IFFOR Publishes Two Years Of Tax Returns Showing 85% Of .XXX Domains Don’t Resolve

The International Foundation for Online Responsibility (IFFOR) a not-for-profit organization which was set up as part of ICM application to operate the .XXX registry has now published on its site, its tax returns for 2011 and 2012.

In 2012 IFFOR had income of $267,740.

“This income is derived entirely from the $10 per resolving domain commitment that ICM Registry has made to fund IFFOR.”

“The increase of $58,880 in 2012 is due to an increase in the number of resolving dot-xxx domain names.”

In 2011 IFFOR had an income of $208,860.

“This income is derived entirely from the $10 per resolving domain commitment that ICM Registry has made to fund IFFOR.”

Back in February we posted about IFFOR’s 2011 return and the fact that it only took in some $208,000 all paid by ICM Registry at $10 per domain for  RESOLVING .XXX domain names meaning that .XXX only had some 20,800 resolving domain names which led us to ask  “Are 90% of all .XXX registrations defensive”.

We based our 90% figure on the statement of Stuart Lawley the CEO of ICM Registry made to the effect there were  250,000 .XXX domain names under management at ICM and IFFOR’s payment on their 2011 tax return that represented only 20,800 domains.

At the time we got some push back with some saying our numbers were way off and we couldn’t make the conclusion from one year’s tax return.

But now that we have two tax returns of IFFOR published it becomes pretty clear that somewhere between 20,700 and 26,700 .XXX domain names resolved for IFFOR tax years.

Under the 2012 numbers there are some 26,700 resolving .XXX domain names.

We know that ICM reach a high of about 140,000 registered .XXX domain names in the December 2012 report ICM filed with ICANN.

However that 140,000 figure did not include any of the approximate 80,000 ten year blocks ICM sold to trademark and other rights holders.

So out of the 220,000 domain names registered, including the 10 year blocks only 26,700 or so resolved and were paid by ICM to IFFOR.

We do know by its terms non of the 10 year block domain names do not resolve.

With 190,000 non-resolving domain names, it still seem like an incredibly high percentage of defensive registration and certainly based on the 2012 numbers 85% of all registered .XXX domains Do not Resolve which is a huge percentage as well.

To be clear ICM collects $10 on each .XXX domain name registration for IFFOR. however is responsible to pay IFFOR on the number of resolving domain names.  Thereby ICM collected $10 for each of the 140,000 domain registrations (not on the 10 year blocks) and is only paying IFFOR $10 on each of the 26,700 resolving domains, which all means to say there seems to be over 100,000 domain names ICM is collecting the $10 IFFOR fee for that are staying in ICM coffers adding another $1.oM + to added revenue of ICM.

Here are some other info from IFFOR two years of tax returns.

Salaries

In 2011, IFFOR had salaries of $138,808. including the “salary for IFFOR’s Executive Director (and 8,808 in payroll taxes). An additional $60,833 is listed under Board of Directors stipend.”

In 2012, IFFOR had salaries of $318,712. This covers a full year of salary for IFFOR’s Executive Director Kieren McCarthy at $195,000; its chairman at $70,000; its vice-chair at $35,000; and its secretary (and third member of the Board) at $8,750. The difference of $9,962 is due to payroll taxes.

Other expenses

In 2011 there were additional expenses of $403,985.

The most significant were:

  • $100,725 on Travel. IFFOR representatives attended numerous meetings and conferences over the course of the year, including ICANN meetings and a face-to-face meeting of the Policy Council in Washington DC.
  • $75,586 on Other Fees. These were costs related to the creation of IFFOR as an entity and initial administration costs.
  • $37,500 on stipend to the nine-person IFFOR Policy Council.
  • $37,047 on Legal Fees. These were costs related to the creation of IFFOR as a non-profit organization and review of various contracts.
  • $36,704 on Conferences. IFFOR held a face-to-face meeting of its Policy Council in Washington DC.
  • $20,866 paid to MetaCert for its automated labeling system for content held on dot-xxx websites (an IFFOR policy).
  • $16,489 on insurance, including Directors Insurance and travel insurance.

 

In 2012 There were additional expenses of $309,285. Most significant of these expenses was $100,000 paid to the nine-person Policy Council.

The most significant were:

  • $85,807 on contract labor. This included IFFOR’s Ombudsman, IFFOR’s Manager of Public Participation and the organization that carries out IFFOR’s auditing work.
  • $28,233 on legal services. These were mostly in relation to the establishment of IFFOR as a non-profit organization and the drawing up and review of various contracts.
  • $26,774 paid to MetaCert for its automated labeling system for content held on dot-xxx websites (an IFFOR policy).
  • $19,593 on travel. IFFOR representatives attended numerous conferences over the course of the year, including three ICANN meetings.
  • $14,253 on insurance, including Directors Insurance and travel insurance.
  • $10,000 on IFFOR’s Grant Program, which was split equally between two companies (see here for more details: http://iffor.org/news/grant-recipients)

Comments

  1. Kate says

    The figure doesn’t surprise me.

    Back in late 2011 I established that at least 83% of all .xxx are idle registrations:

    http://www.thedomains.com/2011/12/22/what-percentage-of-xxx-domains-are-defensive-two-stories-out-today-one-says-48-the-other-83/

    And that is just for the domains provisioned in the zone file. Many more domains are reserved at registry level but not present in the zone file, so they are not resolving at all.

    So yes, the figures are pretty bad.

  2. says

    Andrew

    As far as the IFFOR fee and 2011 and 2012 returns and the promotion ICM ran in May let me say this

    Of course the tax returns in question are before the promotion

    Second of all as it was announced the promotion was in part to settle a federal lawsuit with Manwin that ICM was defending and also paying ICANN legal bill for which I’m sure was not a small amount.

    ICM made out on two years of registrations 2011 and 2012 and renewals in 2012 which also included the $10 IFFOR fee.

    We know by ICM own statements that they registered 12,000 domains during the promotion representing 25,000 domains years.

    If every one of these new registrations resolved they would as you say be losing a $1 a registration.

    So by my calculation its $2M bonus in IFFOR fees collected over 2011 and 2012 but not required to be paid out and $24,000 in extra fees paid on IFFOR behalf in 2013 assuming every new registration resolves.

    A +2M gain vs. a MAX loss of $24K, that’s a deal I will take every time and no I don’t think that minimal amount of potential loss needed to be pointed out in a story on 2011 and 2012 tax returns.

  3. says

    Nice analysis, Mike. It’s clear that the ICANN community was promised lots of “benefits” for the approval of this gTLD, but it seems that the costs on the public far exceeded any benefits. The same can be expected for many of the new gTLDs, whose business models will exploit defensive registrations, with ICANN and its insiders laughing all the way to the bank.

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