The day after announcing a deal to hike .com prices, Verisign threw domain investors under the bus.
Verisign (NASDAQ: VRSN) supplies .com domain names by maintaining the registry for these domains. That’s essentially its only job.
Over the past couple of decades, it has worked hand-in-hand with domain name registrars to promote .com to customers. It has also worked hand-in-hand with domain investors to help them acquire more domain names. It created tools designed to calculate the traffic from expired domains to help investors snap up more of them. It sponsored domain investor-focused conferences and held dinners with top investors.
Sure, there has always been an underlying current between these groups. Domain registrars and investors—heck, anyone who owns a .com domain—don’t want to see the price of .com domains increase.
But it’s been a reasonably good relationship. Verisign helped domain investors in their business while also trying to improve its already-rosy financial picture.
When it time came for Verisign to negotiate an extension of its Cooperative Agreement with the U.S. government, the company fought to get as much of a price increase for .com as possible. Domain investors and registrars fought for the status quo, which is no increase.
The domain community would actually prefer the contract to be put out to bid. The competitive price for operating .com is probably in the neighborhood of a dollar or two per domain, not $7.85.
But the nature of the contract between ICANN and Verisign is such that putting it out to bid likely isn’t possible. So the domain community wants to at least keep prices in check.
In the end, Verisign won. On November 1, 2018, the U.S. government announced an agreement that allows Verisign to increase prices 7% in the last four of every six years of each contract extension.
That 7% falls directly to the bottom line. Previously, the only way Verisign could increase its revenue was to sell more domains. Now, at the end of the current contract cycle, it will collect 31% more revenue per .com domain registered or renewed. Without lifting a finger.
It’s a sweet deal and disappointing to registrars and domain investors. Verisign flexed its might and, seemingly, got what it wanted from the U.S. government.
Which is why Verisign’s next move was perplexing. The day after Verisign announced its contract extension with price hikes, it published an inflammatory blog post that threw domain investors under the bus. It attacked two of the Verisign’s biggest customers, GoDaddy and TurnCommerce. It suddenly argued that domain investing was a bad thing. Verisign attacked the same people it previously took out to dinner and asked how it could help them with their domain investments. It was disingenuous at best.
That blog post was supposed to be the first of a series. It concluded with:
How can we ensure that the intended benefits of the .com price caps actually accrue to consumers? Stay tuned – that question will be tackled in my next blog post, where I’ll explore this question with industry experts. You’ll be surprised at how simple and effective some of the answers will be.
I was genuinely interested in what Verisign would suggest. I’ve never heard an alternative that would work, so I’m certainly interested in “simple” alternatives.
But the follow-on post(s) never came.
One year later, I remain perplexed as to Verisign’s strategy with its November 2 blog post. This post was ostensibly approved at the highest level of the company and by Verisign’s lawyers. It must have made for some awkward conversations when Verisign’s account managers had their next phone call with GoDaddy and TurnCommerce, asking them how they can help push .com.
After getting U.S. government approval, Verisign still needs to get ICANN’s approval to increase .com prices. That’s coming soon, and no amount of public comments will change it.
It’s fair to say that the relationship between Verisign and domain investors has never been more strained, but both parties still need each other.
The cobwebs in my mind are pretty thick this far back, so I’m likely to get some details wrong.
While Verisign owned Network Solutions, NS tried a marking campaign with one of the office “box stores” to sell domain names to customers. I recall it going no where, as most were still very clueless of domain names.
Domain Investors were, and still are, the ones marketing and selling its products, and the products of the other registries as well. Without domain investors promoting domain names, because of the financial incentive the arbitrage gives them, it is not at all likely that the industry would have grown as it did.
It appears in 2013 GoDaddy tried something similar, and when I do a search now no relationship between the two companies comes up so I ASSuME the attempt flopped again:
https://www.prnewswire.com/news-releases/officemax-teams-up-with-go-daddy-to-provide-exclusive-website-service-bundles-for-small-business-customers-187274571.html
With increasing price will come increasing number of domain investors, all spending more money, but each putting in less total amount because our numbers will increase.
If Verisign does not like domain investors now, just wait until price increases raise the number of domain investors by orders of magnitude and greatly reduce their average experience level. Price increases will result in professional domain investors reducing their reg counts, and those domains will move to inexperienced hands with a high churn rate among those inexperienced domains. We will probably watch lessor domain move from new domain investor to another year to year (oh wait, we see that now). Great income for Verisign, and a very poor experience for end users who might want those domains …
Your recent interview of GoDaddy is interesting, as they try to reduce the friction in the movement of domains towards end users. But end users are focused on their business, not the business of domain names. Someone willing to hold their hand will always be needed. After 20 years I still bang my head over some of the things we do in this industry, and a newbee is going to accept them with a smile? No ….
As a registrar who has spent much time on the phone with Verisign support (oh the stories I could tell), the idea that they understand endusers is a bit laughable. Their tech support people are hardly empowered to do anything always passing issues into an opaque black hole in which they are dealt. The same is true of Sydney, when our question was past to ICANN and they treated us with contempt for even asking the question. What was the question:
“How does ICANN serve the needs of end users?”
I understand another question, at another ICANN meeting received the same contempt, but I did not personally observe it happening. The question was:
“Question for each of the panels ICANN representatives: How many domain names do you personally have?”
Registrars and domain investors get it, registries and ICANN do not. Of course registrars are in a position of relative don’t care as someone is going to pay for the registration. Domain Investors, it seems, are the spot in the domain name hierarchy where priorities are most in line with end user needs.
Be careful what you wish for Verisign.
It’s only a matter of time, Verisign will be hit by a class action for selling $7.85 something that would cost only one dollar or two if another company was in charge of the .COM registry.
The class action will cost Verisign tens of billion dollars and i wouldn’t want to own Verisign stock when that happens !
Jack – how much time until it is “too much”. At some point the greed and shenanigans of both ICANN and Verisign will come to an abrupt end. It is a shame. I would welcome such a lawsuit and would gladly be a part of it.
Any law firm willing to start this class action ?
Count us in.
We will be refunded a fortune.
The sooner the better.
What are you going to sue them for? Trying to get the best possible contract for their shareholders?
The NTIA and ICANN will be added to the class action too.
Jack is right. There are plenty of material facts on the web to effectively deal with ICANN, NTIA and Verisign. The case is not about shareholders, including some prominent domainer(s) on the record..
ICANN is now a “supranational organization”:
https://www.investopedia.com/terms/s/supranational.asp
April 3, 2007 12:11 AM PDT: https://www.cnet.com/news/icann-may-be-looking-for-immunity-from-u-s-law/
“The closest thing the Internet has to a governing body seems to want the same kind of immunity from national laws that the International Red Cross and the International Olympic Committee have enjoyed for decades.”
“Dejargonized, that means ICANN could become largely immune from civil lawsuits, police searches and taxes, and its employees would have quasi-diplomatic privileges (such as importing items into the U.S. without paying customs duties).”
“Today, though, it looks more like ICANN will try to mimic the United Nations.”
They have succeeded, that is why they no longer even bother with the illusion of listening.
Not so for Verisign. However ICANN has given Verisign clear cover on this issue: Everyone is now the same, no price caps. Checkmate.
The trifecta Verisign, NTIA, ICANN is defrauding customers of billions of dollars EACH and every year.
That must stop NOW !
If the dotcom contract was put for bid with at least 10 competent companies bidding then Verisign would kill to be awarded the contract for $2 per domain instead of the outrageous $7.85 they currently charge !!
>outrageous $7.85
Seriously?
Being in business is also about your employees having a roof over their head and food on the table, and some assurance that will continue into the future. That is also good for your customers AND REQUIRED by shareholders.
Yes, a competitive bid is welcome, but the goal of sending profits to near zero will cause other problems. Its good to have a “healthy” income, whomever is running .com. What that number is is up for debate, but in my mind its long past time to argue the price MUST go down as $10 per domain year seems a common price point for a number of popular TLDs. Its adding zeroes to that number that is at issue, and .COM could do that and have very little effect on the industry. A $100 per domain year fee is less that one month phone service for most businesses. Its the upward pricing which we need to be concerned about.
a “common price point”? who are you? why are you arguing for price fixing in the domain name industry? you are clearly a part of the problem.
At $2, Verisign would still make a VERY healthy profit.