Verisign is the big winner as consumers face higher bills for .com domain names.
The U.S. Department of Commerce’s National Telecommunications and Information Administration (NTIA) has extended the Cooperative Agreement between it and Verisign (NASDAQ: VRSN). This agreement governs how Verisign is able to operate .com, which has a contract with ICANN to run.
The biggest element of the agreement is pricing. Previously, the agreement froze the wholesale price that Verisign could charge for .com domains. The new agreement still has pricing restrictions but allows for 7% price hikes in four out of every six years. Actual pricing must be negotiated with ICANN.
Those 7% price increases mean the price registrars pay for a .com could increase up to 31% every six years. They pass these costs on to their customers.
I’m still struggling to understand what NTIA chief David Redl got from Verisign in return for these price increases. The NTIA release states that Verisign has agreed to “operate the .com registry in a content neutral manner”, which might be a pat on the back to Ted Cruz, who was upset about the NTIA giving up a key contract to ICANN that gave it some theoretical additional control over the internet. But nothing changes here; Verisign has always run .com in a content-neutral manner.
Here’s who wins and who loses from the agreement:
Big Winner: Verisign – This is the most obvious. Nearly all of Verisign’s business is maintaining its monopoly contract to run .com. Every cent it raises prices drops directly to the bottom line. I have to hand it to Verisign; this deal will be a boon for investors. They have a contract to run .com that’s already well above market prices, and they will likely get to increase prices even further. Its stock is up 18% today.
Winner: Other Registries -When Verisign increases .com prices, it makes other TLDs seem more appealing. Other domains can be priced lower, and even those that are priced higher will be able to justify their prices to the marketplace.
Winner: ICANN – ICANN wants more cash in the bank, and what better way to do this than to renegotiate its contract with Verisign. ICANN will grant Verisign price increases in return for Verisign giving a bigger kickback to ICANN’s coffers.
Winner: Phil Corwin – The outspoken critic of Verisign laid out excellent reasons Verisign shouldn’t be able to increase .com prices when he worked for an advocacy group that represents domain owners. Then Verisign hired him, silencing a key critic. Think he gets a bonus?
Depends: Domain Registrars -This might seem counterintuitive, but some domain registrars stand to benefit from the wholesale price increases. Whenever Verisign has increased fees in the past, these registrars have used it as an excuse to raise their prices and blame someone else. History tells us that they tend to hike their prices more than the 7% that’s being assessed to them.
Other registrars will be hurt, especially ones that offer low-cost services or have customers with large domain portfolios. GoDaddy will be one of the hardest hit. It’s looking at millions of dollars a year in extra fees based on its portfolio alone, plus passing along fee hikes to all of its customers.
Big Losers: Consumers – Consumers will pay more for their .com domains. A very small business that has one or two domains won’t feel the sting, but in aggregate there will be a large hit to SMBs. Larger corporations, domain investors, and businesses that rely on lots of domains to make their business hum will directly feel the pain.
Check who in the administration bought large amounts of Verisign stock prior to the announcement. This administration is the most corrupt administration ever.
Do not bash the current Administration over events that took place before they came to office..The real issue is a previous Administration (we all know which one) who turned over the Keys to the US Taxpayer Funded Creation which is the Internet. Allowed ICANN to fall under control of International entities.. I would add knowingly did so because of the Protections US Laws provided to dissident anonymous free speech from any sector. Mucking around with the money/costs is part of the devolution of the web into a Crony Capitalist Dominated entity. Look at the effort to unmask the owners of web domains…Not a good thing granted nonetheless that was not started yesterday.
Back when the 2012 Cooperative Agreement was up for renewal, Larry Strickling (Assistant Secretary for the NTIA at the time) initiated an Inter-agency review and determined the economics of the no-bid registry contract were too lucrative.
Because of the market power of .com domains, Larry Strickling took away VeriSign’s ability to increase prices and froze them at $7.85 each.
Larry concluded this was in the best interest of consumers:
https://www.internetcommerce.org/dotcom_price_freeze/
VeriSign ended 2011 and 2012 with $141.1 Million and $322.7 Million in Net Income respectively. The base of .com domains was 106 million in 2012.
Now, in 2018 – because the base of .com domains has grown to 137.6 Million – VeriSign is projected to generate Net Income of $541 million on $1.21 Billion in revenue, with operating margins of 63.8%. All from a no-bid contract.
* Why did David Redl allow this price hike which only benefits VRSN and its shareholders?
* Did Mr. Redl conduct an economic study of the economics of the no-bid contract?
* Did Mr. Redl initiate an Interagency Review (what his predecessor did in 2012?)
* Did Mr. Redl hold a public comment period on the Cooperative agreement and .com pricing?
* Why did David Redl do this backdoor deal and not consult with any other stakeholders?
Most importantly – why did David Redl throw so much more money at VeriSign (already insanely profitable) and not take into consideration Internet consumers?
Consumers lose. Makes no sense.
What gives the Trump Administration the right to throw Billions in additional cash (pure profit) to a company operating a no-bid contract?
VeriSign was already enormously profitable with 63.8% operating margins.
So now the Trump Administration is handing out Billions in free cash flow without any justification or reason?
The big losers also will be those holding large numbers of .com domains, until they sell them of course but still could be a large increase.
Sorry, but your current admin is so damn corrupt it’s not even funny hunny.
Phil gets the sellout award.
I think this could be a win for some domain investors as well.
This may force them to look at their portfolios and start dropping some of the garbage names they have been holding for years
I agree with you Princess. I find there’s a silver lining in every cloud, and I make it my mission and my passion to find it. Someone mentioned “shorting” Huge Domains stock “if” it were publicly traded? I’d caution against that unless you know and understand their business model. As an investor myself, I just shorted one stock in my life and that was Dollar Tree, stock symbol “dltr”. As it turns out, I shorted it at around $50 a share because I thought there is no way they could continue making money selling “everything” for a dollar and make a profit while prices continue to rise. Well, I covered my short position when it went to $60 a share, but not before losing about $3,000. If I hadn’t covered it at the time, I would have lost over $10,000 if I were to cover my position today.
My point is, I’m pretty sure the folks at Huge Domains know what they’re doing, and all they need to do to continue to profit is sell just 1/4 pf 1% more domains each year to offset the industry price increases.
Princess, while I’m relatively new to the domain industry, I believe I’ve discovered the “silver lining” that works for me and will work for others. And most important, it’s NOT rocket science. I currently own 1,500 domains, and I’ve developed my own plan to sell my domains DIRECT to end users via two marketplace sites I recently hand registered, DomainGourmet™.com and DomainBlackMarket™.com. I’ve learned and know just enough to be a dangerous force for profit, and knowing me and my business background, only a fool would short my stock
Good luck Princess!
The .com brand is clearly a big winner. Investors pushed up market cap of VRSN by multiple billion dollars, and .com registry primary revenue/profit stream. Investors do not appear to be concerned that .com owners will no longer buy or renew due to price hikes.
It’s easy to see what to do at this point — at the next stock market collapse that erroneously pushes down the price of Verisign stock well below it’s intrinsic value, buy as many shares of Verisign stock as you can and HODL. It’s surely what Warren Buffett is going to do at that time (he already owns millions of shares of Verisign).
VeriSign might actually be shooting themselves in the foot, at least starting in 2 years and continuing on to about the 7-year mark. Then it might start growing again.
Look at how many new investors have piled onto this market in the last 5 years and bought all kinds of trash domains in .com.
This might cause a huge flush of trash domains that nobody would register anyway even if dropped. I see .com domains getting bid up in the auctions every day in which in my opinion will never have a buyer, even if dropped. I’ve been doing this for over 20 years so I think I know what I’m talking about. I have made all the mistakes these new investors have made the last few years.
It could be that we see a dip in .com registrations as all the new domain investors create a big domain dump.
After letting tons of my com’s and org’s expire over past several years (especially recently) i have noticed the vast majority of my drops are picked up by Huge Domains.
Not sure why they get them as most every name I dropped had basically zero ppc revenue and traffic, were not reg’d in other tld’s and received no sale inquiries over the years.
So i fail to understand how in the world “Huge Domains” is going to sell them, most of which they seem to have priced at $1,500 to $3,000. If you combine that bad sale outlook along with the upcoming 31% Verisign hikes it may be a good time to short HugeDomains stock now, Do they have exchange traded stock?
I say 2 years because that’s when the prices will probably start going up on .com domains.
Andrew…there’s another WINNER you left out known only as the;
DrivelKing™
Domaining seems to be declining more and more and on its way down the tube unfortunately, IMO. At least in part due to the upcoming huge and unwarranted 31% increase in a monopoly non-bid contract I am marking more and more domains to non-auto renew.
10 years ago I had well over 3,000 names, a few years ago was down to nearly 2,000 and with all my scheduled drops I will be down to 600 soon, with plans to take even more off auto-renew next year when I plan to be well under 500.
Andrew etal, I’m not sure why you attached “Trumps” name to the domain price increase, but I won’t go there.
I tend to disagree with your observation that consumers and “domain investors” will be the “Big Losers”. There will be losers alright, but those are the ones who run from this industry with their tails between their legs. If everyone were to run from this industry leaving only me and you Andrew, we’d be as rich as Warren Buffett and Berkshire Hathaway.
To expand on my lesson learned about “shorting” Dollar Tree’s stock (see my response to Princess on this thread) when it got to $50 a share before it eventually split and doubled years ago, I’ll share a personal story with you about Dollar Tree selling wine for $1 a bottle at many of their 14,000 plus stores Nationwide. About six years ago I was able to get Macon Brock, one of the founders of Dollar Tree to speak to the Va. Beach Kiwanis Club. While Macon died just a little over a year ago, he was considered by many the Sam Walton of the “dollar world”..At our meeting, when the question was asked, how do you keep your prices at always a dollar when stores like Trader Joe,s for example sold wine for two bucks, aka TwoBuckChuck now sells for 2.99? Macon’s answer was a big surprise when he said he just came back from visiting his California operation, and they were selling wine for just a dollar in their stores all over California (not sure if they’re still dooing it?). And he proceeded to tell us that some of our local Dollar Tree stores here in Virginia were obtaining liquor licenses, and they were to start selling wine locally for a dollar a bottle. Bottom line, we were amazed, and assumed for a moment the wine had to be rot gut wine or the kind of wine we use to drink when I was a kid like Boones Farm or Ripple wine (personally, I was more of a beer drinker). Actually the wine turned out to be pretty good. How so? When Macon explained to us how many wineries go out of business every year, we were amazed again. He went on to say many of the wines they bought were from the bankruptcy courts, and they paid from .20 to no more than .40 a bottle. I ask domainers reading this, how cool is that?
Andrew, there are several points I want to make here. First, consumers not unlike my self benefited from these wineries going out of business, and domain consumers and domain investors may also benefit while other domain investors run from the market due to the “Trumps (lol) price increases for domains. The second point I want to make is that seldom do “Headlines” tell the whole story, and more often than not there’s a lot more to the story when you start digging down…ever hear the expression, “There are two sides to every story”? The moral to this story Andrew is: “Drink more Wine”, lol…sorry, the domain DrinkMoreWine™ is spoken for or I would own it right now.
Bulloney☺