Domain names are cheap. That’s why they’re valuable. A .ORG domain costs under $20 dollars. Depending on promotions you can even get them for free. It’s the perfect hook.
Domain names are something you actually need. Usually they are one of the first things people buy when they are starting something new online. Domains are a great way to get you into the store so you walk out with more than you planned to. Almost every website builder from Wordpress to Shopify sells domain names.
People have been predicting the death of domain names since I started working with them in 2005. And every year, people just keep on buying them. This year the number of domain names online grew by 4.4 percent. There’s currently just under 355 million of them (Verisign). People also love to hang on to domain names. The .ORG renewal rate is almost 80 percent.
The reason the renewal rates are so high is that it is just terrible to change your domain name after you build on it. One company said it lost 20% of its revenue after switching domains.
Greenpeace took in $36 million in revenues in 2018, mostly from donations and other contributions. Even halving this number to a conservative 10% revenue loss means risking $3.6 million dollars for Greenpeace to switch from .ORG.
The low cost, stable growth and high renewal rates make domain names a magnificent opportunity. Almost all of the 16 startup metrics Andreessen Horowitz thinks are important depend on underlying drivers that domain names excel at delivering. That’s why so many domain name businesses have been purchased by private equity firms in the last few years, one of the most notable being Neustar in 2017.
The nice thing about domain names is that small increases in price can have huge impacts on your bottom line. Most people wouldn’t even notice a $1 dollar price increase on an annual fee that is set to auto-renew.
But for the owner these small price increases are amazing. The high renewal rate of .ORG means that for every $1 increase the long term value of your customer rises 10 percent, from $50 to $55. You basically wave a magic wand and drive a 10 percent annual increase not only in your bottom line, but in the overall long term value of your annuity.
Ethos capital is fine sticking with $1 a year price increases, because that’s already an incredible return on investment. As Cory Doctorow says on Boing Boing, would you jump at the opportunity for a very low risk 10% a year return? Yes, you would. Would you run screaming from any bank offering you a mortgage with an interest rate that increased by 10% a year, every year? Yes, you would.
That’s the “concession” being offered to nonprofits by Ethos and PIR. It’s positioning a win as a painful concession. This opening stance tells you everything you need to know about their intentions.
It’s also why the pricing issue is so problematic. Like the secret sale, it’s as much about how it is being done as it is about the cost. There is simply no justifiable reason to increase .ORG prices other than to extract rent from nonprofits. The size of the increase is irrelevant.
.ORG prices should be going down, not up. The Internet Society delivers between $3–5 million a year to the Internet Engineering Task Force (IETF). This critical institution is essentially the custodian of the Internet’s DNA.
How ISOC can possibly justify giving themselves more than the IETF is something that still remains beyond me. Yet, the Internet Society has been extracting tens of millions of dollars a year from nonprofits. They have taken with near total disregard for the very people they take from for almost 20 years.
It might be because not a single major nonprofit sits on their board. Internet Society became so good at taking that it came to think of the money as theirs alone. It was their right not only to extract money from non-profits, but to sell that right to anyone they wanted. They came to believe that so thoroughly that they didn’t even anticipate the negative reaction to a secret sale of “their business”.
At the same time the now farcically named Public Interest Registry has been raising prices. This is despite nearly 12 years of 12% annual revenue increases. Any investor would have been howling for dividends and share buybacks at this point. Yet it seems never to have occurred to either ISOC or PIR to pass on their windfall gains to nonprofits.
Internet Society and PIR forgot completely about their social license. It’s not a new notion. In 2014, John Morrison wrote in the Guardian:
We need to think more profoundly about how business relates to the pre-existing social contracts that bind societies and legitimise those that represent us at the international, national or local level.
John goes on to argue:
Social license can never be self-awarded, it requires that an activity enjoys sufficient trust and legitimacy, and has the consent of those affected.
With the twin shocks of removing price controls followed by a secret sale, Internet Society and Public Interest Registry have effectively destroyed their social license to operate. Nonprofits are now justifiably asking themselves, what next? Will you sell our data? Will you censor our websites?
The amount of volume of oil and dispersant we are putting into it [the Gulf of Mexico] is tiny in relation to the total water volume.”
That little quip cost Hayward his job. Just like BP will never rebuild trust in the Gulf of Mexico, Ethos and PIR can never rebuild trust with nonprofits. Not all contracts are written down. In fact, the most important ones — social contracts like marriage — usually aren’t. That’s why they are so easy to break and so important to uphold.
Internet Society might stop the sale, or they might not. But one thing is certain: everyone knows they’ve got a cheatin’ heart, and no one is going to trust them, or their mistress, any time soon.
Your cheatin’ heart will make you weep
You’ll cry and cry, and try to sleep
But sleep won’t come, the whole night through,
Your cheatin’ heart will tell on you.
— Hank Williams