Should GoDaddy Buy .ORG? Exploring the Future of the .ORG Registry

The proposed takeover of the .ORG registry by Ethos Capital has sparked significant concerns within the internet community. The transition from a non-profit organization dedicated to serving the public interest to a profit-driven entity raises questions about the future of .ORG domains and their affordability. The involvement of former ICANN CEO Fadi Chehadé in Ethos’ bid further complicates the situation, adding another layer of apprehension.

This scenario opens the door for a “white knight,” a company with the financial resources and commitment to offer a more favorable deal than Ethos Capital. A superior offer would ideally address two key concerns: a higher purchase price and a contractual price limitation agreement with ICANN. These conditions would provide much-needed reassurance to .ORG domain holders and the broader internet community.

Several businesses possess the financial capacity to surpass Ethos’ bid. According to Internet Society CEO Andrew Sullivan, Ethos imposed strict time constraints on the Internet Society (ISOC) to finalize the deal, limiting their ability to explore alternative offers. It’s also likely that ISOC preferred to keep the potential sale of .ORG confidential until an agreement was reached, giving Ethos a strategic advantage. This lack of transparency has fueled criticism and calls for greater accountability.

Numerous private equity groups have expressed disappointment at not being included in the bidding process. However, simply replacing Ethos with another private equity firm doesn’t necessarily resolve the underlying concerns, particularly regarding pricing. Assurances that prices won’t be drastically increased are insufficient. A more concrete commitment is needed to protect .ORG domain holders from potential exploitation.

GoDaddy: A Potential Savior for .ORG?

This is where GoDaddy (NYSE: GDDY) enters the picture. GoDaddy has historically focused on the registrar side of the domain industry, avoiding becoming a registry operator. While they have explored registry opportunities in the past, such as bidding for the .US contract and applying for .HOME and .CASA, they ultimately withdrew from these ventures. Now might be the opportune moment for GoDaddy to reconsider its strategy and step in to acquire the .ORG registry.

There are several compelling reasons why GoDaddy should consider this acquisition. First and foremost, GoDaddy is committed to preventing drastic price increases on domain names. Their decision to halt the sale of Uniregistry domains after significant wholesale price hikes demonstrates their dedication to protecting customers from unfair pricing practices.

Mike McLaughlin, former GM of GoDaddy’s domain business, emphasized the importance of a positive customer experience, stating that exorbitant price increases are detrimental to both customers and the domain name industry as a whole. GoDaddy understands that predictable and reasonable pricing is crucial for maintaining trust and fostering a healthy online ecosystem.

While Ethos Capital has stated its intention to avoid significant .ORG price increases, these assurances are not legally binding. The possibility remains that Ethos could be acquired by another entity that prioritizes profit maximization over community interests, leading to substantial price hikes in the future. Such a scenario would be detrimental to .ORG registrants, GoDaddy, and the domain name industry in general.

GoDaddy’s significant market share in .ORG domain registrations, accounting for nearly 40% of all registered .ORG domain names, underscores their vested interest in ensuring the stability and affordability of .ORG domains. Acquiring the .ORG registry would not only protect their existing customer base but also provide a significant opportunity for growth and innovation.

Financial Considerations and Strategic Advantages

Secondly, GoDaddy’s current valuation is exceptionally strong, exceeding $11 billion. This robust valuation, coupled with projected 2019 revenue of approximately $3 billion and unlevered free cash flow of $730 million to $740 million, positions GoDaddy as a financially capable contender for the .ORG registry.

The market would likely respond favorably to an acquisition that generates an additional $100 million in revenue, with a substantial portion contributing to the bottom line. GoDaddy’s favorable cost of capital further strengthens its position to make a competitive offer.

Thirdly, owning a major registry like .ORG could exert pressure on Verisign (NASDAQ: VRSN), the .COM and .NET registry, to maintain reasonable pricing. While .ORG is currently priced higher than .COM, acquiring .ORG would provide GoDaddy with an alternative domain extension to promote should the U.S. government further deregulate .COM prices.

It’s worth noting that Verisign’s revised agreement with the U.S. government allows them to act as a retailer for non-.COM domains, potentially increasing competition and innovation in the domain name market.

Addressing Competitive Concerns

The prospect of GoDaddy owning .ORG would undoubtedly raise concerns among its competitors. Regulatory scrutiny from competition authorities would also be likely. However, GoDaddy can mitigate these concerns by implementing several safeguards.

Maintaining separate management for the .ORG registry would ensure its independence and prevent conflicts of interest. Contractually limiting price increases with ICANN would provide a legally binding commitment to affordability. Establishing a minimum price for .ORG domain registration would prevent GoDaddy from undercutting its rivals and engaging in anti-competitive practices.

In conclusion, numerous entities could offer more advantageous terms than Ethos Capital. By offering ISOC a higher purchase price and committing to contractual price restrictions, they can address the core concerns surrounding the proposed acquisition. GoDaddy, with its financial strength, commitment to customer satisfaction, and strategic vision, is uniquely positioned to be that entity. GoDaddy should seriously consider stepping up and bidding for the .ORG registry, securing its future and safeguarding the interests of the internet community.

The acquisition of .ORG by GoDaddy would not only protect the interests of current .ORG domain holders but also foster innovation and competition within the domain name industry. It’s a win-win scenario that deserves serious consideration.

Ultimately, the decision rests with the Internet Society. However, the potential benefits of a GoDaddy acquisition, including price stability, community engagement, and a commitment to the non-profit values of .ORG, make it a compelling alternative to the Ethos Capital proposal. The future of .ORG, and the countless organizations that rely on it, may depend on it.

This move could redefine GoDaddy’s role in the internet landscape, solidifying its position as a champion of domain name accessibility and affordability.