Show me the money: gTLD consultants talk finances Published in dot-nxt , on March 7, 2012 by Edward Conlon

A financial report released by Top Level Domain (TLD) Holdings has shed light on the challenges facing gTLD consultants in a fiercely competitive market.

In the fifteen months to 31 January 2012, the company that owns consultants Minds + Machines made a $2.25 million operating loss. And according to chairman Peter Dengate Thrush, the company’s $117,000 revenue in that time did not come from any gTLD consultancy work.

Dengate-Thrush told .Nxt that Minds + Machines has only begun receiving gTLD-related revenue since 12 January 2012 when ICANN opened the application stage. He said until this year, the company has relied on other independent revenue streams.

He said that Minds + Machines, whose full package costs $100,000, allows clients to operate on a pay as you go model. This means that clients requiring services related to back-end registry and sunrise periods those that won’t be needed until applications are successful will not be charged until around 2013.

Dengate Thrush said he was confident that despite his company making sizeable losses, most clients will go on to pay the full $100,000 fees. Most will take it very seriously, he said. The great majority will stay.

The costs of delay

The report might seem unsurprising given that clients were uncertain about a programme delayed several times before. But it does show that the delayed programme has haemorrhaged some consultants finances, forcing them to find alternative revenue streams.

Rival consultants Architelos reportedly made more than $1 million in revenue in its first year. According to chief executive Alexa Raad, half of this revenue came from consultancy. But she said not all of this consultancy revenue derived from gTLD work, because Architelos provides strategic support on wider domain industry issues.

She added:

“Since the first of the year, we’ve had a tremendous jump in business as companies and organizations decided to investigate TLDs.”

We can see that gTLD consultants are operating in a competitive market where uncertainty prevails. But while Architelos did not limit its work to new gTLD applications, Minds + Machines did ñ and may have suffered as a consequence.

However, a recent development suggests that not only is there a competitive and challenging market, consultants have employed contrasting strategies based on their strengths.

Slot money

Last month,TLD Holdings raised $14.2 million on the AIM market of the London Stock Exchange, wiping out its losses, with chief executive Anthony Van Couvering saying there was now a $25 million cash balance. According to a statement:

“The company intends to use the placing proceeds to provide additional working capital and in particular, to fund the application slots and subsequent fees for new gTLDs on behalf of itself and clients of Minds + Machines.”

Was this TLD Holdingsí trump card? Did it wait and wait, knowing that once the gTLD application stage finally opened it could raise substantial funds from investors? It seems so.

Dengate Thrush confirmed that no clients signed before January 12, saying that they would be foolhardy to do so. But knowing that it could use the stock market to its advantage, Minds + Machines was not under the same pressure as private firms, and may have believed it unnecessary to provide wider consultancy services.

It is also notable that while Architelos takes no financial interest in any applications, Minds + Machines does. A spokesman said:

“In many instances TLDH is effectively partnering with the client which means in theory application fee costs can be shared.”

Minds + Machines will also be applying for its own gTLDs. So far it has registered 40 application slots and according to Dengate-Thrush, more is likely. We don’t know what proportion of these slots are for clients and we don’t know how many strings have been applied for: each slot allows 50 strings.

But, it raises interesting questions about Minds + Machines strategy. It has a lot of money, is willing to spend it on its own applications, and seems to be covering some portion of some clients fees.

Where will it put its money? Will these be joint or independent projects? And will it be able to bully other applicants at auction?

We will only know for certain on 1 May 1 2012, when ICANN publishes the full list of gTLD applications.