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.
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.