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PE’s $1.1B battle for the .org domain may not be over

Ethos Capital’s bid to buy control of the .org domain was blocked by ICANN, but a PE purchase could yet prevail.

Göran Marby, CEO of the Internet Corporation for Assigned Names and Numbers ​​​​​​(Courtesy of ICANN)

Ethos Capital‘s bid to buy control of the .org domain was blocked by the Internet Corporation for Assigned Names and Numbers (ICANN), the nonprofit that oversees internet domain registries, but the possibility of a private equity purchase could remain.

The firm agreed to acquire .org owner Public Interest Registry (PIR) from its nonprofit parent the Internet Society for $1.1 billion in November. When the deal was announced, Andrew Sullivan, CEO of the Internet Society, said the deal offered an “endowment of sustainable funding,” and Ethos would provide the necessary capital to expand PIR’s services. In February, Ethos announced it would further support the .org community through a $10 million community enablement fund.

The deal was met with a backlash from nonprofits, advocacy groups and politicians concerned about the lack of transparency around Ethos and its investors. ICANN’s rejection of the deal cited the removal of PIR’s nonprofit status, pointing out that the group’s focus would shift from protecting the .org community to serving its shareholders. It added that the deal would have saddled PIR with $360 million of debt.

“We see this certainly as a positive step, but essentially half of what needs to happen,” said Amy Sample Ward, CEO of NTEN, a group that led a public pressure campaign opposing the acquisition. “I wouldn’t be surprised if [Ethos Capital] introduced a new proposal.”

Indeed, Ethos Capital has not ruled out a new attempt to buy the .org domain. It did not respond to multiple requests for comment but released a statement that it was evaluating all options. The firm had already tried to assuage concerns by proposing price controls on the domain registry, which would limit registration fee increases to 10% a year for eight years, as well as creating an independent stewardship council with the ability to veto policy changes regarding issues such as censorship and user data. For its part, ICANN made clear that its ruling should not be read as any kind of ban on PE firms controlling registry operators.

Though disappointed by ICANN’s ruling, PIR currently maintains it is not up for sale. Meanwhile, in a statement, the Internet Society said that it would have been irresponsible not to consider Ethos’ unsolicited bid, which could mean that a similar situation might arise in the future.

Sample Ward said ICANN blocking the transaction may not be enough, adding that any possible future sale of PIR should be done through a public open bid overseen by ICANN. Private equity firms, she said, do not fit the bill, because investors typically place profit-making considerations ahead of considerations that drive nonprofits.

Nevertheless, PE investors have a history of backing businesses in the domain sector. Abry Partners owns Washington-based Donuts, which holds one of the world’s largest portfolios of new top-level domains such as .ltd and .company. And European web domain provider Host Europe received an undisclosed investment from Idinvest Partners in 2017. Sample Ward added that in order to avoid a similar situation, PIR should stay within the nonprofit world and look for a buyer there.

  • leah-hodgson-photo.jpg
    Written by Leah Hodgson
    Leah Hodgson is a London-based senior reporter for PitchBook covering venture capital across Europe and the Middle East. Leah graduated from the University of Surrey with a BA in international politics with French. She has previously been a radio reporter in France. She later turned to financial journalism, covering the wealth management industry. She joined PitchBook in 2018.
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