Profiting from Nonprofits? The Sale of Dot-Org



You’re probably familiar with websites that end in .org,
which is one of the original domain names that the Internet started out with
back in the 1980s.  Historically, it was
used to distinguish nonprofit organizations from those whose URL ends with
.com, which presumably were in it for the money.  That distinction is no longer observed, as
anyone with enough money and an idea for a .org domain name that nobody’s
thought of yet can get one, profit or no profit. 
Nonprofits that got in early and want to keep their .org
domains thought they had something to worry about when an Associated Press
report came out this week regarding the sale of the Public Interest Registry
(PIR), the nonprofit organization that oversees .org.  The buyer is a for-profit entity called Ethos
Capital, and they are reportedly paying over $1 billion for the PIR and its
rights to receive registration and renewal fees for .org domains.  There were even some protesters with signs
outside the Los Angeles offices of the Internet Corporation for Assigned Names
and Numbers (ICANN), the umbrella organization that turned over .org to the PIR
in the first place and presumably must approve the sale of PIR to Ethos. 
As protests go, this one was small potatoes—about 20
people.  On Friday, Jan. 24, by contrast,
a whole lot more folks than that showed up in Washington, DC, for the annual
March for Life protesting the 1973 U. S. Supreme Court decision Roe v. Wade
legalizing abortion.  The fact that these
events got roughly the same coverage says something about media priorities, but
that’s a discussion for another day.
What’s interesting about the protests surrounding the sale
of the .org domain operation to Ethos is the concern that Ethos will jack up
prices and fees to the point that nonprofits will be unable to keep their
domain names.  Theoretically, that is a
possibility.  But the point I would like
to make is that just as anybody nowadays can buy a .org domain name with enough
cash, anybody can organize as a nonprofit and do almost anything a
profit-making entity can.  And that’s not
right.
The phrase “non-profit” itself, as modifying
“organization” or “corporation” dates back only to the
1920s.  Before that you might have called
them charitable organizations, or charities. 
But as life got more complicated, outfits arose that were not strictly motivated
by compassion or mercy (the root meanings of “charity”), but
nevertheless were not founded simply to make money.  And as corporate tax laws cast an
increasingly greedy eye on profits, it became advantageous to operate under the
label of a nonprofit, and so more organizations did so.  The only taxes nonprofits pay are typically
employee taxes such as Social Security and Medicare, but otherwise they are
exempt.
Back when I was young and innocent (now I’m old and not
quite so innocent), the word “nonprofit” conjured up in my mind the
image of a small, storefront place where the roof leaked and the people there
all ate beans out of a can for lunch, because any money they got went into the
Cause, whatever the Cause was, and not their own pockets.  The Sisters of Charity founded by Mother
Teresa still hews to this model pretty much, I am told, but it’s now the
exception rather than the rule. 
Some nonprofits are huge multinational corporations with
multimillion-dollar budgets.  And, to be
fair, many of them still have the nonprofit spirit of keeping as their highest
priority a goal other than making money: 
relieving poverty, encouraging education or spiritual growth, or any
number of other worthy goals that are not monetary profit. 
But just because you have “nonprofit” in your
charter doesn’t mean you can’t pay some extremely remunerative salaries.  A few years ago, the American Red Cross was
in the news for the poor accounting it made of donations given to Hurricane
Harvey relief, and it was pointed out that their CEO makes $500,000 a year,
which they said was in the mid-level of CEO pay for large nonprofits.  Cecile Richards, the former head of another
large nonprofit called Planned Parenthood, reportedly was paid over $1 million
in the fiscal year 2017-2018.  Clearly,
these folks are not eating canned beans for lunch.
Such organizations might reply that one of the main
functions of their CEOs and high-level officials is fundraising, and the person
asking for money has to be able to hold up their head in a moneyed environment,
which you can’t do on a $20,000-a-year salary. 
And while executives of nonprofits don’t expect to be paid at a rate
competitive with the for-profit world, they will put up with only so much of a
pay cut before they will decide it’s not worth it and go somewhere that pays more.  There’s competition for executive talent
among nonprofits too.
All these are valid arguments in the current
environment.  But in view of the almost
vanishing distinction between some nonprofits and profit-making entities, I
would tell those who have .org domain names to cool your jets.  Obviously Ethos Capital isn’t paying a
billion dollars for the .org domain system out of the kindness of their
hearts.  But these days, nonprofits can
be just as rapacious and exploitive as profit-making companies can be.  It appears that some former ICANN members are
also involved in Ethos Capital, so the most likely outcome will be that things
will roll along more or less as they’ve always gone, perhaps with even better
service regarding domain-name registration and renewal.  After all, the market does work well in most
cases, and profit-making outfits in a competitive environment often outperform
nonprofits that are not competitive.  The
domain-name business is not competitive in that sense—if you don’t like the service
you get from Ethos in trying to obtain a .org domain name, you will be out of
luck—but they may come up with other profitable activities that will
synergistically make their services better.
So for now, I don’t expect any big changes in this
area.  And I also don’t expect the CEOs
of big nonprofits are going to start eating beans for lunch any time soon
either, as the phrase “nonprofit” is just a label now, not a guarantee
that its people have taken a vow of poverty. 



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