The Business Model of .XYZ Doesn’t Bother Me And It’s Also the Reason I Invested in Rightside

Dec 21 2014

Maybe I’m getting old. Perhaps as a business owner I judge too many things based on profits alone.  But the more I think about it, the more I don’t get all this concern over the tactics of .XYZ.  My original thoughts were quite the opposite. I wrote some misguided articles myself about how the business plan of .xyz bothered me.  Over the past few months I’ve changed my mind.  WHY do I care how .XYZ gets their registrations?  For every argument against their model I can present another major Internet company doing the exact same thing daily.

The biggest complaint  I hear is the numbers are skewed.  And?  We in the domain community are the ones that are judging success by registrations. Yet some are $10 and some are $30.  Movie theaters don’t use the number of tickets sold to judge.   No, they use dollars brought in.  But we don’t have the numbers so we just use what we have. We have to judge, we have to measure.  It’s what we do in today’s society.  We judge popularity and success through numbers of likes, Instagram and Facebook friends.  Those are gamed every single day. Instagram proved the other day that up to 20% of all Instagram users were fake as they dumped them all.   There is only one parameter that truly measures the success of all these new ventures. Profit.  Even if they are valued like Snapchat and new startups that have no profits, they are still valued by potential.  Potential profit.

I see nothing unethical about giving free registrations to people to drive up numbers.  As a business owner,  if I am being judged on a metric then I am going to try and drive up that metric.  People seem to have a problem with this because the numbers aren’t all paying customers.  All that does is prove that the industry has come up with a poor measurement of success. Don’t like it? Then come up with a better metric . “But we have to measure them some how”.   That’s a media thing, a people thing.  We need statistics to judge others.  A quarterbacks completion rate, touchdowns, and interceptions aren’t easy enough to measure.  Too hard to compare with all that data.  So we come up with a QBR rating so that its one simple number.  But then quarterbacks who are on a contract year start refusing to throw a hail mary because the interceptions mess up the ratings and their next contract is based on those ratings.

On the other hand the publicity has been incredible.  Good or bad, .xyz has been discussed on an almost daily basis.  Uniregistry has spent their money by advertising heavily on domain blogs.  .XYZ gives away domains.  Both marketing cost.  Only .xyz knows if the model is profitable and judging by their actions, it is. “But he got it in an unethical way”.  No, he took advantage of our flawed measure of success.  There is no fair or not fair, no right or wrong,  when it comes to what you want to charge for a domain.

I got most upset when he didn’t answer about how many names he gave away in the beginning.  But as the months roll on I realized he had no reason to answer those questions.  There was nothing to be gained by giving away details.  Godaddy gives out $1.99 domain and 99 cent transfers every day.  They are purposely underpricing everyone because they have a bigger cash hoard than everyone else. You don’t hear people complaining about getting dot coms for 99 cents from Godaddy.  The XYZ tactic is not that much different.  He is merely using the misguided analysis tool of number of registrations against the public.  He’s not lying.  He’s just giving them away.  Again, not illegal. Not talking publicly about it doesn’t make it unethical.  He’s simply playing on the lack of information about what makes a domain valuable.  Using it as a marketing cost. At this point all we have is the sheep metrics.  If all these people have registered then it must be good.

And why do we use these misguided metrics in the new gTLDs?  Because we don’t have any others.  There are only a handful of real companies using the names for daily business. There have been very few resales in the aftermarket.  There are no big domain investors telling of how good this one or that one is.  We all sit there and look for something that tells us that buying this gTLD is better than that that one.  There is no authority figures guiding the way. Daniel knows this.   You don’t like it because it’s shady, its unethical, its misleading.  I think what you don’t like is you just don’t know.  You have no idea where to put your money.  You don’t want to miss out if this turns out to be the next great millionaire maker yet the market is so big you don’t know how to take advantage.  But I do

I bought Rightside.  They are a publicly traded company so they HAVE to disclose almost everything.   Yes I don’t have a clue which names to buy either and feel the real money is in being owners of the new gTLDs.  But there are a limited amount of public companies out there that are selling gTLDs.   Raymond at TLDinvestors has a nice wrapup of the domain stocks that are publicly traded.  After a little research I thought it was better for me to invest in a company rather than the domains themselves.  I chose Rightside because they own several gTLDs.  But that is not the real reason I bought.  I bought because they are diversified. I bought because they own several new gTLDs AND they own Enom and Namejet.  It was largely overlooked in the public paperwork but Namejet has quite a portfolio of domains it has acquired.  We all know Namejet as one of if not THE best domain aftermarket platforms in the industry.   They sell the expiring names of dozens of registrars.  What many didn’t know is they get first dibs on the expiring names of their registrars and partnering registrars and often choose to hold them and keep them in their portfolio instead of auctioning them off now.  Making them assets.  There are still plenty of great names coming through but they have acquired “300,000 names through the expiration and bulk acquisition process” .  That is HUGE.  It also means if they every come up short of cash, short on profits, need to make numbers, they can simply move some of their own names into the system and sell them off.  With a market cap of 153 million dollars those names are are worth at least 5% of market cap.  It could be dramatically higher than that depending on quality of names.  You have to assume they aren’t junk if they were picked to be some of the better names.  Because some great expiring names come through. (EDIT: I have no idea if they are left over names that received no bids and they deemed quality or names chosen before auction, would be a question for the next investors meeting, regardless they’ve built up a hand chosen portfolio)

In short,  there is no way I can judge how .xyz is doing.  I think their business model is solid.  Them and dot club are the only two gTLDs that the general market is talking about.   That’s half the goal. Domains are not shares of stocks. You don’t get a piece of the pie.  Sure you want to buy a domain from a company that runs their company well.  That drives profits and sales so they can continue to market the gTLD.  How can you argue that .XYZ is not doing that?  What you are really relying on is the masses.  You need people to want to own that name, that new gTLD.  THAT is the goal of the owners.  Daniel is doing that in my opinion regardless if how he’s doing that is wrong in your eyes.  Again, just because he’s messing with your metrics doesn’t mean he’s wrong.  It means you have the wrong metrics.  It means you don’t have the ability to measure because you don’t get to see profits.  You’re just guessing……….Unless you buy a public company and then you will know.  Then you can judge. Then you can profit…or lose.  If you just sit there are throw darts at the new names coming out and bitching about .XYZ I can guarantee you more likely to lose.

DISCLOSURE:  I own shares of Rightside and I plan on adding more in the next 30 days

DISCLOSURE:   I don’t know Daniel Negari and have never spoken one word to him or anyone involved in .xyz


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Outsmarting the Dumb, Outworking the Smart

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  1. Jay

    The winner of generic domain extension race will build a great business.
    .com will stay as a leader for the next 20 years but the position of .net will be up for grabs in the next 5 years and whoever becomes the 3rd space generic extension will make tens of millions in profits.

    .web is most likely to become the 3rd place generic extension and eventually eclipse .net UNLESS the current crop of generic extensions build enough momentum before .web becomes available.

    So far .xyz is leading the race but others with great potential are .link and .click.

    Of these only .xyz seems to have realized that time is limited and is breaking the rulebook in marketing with some quite outrageous marketing tactics.

    .lawyer , .attorney , .photography style extensions will be profitable good businesses.
    cool extensions .guru , .ninja etc will also be profitable good businesses.

    However the biggest winner who will earn the most money is the one who wins the 3rd place in generic extension race and eventually competes with .net

  2. Jay

    Based on my analysis Rightside seems to be keeping some of those expired domains that expire through Enom but don’t get bids at namejet.
    Most likely they do the same also for domains which expire through

    They probably choose these based on the traffic stats since they have those for all the domains which expire through Enom and they probably have hired some people to go through the lists also manually for brandable style names.

    Out of rightside holdings the most potential in my opinion lies with and the new gtld portfolio.
    Been thinking about investing myself.

  3. Mike

    Is rightside ticker symbol NAME?

    Gtlds are an interesting subject, people keep pinning extensions against others, this is a complete paradigm shift that the corporate, and public need to grasp, and invest in.

    .com has a 20 year head start, plus trillion dollar marketing budget already implemented.

    .xyz I feel is a scary afterthought of putting domains, and legal liability against one’s consent is very morally wrong.
    I feel like it is essentially committing fraud, and the world needs less bs more truth. I have no respect for that Daniel character.
    Could have out much less effort into something more tangible, and burnt a lot less money.

    You are going to see many gtlds going off in the 50 cents to $2 range shortly.

    Just way to many useless strings with no market.

  4. Konstantinos Zournas

    Shane you seem to forget that the 375,000 .xyz domains at Network Solutions were not just free domains.
    They were free domains to people that didn’t want them and many don’t even know they have them.
    These domains are quite different than the thousands of $1 .xyz domains that they are selling.

    But if you want to talk about a business model alone then I can tell you that this .xyz thing is not working.
    They are millions in the hole and there is no way out of it. All these $1 domains are actually being financed by the .xyz marketing fund.
    Even 100,000 full paying domains (and I am being generous here) will not produce more than 500k of revenue per year. And that is without subtracting the backend and all the other expenses running that are a lot more than 500k. A lot more.

    .Club has nothing to do with .xyz.

    1. Post author


      Sounds a lot like the U2 album I got on my iTunes. If there is automatic renewal than this is a big problem. Otherwise why does it make a difference if they have a domain in their account that will expire if they don’t renew it? As far as not working. That is your opinion. You and I have zero idea how the numbers are coming together. Less than a year into this you are already assuming there is no way out of the hole. I think you’re wrong. Daniel thinks you are wrong. He is so sure that he is putting his own money into it. Where you and I simply write conjecture and opinion and spend a little time typing.

      “.club has nothing to do with .xyz” Wrong. They are both new players and leaders in the gTLD market. They both are competing to break the mold of what domains people use to market their companies and products on the Internet. They are both decades behind the big players and doing what they can to rise to the top of users minds. They both have no other choice than to market their way in to profitability. There are more alike than they are different. They are only completely different in your moral opinion.

  5. Jay


    you are right that .xyz is probably millions in the hole at the moment but I think they can recoup that money if enough people renew their xyz domains.
    You have been the top reporter when it comes to the outrageous marketing tactics XYZ has been using.

    If XYZ can get enough people to actually register .xyz domains for 1-dollar or a similar bargain price and build websites on these then the renewal percentage will be high and they will create a momentum for themselves and recoup the money spent in the marketing through renewals.

    When it comes to the Network Solutions XYZ gimmick there the renewal percentage will probably not be high but I believe some will get renewed because the people who got free XYZ through NetSol also got a free email package tied to that XYZ so some people are using that email package and will want to renew the domain and they are also spreading the conciousness about XYZ through each email they send.

    I predict XYZ registrations will be sold for 29,39 or 49 cents as a marketing tactic.

    If Daniel Negari had stated in the interview Rick Schwartz conducted that they are breaking the rulebook in marketing and being extremely aggressive in their marketing tactics then his image would now be quite different but maybe he had some contractual obligation with NetSol to be evasive.

  6. Tom

    You simply need to wait for some time of UDRP on a .xyz domain that was placed in an accoun without the account holders permission, and all hell will break loose.

    1. Post author


      UDRPs come after you don’t agree to transfer over the name. Doubt anyone is going to challenge someone asking for a name they got free. So I don’t think we’ll be seeing an UDRP on a free name

  7. Tom

    Shane, UDRP’s can come without any notice, or correspondence, I think the GTLDS have a new URS system in place, which is much quicker, would probably come, and go before a person even figures out what is going on. All in all, this system of attaching liability is pretty messed up.

  8. Konstantinos Zournas

    I have said it too many times but here is the short version again.
    It matters because corporate accounts don’t let domains expire unless they get an approval.
    Others may put it on auto renewal without remembering they bought them or without even seeing them. Most people select all and they put on auto-renew. (You could say it’s their fault but I say this is borderline fraud.)
    It matters because all these people are open to legal problems >including< UDRPs.

    "UDRPs come after you don’t agree to transfer over the name."
    This is totally wrong. Most of the UDRPs I have received were out of the blue.
    There is no requirement to send a C&D letter before a UDRP or even worse a lawsuit.

    What I am saying about numbers is not an opinion. You are wrong about being an opinion.
    It is simple math. Registrations, ICANN fees, backend fees, other expenses.
    Free registrations cost a lot of extra money, about a $1 on backend fees + 0.18 ICANN fee + possibly extra insurance.
    The expenses are: staff, offices, hardware, software, furniture, electricity, etc and of course this grand marketing costing millions!
    You know all this. I think it would be easy for you to calculate this and see what's going on.

  9. Konstantinos Zournas

    I can assure you that no one is using an email address of a domain name they didn’t want or don’t even know they own.

    And do you know what is the percentage of the developed website of the total domains registered every day?
    Less than 1%. Is this what .xyz could hope for?

  10. Daniel Negari

    Nice article Shane.

    I can officially debunk any and all questions as to the profitability of .xyz – We are cash flow positive from .xyz operations, and I love the results we have had so far. I set out to shake up the game and provide competition and choice for internet users, and it is working. I have re-invested in the registry and we have expanded to many more TLD’s coming in 2015. I would not be buying more TLD’s and continuing to invest in the space if I did not believe in it or my business model was not sound. I run many businesses and have a great track record in online and offline business.

    Konsta – not sure your problem with me / .XYZ – I popped on your blog last week after you wrote that slanderous article (a competing registry fed you). I actually would have preferred you left the last post up, not deleted it as it showed your opinion and the communities response. The next generation of naming is here, please show some professionalism.

    Shane – You have made a wise investment in Rightside. I too am an owner, and have been buying for months (continuing that). My business partners and I have almost 5% of the company. I suspect someone will take it over soon, if not – I might try myself. The stock needs activism. They should start reporting major gains from TLD auction withdrawals, and extreme profitability from their registrar operations, aftermarket sales, and registry. It would also be great to know how much they make from third party registrations, as they power 1.1 million donuts domains right now, and they still have 30+ auctions left in partnership with donuts.

  11. Konstantinos Zournas

    To people reading what Daniel says: Positive cash flow does not necessarily means profit.

    To Daniel:
    I have a problem with people telling half the truth that in my book that is a lie. And “cash flow positive” is another half truth.
    I made the post private because someone threatened me and the whole thing is under investigation. Period.

    1. Post author

      Thank you Daniel. I don’t mind when people give opinions on moral judgement. Everyone has a different line of what’s wrong and right. But in this particular case profit is defined. For someone to guess as to whether you or any new gTLDD is profitable and not profitable based on only public information is misguided. I like Konstantinos, he is super hard working and intelligent, but when he attacks a company he really attacks. His statements cost the companies money and customers. Godaddy, you, and Namejet have taken a beating over the last year. I assume there is a reason for all of you not addressing the issues but the general public assumes you are in the wrong when you don’t reply. I appreciate your responses in this case.

  12. Konstantinos Zournas

    as I said math don’t lie. Give me any New gTLD and I will tell you an estimate of what it’s doing. I don’t say that I can find out if a registry is loosing $10k or making a profit of $10k but when you can see that the maximum revenue is $100k and the expenses are starting at $185k then you know for a FACT they are loosing money.
    It is not that hard. Most data is available for all to see.

    I don’t believe that .xyz is profitable as a whole. It maybe profitable for month December but that doesn’t mean anything to me.

    The general public assumes they are in the wrong because they have felt it under their skin. Do you think that all is good with Go Daddy and Namejet or that we should all keep quite when money or domains go missing?

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