Pro-.com analyst “sponsored” by Verisign. Is this a big deal?

Verisign has admitted it “sponsors” an analyst who has written more than a dozen articles singing the praises of .com and questioning the value of new gTLDs over the last few years.
Zeus Kerravala is the founder and principal analyst at ZK Research. He writes a regular column for Network World called Network Intelligence.
Last week, domain industry eyebrows were raised by the latest in a series of pro-.com articles — all of which seem to have been removed by Network World in the last 24 hours — to appear in the column.
The latest article was entitled “Why more companies are ditching new domain names and reverting to .com“.
Kerravala basically mined domain industry blogs, including this one, for examples of companies preferring .com over ccTLDs and new gTLDS, to support a view that .com is awesome and other TLDs are not.
He could have quite easily have used the same method to reach the opposite conclusion, in my view.
The Halloween-themed article concluded:

The good news is that .com will be here now and into the future, just like it has been for the past 30 years to provide treats to businesses after they have been “tricked” by other TLDs.

The article, and 12 more before it dating back to August 2012, looked to some like Verisign spin.
Other headlines include “Why .com is still the domain of choice for businesses” and “New generic top-level domain names do more harm than good” and “Companies are movin’ on up to .com domain names”.
They’re all basically opinion pieces with a strongly pro-.com slant.
The opinion that .com is better than the alternatives is not uncommon, especially among domainers who have lots of money tied up in .com investments.
The fact that Kerravala, who doesn’t usually touch the domain industry in his column, has written a dozen stories saying essentially the same thing about .com over the last couple of years looked a bit odd to some in the domain industry.
And it turns out that he is actually on the Verisign payroll.
A Verisign spokesperson told DI: “ZK Research is a sponsored industry analyst and blogger.”
The company declined to answer a follow-up question asking whether this meant he was paid to blog.
Kerravala told DI that Verisign is one of his clients, but denied blogging on its behalf. He said in an email:

they are a client like many of the other large technology firms. Although I blog, like many analysts, I am first an foremost an analyst. I have paid relationships with tech vendors, service providers, end user firms, resellers and the financial community.
Verisign pays me for inquiry time and to have access to my research. Verisign has many relationships like this with many analyst firms and I have this type of relationship with many other technology firms.
In no way do vendors pay me to write blogs nor do they influence my research or my opinions. Sometimes, I may choose to interview a vendor on a certain topic and include them in the article.

Kerravala had not disclosed in his Network World articles or boilerplate biography that Verisign is one of his clients.
In a January 2014 article published on SeekingAlpha, “New Generic Top Level Domain Names Pose No Threat To VeriSign“, contains a disclosure that reads in part “I have no business relationship with any company whose stock is mentioned in this article.”
Kerravala said in an email that although his relationship with Verisign started in 2013, the company was not a client at the time the SeekingAlpha article appeared.
The relationship came to light after new gTLD registry Donuts emailed Kerravala via a third party — and Kerravala says under false pretenses — claiming to have liked his most recent article and asking for a contact name at Verisign.
He would have responded honestly to just being asked directly by Donuts, he said.
In a telephone conversation yesterday, he said that his articles about .com represent his genuinely held beliefs which, as we agree, are not particularly unusual.
He observed that DI has a generally pro-TLD-competition point of view, and that many of my advertisers are drawn from the new gTLD industry, and said that his relationship with Verisign is not dissimilar to DI’s relationship to its advertisers.

Verisign’s silly .xyz lawsuit thrown out

Verisign has had its false advertising lawsuit against the .xyz gTLD registry thrown out of court.
XYZ.com this week won a summary judgement, ahead of a trial that was due to start next Monday.
“By granting XYZ a victory on summary judgement, the court found that XYZ won the case as a matter of law because there were no triable issues for a jury,” the company said in a statement.
The judge’s ruling does not go into details about the court’s rationale. XYZ’s motion to dismiss has also not been published.
So it’s difficult to know for sure exactly why the case has been thrown out.
Verisign sued in December, claiming XYZ and CEO Daniel Negari had lied in advertising and media interviews by saying there are no good .com domain names left.
Many of its claims centered on this video:

XYZ said its ads were merely hyperbolic “puffery” rather than lies.
Verisign also claimed that XYZ had massively inflated its purported registration numbers by making a shady $3 million reciprocal domains-for-advertising deal with Network Solutions.
XYZ general counsel Grant Carpenter said in a statement: “These tactics appear to be part of a coordinated anti-competitive scheme by Verisign to stunt competition and maintain its competitive advantage in the industry.”
While Verisign has lost the case, it could be seen to have succeeded in some respects.
XYZ had to pay legal fees in “the seven-figure range”, as well as disclose hundreds of internal company documents — including emails between Negari and me — during the discovery phase.
Through discovery, Verisign has obtained unprecedented insight into how its newest large competitor conducts its business.
While I’ve always thought the lawsuit was silly, I’m now a little disappointed that more details about the XYZ-NetSol deal are now unlikely to emerge in court.

Verisign offers free public DNS

Verisign has launched a free recursive DNS service aimed at the consumer market.
Public DNS, as the service is called, is being positioned as a way to avoid having your browsing history collated and sold for marketing purposes by your ISP.
There’s no charge, and the company is promising not to sell your data. It also does not plan to monetize NXDOMAIN traffic.
So what’s in it for Verisign? According to a FAQ:

One of Verisign’s core operating principles is to be a good steward of the Internet. Providing the Verisign Public DNS service supports the overall ecosystem of DNS and solidifies end-user trust in the critical navigation that they have come to depend upon for their everyday interactions.

Verisign also offers paid-for recursive DNS services to enterprises, so there may be an up-sell opportunity here.
The market for free public DNS currently has big players including Cisco’s OpenDNS and Google.
If you want to use the Verisign service, the IP addresses to switch to are 64.6.64.6 and 64.6.65.6.

New gTLDs growing faster than .com, latest Verisign data shows

New gTLDs grew faster than .com in the last 12 months.
That seems to be one of the conclusions that can be drawn from Verisign’s Q2 Domain Name Industry Brief, which was published (pdf) yesterday, if you dig into the numbers a little.
The headline number is that the number of all domains across all TLDs was 296 million, up sequentially by 2.2 million domains. That’s annual growth of 16.4 million domains, Verisign said.
I thought it might be interesting to see where that growth came from, so I plugged the numbers from Verisign’s last five DNIB reports into a spreadsheet, reproduced in this table.
[table id=35 /]
From these numbers, we can calculate the quarterly sequential growth, measured in domains, for the whole DNS, for .com, for new gTLDs and for ccTLDs.
That table looks like this:
[table id=37 /]
It appears from this table that .com grew by more domains than new gTLDs over the last year — 4.8 million versus 4.36 million — but the numbers are a bit misleading due to the way Verisign sources its data.
For most ccTLDs, Verisign has always used the third-party research outfit ZookNic, which has its own way of estimating registration volumes.
For new gTLDs, Verisign uses the zone files as published daily by ICANN — the same source DI and others use to measure volume.
However, for .com Verisign uses its own in-house data source. It is, after all, the .com registry.
The numbers for .com you find in the DNIB reports are exactly the same as the numbers Verisign gives financial analysts and investors when it reports its quarterly earnings.
And the company changed the way it reports those numbers in Q1 this year.
See that unusually high addition of 2.2 million names in .com in Q1 in the above table? That reflects the addition of very nearly 750,000 hidden .com names in March this year.
At that time, Verisign started counting domains that are on “hold” statuses, largely due to new ICANN policies on unverified Whois information.
The last two DNIB reports have sourced .com numbers with this disclosure:

The domain name base is the active zone plus the number of domain names that are registered but not configured for use in the respective Top-Level Domain zone file plus the number of domain names that are in a client or server hold status.

The actual Q1 growth number for .com should in the 1.4 million to 1.5 million range, which would bring .com’s total growth over the last four quarters down to roughly 4.1 million names.
An apples-to-apples comparison of extant zone-file domain growth would show new gTLDs beating .com, in other words.
But is this a fair measure of demand?
No. It’s fairer to say that .com still outsells its competition by a long way.
New gTLDs had yet to experience any significant churn by Q2 this year, as most had been on the market for under a year, so the growth numbers are more or less untempered by the renewal cycle.
While Verisign’s .com growth is net, for new gTLDs it’s almost all gross.
Verisign says in the latest DNIB has it had 8.7 million new registrations across .com and .net in the second quarter, which would be roughly eight times as many as new gTLDs — all several hundred of them combined — managed to move.

.cam given the nod as Rightside wins confusion appeal

Rightside’s application for .cam will be un-rejected after the company beat Verisign in an appeal against a 2013 String Confusion Objection decision.
That’s right, .cam is officially no longer too confusingly similar to .com.
In a just-published August 26 decision (pdf) a three-person International Centre for Dispute Resolution panel overruled the original SCO panelist’s decision.
The new panel wrote:

Based on the average, reasonable Internet’s user’s experience, and the importance of search engines, in the [Final Review Panel]’s view, confusion, if any, between .COM and .CAM is highly likely to be fleeting. While a fleeting association may create some “possibility of confusion” or evoke an “association in the sense that the string brings another string to mind,” both such reactions are insufficient under the ICANN SCO standard to support a finding that confusion is probable.

It’s not quite as clear-cut a ruling as the .shop versus .通販 ruling last week, relying on the appeals panel essentially just disagreeing with some of the finer points of the original panel’s interpretation of the evidence.
Relating to one piece of evidence, the appeals panel found that the original panelist “improperly shifted the burden of proof” to Rightside to show that .cam was intended for camera-related uses.
Rightside was one of two applicants given the opportunity to appeal its SCO decision by ICANN last year, largely because two other .cam applicants managed to pass their Verisign objections with flying colors, creating obvious inconsistency.
Taryn Naidu, Rightside’s CEO, said in a statement:

We always felt strongly that the first panel’s decision was seriously flawed. How can .CAM in one application be different from the .CAM in another application when evaluated on the basis of string similarity? The fact is, it can’t.

It’s always struck me as unfair that Verisign did not get the chance to appeal the two SCOs it lost, given that the panelist in both cases was the same guy using the same thought processes.
The question now is: is the appeals panel correct?
I suppose we’ll find out after .cam goes on sale and unscrupulous domainers attempt to sell .cam names for inflated prices, hoping their would-be buyers don’t notice the difference.
The other two .cam applicants are AC Webconnecting and Famous Four Media. All three will now go to auction.

Did XYZ.com pay NetSol $3m to bloat .xyz?

Evidence of a possibly dodgy deal between XYZ.com and Network Solutions has emerged.
Court documents filed last week by Verisign suggest that the .xyz registry may have purchased $3 million in advertising in exchange for $3 million of .xyz domain names.
Verisign, which is suing .xyz and CEO Daniel Negari over its allegedly “false” advertising, submitted to the court a list of hundreds of exhibits (pdf) that it proposes to use at trial.
Among them are these two:

• Email from Negari to Andrew Gorrin re EPP Feed and billing directly for $3,000,000 in domains
• Credit Memo to Andrew from Negari “We have elected to pay for our $3MM Q2 advertising insertion order, which was dated May 20th with a credit…….” (5/31/14)

Gorrin is Web.com’s senior VP of marketing and Negari is Daniel Negari, XYZ.com’s CEO.
The documents these headings refer to are not public information, and are not likely to be any time soon, but they appear to refer to on the one hand XYZ billing NetSol for $3 million in domain names and on the other NetSol billing XYZ for $3 million in advertising.
Only one of the two document headings is dated, so we don’t know how closely they coincided.
Other headings, among the 446 documents Verisign wants to use at trial, suggest that they happened at pretty much the same time:

• Email from Andrew Gorrin to Ashley Henning (web.com) re Bulk Purchase of .xyz domains (5/29/14)
• Email from Andrew Gorrin to Negari re XYZ.Com Advertising IO and Marketing Agreement attaching signed agreements (5/20/14)
• Email string Ashley Henning to Christine Nagey, Andrew Gorrin, Edward Angstadt re Bulk Purchase of .XYZ Domains (5/30/14)

The emails Verisign cites were dated May 2014, shortly before .xyz went into general availability June 2.
What we seem to be looking at here — and I’m getting into speculative territory here — are references to two more or less simultaneous transactions, both valued at exactly $3 million, between the two parties.
Both companies have consistently refused to address the nature of their deal, citing NDAs.
As you recall, the vast majority of .xyz’s early registrations were provided by NetSol, which pushed hundreds of thousands of free .xyz domains into its customers’ accounts without their explicit consent.
The number of freebies is believed to be about 350,000, based on comments Negari recently made to The Telegraph, in which he stated that .xyz, which had about 850,000 domains in its zone at the time, would have 500,000 registrations if the freebies were excluded.
With a registry fee roughly equivalent to .com’s (.xyz’s is believed to be a little lower), 350,000 names would work out to roughly $3 million.
Negari has stated previously that every .xyz registration was revenue-generating, even the freebies.
Is it possible that NetSol paid XYZ’s registry fees using money XYZ paid it for advertising? Is it possible no money changed hands at all?
I’m not saying either company has done anything illegal, and it’s completely possible I’m completely misunderstanding the situation, but it does rather put me in mind of the old “round-trip” deals that tech firms used to dishonestly prop up their tumbling revenue at the turn of the century.
Back in 2000, the dot-com bubble was on the verge of popping, taking the US economy with it, and companies facing the decline of their businesses came up with “creative” ways to show investors that they were still growing.
AOL Time Warner, for example, “effectively funded its own online advertising revenue by giving the counterparties the means to pay for advertising that they would not otherwise have purchased”.
Regulators exercised their legal options in these cases only where there appeared to be dishonest accounting, and I’ve seen no evidence to suggest that XYZ or Web.com unit NetSol have failed to adhere to anything but the highest accounting standards.
Again, I’m not saying we’re looking at a “round-trip” deal here, and there’s not a great deal of evidence to go on, but it sure smells familiar.
Certainly, questions have been raised that Verisign did not raise in its initial complaint.
Anyway.
On a personal note, I’d like to disclose that among the documents Verisign demanded from XYZ are dozens of pages of previously confidential emails exchanged between myself and Negari.
I’ve read them, and they’re mostly heated arguments about a) his refusal to give details about the NetSol deal and b) my purported lack of journalistic integrity whenever I published a post about .xyz with an even slightly negative angle.
XYZ had no choice but to supply these emails. I can’t blame it for complying with its legal requirements.
I wasn’t the only affected blogger. Mike Berkens, Konstantinos Zournas, Rick Schwartz and Morgan Linton also had their private correspondence compromised by Verisign.
I don’t know how they feel about this violation, but in my view this shows Verisign’s contempt for the media and its disregard for the sanctity of off-the-record conversations between reporters and their sources.
And that’s what I have to say about that.

US gives ICANN an extra year to complete transition

US government oversight of ICANN and the domain name system will end a year later than originally expected.
The National Telecommunications and Information Administration said last night that it has extended ICANN’s IANA contract until September 30, 2016, giving the community and others more time to complete and review the transition proposals.
NTIA assistant secretary Larry Strickling wrote that “it has become increasingly apparent over the last few months that the community needs time to complete its work, have the plan reviewed by the U.S. Government and then implement it if it is approved.”
Simultaneously, NTIA has finally published a proposal — written by ICANN and Verisign — for how management of the DNS root will move away from hands-on US involvement.
The extension of the IANA contract from its September 30, 2015 end date was not unexpected. The current contract allows for such extensions.
As we recently reported, outgoing ICANN CEO Fadi Chehade had guessed a mid-2016 finalization of the transition.
Regardless, expect op-eds in the coming days to claim this as some kind of political victory against the Obama administration.
Part of the reason for the extension, beyond the fact that the ICANN community hasn’t finished its work yet, is legislation proposed in the US.
The inappropriately named DOTCOM Act, passed by the House but frozen for political reasons in the Senate by Tea Party presidential hopeful Sen Ted Cruz, would give Congress 30 legislative days (which could equal months of real time) to review the IANA transition proposals.
There are basically three prongs to the transition, each with very long names.
The “Proposal to Transition the Stewardship of the Internet Assigned Numbers Authority (IANA) Functions from the U.S. Commerce Department’s National Telecommunications and Information Administration (NTIA) to the Global Multistakeholder Community” is the first.
That was created by the multistakeholder IANA Stewardship Transition Coordination Group (ICG) and deals with how the IANA contract will be managed after the US government goes away.
The second prong comes from the Cross Community Working Group on Enhancing ICANN Accountability, which deals with how ICANN itself can improve its accountability to the internet community without the Damoclean sword of US intervention hanging over it.
The CCWG’s latest draft report would strengthen the ICANN board against capture by, for example, making certain bylaws harder to amend and giving the community the right to fire directors.
Both of these proposals are currently open for public comment here.
The third prong, which only appears to have been published this week, deals with the nuts and bolts of how changes to the DNS root zone are made.
The current system is a tripartite arrangement between IANA, NTIA and Verisign.
When a TLD operator needs a change to the DNS root — for example adding a name server for its TLD — the request is submitted to and processed by IANA, sent to NTIA for authorization, then actually implemented on the primary root server by Verisign.
Under the new proposal (pdf) to phase the NTIA out of this arrangement, the NTIA’s “authorization” role would be temporarily complemented by a parallel “authentication” role.
The proposal is not written in the clearest English, even by ICANN standards, but it seems that the current Root Zone Management System would be duplicated in its entirety and every change request would have to be processed by both systems.
The output of both would be compared for discrepancies before Verisign actually made the changes to the root.
It seems that this model is only being proposed as a temporary measure, almost like a proof of concept to demonstrate that the NTIA’s current authorization role isn’t actually required and won’t be replaced in this brave new world.

IDN .com hits the root

Eleven variants of .com and .net in non-Latin scripts joined the internet today.
Verisign’s whole portfolio of internationalized domain name new gTLDs were added to the DNS root at some point in the last 24 hours, and the company is planning to start launching them before the end of the year.
But the company has been forced to backtrack on its plans to guarantee grandfathering to thousands of existing [idn].com domains in the new domains, thereby guaranteeing a backlash from IDN domainers.
The eleven gTLDs are: .कॉम, .ком, .点看, .คอม, .नेट, .닷컴, .大拿, .닷넷, .コム, .كوم and .קוֹם. Scripts include Arabic, Cyrillic and Hebrew.
Verisign signed registry agreements with ICANN back in January, but has been trying to negotiate a way to allow it to give the owners of [idn].com domains first rights to the matching domain in the “.com” in the appropriate script.
The company laid out its plans in 2013. The idea was to reduce the risk of confusion and minimize the need for defensive registrations.
So what happened? Trademark lawyers.
Verisign CEO Jim Bidzos told financial analysts last week that due to conversations with the “community” (read: the intellectual property lobby) and ICANN, it won’t be able grandfather all existing [idn].com registrants.
All of the new IDN gTLDs will be subject to a standard ICANN Sunrise period, which means trademarks owners will have first dibs on every string.
If you own водка.com, and somebody else owns a trademark on “водка”, the trademark owner will get the first chance to buy водка.ком.
According to SeekingAlpha’s transcript, Bidzos said:

Based primarily on feedback from domain name community stakeholders, we have revised our IDN launch strategy. We will offer these new IDN top-level domains as standalone domain names, subject to normal introductory availability and rights protection mechanisms, available to all new gTLDs. This revised approach will not require ICANN approval and is designed to provide end users and businesses with the greatest flexibility and, for registrars, a simple and straightforward framework to serve the market.
Finally, we believe this approach should provide the best opportunity for increased universal acceptance of IDNs. We expect to begin a phased rollout of the IDNs towards the end of this year, and we’ll provide more information on our launch plans when appropriate.

Senior VP Pat Kane added on the call that the grandfathering provisions, which would have required ICANN approval, have been “taken out”.
The question now is whether Verisign will introduce a post-sunrise mechanism to give rights to [idn].com.
That would not be unprecedented. ICM Registry ran into similar problems getting its grandfathering program for .porn approved by ICANN. It wound up offering a limited, secondary sunrise period for existing .xxx registrants instead.

Two more legacy gTLDs agree to use URS

The registries behind .pro and .cat have agreed to new ICANN contracts with changes that, among other things, would bring the Uniform Rapid Suspension policy to the two gTLDs.
Both gTLD Registry Agreements expire this year. Proposed replacement contracts, based heavily on the base New gTLD Registry Agreement, have been published by ICANN for public comment.
They’re the second and third pre-2012 gTLDs to agree to use URS, which gives trademark owners a simpler, cheaper way to have infringing domains yanked.
Two weeks ago, .travel agreed to the same changes, which drew criticisms from the organization that represents big domain investors.
Phil Corwin of the Internet Commerce Association is worried that ICANN is trying to make URS a de facto consensus policy and thereby bring it to .com, which is still where most domainers have most of their assets.
Following DI’s report about .travel, Corwin wrote last week:

this proposed Registry Agreement (RA) contains a provision through which staff is trying to preempt community discussion and decide a major policy issue through a contract with a private party. And that very big issue is whether Uniform Rapid Suspension (URS) should be a consensus policy applicable to all gTLDs, including incumbents like .Com and .Net.
…
ICANN needs to hear from the global Internet community, in significant volume, that imposing the URS on an incumbent gTLD is unacceptable because it would mean that ICANN staff, not the community, is determining that URS should be a consensus policy and thereby undermining the entire bottom-up policy process. Domain suspensions are serious business – in fact they were at the heart of the SOPA proposal that inspired millions of emails to the US Congress in opposition.

The concern about .com may be a bit over-stated.
Verisign’s current .com contract is presumptively renewed November 2018 provided that it adopts terms similar to those in place at the five next-largest gTLDs.
Given that .net is the second-largest gTLD, and that .net does not have URS, we’d have to either see .net’s volume plummet or at least five new gTLDs break through the 15 million domains mark in the next three years, both of which seem extraordinarily unlikely, for .com to be forced to adopt URS.
However, if URS has become an industry standard by then, political pressure could be brought to bear regardless.
Other changes to .pro and .cat contracts include a change in ICANN fees.
While .pro appears to have been on the standard new gTLD fee scheme since 2012, .cat is currently paying ICANN $1 per transaction.
Under the new contract, .cat would pay $0.25 per transaction instead, but its annual fixed fee would increase from $10,000 to $25,000.

.xyz dismisses own ads as “puffery”

XYZ.com has dismissed its own claim that .xyz is the “next .com” as “mere opinion or puffery”, in an attempt to resolve a false advertising lawsuit filed by Verisign.
Attempting to get the lawsuit resolved without going to the expense of a full trial, the registry has filed with the court a lengthy, rather self-deprecating deconstruction of its own marketing.
It says among other things that the blog posts and videos at issue are “not statements of fact but rather mere puffery, hyperbole, predictive, or assertions of opinion”.
Verisign sued XYZ and its CEO, Daniel Negari, in December, claiming that the video embedded below reflects “a strategy to create a deceptive message to the public that companies and individuals cannot get the .COM domain names they want from Verisign, and that XYZ is quickly becoming the preferred alternative.”

Last week XYZ filed a motion asking the court to rule on the pleadings only, meaning it would not go to trial. It appears to be an effort by the smaller company to avoid any more unnecessary legal fees.
“Verisign is attempting to litigate XYZ out of business complaining about a vanity video, website blog posts, and opinions stated to a reporter,” the motion says.
The document goes to great lengths to argue that the video, blog posts and interviews given by Negari are not “statements of fact”, but rather mere “hyperbole”.
It even goes to the extent of arguing that its ads make Verisign look good:

XYZ’s claim to be “the next .com” could not plausibly harm Verisign’s commercial interest because the claim reinforces that Verisign’s .COM is the most-popular, most-successful domain. Perhaps consumers think that since .XYZ is the next .COM, they should not buy other new domains. Perhaps consumers buy more .COM domains because XYZ has promoted Verisign as the market leader. But Verisign suffering any injury as a result of XYZ’s statements is implausible.
…
Some might view the old Honda in the video with the “COM” license plate as trusty and reliable, and the Audi sports car with “XYZ” as high maintenance, impracticable, and too trendy.

Verisign may or may not win the lawsuit, but it does seem to have succeeded in getting XYZ to cut the balls off of its own marketing.
Verisign has not yet filed a response to XYZ’s motion, which will be heard in court May 8.
You can download the PDF of the motion here.