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Minds + Machines’ numbers show new TLD auctions are getting out of control

Highly contested new TLD auctions are likely ending well above $10 million.

Minds + Machines put out a press release today about winning the .law and .vip domain names at auction, and the numbers in it provide hints about how much companies are paying to win private auctions for new TLDs. If my math is right, these new TLD auctions are getting out of control.

The company won .law and .vip, but lost five auctions: .design, .flowers, .group, .realestate and .video. Its net cash inflow from the losses after paying for the wins was $6.2 million.

The .VIP auction was an ICANN-facilitated auction, which means we know the exact price: $3,000,888. That means that Minds + Machines grossed at least $9.2 million from losing the auctions, plus whatever it paid for .law.

The release doesn’t disclose much about .law, other than that one other party participated with it in the auction in return for a share of .law royalties.

Let’s assume for a moment that Minds + Machines paid nothing out of pocket for .law. Let’s assume the partner paid all the cash. (Remember, one partner agreed to contribute up to $15 million for a single one of the domains it applied for.)

That means Minds + Machines received $9.2 million from losing the five auctions.

Here’s how many applicants there were for each of the five domains it lost:

.design 8
.flowers 4
.group 5
.realestate 4
.video 4

Ignore (because we have no option) that the domains didn’t sell for prices exactly proportionate to the number of participants. Also ignore the small amount of auctioneer fees and refunds for withdrawing applications.

Take away one from each for the winner, and that means the $9.2 million was M+M’s 5/20ths share of the pot, or 1/4.

With the caveats in mind, this suggests that these five domains sold for roughly $37 million combined, an average of over $7 million each.

The big bogey in this math is how much Minds + Machines paid for .law. If it also contributed cash, then the average paid for these five domains is much higher. As an example, assume it chipped in just $5 million and its partner paid the rest. Then it received $14.2 million from its five losses and the five auctions grossed $57 million, an average of over $10 million per domain.

Again, I had to simplify things given the data I have. The proportionality of auction participants to final price is a big question.

But one thing is apparent: the prices paid at ICANN’s auctions last week might be considered relative bargains.

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  1. Tom G

    Registry applicants seem to be even more bullish than previously thought. Seriously, if .tech is worth 6.7 million, and Amazon beats Google for .buy at 4.2 million, what is .APP worth? .Art?
    If this trend continues, we’ll see auctions in mid 8 figures over the next year.

  2. Ali G

    Too many variables. It only requires one of the TLDs that was lost to be disproportionately expensive to throw everything out and there’s every chance that a TLD like realestate was that biggie. Still, too many variables to draw useful conclusions.

  3. Mark

    How do these private auctions work? Say there are 5 applicants for one string and the winning applicant pay 8 millions, does it mean the four losing applicants receive 2 millions each, no matter how much they bid?

  4. Robbie

    The blowback for these pricey extensions will come years later, if you read the TOS of many of the registries, they have the right to increase renewals by infinite %, and you only have a short window to renew for set amount of years. Most corporate users will miss this regardless, so establish your sites, pay your premium fees, and in a few years we will double your renewal cost, what are you going to do about it?

    Those millions get eaten up by exec salaries, big parties, and bonus payouts, when the auctions are over, where will the money come from, hiking up renewals…

    You can bet your bottom dollar, if another round comes out, the auctions will be run differently.

    • Bul

      Just what I was thinking. It seems that there are just way too many new gTLD’s coming out every day and more in the pipeline. And yet most seem to be having a bad start. What I don’t understand is how the applicants have made the math on ROI given the multiples VC money attracts.

      • Robbie

        The real numbers will be shown upon renewals, especially on GA day, many domainers will not be able to carry these from speculation phase to an eventual aftermarket if that ever occurs.

  5. Antony Van Couvering

    I can’t contribute to your auction price speculation, but I can say that I have seen no evidence that ICANN auctions are cheaper than private auctions. We have won private auctions for TLDs at prices lower than at ICANN auctions, but also at higher prices. I do not see a correlation.

    It should not surprise anyone that auction prices appear to be going higher, regardless of venue. We are now getting into strings with multiple applicants, which correlates roughly to assumed estimates of worth, which translates to price paid. In other words, TLDs that were thought to be better attracted more applicants, and it should not be a surprise that they are likely also to garner a higher price. Because the private auctions require the assent of all parties, the ones with fewer applicants were easier to arrange, and went out earlier. Now, months later, we are getting to TLDs with 4+ applicants and they should be expected to sell for more.

    – Antony

  6. Phil Buckingham

    Tom Tom , I totally agree. With 12 applicants bidding for .app our valuation calcs with numerous variables indicate $30M +

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