Funding the Association

To be effective the association must have both a representative membership base and also the funds to fulfil the vision and direction provided by the board. There is little point in running an association that either prices itself out of its market or does not have the buy-in of the wider industry at large.

The proposed fee structure is to be based upon the Class and category of membership. Annual membership fees range from as low as $250 for a small individual domain owner doing less than $10K in sales per year up to $25K for a large company doing in excess of $5m in revenue.

By having the annual fees linked to a Class and category (eg. A, B or C) of membership means that the association is affordable to the broad spectrum of the industry. From the previous article I indicated that the members within each of the categories can also nominate for board election to represent their constituency.

There are four major areas of the cashflow.
1.    Drivers – new members and total number of members.
2.    Income from membership fees – other potential incomes have been ignored.
3.    Expenses -  what it will cost to run a lean business with a reasonable CEO package.
4.    Profit and cashflow – results if the targets specified from the above are met.

The drivers outline the targets that the new CEO and board for that matter need to reach in terms of new members by category. After the initial push of gaining 41 members a typical month will mean 10 new members each month for the following 12 months. This will provide near enough to 150 members in the association by the end of 12 months. This does not count the “free” members from the “general user” category that would essentially sign-up for a newsletter.

The above drivers and fees then translate through to the income line of the association.

Finally, the expense are calculated and a monthly profit and cashflow is derived.



As can be seen from the cashflow the lowest point is around $90K positive and by the end of the 12 months there should be near enough to $120K in the bank. The total revenue for the association is $406K with $287K in expenses. This will fund a CEO and membership assistant plus allow ample funds for marketing and traveling to the various conferences around the world. It also allows a not insignificant amount of money for consultants (eg. legal advice, lobbying etc.).

The association will not have an office....I really don't think that it needs one. This avoids a lot of fixed costs and overheads.

So is it financially feasible to build an association based upon these numbers? Although more work may need to be done on the financial model I believe that it does indicate that our industry can support a thriving association. It really comes back to whether the wider community buys into the vision and principles outlined in the initial articles in this series.

There are two keys to building a successful domain name association:
1.    Having a working board – there is absolutely no point in having directors that turn up and haven’t given any thought to the association since the last board meeting. Board members need to be harnessed and put to work for the people that voted them into that position.

2.    Sourcing the right CEO – There are a lot of skills that this person will need to have. Corporate governance, team building, political savvy, respect of the industry and of course an ability to inspire others to join the association. If the wrong CEO is selected then I think that trying to meet the targets will fall largely on the directors…..this may be quite hard.

I know that this article has skirted a number of issues but I believe that it provides the bones from which a good discussion can be had to add the flesh. So please don’t be shy! I’d love any suggestions that you may have and how the association can be given new life and vitality.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He is the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face.
Click here to arrange time with Michael

This is the second in a multi-part series on how I would approach the establishment of a Domain Name Association. I must say that the feedback has been fantastic to date and that the discussion has been really valuable. I would encourage everyone to take part in the discussion.

The role of the board is to monitor the progress of the association so that it is in line with the guiding principles and vision. The following diagram illustrates the position of the board with respect to the principles and membership.

The board has 3 primary responsibilities:
1. Financial prudence and good governance to ensure that the organisation is solvent.
2. Fulfilling the vision via policies that benefit the different membership classes (more on this later).
3. Empower the executive with the necessary resources to meet the policy objectives

Members of the board may be part of a subcommittee that is involved in management tasks but when they report back to the board they need to act as directors.

In board meetings all directors of the association have a fiduciary responsibility to leave their external objectives (ie. personal and possible employer) and to work for the betterment of the association. This means that at times individuals may find themselves in a conflict of objectives. If this is the case the director will need to notify the board of a possible conflict and have it minuted that they have excused themselves from future deliberations on that particular issue. Typically, this will also involve the individual leaving the board meeting physical for a short time.

Issues such as the one above will need to be addressed as a part of the code of conduct that each and every director would need to sign prior to becoming a director.

Board Structure

Other than the CEO all board positions are for a maximum term of 2 years. Any director can serve for a maximum of 3 consecutive terms (ie. a total of 6 years) prior to having to rotate off the board. After being off the board for a term they may then offer their candidacy for election. This will then force a rotation in the board and ensure that fresh ideas are constantly being brought forward by new directors.

The board may initially be formed with a cascading terms (ie. some positions deemed as being already served for 1,2 or 3 terms) so that all elections for all board positions do not fall at the same time.

All board positions are only accessible either via:
1. Election in a particular category class.
2. Appointment by the board to assist in its proper functioning.
3. Chief Executive Officer

Under the guidance of the three overarching principles of inclusive, representative and transparent I would suggest the following structure for a fully functioning board. The category and classes of available board seats are derived from the various “freedoms” that are core to the vision outlined in part 1 of the series.

Members that can possibly be in multiple classes must choose which class they represent at the time of becoming a member. This means that members can ONLY represent a single class. Members with multiple associated organisations may only represent one class. For example, if a member is a part of a group of companies that has both a parking company and a registrar then they must choose which class that they represent. This is to avoid any individual company potentially seizing multiple board seats with different affiliated companies.

To be geographically inclusive there needs to be at least three continents represented on the board. If there isn’t then the board can use one of its two reserved seats and appoint a director from a region to fulfill this objective.

The classes of A, B and C represents bands of size (by revenue). For example, there may be 5 domain investor members that qualify for the class A director seat. Any of these member may offer themselves up for their class’s board seat. If there is more than one member offering their services to the association for a single position then the other members in that class may vote whom they would like to represent their class on the board. In the event that there is a tie the current board chairmen has a casting vote to break the deadlock.

No board seat is automatically awarded to any member that “pays” for the position. All members are treated equally in their class and all directors have equal voting rights within the board itself.

This structure for the board will mean that it is inclusive, representative and transparent. All members will have an opportunity to become a director, represent their membership class and elections will be transparent and open. This would then satisfy the guiding principles of the association.

I would like to make it clear that these are my thoughts on how I believe that a domain association could be established. This is not meant to be disparaging against any existing associations in anyway whatsoever (eg. ICA, thedna.org etc.). I’m sure that this article will provoke a great deal of thought and hopefully comment. It is my belief that it’s through open discussion that a better outcome can be achieved.

Over the last few months I’ve been doing a lot of thinking on the topic of establishing a domain industry association for everyone. The domain industry is being rocked by forces that as individuals we have little control over but as a corporate body we could directly influence.

In the following series of articles I would like to tackle the topic in the following manner:
1.    The associations vision and overarching principles
2.    Constitution, board and elections
3.    Purpose of the executive
4.    Benefits to members

I welcome any and all feedback on the topic as I personally believe that it is critical that we work together to achieve a better outcome for us all. I should also state up front that I don’t believe that I have all of the answers but that I am prepared to kick the ball into play.

Principles and Vision

When you think of successful associations they have a number of guiding principles that underpin the ethos of how the organisation functions, makes decisions and interacts with members. The following are proposed as the principles that should be central to a domain association:
1.    Inclusive
2.    Representative
3.    Transparent

Inclusive
The association should embrace all stakeholders from within the domain industry. Everyone from the end-user wishing to protect their intellectual property rights through to registries, registrars and monetisation partners. Policies ratified by the board need to be for the betterment of the future of the majority of the stakeholders – note that this doesn’t necessary mean all stakeholders.

Being inclusive also means that the association must be truly global. Although the USA founded the Internet, amidst the pressures of the cold war, it has now become a global utility for all of humanity. The structure and foundation of the association needs to reflect this migration.

Representative
As much as the association is inclusive it must also be representative. This means that the board must reflect all the stakeholders from all the geographic regions and not just the members with the biggest pockets. A truly representative board would reflect the structure of the membership and also be a hotbed of innovation solutions to what are sometimes intractable problems.
A lot more on the board later.

Transparent
One of the major problems with the domain industry is the lack of transparency. The association needs to be transparent in the manner in which it operates and as a matter of policy work with the key stakeholders to help change the way the industry behaves so that the industry can grow.

Vision

So what is the vision for the association? First of all it needs to be something that all stakeholders can embrace to a greater or lesser degree. Something simple such as:

“The freedom to be innovative in the development of online destinations with domain names.”

         
A key word in the vision is innovation. One of the many problems in the domain monetisation industry is that Google has sought to block innovation through legal means, ultimately control of the pages themselves and a lack of transparency of payments. The stifling of innovative approaches to monetisation needs to be urgently addressed.

I initially had the word business rather than destination but I believe that the internet is bigger than business. It’s about places that people want to find and explore. It’s about people that help other people and where everyone can have a voice….therefore they are destinations.

As I said in the introductory article, this will be a series that I hope provokes a lot of discussion….so feel free to contribute!

The Internet Commerce Association (ICA) has just altered its membership structure and the way that board members can be elected. I must admit that I applaud the efforts of the incumbent board in trying to juggle the various stakeholders but let’s try and unpack what they’ve actually changed.

There are four classes of membership:
Platinum - $25K/year and an automatic board seat.
Gold - $10 to 24,999/year
Silver - $5,000 to $9,999/year
Bronze - $1,000 to $4,999/year

What’s interesting is the way in which new board seats are awarded. For every $25,000 in revenue a new board seat is created and the gold silver and bronze class members can nominate a member or non-member to the position. There is an election where Gold members have 5 votes, silver members 3 votes and bronze members 1 vote.

From what I see of this structure is that it rewards those with the cash. If you have money then you can effectively buy a board seat at the platinum level. This works well for a commercial organisation that has profit as the motivation but I do not believe that it is healthy for a non-profit association.

In an association the motivation needs to be for the common good of the industry. When it can be seen that members can buy seats then it can be construed by the wider domain community that the association can essentially be “out for hire”. If EVERY seat is up for election then this issue can never arise.

By tying the number of board seats to the revenue line of the association means that as the association becomes successful then it will either have a HUGE board or the $25K hurdle is increased. This will effectively enshrine the “board seat for money” ethos. What I believe it actually means is that the ICA is planning, at its core, to remain a small association. I don’t really understand why you would do this.

Just think about this. Let’s imagine that the association grows and the revenue line becomes $500K/year. This means there will be 20 board seats which in my opinion is way too large. Even Jesus had 12 disciples and one of those didn’t work out too well!

The converse to the situation is if the ICA contracts during the hard times does this mean that the board shrinks in size? This is crazy! This is the time when the board needs to become highly active to ensure that the existing and new members appreciate the value proposition. So just when the association needs the board it slashes the number of positions to reinforce the downward spiral. Why would any association do this????

Now let’s look at the voting structure. The first thought that I have is when a new board member is voted to the board who do they represent? The current structure doesn’t have a representative side to the voting system….it’s all money based. Wouldn’t it be good to have the monetisation, sales, development etc. constituencies rather than just platinum to bronze? Elected board members would then know whom they were elected to represent.

It doesn’t take too long to work out that I can get 10 votes for $10K at a bronze level 6 votes for $10K at silver and 5 votes for $10K at a gold level. How does this make sense? It doesn’t. As soon as you tie money back to number of votes then you no longer have a truly representative association.

What would have been better would be to have 3 board seats plus the CEO for all four classes. This would provide 12 board seats. Each class can vote for the nomination in THEIR class with ONE vote per member. As the association grows then the board seats will become more precious and even prestigious.

Since there are less members in the Platinum class then they are more likely to get voted onto the board. The competition would potentially be fierce at the Bronze level but they can still be nominated and still be elected to the seats allocated to their class.

This is democratic, representative and fair. It detangles the money from the number of votes and resolves the tying of the revenue line of the association to the number of board positions.

So what has really changed with the ICA announcement? I’m not really sure. There was nothing about vision, values or issues that are currently being tackled on behalf of the industry.

Unless I'm not clearly understanding the ICA boards decision, I don’t think that they have really thought about implications of what they have proposed. By putting this out in the public domain as a decision versus a discussion document the ICA board is now committed to a direction that in my opinion will not inspire the industry to get behind them.

As always, I’d be more than happy to discuss any of this with any ICA director.

With the all-pervasive hysteria about the new gTLDs I feel like I’m going a bit against the flow. So why aren’t I getting into a buying frenzy and forking out wads of cash?

In a previous blog I talked about having a business model for each domain name that I own, the problem is I can’t see a business model with the new gTLDs.

Let’s just think about it for a second; they won’t have any traffic, with the glut of opportunities available they won’t really be that sellable and I don’t need another domain to build into business (I’ve got enough to last a lifetime!). Hmmm…..so what is the business model? How am I going to get my return on my investment? I’m not…plain and simple.

On top of there not being a business model I find that it’s also all about focus. Since 2014 started ParkLogic is has been going through a massive growth spurt and we’re in the middle of a major developmental project. We hope to have this ready for release at DomainFest at the end of March. I don’t want to lose my focus from ParkLogic on something that is more of a gamble playing the lottery.

So when you place your hard earned cash on the table ask yourself two simple questions:
1.    What is my return on my investment?
2.    When will this happen?

If you can’t ask these questions then I suggest that you attend TRAFFIC in Las Vegas and put your money on the roulette wheel. At least you may have some fun!