It’s all about your DUM now!

13th Dec 2015 0 Comments

Alex Bligh (a founder of Nominet) has written an interesting blog post on the .uk price rise.
While we agree with Alex that Nominet should have consulted on the proposals and the ‘Bligh Principles’, we thought we would respond to his claim regarding our “bizarre criticism of the co-marketing programmes”.

First of all, the co-marketing programme is for that, marketing, it is not a discount per domain as Alex makes out, and requires match funding by the registrar. The match funding is paid at the end of the programme, so fronting the costs is a requirement in order to gain from the programme. A number of members may not have the cash-flow or reserves to commit to such a campaign and will lose out. Although we do note that marketing is an aspect of the mark-up costs added by the registrar and is passed on to their customers. Each TAG holder, effectively brand for the larger members, can apply separately to the programme. The programme is also only open to Accredited Channel Partners and Channel partners. Self Managed Registrars can not apply for co-funding of any size. Meanwhile many of the larger members will have 50,000 to 250,000 domains on more than one registrar tag and can apply for them all!

The marketing costs Nominet will match fund is determined by two factors, the number of Domains Under Management (DUM) on the ‘random’ date picked by Nominet of 30 September 2015, which is nearly two months out of date at the start of the programme, and the growth in DUM between September 2014 and September 2015.

Registrars can request the full Co-marketing Information Guide from Nominet

The growth aspect

Let’s look at the growth aspect of the funding first, as it is the sizeable £50,000 contribution towards the maximum £80,000 possible per TAG. Nominet refer to this aspect of the fund as a top-up, with the funds calculated at the rate of £1 per incremental increase in DUM between 30 September 2014 and 30 September 2015, subject to the following maximum cap:

Over 250,000 domains – £50,000
50,000-249,999 domains – £20,000
5,000-49,999 domains – £10,000
Under 5,000 domains – Not available

Nominet had a ‘Buy one get one free’ promotion throughout September 2015, so many registrars should be up on their DUM in comparison to the previous year, although the overall growth in the .uk namespace over the closest comparable period is a mere 0.83%.

It therefore makes little sense for Nominet to award a top-up to a member that has had a significant growth when the net growth across all members in that period is less than 100,000 domains. In our opinion this is clearly a way for larger members to be rewarded if they have increased their market share of the industry by taking business away from all the other members (i.e. domain transfers), which is only reiterated by the refusal to apply this aspect of the fund to members with fewer than 5000 DUM. We will review this threshold later.

The DUM aspect

The second aspect of the co-marketing fund is based upon the DUM on the aforementioned selected date. Nominet calls this aspect the base funding. The funding are of fixed amounts, with a different amount depending on which band you fall into. The bands are defined by the number of DUM on your TAG on that date as follows:

Over 250,000 domains – £30,000
50,000-249,999 domains – £20,000
5,000-49,999 domains – £10,000
Under 5,000 domains – £2,000

As you can clearly see, a member who is close to the boundary is set to lose a sizeable amount in comparison to a competitor who may only have one more domain than them. Using Alex’s approach of comparing the fund to a financial rebate, which he has incorrectly calculated in the case of a member with 4999 DUM,  we obtain the following for Nominet’s contribution per DUM:

£2,000 / 4999 domains ≈ £0.40
£10,000 / 5000 domains = £2.00
£10,000 / 49999 domains ≈ £0.20
£20,000 / 50000 domains = £0.40
£20,000 / 249999 domains ≈ £0.08
£30,000 / 250000 domains  = £0.12

To make this clearer, here’s a graph with a logarithmic scale:

co-marketing_per_dum

As can be seen, the graph is a complete sawtooth, with members that are close to the next threshold loosing out on a proportional return.

You may be thinking at this point, as Alex has previously noted, that the large members get less per DUM than the smallest members, but let’s remind ourselves that the funding is for marketing and the largest members already have the biggest marketing budgets: See GoDaddy UK Adverts.

The 5000 DUM threshold

While it does seem you get back £2.00 if you have 5,000 names exactly compared to 12p back per DUM if you have 250,000, there is a significant issue in that only around 80 Nominet members have 5000 domains or more!

The number of domains a member has isn’t directly public, but their Nominet voting rights is based upon the number of paid-for DUM. The most recent published voting rights is that of 25 March 2015, where the equal part of the vote is 1198. As such we can easily derive the DUM for members on this date.

Therefore the top 100 members that will miss out on £8,000 of co-marketing funding, with a potential £10,000 top-up are:

82 – Sonexo B.V. 6197
83 – Memorable Domains Ltd 6141
84 – Create Internet Ltd 6020
85 – Zebra Electronics Limited 5998
86 – Nimbus Hosting Ltd. 5981
87 – Enix Ltd 5904
88 – Patrick Cummings 5899
89 – Dynadot, LLC 5881
90 – Telewest Ltd 5846
91 – Hostnet bv 5845
92 – Bee Internet Ltd 5747
93 – GWI Solutions Ltd 5702
94 – Elite Limited 5649
95 – Shores Ltd 5643
96 – Gransy s.r.o. 5578
97 – Timico Limited 5553
98 – Sub 6 Limited 5596
99 – Gradwell Communications Limited 5524
100 – Nexus Data Systems Ltd 5490

It therefore comes at no surprise, that at time of writing 37% of the above members have signed our petition calling for an EGM.