Government to regulate UK-related domain names

The UK government is to trigger a law that would allow it to take control of .uk, .wales, .cymru, .scot and .london if their registries get thoroughly abused and they fail to do anything about it.

The Department for Science, Innovation and Technology said today it is to activate (or “commence”) the parts of the Digital Economy Act of 2010 that give it the power to appoint a new manager for any “UK-related” TLDs.

DSIT would only be able to exercise these powers if the registry in question had let DNS abuse or cybersquatting run amok and failed to follow government orders to fix it. I don’t believe any of the affected registries are currently in such a state.

The government has now launched a consultation, running until the end of August, to get industry and public feedback on its definitions of abuse and what it called “unfair domain use”, meaning cybersquatting.

Nominet, which runs .uk, .wales and .cymru, said in a statement:

The proposed prescribed requirements are consistent with Nominet’s current voluntary procedures, which Government has made clear it believes Nominet operates in a perfectly satisfactory manner. As the Government has had a reserve power to “step in” ever since the DEA was introduced, the purpose of the new provisions is to give Government a formal mechanism to do so, should it ever be required. Our understanding is that Government is enacting these provisions now to ensure the UK meets international best practice on governance of country code top-level domains in line with key global trading partners and future global trading commitments.

Based on my first read, I expect registries and registrars will think it looks generally pretty palatable. It seems DSIT has followed ICANN and the industry’s lead in terms of what qualifies as abuse, and Nominet said in a statement tonight that all three affected registries have been meeting with DSIT to craft the consultation.

Domain investors may take issue with the precise wording of the cybersquatting definition, however.

The definitions of abuse cover the industry standard five bases: malware, phishing, botnets, pharming and spam (insofar as it facilitates any of the other four) and cybersquatting is defined thus:

the pre-emptive, bad faith registration of trade marks as domain names by third parties who do not possess rights in such names. This includes ‘typosquatting’, when an end user takes advantage of common misspellings made by Internet users who are looking for a particular site or a particular provider of goods or services, in order to obtain some benefit.

Domainers will notice the document talks about “bad faith registration”, whereas UDRP talks about bad faith “registration and use”, which is sometimes an important edge-case distinction in cybersquatting disputes. Nominet’s DRS uses bad faith registration “or” use.

Where the consultation gets vague, and the potential for debate arises, is when it talks in general, high-level terms about how dispute resolution procedures should be designed.

Failure to deal with child sexual abuse material, as defined in the Convention on the Rights of the Child, in an affected TLD could also result in the government appointing a new registry.

The four gTLDs affected by the legislation all are considered geographic under ICANN rules and had to secure local government support when they applied for their strings. ICANN has a contractual right to terminate them if that government says so.

After the consultation is complete, DSIT intends to make its definitions law through secondary legislation.

This post was updated shortly after publication to add Nominet comments.

CentralNic wins .london back-end deal from Nominet

CentralNic today announced that it’s taking over back-end registry operations for .london.

It’s taking over from Nominet, which has run the technical aspects of the registry since 2016 when MMX dumped its registry business.

The contracted registry is London & Partners, the marketing arm of the London mayor’s office.

CentralNic is based in London, whereas Nominet, which runs .uk and .wales, is based in nearby Oxford. Original registry MMX was based in the British Virgin Islands.

.london currently has about 51,000 domains under management, down from a 2018 peak of about 86,000.

MMX to pay $5.1 million to get out of terrible .london deal

Minds + Machines will pay its partner on .london roughly $5.1 million in order to put the catastrophic deal to bed for good.
That’s a reduction from the $7.9 million liability it had previously estimated.
The company said last week that it will pay an unspecified partner the $5.1 million “as full and final settlement for any further liability or contractual spend” after renegotiating the contract.
In April, MMX said that the deal had cost it $13.7 million since the outset.
While MMX has never publicly fingered the contract in question, which has been a pair of concrete boots for years, its deal with .london’s London & Partners is the only one that fits the bill.
The registry secured L&P, the marketing arm of the London Mayor’s office, as a client during the mayoral reign of Boris Johnson, the man set to be anointed the UK’s next prime minister this week.
It agreed to make millions of dollars in guaranteed payments over the duration of the contract, because it expected to sell a shedload of .london domains.
That never happened. The gTLD peaked at 86,000 names in March 2018 and was down to 54,000 a year later, evidently a fraction of what MMX had planned for.
The renegotiated deal — I believe at least the second time the deal has been amended — is “in principle” for now, with formal approval expected soon.
In its trading statement last week, MMX also said that the first half of the year ended with a 19% increase in regs, ending June at about 1.82 million.
It said it has “stabilised” declining billings in its acquired ICM Registry portfolio of porn-themed TLDs at $2.8 million, and that it has a “clear pathway” to growth from the four zones.
It’s hoping “further new initiatives” — likely a reference to a new trademark-blocking service — will help out in the current half.
MMX also said that it’s spending $1 million of its cash reserves on a stock buyback.

.london disaster leads to mixed 2018 for MMX

New gTLD registry MMX, aka Minds + Machines, suffered a huge net loss in 2018, largely due to its disastrous .london contract, even while its operating fundamentals improved.
For the year, MMX reported a net loss of $12.6 million, compared to a 2017 profits of $3.8 million, on revenue up 5% to $15.1 million.
The loss was almost entirely attributable to charges related to an “onerous contract” with one of its partners.
MMX has never disclosed the identity of this partner, but the only outfit that fits the profile is London & Partners, the agency with which MMX partnered to launch .london several years ago.
The registry, expecting big things from the geo-TLD, promised to pay L&P millions over the term of the contract, which expires in 2021.
But it’s been a bit of a damp squib compared to former management’s expectations, peaking at about 86,000 regs last year and shrinking ever since.
MMX says the estimated gap between the minimum revenue guarantee payable to L&P and the expected revenue is expected to bring in before 2021, is $7.2 million.
It’s recorded this as a charge on its income statement accordingly, along with another $4.2 million impairment charge related to the same contract.
The company recorded a $7.7 million accounting charge related to this contract in 2016, too.
The company says that to date it has lost about $13.7 million on the deal.
These charges, along with a few other smaller one-off expenses, were enough to push the company into the black for 2018.
But other key performance indicators showed more promise, helped along by the acquisition last year of porn-themed registry operator ICM Register, best-known for .xxx.
Notably, renewal revenue almost doubled, up 97% to $9.4 million.
Domains under management was up 37% to 1.81 million.
Operating EBITDA was $3.6 million, up 12.5%.
Looking ahead, MMX said billings for the first quarter are expected to be up 246%, due to the first impact of the ICM acquisition.
It also said it closed $500,000 of sales in .law in China in March. That would work out to over 5,000 domains, based on the retail price of about $100 a year, but those domains have yet to show up in the .law zone file, which only grew by about 200 domains last month.
MMX said it is planning to launch “a high-value defensive registration product” for corporate registrars by the third quarter.
If I had to guess, I’d say that is probably a clone of Donuts’ Domain Protected Marks List service, which offers trademark owners deep discounts when they defensively block strings across the whole Donuts gTLD portfolio.
It’s a model copied by other registries, including recently Uniregistry.

MMX waving goodbye to .london? Boss puts focus on renewal profits, China

MMX’s revenue from domain renewals could cover all of its expenses within the next 24 months, if everything goes to plan, according to CEO Toby Hall.
Hall was speaking to DI this evening after the company reported its first-half financial results, which saw revenue up 22% to $6.4 million and a net loss of $14.7 million, which compared to a loss of $526,000 a year earlier.
MMX’s huge loss for the period was largely — to the tune of $11.8 million — attributable to the restructuring of an “onerous” contract with one of its gTLD partners.
Hall refuses point blank to name that partner, but for reasons I discussed last year, I believe it is .london sponsor London & Partners, which is affiliated with the office of the Mayor of London.
When L&P selected MMX to be its registry partner for .london back in 2012, I understand a key reason was MMX’s promise to pay L&P a fixed annual fee and commit to a certain amount of marketing spend.
But two years ago, after it became clear that .london sales were coming in waaaay below previous management’s expectations, MMX renegotiated the deal.
Under the new deal, instead of committing to spend $10.8 million on marketing the TLD itself, MMX agreed to give half that amount to L&P for L&P to do its own marketing.
It appears that L&P has already spunked much of that cash ineffectively, or, as MMX put it:

a significant portion of that marketing budget has been spent by the partner with minimal impact on revenues in the current year and no expectation of any material uplift in future periods

MMX seems to have basically written off the .london deal as a bad call, and now that MMX is no longer in the registry back-end or registrar businesses, it seems unlikely that the .london partnership will be extended when it expires in three years.
Again, Hall would not confirm this bad contract was for .london — I’m making an informed guess — but the alternatives are limited. The only other TLDs MMX runs in partnership currently are .review and .country, and not even 2012 MMX management would have bet the farm on those turkeys.
Another $2.1 million of the company’s H1 net loss is for “bad debt provisions” relating the possibility that certain US-based registrar partners may not pay their dues, but this provision is apparently related to a new accounting standard rather than known deadbeats threatening to withhold payments.
If you throw aside all of this accountancy and look at the “operating EBITDA” line, profit was up 176% to $661,000 compared to H1 2017.
While the loss may have cast a cloud over the first half, Hall is upbeat about MMX’s prospects, and it’s all about the renewals.
“Renewal revenue will be more than all the costs of business within 24 months,” he said. To get there, it needs to cross the $12 million mark.
He told DI tonight that “an increasing percentage of our business is based on renewals… just on renewal revenue alone we’ll be over $10 million this year”.
Renewal revenue was $4.7 million in 2017 and $2.4 million in 2016, he said. In the first half, it was was up 40% to $3.4 million.
MMX’s acquisition of porn domain specialist ICM Registry, which has renewal fees of over $60 per year, will certainly help the company towards its 2018 goal in the second half. ICM only contributed two weeks of revenue — $250,000 — in H1.
Remarkably, and somewhat counter-intuitively, the company is also seeing renewal strength in China.
Its .vip gTLD, which sells almost exclusively in China, saw extremely respectable renewals of 76% in the first half, which runs against the conventional wisdom that China is a volatile market
Hall said that .vip renewals run in the $5 to $10 range, so apparently TLD volume is not being propped up by cheap wholesale renewal fees. The TLD accounts for about 30% of MMX’s renewal revenue, Hall said.
About 60% of .vip’s domains under management are with Chinese registrar Alibaba. The biggest non-Chinese registrar is GoDaddy, with about 3% of the namespace.
More exposure to China, and specifically Alibaba, is expected to come soon due to MMX’s repurposing of the 2012-logic gTLD .luxe, which is being integrated into the Ethereum blockchain.
MMX said last week that some six million (mostly Chinese) users of the imToken Ethereum wallet will in November get the ability to register .luxe domains via imToken and easily integrate them with their Ethereum assets.
The announcement was made at the Alibaba Cloud Computing Conference in China last week, so you can probably guess imToken’s registrar of choice.

MMX stung for $7.7 million by crappy .london contract?

Did MMX take a $7.7 million accounting hit to renegotiate a crappy .london gTLD contract? It looks a bit like that to me.
Found in the company’s full-year 2016 financial results yesterday is the disclosure that it had to pay off an undisclosed gTLD partner after originally making “overly ambitious” predictions about its likely popularity.
The deal apparently had MMX — then under previous management as Minds + Machines — making guaranteed payments to its partner on the assumption that it would sell a lot more domains than it eventually did.
.london currently has about 56,000 names in its zone file, down from a post-launch peak of about 65,000.
According to its statement to the markets, MMX recorded a 2016 one-time contract restructuring expense of $3.8 million and has added a $3.9 million intangible asset to its balance sheet in relation to the contract.
That’s a total of $7.7 million, but CEO Toby Hall told DI that the cash payment was nowhere near that amount. He said:

in reality we have paid no where near that amount and much of this is the accounting treatment of a new contract that we believe has the potential to deliver future economic value to the business and will be covered from future revenues.

The gTLD in question is not named in the statement, and Hall also declined to name it in response to a DI inquiry, but MMX says of the contract:

In very early 2012, at the time when ICANN was still accepting new generic Top Level Domain applications, the then Executive Team entered into an overly ambitious agreement that it believed would provide value to the overall profile of the Group. The agreement had very significant financial commitments over the life of the contract and did not include any clauses that could allow the Group to renegotiate those commitments should the specific top-level domain not perform to the agreed financial projections. The growth of this top-level domain has not come close to meeting those expectations and the agreement has proven – and would have continued proving – to be a significant drag on the Group’s ability to generate positive cashflow from the given TLD.
In late Q4 of 2016 the current Executive team was able to successfully conclude renegotiations of certain components of the agreement by either restructuring or buying out certain financial commitments thus making it more economically viable going forward. As a result of the renegotiation effort, the Group has revised its modeling and believes that it can derive future economic benefit from the renegotiated contract. Accordingly, based on Management’s review, a portion of the buy out ($3.8million) has been expensed as a one-off restructuring cost while the remaining portion ($3.9million) will be capitalized as an intangible asset with future economic benefit.

All the evidence points to .london being the gTLD in question.
First, MMX says that the deal was entered into in “very early 2012”, which ties up with the timing of the request for proposals by the Mayor’s marketing office, London & Partners.
Second, MMX doesn’t have any other partner-based gTLDs that would plausibly have such ambitious commitments.
Third, MMX has previously stated that it was renegotiating some “burdensome” contracts. Last year, without relating it to a renegotiation, it said in a trading update that it was “encouraging to see an increasingly commercial and flexible approach from London & Partners, our Dot London partners”.
Fourth, word on the street back in 2012 was that L&P (which remember is affiliated with the London Mayor, an elected political office) had gone with tax-haven-based MMX rather than UK-based non-profit Nominet because MMX (then Minds + Machines) had offered the best financial incentives.
The scrapping of the old deal is perhaps another indicator of the hubris that accompanied the opening of the new gTLD program five years ago.
While L&P is the “owner” of .london, for want of a better word, in practice I gather that MMX runs it pretty much as if the gTLD was part of its regular portfolio.
The news of the contract changes were made in MMX’s audited 2016 results, which showed its billings doubling to $15.8 million during the year.
Revenue was $15 million, up from $6.3 million in 2015. Less partner payments, revenue was $13.5 million versus $5.5 million a year earlier.
The statement has half a dozen or more bottom lines, depending on what costs you exclude, but the one MMX wants us to look at is “Billings Operating EBITDA before one off restructuring costs”, which was $4.2 million compared to a loss of $6.6 million in 2015.
That, in other words, means that an unprofitable company has become a profitable one.
A lot of that has to do with the revenue from hundreds of thousands of .vip domain sales in China and a swingeing restructuring that led to headcount being slashed from 43 people to 20 people.
The company also sold off its registrar business to Uniregistry and started outsourcing its back-end functions to Nominet.
For 2017, the company has already disclosed two huge sales that will boost domains under management considerably, but at the risk of concentrating a larger part of MMX’s business outlook in just a few hands.
UPDATE: This article was updated a few hours after publication to clarify what MMX has said in relation to .london in previous trading statements.

A third of mayoral candidates using .london domains

Londoners are going to the polls today to select a new mayor so, as a Londoner, I thought I’d check out how many of the candidates are supporting the local domain name.
Turns out four of the 12 candidates have registered .london domains for their campaign sites.
The four are favorite Sadiq Khan (Labour), Sian Berry (Green), Peter Whittle (UK Independence Party) and Prince John Zylinski (damned if I know).
The remaining candidates, if they have dedicated sites at all, use a mixture of .com, .org and .net domains. Not a .uk to be seen.
Will this influence anybody’s vote? No. Has it raised the profile of .london domains? Probably.
Whoever wins the election will find themselves with a degree of control over the future of .london.
While the registry is basically managed by Minds + Machines, the ICANN contract is held by London & Partners, a not-for-profit promotional agency funded by the mayor’s office. The mayor is also a partner in the endeavor.
The M+M outsourcing contract was recently renegotiated in light of M+M’s financial woes, but details have not been made available.

Dot London auctioning 50 registry-owned premium names

Dot London is to auction off 50 premium .london domains over the next two weeks.
The names are all currently registry-owned, and include the likes of dentist.london, flats.london and coffee.london. The full list can be viewed here.
The auctions are scheduled to end on July 30 and all have £100 ($155) starting bids.
According to the registry, it has sold over 3,000 names from its premium list since its launch last year. Some live examples include golf.london and catering.london.
The .london gTLD has a tad over 63,000 names in its zone file today.

.london launch day biggest yet for new gTLDs, but did it miss targets?

Dot London Domains’ .london had just shy of 35,000 domains in its zone file this morning, after its first partial day of general availability.
That’s an addition of 12,421 domains over yesterday’s number, making .london the 11th most-registered new gTLD.
This makes .london — which in my opinion has had one of the best launch marketing campaigns we’ve seen this year — the most-successful gTLD, in volume terms, after its first GA day.
It has beaten the 33,012 names that .在线 (“.online” in Chinese) and the 31,645 names that .berlin had in their zone files at the end of their respective GA days.
.london domains are not particularly cheap, either. Minds + Machines sells at £30 ($48) a year and Go Daddy (which lists .london at the top of its UK home page today) sells at $59.99.
UK-based Domainmonster, part of Host Europe Group, performed well with a £34.99 ($56) annual fee.
There were 22,547 .london names claimed during the “London Priority Period”, a combined sunrise/landrush phase that gave first dibs on names to trademark owners followed by London residents.
The registry has not broken down the mix between sunrise and landrush, but I believe based on the paltry sunrise performance of every other new gTLD to date that the vast majority were landrush names.
The full priority period queue has not yet been processed — domains with more than one applicant are currently in auction.
Back-end provider Minds + Machines, recently told the markets that it expects about a quarter of landrush/sunrise names to go to auction, so we could be looking at something like 7,500 applications (as opposed to domains) currently in the auction queue.
What this may mean is that .london had roughly 30,000 applications during its priority period, about 20,000 less than it had predicted back in July.
Dot London Domains is closely affiliated with London & Partners, the PR machine for the Mayor of London, so it had resources and access to throw at an effective marketing campaign.

Crazy housing market reflected in .london landrush

The world’s insatiable appetite for property in London is being reflected in applications for domain names during .london’s landrush, according to the registry.
Just a few days before the landrush ends, over 30 applications have been filed for properties.london, Dot London said, and apartments.london and houses.london “are among the most sought after” domains.
The registry said:

Trades that serve the property industry are also proving popular, with addresses such as removals.london and scaffolding.london receiving numerous applications, while there are three times as many applications for estateagent.london as for lettingagent.london.

The property market in London is utter madness right now. The average price of a house here is £567,392 ($963,275), up over 12% on a year ago, according to Zoopla.
I could buy a three-bedroom semi-detached house in the town of my birth for the price of a parking space in London.
Apartments literally smaller than a snooker table were selling for £90,000 ($152,000) two years ago.
It’s madness, I tell you, madness.
While much of the house price boom can be blamed on overseas investors, many of whom leave their properties vacant, Dot London is at least giving the city’s residents special treatment in .london.
The landrush is being carried out simultaneously with the sunrise period. Both commenced April 29 and end July 31.
Trademark owners get priority, followed by applicants with London addresses. In the event domains are contested by multiple applicants with the same priority, there’ll be a private auction.
Dot London says that the most-popular landrush domain is nightlife.london, completely unrelated to property. It has more than 40 applications.