VeriSign to Outsource .com Registry to Go Daddy

I met my source in one of my local branches of Starbucks in downtown San Francisco.

He was huddled over his laptop, bashing away at an Excel spreadsheet and hastily scribbling down his findings on the back of an envelope. He looked disheveled, like he'd slept in his clothes or not slept at all, his eyes were propped open with caffeine.

“You okay, bro?” I asked as I approached his table. He always looks a bit weird, a bit wired, but this was different.

“VeriSign is about to pull off the biggest piece of techno-political chutzpah in the history of the internet!” he barked immediately, then clasped a hand over his mouth. “I'm sorry, yes, yes, I'm okay. I just came across some very disturbing information.”

“What's that about VeriSign?” I asked, genuinely interested. “You've been looking into their deal with ICANN to raise the price of a .com?”

(You have to understand that I didn't actually verbally say the hyperlink. I'm putting it into my sentence now, as I transcribe the meeting, for your easy reference.)

My source nodded rapidly.

“It's a conspiracy,” he whispered.

“Between who?” I asked, secretly wondering whether 'whom' would have been more grammatically correct.

“Stratton Sclavos and Bob Parsons,” my source said. “They're in bed together. Figuratively. As soon as the Department of Commerce signs off on the new .com deal, VeriSign is going to migrate the entire .com registry infrastructure to Go Daddy Economy Windows Hosting accounts.”

He wasn't actually verbalizing the hyperlinks either, just for the record, although he has been known to do that sometimes.

“Why on earth would they do that?” I asked.

“To save money,” my source said, as if it should have been obvious.

It should have been. I thought about it for a moment.

“Of course!” I said, experiencing a sudden epiphany. “The more money VeriSign saves, the more incentive they will have to invest in their infrastructure! Just like when they pushed for higher prices on .com, just so they would have more incentive to invest in their infrastructure.”

“Exactly!” my source said, beaming. “This whole thing is just a huge conspiracy to give VeriSign more incentive to invest in their infrastructure. Bob is just playing along to VeriSign's tune. Even ICANN is involved. It goes right to the top.”

I took out my reporter's pad and pen. “Okay, I'm interested,” I said. “Tell me what you got.”

My source pushed the envelope across the table. On it, a crudely scribbled replica of an Excel spreadsheet. At the top, he'd written the the word “Untitled”, then crossed it out and replaced it with “Cost Analysis, .com on Go Daddy -- OMG They Finally Did It.”

“Okay, listen carefully,” my source said. “There's one very important thing you need to understand before I go any further.”

I listened, shouldering towards him over the table.

“That thing is...” he paused, drew breath, closed his eyes, nodded somberly. “I haven't got a fucking clue how the DNS works.”

“I know,” I said, nodding. “I don't think anybody does. Not even Karl Auerbach. He's been letting people believe he knows for years. Everybody else is just too scared to confront him, just in case he can bullshit about it better than they can.”

“Okay, we're on the same page,” my source said. “So let's start with some things that we do know. Namely, that there are about 48 million .com domain names out there at the moment, and there are 15 billion DNS queries against the .com registry every day. Mr Sclavos gave us this information, and he has no reason to massage the numbers.”

“Of course not, why would he?”

“Exactly,” my source said. He stabbed at the envelope with an inked-stained finger. “Simple division tells us that each .com gets, on average, 313 queries per day.”

“Makes sense.”

“So if we know how much data transfer that eats up, and we know how much it costs to run a data center, we can figure out roughly what it costs to run .com, right?”

“Well...” I started. I wanted to believe him, but the math he was proposing seemed more than a little simplistic, the kind of nonsense a drunk blogger might come up with.

My source carried on, regardless.

“The maximum size of a DNS message is 64 kilobytes,” he said. “I read that somewhere once. Probably on the IETF web site or something. So we can use that number in our spreadsheet. Maybe we should double it though, because I reckon there's a question and an answer to every query.”

“That seems fair,” I said, as if I had any idea what I was talking about.

“So that's 313 resolutions a day, 128k each,” my source said, indicating the relevant section of the envelope. “It works out at about 40,000K a day, or 1,200,000K per month.”

“What's that in gigabytes?”

“About 1.14Gb a month,” my source said, consulting his spreadsheet. “Annually, it's about 13.73Gb of data transfer.”

“So, what you're saying,” I said, “is that every .com out there generates on average a maximum of 13.73Gb of traffic against VeriSign's infrastructure every year?”

“Exactly,” my source said, excited that I was following his thought process properly. I noticed that foamy spots of saliva had started to form at the corners of his mouth.

“But what does that mean in dollar terms?” I asked.

“Easy,” he smiled. “Go Daddy's Economy Windows Hosting accounts cost $3.95 per month for 250Gb of data transfer. That's 3,000Gb a year for $47.40. Or about two cents per gigabyte.”

'What a good deal,' I thought to myself, 'if only Go Daddy had an affiliate program I could link to.'

My source carried on, now suddenly on the verge of frantic, pointing to cells on his envelope.

“So if one .com registrant is using up 13.73Gb of data transfer every year, do you know what that works out to? In dollars and cents? Do you?!?” he asked, his volume increasing as his theory reached its hideous conclusion.

“No, no, I don't,” I confessed. Damn him. Damn him and his Excel spreadsheet.

“It works out at 28 cents a year.”

“Dang.”

“Dang is right,” he said. “VeriSign gets $6 a year for each of those domains. So the profit margin when they switch to Go Daddy's Economy Windows Hosting will be in excess of 96%.”

It seemed too perfect.

“But surely VeriSign has other costs,” I said. “What about the SRS? The shared registry system. That's a far more important part of the .com infrastructure. If resolving domain names was so important, ICANN would have given VeriSign domain resolution SLAs back in '01. They didn't. When it came to performance service level agreements, ICANN was only interested in the SRS.”

My source glared at me. I had spotted the weakness in his theory.

“Fuck you,” he said, spinning around his laptop so the Excel spreadsheet was facing me. The envelope went spinning to the floor. “If you're so fucking smart, why don't you just double VeriSign's costs? Why don't you triple it?? In fact, why not just quadruple the motherfucker???”

I sensed that I had offended my source at a critical moment. Years of reporting experience told me that the only way to regain his trust would be to follow his instructions.

I thought fast. Okay, VeriSign's costs on Go Daddy's data center, according to the envelope, are 28 cents per domain per year. My source is asking me to quadruple it. That means multiply by four, right? Yeah. Okay, 28 times 4... 28 times 4... 28 times 4...

Fortunately, Excel was within reach, and she answered me quickly and accurately.

“That would be a buck and twelve,” I said. “$1.12 per domain per year.”

My source continued to glare. He wanted more.

Tap. Tappetty-tap. Tap.

“Er... an 81% margin, I think,” I said. In the back of my mind, I was thinking about the last time I had read Microsoft's quarterly financial report. If I recalled correctly, that particular company is considered lucky if its margins on sales of Windows exceed 80%.

This information, I thought, would set his troubled mind at rest.

“Now double the costs again,” my source snarled.

“Why??!” I gasped. “What could be the cost justification for that?”

“I dunno... firewalls, staff, load balancers, cabling, servers, depreciation, software, hardware, amortization, rent, air con, VPNs, databases, R&D, incentive to invest in the infrastructure...”

“Surely Go Daddy has to cost all that too, just to offer VeriSign its reasonably priced Economy Windows Hosting service,” I complained.

“Just DO it.”

I went along with his insane theory. But this math I could do in my head.

“It's $2.24 per domain per year,” I said. “Or, maybe about 63% margins.”

Jesus, I thought, that's not bad. A lot of software companies don't see anywhere near that margin. Oracle sells a helluva lot of databases, and they don't make that kind of wedge.

There was a long silence, interrupted only by the splutter of the coffee percolator and the persistent whine of a man with a ponytail talking about his Web 2.0 startup.

My source kept my gaze throughout.

He was waiting for me to comprehend. To grasp the enormity of it. To understand that once VeriSign and Go Daddy aligned their sales strategies and, more importantly, their public relations strategies, I would be shit outa luck for domain name stories for the foreseeable future.

“Do you understand now, my young Padawan?” he said, suddenly serene in Starbucks.

I nodded.

“You don't really believe any of this, do you?” I said.

“Not at all,” my source said. “It was merely an exercise. An exercise in what the Elders call BullShit Math. It is used as a thought tool by the Adepts, whenever they try to figure out which of two conflicting Gurus are lying to them.”

“Was that an upper-case S in BullShit?” I asked.

“Yes, it was,” my source said. “You can make things sound much more important if you give them upper-case letters. This, I will address in my next lesson.”