The Internet Society (ISOC) international professional organization and investment company Ethos Capital Investors have announced a deal in which the Public Interest Registry (PIR) associated with ISOC is being acquired by Ethos Capital Investors. The acquisition price has not been disclosed; the transaction is to be closed in the first quarter of next year. The news had a bombshell effect on the domain community, as its consequences could affect many stakeholders, from individuals and small charities to large commercial companies.
First, .ORG was originally intended for non-profit organizations. So, even though much has changed over the years, the .ORG domain zone is still home to websites of various philanthropists, activists, public figures, etc. That was mainly sustained by the fact that until recently, ICANN’s contract with PIR included 10%-per-year price increase caps. However, the contract was renegotiated last spring and the restrictions were scrapped, giving PIR the right to raise its prices from about $10 per year to as high as it wants. PIR representatives then hastened to explain to concerned registrants that it was a mission driven, non-profit registry that had no specific plans for any price changes.
But the situation is changing dramatically with the acquisition by Ethos Capital Investors. PIR now plans to apply for B Corporation certification, which is a private program in the United States that certifies companies that meet certain social, environmental and transparency standards. But PIR, by definition, will cease to be a non-profit organization and will now be a commercial company. Accordingly, the objective of making a profit will inevitably come to the fore, especially given that the acquisition had to cost a generous amount – PIR is grossing over $90 million a year, according to the most conservative estimates by the reputable Domain Incite resource. The company that invested in the acquisition would want a return, and the most obvious way to do this is to increase registration prices.
The deal also raises the question of how ISOC is going to be financed in the future. Until recently, more than half of PIR’s revenue, about $50 million a year, went directly to ISOC. Now it probably needs to wisely invest the proceeds from the sale. But it is the registrants and registrars who will face the biggest financial problems. PIR CEO Jon Nevett said as he announced the deal, that the registry “would never make dramatic price increases as we know it would harm our registrants, as well as our registrars.” That did not sound too reassuring though – first, because shortly before that, he also talked about PIR’s status as a non-profit organization. And second, because a “dramatic increase” is a rather vague concept: for many single activists or small public organizations, even a few-dollar rise will be enough to lose their domains.
Ethos Capital Investors also warrants a mention. Its founder and CEO is Eric Brooks, who this year quit the private equity firm Abry Partners after 20 years. Abry Partners is known, for example, for hiring former ICANN CEO Fadi Chehade in 2016. Last year, it also acquired Donuts, which owns the largest portfolio of new common top-level domains. Brooks’ business partner is Nora Abusitta-Ouri, who until 2016 served as ICANN’s senior vice-president.
Finally, there are two more interesting circumstances, which might be either accidental coincidences or evidence of a carefully thought-out scheme. The domain name ethoscapital.org was registered on May 7 2019, by none other than Fadi Chehade. And Ethos Capital Investors was registered in Delaware on May 14, exactly a day after ICANN published its summary of the .org contract renewal’s public comment period, thereby actually approving the lifting of restrictions on price increases in the domain zone.
