4 minutes reading time (790 words)

A Pragmatic View on the .org Sale

20191206_dotorg Ethos Capital purchases .org

I’ve been reading with interest about the sale of the .org registry by the Public Interest Registry (PIR) to Ethos Capital. The value of the deal is just shy over $1.1 billion and if you are to believe some people, the deal was done in a cesspool of corruption and scandal.

Escrow.com

What's in it for PIR? They are now funded to do good for the Internet in the long,long,long-term future without having to worry about running a registry. Could you imagine being on the board of PIR, facing the prospect of another round of extensions being released by ICANN and then having a billion-dollar opportunity fall out of the sky and into your lap? You would be crazy not to seriously look at it!

Now let’s think about the numbers for a second. A typical .org domain sells for $10 (to make the maths easy) and since they have roughly 10 million domains in the registry then .org generates a top line revenue of $100 million per year. Of course, this is shared with the registrar in a variety of different agreement structures but let’s imagine that it wasn’t.

By paying $1.1 billion for the business either Ethos Capital is possibly going to be looking for a long-term hold (ie. north of 11 years) of the business, plan on growing the number of domains or there is some other reason they purchased it.

Growing the registry is a long, hard road. The entire domain space grows by about 5% per year and .org is a small percentage of that. If they managed to grow by 200,000 domains (ie. 2% per year) it would be a miracle. This would only add $2 million to the top line revenue and doesn’t really change the ROI economics that much for Ethos Capital.

If I had a spare $1.1 billion, I would need more reasons to invest it into a domain registry than what appears on the surface. This got me thinking…..what else does a long-established domain registry have? And then it hit me….they have data.

If you ask me, the untapped value of a domain registry is all the DNS requests. These requests provide a snapshot of real human behaviour and the last time I checked; human behaviour influences all commerce. So maybe the Ethos Capital strategy is to mine the data and then flip .org to a hedge fund? Just a thought…..

If you read online, amongst all the machinations of a big deal like this are juicy conspiracy theories and gossip. Some are so far fetched that they would even shame an episode of "Gossip Girl" in their confounding audacity!

Such as the founder of Ethos Capital is Erik Brooks and he left Abry Partners earlier this year, which is the same firm that purchased the domain registry business Donuts. Also, the .org deal involved the former CEO of ICANN, Fadi Chehadé….how shocking!

I’m sorry but who cares? If you leave an investment company to start your own firm, then of course you’ll go after opportunities that you know about! Likewise, Fadi knows about the domain industry so why wouldn’t he try and earn a dollar by working in an industry that he knows?

Besides this, does anyone honestly believe that wealthy investors and institutions would fund a deal like this if there was any level of impropriety? If they did then it will come out in the end and everyone can tell me I was wrong but for now these two individuals haven’t done anything wrong…..so my advice is to stop all the conspiracy theories and speculation.

The one tangible fear that domain investors have is that .org will suddenly increase their prices. If your business depends entirely upon someone else not doing something, then you haven’t mitigated your risk far enough. There are many, many other extensions (with more on the way) that investors can buy into if they honestly believe that a .org price increase will threaten their livelihood.

From a number’s perspective, increasing the price by as much as 30% will hardly budge the ROI for Ethos Capital. I wouldn’t be surprised if they still didn’t do it though….it’s free money with little downside risk. I don’t imagine that many not for profits will drop their domain because of a few dollars added to the annual price.

If you have big, well-funded players stomping up lots of cash to purchase assets in our industry then it’s a great endorsement of its health. In my opinion, this is a deal that each of us should be excited about rather than bemoan…..you never know, some of the cash may splash in your direction.
 

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Comments

bmugford on 07 December 2019
A Pragmatic View? Please...

"The one tangible fear that domain investors have is that .org will suddenly increase their prices. If your business depends entirely upon someone else not doing something, then you haven’t mitigated your risk far enough. There are many, many other extensions (with more on the way) that investors can buy into if they honestly believe that a .org price increase will threaten their livelihood."

That is not just a fear to domain investors. Now price caps have been removed, while ICANN completely ignored the community feedback, the .ORG registry is in the hands of a private equity firm. There are no registrant protections in place.

This firm has many obvious shady connections to former ICANN leadership and insiders. It is clearly a revolving door here. ICANN is subject to regulatory capture.

Is there anything stopping the registry from charging thousands of dollars a year if they wanted to?
Is there anything stopping them from charging individual premiums?
Is there anything from stopping the registry from being flipped to another company that might have different polices when it comes to pricing or censorship?

"Trust us" is not a protection.

ORG is a legacy extension have have been around since the dawn of the internet.
.ORG predates the new gTLD's and should not be shoved into that box.

What has happened here is simply not right. It is placing one stakeholder above the other millions.

There is no secondary option for registrants. An .ORG registrant with many years of history can't just easily switch to some other extension. It is silly to even suggest that.

While technology costs are driving operating costs down, the cost for registrants are going up thanks to a de facto monopoly. That is not right.

Brad

"The one tangible fear that domain investors have is that .org will suddenly increase their prices. If your business depends entirely upon someone else not doing something, then you haven’t mitigated your risk far enough. There are many, many other extensions (with more on the way) that investors can buy into if they honestly believe that a .org price increase will threaten their livelihood." That is not just a fear to domain investors. Now price caps have been removed, while ICANN completely ignored the community feedback, the .ORG registry is in the hands of a private equity firm. There are no registrant protections in place. This firm has many obvious shady connections to former ICANN leadership and insiders. It is clearly a revolving door here. ICANN is subject to regulatory capture. Is there anything stopping the registry from charging thousands of dollars a year if they wanted to? Is there anything stopping them from charging individual premiums? Is there anything from stopping the registry from being flipped to another company that might have different polices when it comes to pricing or censorship? "Trust us" is not a protection. ORG is a legacy extension have have been around since the dawn of the internet. .ORG predates the new gTLD's and should not be shoved into that box. What has happened here is simply not right. It is placing one stakeholder above the other millions. There is no secondary option for registrants. An .ORG registrant with many years of history can't just easily switch to some other extension. It is silly to even suggest that. While technology costs are driving operating costs down, the cost for registrants are going up thanks to a de facto monopoly. That is not right. Brad
mgilmour on 08 December 2019

I tried to write this article with a very pragmatic perspective. I didn't say whether I liked the outcome or not....only that I was being pragmatic about the various aspects of what has happened.
This means, I viewed how the sale would potentially impact my own business and unless .org was goingt to do something really silly with the pricing then I came to the conclusion that it would have little impact.
That being said, pricing based upon metrics such as perceived success of an online business would be VERY BAD for the Internet. For instance, what is google.com actually worth? $10/year or would they pay millions per year?
Definitely agree with you that "trust us" is not a protection.

I tried to write this article with a very pragmatic perspective. I didn't say whether I liked the outcome or not....only that I was being pragmatic about the various aspects of what has happened. This means, I viewed how the sale would potentially impact my own business and unless .org was goingt to do something really silly with the pricing then I came to the conclusion that it would have little impact. That being said, pricing based upon metrics such as perceived success of an online business would be VERY BAD for the Internet. For instance, what is google.com actually worth? $10/year or would they pay millions per year? Definitely agree with you that "trust us" is not a protection.
Guest - page howe on 07 December 2019

pragmatic???

i think you lose the concept Vinf Cerf gave .org to the Internet Society, then said we should cash out.

Now we've we lost a Verisign competitor to show registry prices are less than what they were, lower .org prices, reasonable stewardship. and moves to make the standard registry agreement better for registrants..

they are a society doing whats best for them, then telling us what's best for the internet

the phrase is dont piss down my back and tell me its raining...

Page

pragmatic??? i think you lose the concept Vinf Cerf gave .org to the Internet Society, then said we should cash out. Now we've we lost a Verisign competitor to show registry prices are less than what they were, lower .org prices, reasonable stewardship. and moves to make the standard registry agreement better for registrants.. they are a society doing whats best for them, then telling us what's best for the internet the phrase is dont piss down my back and tell me its raining... Page
mgilmour on 08 December 2019

The question is whether the Internet Society should run any registry....or whether they should use a war chest to promote the Internet and defend the rights of ALL registrants.
I never saw .org as a Verisign competitor. I'm also a firm believer that if a legislated monopoly raised prices or dramatically changed payment terms (see comment above on google.com) then there are appropriate legal ways of dealing with the problem.

The question is whether the Internet Society should run any registry....or whether they should use a war chest to promote the Internet and defend the rights of ALL registrants. I never saw .org as a Verisign competitor. I'm also a firm believer that if a legislated monopoly raised prices or dramatically changed payment terms (see comment above on google.com) then there are appropriate legal ways of dealing with the problem.
Guest - Keith on 07 December 2019
Respectfully Disagree

Well thought out and fair enough assessment.

But couldn't Ethos just as easily reduce prices by a few dollars, put some marketing effort into bringing more users online, growing internationally, our industry, making the Internet more diverse, inclusive and vibrant. Everyone would thrive, not just Ethos Capital. Grow the pie, not just slice it up for themselves to hog up.

That is the dot org spirit. The dot org/nonprofit spirit is not to raise prices as high as the market will afford and then milk dot org like a cash cow.

How is that good for the registrants? For the prospective registrants overseas for whom $15 or $25 really does make an impact financially? Won't it just chase them away from domain names and on to stand-alone platforms such as Facebook.

Do you think that is good for the domain industry as a whole?

Well thought out and fair enough assessment. But couldn't Ethos just as easily reduce prices by a few dollars, put some marketing effort into bringing more users online, growing internationally, our industry, making the Internet more diverse, inclusive and vibrant. Everyone would thrive, not just Ethos Capital. Grow the pie, not just slice it up for themselves to hog up. That is the dot org spirit. The dot org/nonprofit spirit is not to raise prices as high as the market will afford and then milk dot org like a cash cow. How is that good for the registrants? For the prospective registrants overseas for whom $15 or $25 really does make an impact financially? Won't it just chase them away from domain names and on to stand-alone platforms such as Facebook. Do you think that is good for the domain industry as a whole?
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