ICANN slashes staff and domain prices could rise
ICANN has laid off 33 people, about 7% of its 485 staff, and has raised the specter of increased domain name prices, as it struggles to balance its budget.
The job losses are effective today and come “across all functional areas and regions”, acting CEO Sally Costerton wrote.
The Org said this evening that it made the decision to lose the employees as part of a broader cost-cutting effort that it hopes will help close a $10 million hole in its budget. At the end of April, it had said it was looking for $8 million in savings.
Costerton said ICANN will also look at reducing travel expenses and doing more work from its cheaper regional offices, as well as finding other efficiencies.
But it is also “evaluating ICANN’s fee structure to ensure it scales realistically with inflation”, Costeron wrote.
This will be of great interest to domain registrants, particularly those on a tight budget or with large portfolios, as any increases in the transaction fees ICANN charges registries and registrars will inevitably be passed on to their customers.
Registrars currently add a $0.18 per-domain-per-year ICANN fee at their checkouts, and registries pay $0.25 for every add-year, renew-year and transfer. The fees have not changed in at least the 15 years I’ve been writing this blog.
For ICANN community members and the domain name industry, the cuts will selfishly beg the questions of which services ICANN provides could suffer as a result, and whether it means delays to already overdue projects such as the new gTLD program.
The budget shortfall has arisen due to inflation and sluggish domain sales from the likes of Verisign, ICANN’s biggest funding source. Verisign’s outlook for the year is pretty bearish, with a low estimate of a 1.75% decline in domains under management.
I believe it’s the first time ICANN has been forced into a mass layoff, having reliably swollen its ranks almost every year until quite recently.
.com shrinks again, but prices to go up again
Verisign plans to increase .com prices again this year, as its latest quarterly results show its top line and margins swelling despite renewals and overall domains under management shrinking.
The company ended 2022 with 173.8 million .com and .net regs in the domain name base, only up 0.2% from the start of the year. Only a quarter ago, it had predicted growth of between 0.25% and 1%.
A year ago, it had predicted that metric to grow between 2.5% and 4.5%, but it reduced its outlook every quarter and eventually missed even its barrel-bottom estimate. The two TLDs shrank by about 400,000 names in Q4.
For 2023, the company expects domain growth of between no growth at all and 2.5%.
The poor performance in volume terms came about as result of post-pandemic effects and China volatility, CEO Jim Bidzos told analysts. He did not blame the last few years of price increases for the dip.
The preliminary renewal rate for Q4 was 73.2% compared to 74.8% in the same quarter of 2021, but new regs were down across the two TLDs also — 9.7 million compared to 10.6 million over the same periods.
But of course domains under management alone is a poor way to measure Verisign’s cash-printing machine.
The company reported 2022 net income of $674 million which was down from $785 million a year earlier when it had benefited from a one off tax-related boost of $165.5 million.
Annual revenue was up 7.3% at $1.42 billion, a touch ahead of the 7% .com price increase it imposed during the year. Operating margin for 2022 was 66.2%, up from 65.3%.
For the quarter, net income was $179 million compared to $330 million (with the aforementioned tax benefit) on revenue that was up 8.5% at $369 million. Margin was 66.5% compared to 65.3% for Q4 2021.
The company said .com prices will go up again in September 1, from $8.97 to $9.59 per year.
Gee, thanks. auDA cuts price of .au names by five cents
Australian ccTLD registry auDA has cut the wholesale price of .au domains by a measly five cents, according to local reports.
Aussie domainer blog Domainer reports that registry back-end provider Afilias, owned by Donuts, has notified registrars that the price is coming down to AUD 7.83 ($5.56), from AUD 7.88, not including sales tax.
The cut kicks in June 1 and effects all new registrations, renewals and transfers.
With about 3.6 million .au domains under management, that amounts to $180,000 a year out of the registry’s pocket, but the price reduction obviously won’t be noticeable for any but the most prolific domain collector.
GoDaddy Registry to raise some TLD prices, lower others
GoDaddy Registry is to raise the base price of three of its recent acquired gTLDs and lower the price on three others.
The company is telling registrars that the prices of .biz, .club and .design domains are going up later this year, while the prices of .luxe, .abogado and .case are going down.
For .biz, which GoDaddy took over when it acquired Neustar’s registry business in 2020, the price will increase by $0.87 to $13.50.
While .biz hasn’t been price-regulated by ICANN since 2019, the new rise is lower than the annual 10% it was allowed to impose under its previous, price-capped contracts. It’s around 7% this year, roughly in line with .com’s capped increase. It will mean the price of a .biz has gone up by over 70% in the last decade.
For .club, which GoDaddy acquired last year, registrations, renewals and transfers are going up by a dollar to $10.95, the fourth consecutive year in which .club fees have increased.
It’s in the ball-park of what previous owner .CLUB Domains was already doing — .club launched in 2014 with a $8.05 fee, but that went up to $8.95 in 2019, then $9.45 in 2020, then $9.95 last year.
.club has about a million domains under management at the moment. If that level holds, it’s an extra million bucks a year to GoDaddy, which frankly will barely register on the company’s now billion-dollars-a-quarter income statement.
For lower-volume .design, another one of the 2021 acquisitions, the price is going up by $2 to $35.
All of these price changes go into effect September 1 this year, giving registrants over six months to lock-in their pricing for up to 10 years by committing to a multi-year renewal before the changes kick in.
Registrars in most cases pass on registry price increases to their customers, but they don’t have the same six-month notification obligations as registries.
For three other GoDaddy Registry TLDs, prices are coming down in the same timeframe, so registrants may wish to see if the savings are passed on in future by registrars.
.luxe prices are going down from $15 a year to $12, .abogado is going down from $25 to $20 and .casa is going down from $7.50 to $6. The latter two mean “lawyer” and “home” respectively in Spanish.
GoDaddy isn’t currently altering the regular price of the TLDs it acquired from MMX, but it is bumping the restore fee for expired domains by $10 to $40, bringing them into line with .com.
Surprising nobody, Verisign to raise .com prices again
Verisign has announced its second consecutive annual price increase for .com domain names.
The wholesale registry fee for .com names will rise from $8.39 to $8.97 on September 1 this year, an extra $0.58 for every new or renewing domain, of which there are currently over 160 million.
Verisign announced the move, which was expected, as it announced a 2021 profit of $785 million and a 65.3% operating margin.
CEO Jim Bidzos, speaking to analysts, played down the impact of the increases on .com registrants, pointing out that .com prices were frozen under the Obama administration and have only gone up once before, last year, since 2012.
“This is the second wholesale price increase for COM since January of 2012,” he said. “So, if you look back over the last 10 years, that translates into a cost increase of only 1.3% CAGR over the last ten and a half years actually.”
The current .com contract, signed off by the Trump administration and ICANN, allows for two more 7% annual price increases, excluding the just-announced one, but Bidzos would not say whether Verisign plans to exercise those options.
If it does (and it almost certainly will) it would raise the price to $10.26, where it would stay until at least October 2026, he said.
“We believe .com continues to be positioned competitively,” he said.
It’s still basically free money for Verisign, which saw strong fourth-quarter and full-year 2021 results.
The company yesterday reported revenue of $1.33 billion for 2021, up 4.9%, with net income of $785 million, down from $815 million. The operating margin was 65.3%, compared to 65.2%.
For the fourth quarter, revenue was up 6.3% to $340 million, with net income of $330 million compared to $157 million. Operating margin was 65.3%, compared to 63.9%.
For 2022, the company is guiding for revenue of between $1.42 billion and $1.44 billion, based on the price increases and predicted unit growth of between 2.5% and 4.5%. The operating margin is expected to be between 64.5% and 65.5%.
Bidzos also addressed the controversial .web gTLD, which it won at auction but has been unable to launch due to legal action pursued by rival bidder Afilias/Altanovo.
An Independent Review Process panel recently threw a decision about .web back at ICANN, which is now considering Afilias’ allegations of wrongdoing at the board level.
“ICANN looks to be moving forward with making the decision on the delegation of .web, and we will be monitoring their process,” Bidzos said. He said that Verisign has not budgeted for any revenue or costs from .web in 2022.
That’s probably wise. Afilias recently told us that it has not stopped fighting against Verisign’s .web win.
Verisign upgrades its cash-printing machine but warns post-pandemic “could go either way”
Verisign has named the date for its long-anticipated .com prices increases, as it reported another healthy quarter and year of growth.
The company announced that the annual wholesale fee for a .com domain is going up from $7.85 to $8.39, effective September 1. That’s in line with the 7% annual cap reinstated by the Trump administration and rubber-stamped by ICANN.
It’s the first .com price increase since 2012, when reg fee was frozen by the Obama administration’s Department of Commerce under its longstanding contract with the company.
The $0.54 price increase would mean an extra $82.5 million for Verisign’s top line, assuming the .com base remains static at today’s level of 152,883,064 domains. The reality is very probably that registrations will continue to grow, however.
Verisign is allowed to increase prices by 7% three more times under its current ICANN contract. It was allowed to take the Trump bump last year but deferred due to the coronavirus pandemic.
Registrants are able to lock-in their current renewal rates for up to 10 years before the price rise kicks in, assuming registrar fees don’t increase in the meantime.
.com is of course a fabulously successful business, and it received a pandemic-related boost last year, due to a increase in small businesses moving online due to lockdown rules, which was reflected in Verisign’s fourth-quarter and full-year results.
Verisign reported fourth-quarter net income up from $148 million to $157 million, on revenue that was up 3.1% to $320 million.
For the full year, net income was up from $612 million million to $815 million, on revenue that was up 2.7% at $1.23 billion.
Operating margin is always an metric where Verisign shines — I often get phone calls from analysts baffled as to why ICANN allows such blatant profit-taking — but it was down a tad to 65.2%, from 65.5% in 2019.
That’s probably not enough to dislodge its crown as the company with the highest operating margin of the S&P 500.
Speaking to analysts and investors last week, Verisign said it’s projecting 2021 operating margin down again, to be between 64% and 65%, because of increased investment in its infrastructure and the $4 million annual bung it’s agreed to pay ICANN.
While Verisign is only going to see one quarter of higher prices this year, it seems the majority of its increased revenue will trickle down to the bottom line.
The company expects its domain growth to be between 2.5% and 4.5% in 2021. Execs noted continuing pandemic-related uncertainty. CFO George Kilguss said:
when the pandemic subsides and things start opening it up, I think it could probably go either way either it could accelerate or it could slow a little bit. We’re just not sure how the market would react just as we were somewhat uncertain when this whole pandemic started
In other words, while coronavirus proved an unexpected boon, post-pandemic economic recovery may not necessarily be a good thing for the industry.
.com renewals lowest in years, but Verisign sees lockdown bump anyway
.com and .net saw decent growth in the lockdown-dominated second quarter, despite Verisign reporting the lowest renewal rate since 2017.
The company last night reported that it sold more new domains in Q2 than it did in the same period last year — 11.1 million versus 10.3 million a year ago.
It added a net 1.41 million names across both TLDs in the quarter, compared to growth of 1.34 in Q2 2019.
CEO Jim Bidzos did not directly credit coronavirus for the bump, but he told analysts that the growth was driven primarily by small businesses in North America getting online. The US went into lockdown in the last week of March.
Verisign has now upped its guidance for the year. It now expects growth in domains of between 2.75% and 4%. That’s higher than the guidance it was giving out at the start of the year, pre-coronavirus.
The company had lowered this guidance to between 2% and 3.75% in April due to coronavirus uncertainties, which with hindsight clearly seems overly cautious.
On the flipside, Verisign’s estimated renewal rate for the quarter was down to only 72.8%, down from 74.2% a year ago, the worst it’s been since Q1 2017, when renewals were suffering through the tail-end of a massive Chinese junk drop.
But Bidzos said that the low rate was “primarily related to the lower overall first-time renewal rate”, suggesting that it might be more due to registrar promotions or heightened speculation a year ago than any coronavirus-related drag factor.
For Q2, Verisign reported revenue up 2.6% year over year at $314 million, with net income up from $148 million to $152 million.
The company also announced yesterday that it is freezing its prices across all of its TLDs until March 31, 2021.
You’ll recall that it gets the right to increase prices 7% starting on October 26 this year, under its new deal with ICANN and the US government, and Verisign confirmed yesterday that there will definitely be a price increase next year.
Because there’s a six-month notice period requirement in the contract, news of the timing of this increase could come as soon as September this year.
Nominet raises .uk prices
Nominet is to raise the price of a .uk domain name in January, adding a couple million quid to its top line.
The company’s annual registry fee will increase by 4%, from £3.75 to £3.90 ($4.77), on January 13 next year.
Nominet said the increase is to reflect “some of the increased costs of running the registry business since prices last changed in 2016.”
While it’s a modest £0.15 extra per name per year, at the current registration volume that works out to just shy of £2 million ($2.45 million) more revenue per annum.
Perhaps predicting a backlash from large-volume registrants, Nominet told registrars:
We appreciate that price rises are never popular, but even after this modest rise, .UK domains remain extremely competitively priced in the market and accessible to all.
If US dollars are your frame of reference, .uk names will still actually be cheaper following the price increase than they were following the 2016 price increase, due to exchange rate fluctuations.
The last price increase went into effect in March 2016. Before that, prices had been unchanged since 1999.
PIR says it has no plans to raise .org prices
Public Interest Registry claims it has no plans to raise its wholesale fee for .org domains, in the face of outrage from domainers and non-profits.
Under a proposed renegotiated contract with ICANN, price caps that have limited PIR to a 10% price increase every year would be removed.
But in a statement last week, the company said:
Rest assured, we will not raise prices unreasonably. In fact, we currently have no specific plans for any price increases for .ORG. We simply are moving to the standard registry agreement with all of its applicable provisions that already is in place for more than 1,200 other top-level domain extensions.
This does not necessarily translate to a commitment to not raise prices, of course. PIR may have “no specific plans” today, but it may tomorrow.
Over 3,300 people and organizations filed comments with ICANN about the proposed removal of the price caps, almost all of them negative.
Comments came initially from domain investors, but they were soon joined by many non-profit .org registrants and others.
Most claimed that it was unfair to allow unlimited price increases in legacy, pre-2012 gTLDs such as .org, which can be seen more as a public trust.
PIR went on to point out in its letter that it has not raised its prices — believed to be still under $10 a year — for the last three years.
But it might be worth noting that senior management has changed in that period. Brian Cute left the CEO job a year ago and, after an interim caretaker manager, was replaced by Donuts alumnus Jon Nevett in December.
.org’s registration numbers have been dipping. Over the last three years, it’s dropped from a peak of 11.3 million to 10.6 million at the end of 2018.
But it’s also renegotiated its back-end contract with Afilias over that period, meaning it’s now paying millions less on technical running costs than it once was.
PIR also reiterates that, like many of its customers, it is also a non-profit that is not motivated by investors and share prices.
More than half of its profits go to fund the Internet Society, itself a non-profit organization.
“We are different. We are mission based and not every decision is a financial one; we are not just driven by the bottom line,” its statement says.
PIR says that registrants are also protected by the measure in all ICANN gTLD contracts that allows registrants to lock in prices for up to 10 years in the event of a price increase, and by the fact that .org operates in a competitive market.
Reasonable people can and do disagree on whether these are effective protections in a case like .org.
Non-coms say .org price cap should be RAISED
With the entire domain name community apparently split along binary lines on the issue of price caps in .org, a third option has emerged from a surprising source.
ICANN’s Non-Commercial Stakeholders Group has suggested that price caps should remain, but that they should be raised from their current level of 10% per year.
In its comments to ICANN (pdf), NCSG wrote that it would “not object to the price cap being raised by a reasonable level”, adding:
Rather than removing price caps from the agreement entirely, these should be retained but raised by an appropriate amount. In addition, this aspect of the contract should be subject to a review midway through the contract, based on the impact of the price changes on non-profit registrants.
The NCSG does not quote a percentage or dollar value that it would consider “reasonable” or “appropriate”.
The letter notes that Public Interest Registry, which runs .org, uses some of its registration money to fund NCSG’s activities.
The NCSG disagrees with the decision to remove price cap provisions in the current .org agreement. On the one hand, we recognize the maturation of the domain name market, and the need for Public Interest Registry to capitalize on the commercial opportunities available to it. Public Interest Registry, as a non-profit entity, supports many excellent causes (including, it is worth noting, the NCSG). On the other hand, as the home for schools, community organizations, open-source projects, and other non-profit entities that are run on shoestring budgets, this registry should not necessarily operate under the same commercial realities that guide other domains. Fees should remain affordable, with domains which are priced within reach of everyone, no matter how few resources they have. Consequently, we support leaving the price cap provisions in place. We would not object to the price cap being raised by a reasonable level.
Basically, the ICANN community group nominally representing precisely .org’s target market doesn’t mind prices going up, just as long as PIR doesn’t get greedy.
It’s slightly surprising, to me, to find NCSG on the middle ground here.
There are currently over 3,250 comments on the renewal of PIR’s registry contract with ICANN — coming from domainers, individual registrants, and large and small non-profit organizations — almost all of which are firmly against the removal of price caps.
The only comments I’ve been able to find in favor of the scrapping of caps came from the Business Constituency. Intellectual property interests had no opinion.
I don’t believe the registries and registrars stakeholder groups filed consensus comments, but Tucows did file an individual comment (pdf) objecting to the removal of caps.
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