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Oh my, Verisign is actually scared of new top level domains!

Company sues .XYZ and claims its marketing is hurting .com.

If you listen to any of Verisign’s quarterly investor calls, you’ll often hear analysts asking what new TLDs are doing to .com.

Well, new TLDs are creating confusion, the company says. That confusion isn’t really hurting .com. Maybe .net gets caught up in the confusion, but that’s about it.

Actions speak louder than words, though, and Kevin Murphy wrote about proof today that Verisign must actually be a bit concerned about .com in the wake of new TLDs.

Verisign has sued .XYZ and its founder, Daniel Negari, for disparaging .com and allegedly falsely inflating the company’s success.

Verisign takes issue with Negari stating that it’s impossible to find the .com consumers want, that .xyz is the next .com, and a whole bunch of other marketing hyperbole.

It seems to be particularly insulted by a video that seeks to show that .com is old and .xyz is the new cool thing.

I thought it was April Fools’ Day when I first read the Domain Incite article.

Does Verisign really think .XYZ poses a threat? Why else would it file suit?

By filing this lawsuit, Verisign must be concerned that people saying .com is old and stale is actually resonating with consumers.

Verisign itself is a fan of marketing that leaves out the big picture. It pitches that over 95% of five character .com domains are available, and over 99% of six character domains. While true, it leaves out the important part that this includes silly combinations of numbers, letters and hyphens. Remove the digits and hyphens and the number of available .com domains drops precipitously, a fact Verisign conveniently leaves out.

I’m a bit dumbfounded by Verisign’s move here. Now that it’s out in the open, I don’t think Verisign can plausibly deny that it’s concerned about new TLDs. Verisign is alleging that Negari’s .xyz marketing has actually harmed Verisign and .com. You can’t backtrack on that.

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  1. David J Castello

    IMO, dotXYZ may be guilty of deceptive promotion, but not deceptive advertising. Is there a legal difference between the two? That’s for the courts to decide. Of course dotXYZ is going to claim they are the heir apparent and a viable alternative to dotCOM. It’s completely silly, but they have the right to say whatever they want and let the free market decide.

  2. Acro

    It’s not a hyperbola that all the good .coms are taken. We are talking about reg fees, not the secondary market. The video in Murphy’s coverage that allegedly triggers emotions of unfair marketing isn’t disparaging at all. Sorry, but I’m on the side of XYZ here. Whether their domains can become a viable alternative to .com and .net managed by Verisign is another story, what matters is that their gTLD *is* an alternative when the .com is long gone. I’m sure there’s more to that lawsuit than we know but I’m all against monopolizing the Internet name space or any other industry.

  3. Mike

    I am happy when I sell “a” .com domain ,not only bexause of the money but also because that domain will also then reinforce the use of .com as “the” tld for serious companies .Infact sometimes I am not too worried if I have undersold it and gotten less US$ than I could have because as long as it is end user they will then go ahead and advertise it and increase .com publicity. Maybe domainers have been just tooooo good in registering .com and therefore there is not enough end user use ?. A parallel would be a species of animal kept only in zoos. Only when it “escapes” from the zoo into the wild will it breed and become prolific. Perhaps we need a few more .com to “scape” from domainers portfolio’s and into the hands of end users who will use them on TV /News advertising and then create more knowledge of and demand for .com ??.

    • Acro

      Dot .com does not need any publicity, more than what it already has. Let’s be frank here, most end users associate .com with anything related to domain names. Although, I’ve heard the expression “where do I get my GoDaddy?” as well, in reference to a domain name. Many quality domain names are held by companies as a generic extension to their products and brands, too numerous to mention here. So ‘domainers’ aren’t the biggest force that holds onto domain assets for reselling. On the other hand, the introduction of thousand plus gTLDs solves the keyword issue; if you *must* have that ‘Nevada’ keyword as in the commercial, you will get the .XYZ or .guru for all I care. I’d like to see this lawsuit thrown out by the judge.

  4. Joseph Peterson

    Most people hearing about this lawsuit probably won’t take the time to read Verisign’s complaint against XYZ. But I would strongly recommend doing so:

    http://domainincite.com/docs/verisign-v-xyz-complaint.pdf

    There are basically 3 prongs to Verisign’s complaint:

    (1) XYZ says it’s impossible to find good .COMs.

    (2) XYZ inflated its registration numbers artificially yet continues to point to those numbers as evidence of consumer demand, thereby deceiving consumers.

    (3) XYZ cites various 3rd parties (such as NPR) as if they had endorsed .XYZ as the heir to .COM even though they said no such thing. This again deceives consumers.

    People who feel sympathetic to XYZ will focus on #1. And on that count, I too think Verisign is out to lunch. Clearly, when XYZ says it’s “impossible” to find .COMs that’s hyperbole and not a case o knowingly spreading false information. Likewise, filming a video that implies .COM is an old clunker parked by the curb while .XYZ is a 6-figure sports car (though absurd) is entirely within XYZ’s rights to free speech. Any court ought to throw out this particular complaint as groundless.

    But the other 2 complaints are very serious. I for one have long wished to see XYZ sued for these very reasons; and, in my opinion, Negari deserves to be found guilty. I would have loved to see a class action suit representing .XYZ registrants go after the registry. But if Verisign wants to, that’s superb! Deceptive practices on the part of the XYZ registry would have hurt domain registrants, of course; but Verisign itself would be affected as consumers misled by Negari spent their money on .XYZ instead of .COM.

    No, Verisign hasn’t suffered grievous harm since bona fide .XYZ registrations are far outweighed by bogus .XYZ registrations … and even more so by .COMs.

    But Verisign is going after XYZ because of what looks to me like the company’s ongoing attempt to deceive the public. Versign deserves our respect in this, since they are the only group holding XYZ to account in a legal setting. Verisign’s complaint about the car commercial is just padding or ill judged marketing. Set it aside.

    Take a look at the actual charges. Here are some excerpts:

    1.

    XYZ claims: “Coined the next .COM by NPR and VentureBeat”

    NPR actually said XYZ “could try to become the next .COM.”

    VentureBeat actually expressed skepticism: “Interestingly, .xyz’s own website is at a dot-com address, xyz.com. Go figure.”

    2.

    Long after the .XYZ robo-registrations were being widely discussed, Negari has continued to point to XYZ’s numbers as if they indicated meaningful market success. That behavior appears to many of us to be knowingly deceptive. Undoubtedly it has induced some consumers to buy .XYZ who would not have done so if given the facts:

    “We are now the number one new [g]TLD in the marketplace”

    “.XYZ has received the most registrations of all new gTLDs”

    “It seems I aimed too low in my ambitions of .COM, .NET, .XYZ, as it has now become .COM, .XYZ, .ORG!”

    “In nearly every relevant metric for success including registration
    numbers xyz leads the pack”

    Why does this matter? Because deceptive advertising isn’t and shouldn’t be permitted! Verisign’s argument isn’t something that should be dismissed lightly. Their claim sums things up as follows:

    “The Lanham Act prohibits deceptive advertising and prohibits advertisers like XYZ from making any claim, in words or in substance, that contain express or implied falsehoods”

    and

    “XYZ and Negari’s deceptive promotional statements, as described above, have been widely disseminated in interstate commerce sufficiently to the relevant purchasing public so as to constitute commercial advertising under the Lanham Act.”

    and

    “XYZ and Negari’s false and/or misleading statements offact have actually deceived a substantial segment ofthe audience exposed to it, or have the capacity for such deception.”

    and

    “The deception caused by the false and/or misleading statements of fact, as described above, have, or are likely to, influence domain name registration purchasing decisions.”

    and

    “XYZ and Negari have acted willfully, recklessly, intentionally, and wantonly in intending to deceive domain name consumers.”

    I regard each of those claims by Verisign as 100% true. So before you regard XYZ as a persecuted lover of free speech, ask yourselves which of those allegations against Negari is untrue. Remember the robo-registrations. Look at how Negari has used XYZ’s numbers as leverage to sell .XYZ to the public. Look at how NPR and Venture Beat are (apparently) misrepresented. Isn’t this a large-scale pattern of flagrant deceit?

    There ought to be consequences for deceptive advertising. And if that is what XYZ has engaged in, then we should be grateful to Verisign for squashing a pernicious bad actor. No class action lawsuit was in the offing. Someone had to do something, and Verisign looks to be the only organization willing and able to make the case against XYZ.

    • John Berryhill

      You know, I lost count of how many times I said, “Daniel, go with the mail-order puppy ad instead.”

      But did he listen to me? No.

      I know you’d be standing by .xyz if only they went with the puppies.

      • Joseph Peterson

        Ha!

        I defend XYZ’s car ad 100%. Nothing wrong with it at all (except for the underlying premise, that is). Verisign looks ridiculous for objecting to it.

        Verisign ought to have focused on the other complaints exclusively, since they’re quite solid.

        Daniel Negari has the right to call .COM a dinosaur and to use hyperbole as a method of free speech.

        He shouldn’t be free to knowingly deceive consumers about the implications of .XYZ registration volume. Nor should his company be allowed to sell its wares to consumers based on implied endorsements by National Public Radio if such endorsements never took place.

    • h4ck3r

      “.COM added over 30 million domain names to the base in 2013″

      Verisign is going to complain about .xyz inflating numbers by 700K or so? I think Verisign just claimed that a jump from about 140million to 146 million is 30 million!

      “millions of customers find the .COM domain name they want every quarter”
      In 2014 the number of domains went up under 3 million. Accounting for drops we could perhaps say that a million were registered a quarter – but a millions (PLURAL) of customers?

      Who’s the biggest liar here?
      .XYZ inventing 700K+ domains in advertising
      or
      Verisign inventing 100Ks of customers and millions of domains in a legal document?

      As for fair competition? I believe between .xyz and .com – only one of these resulted in more or less a monopoly on the back of a no-bid contract.

      Verisign look like idiots unless I’m missing something.

      • Joseph Peterson

        @h4ck3r,

        Yes, you’re missing something.

        These comments of yours are word-for-word the same as your remarks over at DomainIncite.com.

        Since you were refuted there, it would be redundant to respond to you again here (or at any other blogs where you paste carbon copies of this diatribe).

        • h4ck3r

          Not word-for-word but very much similar. All these blogs look the same to me.

          I thought I posted here but I was over there and I didn’t see the comment “under moderation” as I change devices. Not intentionally filling the internet with duplication.

          • Joseph Peterson

            Ah, I can see how that happens. Sorry for being snarky.

            Basically, you’re mistaken about the numbers. Suggesting that Verisign has lied about those numbers is therefore unwise.

            You’re looking at a net add, but Verisign has reported between 7.5 and 8.9 gross .com + .net ads per quarter since the beginning of 2010. So their 30 million figure is accurate. And, what’s more, it’s the relevant number because it’s the number of hand-registrations.

            Verisign is making the argument – correctly – that if 30 million .com domains were hand-registered during 2014, then it isn’t true that all the good .com domains are already taken. Many of them are taken, and many of those are for sale.

            XYZ is exaggerating the situation in order to sell its wares, and I think that’s fine actually. But it isn’t fine if XYZ deceives consumers about its registration numbers or pretends that it has received endorsements from NPR. We shouldn’t be ok with that.

            As for Verisign’s price increases over time, well, at least they have price caps. To me .com and .net look very affordable in comparison to the average new gTLD. (I just renewed some at $99 per year a few minutes ago.) It’s my understanding that the nTLDs may be able to raise their renewal fees unchecked. So it’s a bit ironic that Verisign would be the target for this particular criticism.

        • h4ck3r

          Your numbers over there are totally misrepresentative.. unless I just keep missing stuff.

          I won’t post on this side anymore and leave it over there.

          Seems a waste of effort to post twice here and there… or if .xyz is counting, 20 times… and if VeriSign is counting, 14 million or so times.

          • h4ck3r.com

            Last comment because for some reason my criticism of VeriSign is a diatribe 🙂

            The comment on the price increase was more to do with the “no bid contract” and the favorable quasi monopoly position that VeriSign has been given making the argument against .xyz all a bit rich.

            The price protections are, in general, a positive thing; however, it’s only until 2018 when the US Dept of Commerce turns it over to IANA (last time I checked).

            I also don’t respect claims of exaggeration when the same is done in the court filing no matter how you want to interpret he numbers they provide.

            As for NPR – that’s totally wrong but it’s NPR that is hurt by that association not VeriSign. If this suit does help NPR then I’m all for it as I’m a supported of NPR.

            Peace Out. Sorry that I appear to have agitated you. We just have different views and I disagree with yours. I do understand and appreciate that you are trying to find the moral high ground though and that is at least somewhat commendable.

            Last comment as the sky is grey and I want to go out before the weather turns.

  5. KC

    I like confusion, fear, concern, or whatever that makes people worried. In fact, I like bad news because there will be opportunities.

  6. jennifer

    .XYZ is a serious joke, but they WERE trying to paint themselves as
    the “next” .com and big thing. Basically they were implying that .com
    was the old domain way and hey .xyz was the new stupid way. whatever.

    the .com registry is what has built a multi-million dollar domain industry
    and everyone who has ever had any success in the domain industry
    owes tribute and respect to verisign for .com afterall it is what started
    it all.

    Think about it , MULTI BILLION dollar registries like Go Daddy and
    1-1.com, ENOM etc. wouldnt even exist if all the public had to chose
    from was.XYZ .

    Personally, I am glad someone sued .XYZ, really someone needed
    too for all the crooked BS they were trying to pull on domainers if
    nothing else.

    Although Im certain nothing will seriously become of it, except .xyz will get
    maybe even more undeserved attention.

    Of all the dumb extenstions released I think personally .XYZ made the
    least sense. Although I do like the “band”

  7. David

    Not a good look for Negari after being one of the main defendants in the massive Facebook cybersquatting case…

    • h4ck3r

      But it’s based on the following:

      “liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”

      It’s hard to see how Verisign was damaged given that (a) Verisign was never mentioned and (b) Their numbers, according to their own suit, haven’t been changed at all.

      The act is not about consumer protection – it’s about brand protection. I hope this gets massive play and we can all learn about how Verisign has made lots of money from the American public through a no-bid contract with built in 7% increase in price revenue in a quasi-monopoly.

      Perhaps a reverse suit that suggest unfair competition is in order? How can .xyz compete with .com with the current method of contract management? Maybe in 2016 we can see the real $hit hit the fan by opening it up. Maybe Mr Schilling would like a shot at running the registry…. it’s not the first conflict of interest in this industry.

      I don’t get the focus on small .xyz bull$hit when so much else is going on.

  8. luvdomains

    To me it looks like some people are living in denial about the ever changing world including the internet. All i see is reminders of “Kodak Forever” and “Digital is Bad” while the boat is already sailing.

    • Joseph Peterson

      @luvdomains,

      I don’t think so. This isn’t a case of Noah’s arc … either climb aboard or drown with the sinners.

      Most domain investors I run across day to day are pursuing a mixed strategy – investing in legacy gTLDs, ccTLDs, and (to a lesser extent) new gTLDs simultaneously. That includes me.

      A few people stake out extreme all-or-nothing positions, but they’re mostly cranks. Why not take a nuanced view?

      To see this lawsuit against XYZ as though it were some reactionary war of .COM versus new gTLDs is to miss the point entirely.

      The complaint isn’t about the new gTLDs as such. It’s about specific misleading claims made by the XYZ registry … the XYZ registry alone, apart from all other nTLD registries. This isn’t some partisan fight about innovation versus tradition. Hardly! It’s about spurious registrations and pretended endorsements, allegedly used to deceive consumers.

      False advertising is false advertising. In any industry, lawsuits are an important deterrent against fakery.

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