ICANN budget: mild optimism amid maturing industry

ICANN thinks the domain industry, including the new gTLD industry, is maturing and will continue to grow, in its just-published draft budget for fiscal 2023.

The Org is predicting growing transactions across the board, as well as an increase in the number of accredited registrars and a slowing decline in the number of contracted gTLDs.

ICANN is expecting funding of $152 million for FY23, which includes the $4 million bung it negotiated with Verisign as part of the deal to allow the company to raise .com prices.

That’s up from the $149.1 million is expects to receive in the current fiscal year.

As usual, the bulk of the funding comes from gTLD transaction fees — the taxes registrants pay through their registrars and registries whenever they register, renew or transfer a domain name.

Legacy gTLD transaction fees are expected to amount to $93.1 million, up 3% on a forecast of $90.1 million in the current year, while new gTLD transaction fees are expected to rise modestly from $9.5 million to $9.9 million, a 4% increase.

Transactions in legacy gTLDs are expected to be 201.2 million, versus 193.6 million in the current year.

New, post-2012 gTLDs are expected to process 25.8 million transactions, up from 24.8 million, of which 21.1 million will be billable, up from 20.3 million. New gTLDs only pay transaction fees after 50,000 domains under management.

ICANN is expecting to lose four registries in FY23 — this almost always means dot-brands that cancel their contracts — with the total declining from a June 2022 total of 1,149 to 1,145 a year later. This will have a modest impact on fixed registry fees.

But the Org is once again expecting to see an increase in the number of registrars paying fixed accreditation fees, up by 28 to 2,447 at the end of FY23.

Accompanying the budget, ICANN has published some industry trend analysis (pdf) outlining some of the assumptions behind the budget forecasts.

Basically, the document describes what regular readers already know — many domain companies benefited from pandemic-related lockdowns driving small businesses online, but overall industry volumes were driven down by low-cost new gTLDs experiencing huge junk drops.

For ICANN’s purposes, factors such as customer quality and pricing are irrelevant. A spammer registering 1,000 domains in bulk pays ICANN the same amount in fees as 1,000 small businesses building their first web sites.

The document reads:

Taken as a whole, DUMs failed to expand in the past twelve months ending in mid-2021. While this decline is at least partly attributable to lower promotional activity among some of the largest new gTLDs which could be reinitiated in the future, it nonetheless points to an industry that has shifted from a period of rapid expansion to one that is now witnessing steady maturation.

The draft ICANN budget covers the 12 months beginning July 1, 2023, and is now open for public comment before possible revisions and final approval.

Delta variant cranks up Aussie domain regs in Q3

Australia’s ccTLD had a growth spurt in the third quarter, driven by pandemic lockdown rules.

Local registry auDA today reported that it took 171,846 new domain creates in Q3, up 22% on Q2. There were over 60,500 new regs in July, making it .au’s second-biggest sales month of all time.

auDA said in its quarterly report (pdf):

This increase took place at a time when COVID-19 restrictions were re-introduced in several states, and followed a levelling out of demand and seasonal dip over Easter in Q2. However, Q3 registrations are only slightly below the same period in 2020, which experienced a historic peak in new domain names created, driven by COVID-19.

Such lockdown bumps were experienced by many registries in 2020, as bricks-and-mortar businesses rushed to get an online presence to continue functioning while stores and venues were closed.

The delta variant of Covid-19 started worrying Australia in June, leading to lockdown rules in major cities that lasted most or all of July. The country has had a relatively low incidence of the virus, but has taken a hard line on restrictions.

At the end of September, .au registrations were up 5% at 3,386,186 names, auDA said. The .com.au level names were up 6% but .net.au was down 1.5%.

Next March, Australia will follow in the footsteps of some other ccTLDs and make second-level .au domains available for the first time.

Lockdown bump sees GoDaddy double customer gains in 2020

GoDaddy almost doubled its rate of customer acquisition in 2020, compared to 2019, as pandemic-related lockdown measures pushed more small businesses online.

The company last week reported that it added 1.4 million customers last year, a 7% year-on-year growth but almost double the number it added the previous year.

It ended the year with 20.6 million customers, up from 19.3 million 12 months prior.

Recognizing that coronavirus restrictions in various parts of the world were increasing demand for domains, hosting and related services, the market-leading registrar upped its marketing spend to make sure it captured as many customers as possible.

It spent $438.5 million on marketing last year, up from $345.6 million in 2019.

Its full-year revenue from domains grew from $1.35 billion to $1,51 billion. Including its other segments, company revenue was up to $3.31 billion from $2.98 billion, an 11% increase.

Domains revenue for the fourth quarter was $402.2 million, up 14.2% on Q4 2019. Total revenue for the quarter was $873.9 million, up 12.0%.

ICANN may not meet again for a looong time

The grim reality of the ongoing coronavirus pandemic seems to be sinking in at ICANN.

Management and board all but confirmed yesterday that ICANN 70, currently still scheduled for Cancun, Mexico next March, will instead take place online via Zoom.

“We would all like to get back to face-to-face, but at this moment Cancun is not looking good for now,” chair Maarten Botterman said during a community discussion about meetings at ICANN 69, also online-only.

CEO Goran Marby said that there’s a “high probability” that Cancun will be virtual.

The session, “Board/Community Focus on ICANN Meetings” was notable for being extremely depressing rather than merely boring.

Several participants spoke in terms of ICANN meetings being virtual “for the foreseeable future”.

“With the world as it is right now, it’s very hard to say when we come back to full-fledged physical meetings,” CEO Göran Marby said.

He said there’s a possibility of “hybrid” meetings, where a face-to-face gathering could take place in a part of the world where the pandemic was under control, but he noted that this would put online participants at a disadvantage.

The overall vibe of the session was that things probably aren’t going to be back to “normal” for some time.

Even though coronavirus vaccines are already reportedly rolling off the presses right now and will be in the hands of governments by the start of 2021, many experts say the logistical problem of distributing vaccine widely enough to ensure herd immunity is tough enough that the “return to normal” is still a long way off.

Meeting participant Susan Anthony predicted that airline fares will be sky-high next year, limiting the ability of many would-be participants, particularly the smaller, less well-funded ones, to show up in person.

She said virtual or hybrid meetings could be around for “the indefinite future”.

Afilias director Jonathan Robinson concurred, saying “the world may have changed immeasurably and somewhat permanently”.

ICANN director Tripti Sinha later compared the post-pandemic world to the aftermath of the 9/11 terrorist attacks.

There was lots of talk about dumping 2020’s practice of holding the meetings during the time zone of the originally planned host country — the Hamburg time zone has been particularly tough on those in the Americas, who have to start their working day at about midnight — in favor of a utilitarian approach that is least inconvenient for the largest number of participants.

It seems to me that one reason that ICANN has yet to formally cancel Cancun — it’s not even on the board’s agenda this week — is that it’s toying with longer-term plan that may mean standard face-to-face ICANN meetings are a long way off indeed.

It’s difficult to believe that it was only June when some ICANN directors thought Hamburg would be sufficiently safe to return to face-to-face meetings this week.

Lockdown bump was worth $600,000 to ICANN, but end of Club Med saves 10x as much

The coronavirus pandemic lockdowns and the resulting bump in domain name sales caused ICANN’s revenue to come out $600,000 ahead of expectations, up 4%, the org disclosed last week.

But ICANN saved almost 10 times as much by shifting two of its fiscal year 2020 public meetings to an online-only format, due to travel and gathering restrictions.

The organization’s FY20 revenue was $141 million, up by $5 million on FY19, against a rounded projection of $140 million. ICANN’s financial years end June 30.

ICANN said it is “uncertain if these market trends will continue”.

Back in April, the organization lowered its revenue forecast for FY21 by 8%, or $11 million.

Expenses were down $11.1 million at $126 million, 8% lower that expectations and $4 million lower than the 2019 number.

That was mostly due to a $6.2 million saving from having two public meetings online-only.

ICANN typically spends $2 million per meeting funding over 500 travelers, both ICANN staff and community members, but that was down to almost nothing for the first two meetings of this year.

Pre-pandemic, ICANN expected these meetings, slated for Cancun and Kuala Lumpur, to cost $4.2 million and $3.4 million respectively, but the switch to Zoom brought them in at $1.4 million and $0.4 million.

ICANN would have occurred some pre-meeting travel expenses for the Cancun gathering, which was cancelled at the last minute, as well as cancellation fees on flights and hotels.

The org has previously stated that the switch away from face-to-face meetings could save as much as $8 million this calendar year.

The rest of the savings ICANN chalked down to lower-than-expected personnel costs, with hiring slowing during the pandemic.

Incidentally, if you’re wondering about the headline above, it’s a reference to a notorious 2009 WSJ article, and outrage about ICANN’s then $12 million travel budget.

Eleven years later, the FY20 travel budget was $15.7 million.

No lockdown bump for .eu as domain base shrinks in Q2

The European Union ccTLD .eu did not see an overall benefit from the pandemic lockdowns that affected many of its member states in the second quarter.

Registry operator EURid this week said that its total domains under management for .eu was 3,606,143 at the end of June, down by 16,907 from 3,623,050 at the end of March.

The company blamed Brexit for the decline, as Brits will no longer be eligible for .eu domains after the political transition period expires at the end of the year and many are therefore being allowed to expire.

This has been EURid’s story for many quarters, with the exception of a discount-related Portuguese aberration in Q1.

The number of regs from the UK dropped by 16.6% year-over-year and 5.1% quarter-over-quarter, to wind up at 135,355.

But .eu did not see the lockdown bump experienced by many other registries and registrars during the quarter either.

New regs in Q2 were at 163,277, compared to 190,011 in Q1 and 164,906 in Q2 2019. It sold fewer domains, even as its peers reported significant increases in sales.

I expect this is fairly easily explained.

Anecdotally, much of the pandemic-related boost the industry has experienced has been due to bricks-and-mortar microbusinesses such as mom-n-pop retailers, bars and restaurants selling online for the first time and needing domain names to make the switch.

These types of registrants, serving a small local area, don’t need a TLD reflecting their membership of a vast trading union, and are probably better served by their national ccTLD or a descriptive generic, so .eu got overlooked.

When it comes to the lockdown bump, it appears .eu was the exception to the rule.

The two biggest registrars knock it out of the park in Q2

GoDaddy and Tucows, the industry’s two largest registrars, both last week posted very strong second-quarter results due to the beneficial impact of the coronavirus lockdown.

Market-leader GoDaddy in particular seems to have knocked it out of the park, adding a ridiculous 400,000 net new customers during the April-June period, the strongest quarterly performance in the company’s 20-year history.

The company reported domains revenue of $369.6 million, up 10.5% on the year-ago quarter, its strongest-performing segment.

Tucows, meanwhile, reported domains revenue essentially flat at $60 million, but pointed to registration growth as an indicator of its showing.

Tucows CEO Eliot Noss said in prerecorded remarks that new registrations from its reseller channel were up 41% in the quarter, with overall wholesale registrations up 7% to 4.3 million.

In the retail channel, domains under management was up 9% year-over-year to 400,000, with new registrations up more than 20%.

The CEOs of both companies were unambiguous that the coronavirus pandemic could take credit for their results. Noss said:

As expected, in Q2 we saw the full effects of the pandemic that we began to experience toward the end of Q1, with businesses globally moving quickly online, and displaced workers turning to entrepreneurship as the next stage in their career paths. A large proportion of that new registration activity was those resellers who focus on helping small and micro-sized businesses and start-ups establish a web presence for the first time.

GoDaddy CEO Aman Bhutani characterized the virus as a catalyst for businesses stubbornly remaining offline to finally get a web presence, telling analysts:

COVID-19 has pushed a number of people past the point of inertia where they were not adopting digital… because people have no choice but to go digital to support their businesses, we’re seeing people experimenting with ideas. We’re seeing people come online, even though they had hesitated to do it in the past.

Overall, GoDaddy reported revenue up 9.4% at $806.4 million. Its net loss was $673.2 million, due mostly to a one-time tax-related payment.

Tucows overall revenue was $82.1 million, down from $84.1 million, largely due to the drag factor of its recently restructured Ting Mobile business. Net income was $157,000, down from $2.6 million.

Domain industry had best April ever under lockdown

The domain industry had its best April ever in terms of new domains sold in gTLDs, according to my tally, despite much of the Western world spending the month in coronavirus lockdown.

There were a total of 5,291,077 domain adds in April, across all 1,253 gTLDs currently filing transaction reports with ICANN.

That’s up almost 100,000 on the 5,191,880 adds in April 2019 and the best April since the first new gTLDs started coming into circulation in 2013.

[table id=60 /]

While a measly 100k jump may be less impressive than expected based on the enthusiastic descriptions of the lockdown bump coming from registries and registrars over the last few months, it makes a bit more sense when you factor out Chinese volume success story .icu.

.icu, currently the largest of the new gTLDs, was having a bit of a growth spurt at the start of 2019, and added 267,287 domains in April last year. That was down to 56,714 this April. The TLD has been declining for the last few months.

Looking at the TLDs that seem most obviously related to lockdown, the standout is .bar, which added 26,175 names this April, compared to just 151 a year ago.

It’s been well-reported that many restaurants and bars affected by coronavirus switched to online ordering and home delivery, and .bar appears to be a strong beneficiary of this trend.

.bar currently has more than 100,000 names in its zone file, roughly double its pre-lockdown level.

.com fared well, adding 3,382,029 domains this April, compared to 3,360,238 in the year-ago period.

But .xyz did better, relatively, adding 256,271 names, compared to 200,003 a year earlier.

Also noteworthy was .buzz, which has been performing very strongly over the last 12 months. It added 60,808 names this April, compared to just a few hundred.

This table shows the 20 gTLDs with the most adds in April 2020, with their April 2019 numbers for comparison.

[table id=61 /]

Domainers immune from the lockdown bump?

While the can be little doubt that the domain industry saw a boost in the second quarter due to the impact of coronavirus lockdown mandates, the same may not be true for those playing in the secondary market.

Data out from Escrow.com last night shows the weakest quarter for secondary market sales since the company started publishing its data two years ago, with average prices and overall sales volume down.

The company, which acts as a trusted intermediary for domain transfers, said it processed $55.2 million of sales in Q2, down from $85.8 million in the first quarter.

All of the primary geographical markets saw a decline apart from Hong Kong, with the US suffering the worst dip.

The US obviously has taken the biggest dose of the virus and has little in the way of a social safety net, so it’s perhaps not surprising that buyers are being more cautious with their cash.

The declines fly in the face of data and commentary from the primary market, where registries and registrars have generally been seeing unexpected boosts to sales as lockdown-impacted small businesses rush online.t

It’s tempting to speculate that while the virus has created more customers for domain names, fears over the incoming recessions have made buyers less likely to want to splash out on a premium domain.

Escrow.com said that the median price of a domain name without associated content dropped from $3,000 to $2,500 in the quarter.

Aussie ccTLD surges under coronavirus lockdown

Australia’s .au ccTLD may have been in decline recently, but it saw a surge in new domain registrations during its coronavirus lockdown, according to registry stats.

auDA said that 48,754 new .au domains were registered in April, a more than 23% increase on its April 2019 number.

The registry called this leap “the biggest month for new domain name creations we’ve seen in a while”. It averages about 40,000 per month, with seasonality.

The overall number of extant registrations was down a bit to 3,168,883, but auDA chalks this up to the expiration of domains registered during registrar promotions a year ago.

Australia was under its lockdown, which was less severe than in other countries, for the whole month of April. The measures were put in place March 21 and relaxed last week.

Numbers for March show a year-over-year decline of 1.4% in new adds.

While auDA does not attribute its April growth to lockdown, I think the numbers show that the movement restrictions imposed certainly didn’t hurt .au’s business.