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13 Jul 2009
Verisign makes a great deal of money from the .COM and .NET registries. Can we tell how much they make, and how much that might change if the CFIT lawsuit succeeds? It's not hard to make some estimates from public information. The largest gTLD registry that Verisign doesn't run is .ORG, which was transferred a few years ago to the Public Internet Registry (PIR) which pays Afilias to run the registry, and uses whatever is left over to support the Internet Society (ISOC). PIR is a 501(c)(3) charity, so their annual financial filings are public information. The most recent one I can find is from 2007, which says that PIR's total revenue was $33M, they spent about $23M on running the registry and other expenses, and gave $9.7M to ISOC, leaving a reasonable end of year surplus of $500K. A quick look through the IRS Form 990 didn't show any notably large or odd expenses, so I it's close enough to say that what ISOC gets is what would be PIR's profit. ISOC is budgeting $15M from PIR this year. The prices for the domains are pretty close: .COM is $6.86, .NET is $4.98, and .ORG is $6.75. Verisign has about 12.15 times as many domains in .COM and .NET as PIR does in .ORG, so do the arithmetic and the estimated profit for Verisign comes out to $180M, not a small number. This assumes that the cost per domain of running .COM is about the same as running .ORG, which seems plausible. On the other hand, the cost of running a database increases with size faster than linearly, and .COM is has some unique costs due to it being the main target for drop catching, tasting, and the like. I would trust the order of magnitude of this estimate, but not much more than that. There's a more direct way to estimate Verisign's profit. VRSN is a public company, so their finances are also public. For 1q09, their revenue was about $255M and their pretax profit comparable to the tax-exempt PIR was about $70M, a robust 27% profit margin. Annualize that and you get $1000M revenue and $280M profit, in the same ballpark as our other estimate. (VRSN has other businesses but they're all trifles compared to the registry business.) To estimate what they would make if the registry contract had been priced competitively, let's wave our hands, and pretend that their revenue was the $5 they get for .NET, rather than $6.86, with the same costs. This drops the revenue to $740M, leaving about $150M profit, a still respectable 17%. So we can estimate that VRSN's profit is about double what it would be if there'd been a competitive bid to run the registry like there (sort of) was for .NET. Thanks to Gordon Cook of the Cook Report for suggesting the comparison to .ORG's surplus.
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