selling .uk domain names because in more than a third of cases Nominet, the registry, is unable to validate the Whois data.
In many cases the domain is subsequently suspended, causing customer support headaches.
It now transpires that the problems are not limited to .uk second-level names, are not limited to UK registrants, and are not caused primarily by mailing address validation failures.
Michael Shohat, head of registrar services at Cronon, got in touch last night to clarify that most of its affected customers are in fact from its native Germany or from the Netherlands.
All of the affected names are .co.uk names, not .uk SLDs, he added.
And the validation is failing in the large majority of cases not due to Nominet’s inability to validate a mailing address, but rather its inability to validate the identity of the registrant.
“This is where the verification is failing. The database they are using can’t find many of our registrants’ company names,” Shohat said.
“So 30% of our registrations were being put on hold, almost all of them from [Germany] and [the Netherlands], and 90% of them because of the company name. We checked lots of them and in every single case the name of the company was correct, and the address as well,” he said.
Michele Neylon of the ICANN Registrar Stakeholders Group said that Cronon is not the only registrar to have been affected by these issues. Blacknight Solutions, the registrar Neylon runs, has been complaining about the problem since May.
According to Neylon, the Nominet policy causing the issue is its data quality policy, which covers all .uk and .co.uk (etc) names.
The policy itself is pretty vague — Nominet basically says it will work with each individual registrar to determine a baseline of what can be considered a “minimum proportion of valid data”, given the geographic makeup of the registrar’s customer base.
Domains that fail to meet these criteria have a “Data Quality Lock” imposed — essentially a suspension of the domain’s ability to resolve.
Earlier this year, Nominet did backtrack on plans to implement an automatic cancellation of the names after 30 days of non-compliance, following feedback from its registrars.
“It’s disappointing that Cronon have taken this step; we hope they will consider working with us to find a way to move forward,” a Nominet spokesperson added.
She said that the registry has over recent years moved to “more proactive enforcement” of Whois accuracy. She pointed out that Nominet takes on the “lion’s share of the work”, reducing the burden on registrars.
“However, our solution does not include non-UK data sets to cross-reference with, so it is possible that some false positives occur,” she said. “Registrars with a large non-UK registrant bases, who are not accredited channel partners, would be affected more than others.”
An Accredited Channel Partner is the top tier of the three Nominet offers to registrars. It has additional data validation requirements but additional benefits.
While .co.uk domains are not limited to UK-based registrants, all .uk SLD registrants do need to have a UK mailing address in their Whois for legal service.
The company’s inability to validate many non-UK business identities seems to mean .co.uk could also slowly become a UK-only space by the back door.