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ICANN New gTLD Auction Proceeds Approaching $30 Million by Philip Corwin, Internet Commerce Association

Internet Commerce Association logoWhile the debate continues as to whether most new gTLDs are a sound long-term investment for their registry operators, there’s no disputing that the program has been an economic boom for ICANN. The 1,930 first round applications each required an application fee of $185,000, which added up to a tidy $357 million. Even after refunds for withdrawn applications ICANN still cleared about a third of a billion dollars from the first round before a single string was delegated.

Now, like the proverbial gift that keeps on giving, ICANN has received a total of an additional $28.5 million in proceeds from its own “last resort” auctions held prior to November. And that total, equal to about eight percent of all new gTLD application fees, came from a mere eight gTLDs! The three highest bids were Dot Tech’s $6.8 million bid for .Tech; Fegistry’s $5.6 million for .Realty; and Outer Orchard’s $5.1 million for .Salon. Meanwhile, Amazon spent a total of $6.8 million for two gTLDs, .Buy and .Spot.

And the money continues to accumulate, with Dish DBS having just plunked down $700,000 for .Dot. That was just one of five ICANN-conducted gTLD auctions scheduled for November, although the others were settled privately pre-auction. And the gTLDs currently scheduled for December are names that could each readily attract seven figure bids — .Baby, .Basketball, .Casino, .Football, .MLS, .Monster, .News, .Pet/.Pets, .School, .Security – and, notwithstanding sentiments that you can’t put a price on it, .Love.

More manna is on the horizon. On November 14th ICANN opened a public comment period regarding “New gTLD Auction Rules for Indirect Contention”. Once those rules are made final, auctions can proceed for four gTLDs contested by a total of thirty applicants — .Game/.Games; .Sport/.Sports; .Web/.Webs; and .Shop/.Shopping (the first three sets involve singular and plural versions of names caught up in inconsistent string contention decisions). Any one of those names could set a new record for top auction price, and collectively they could easily generate $20 million or more. With ICANN recently estimating that the first round of the new gTLD program won’t be completed until mid-2017, tens of $millions more could be realized over the next few years.

By the way, ICANN isn’t the only beneficiary of this process. In September 2013 ICANN signed a no-bid contract with Power Auctions that paid that company an initial $230,000 to develop an auction platform, meaning that the transaction had no potential financial downside of any significance to  it (especially since the contract guaranteed an additional $135,000 in total auction management fees even if not a single auction was ever held). And Power Auctions receives an additional four percent of the first $10 million paid in any auction, with an additional two percent for amounts over that – and is guaranteed a  minimum payment of $15,000 per auction, as well as a management fee of $10,000 for any auction that is scheduled but subsequently canceled when the participants reach their own settlement.

Apparently that contract did not cover all contingencies, because just last month ICANN gave another $120,000 to Power Auctions to develop a system for conducting auctions for the four indirect contention sets mentioned above. That seems quite generous given that the total commissions collected by Power Auctions for the nine auctions conducted to date totals $1.17 million — for an average management fee of $130,000 per auction. These auctions are relatively brief events, with the initial round lasting 30 minutes and any subsequent rounds twenty minutes each, so the hourly payout is up there with tech moguls and investment bankers.

The big unanswered question is what will ICANN do with all that money? The Board has stated that the decision will be made in consultation with the community, but there is no indication of when that discussion might begin. One industry consultant is advocating that “a marketing plan to allocate ICANN auction funds needs to be in place to increase [new gTLD] registrations”. Developing world advocates or GAC members may well propose investing the money in “capacity-building” and “outreach”. Meanwhile, with new gTLD domain registrations substantially below initial ICANN projections, those funds could become a tempting means for filling any hole in ICANN’s out year budgets.

The larger the auction proceeds get the more “creative” ideas we are likely to see on how to spend that growing cash pile. Perhaps the discussion of its disposition should have been started, and settled, before the money started rolling in. It would certainly seem to be something worthy of a final decision before the IANA functions transition takes place.

This article by Philip Corwin from the Internet Commerce Association was sourced with permission from: