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Could New gTLDs Survive Exclusively Through Domainer Registrations?

Posted on 26 February 2014 by Andrei

A few days ago, I explained that without domainers, new gTLDs would/will most likely fail. Today, I’d like to take things one step further by trying to figure out whether or not the new gTLDs could be supported *just* via domainer registrations.

Let’s assume that only domainers will register new gTLDs over the next x years and that end users will appear afterwards. I know, it’s an over-simplification but humor me.

How many new gTLDs (excluding dot brands) will there be?

For the sake of this experiment, let’s say 1,000.

Let’s also go with an average domain registration price of $25.

How many registrations would it take to make a registry reasonably profitable at that price level?

Let’s say 3,000.

At a price level of $25/domain, this would mean $75,000 per year for each extension. Not an amount operators would be thrilled about by any means (since they had to invest quite a bit of capital upfront and at this rate, it would take a while until they recoup their initial investment) but still, most likely enough for an extension to be considered sustainable.

The question is: can the domaining industry support 1,000 extensions at this rate?

For an entire industry, $75,000 is not that much money but multiply it by 1,000 and you’ll realize that 75 million represents something completely different.

So again, can the domaining industry deal with a potential 75 million yearly cost?

I think it can.

Let’s start by simply looking at DNJournal’stop 100 sales for 2013.

By simply adding up the top 100 public sales, the industry “made” a little over $27 million.

Keep in mind that a lot of sales aren’t public.

Therefore, it’s reasonable to assume that the top 100 private sales generated a similar amount. For the sake of this experiment, let’s assume they generated the exact same amount.

Out of the $75 million needed to support all 1,000 new gTLDs, the top 100 public sales + top 100 private sales *alone* could account for $54 million.

If we were to add up each and every public/private sale (so not just the top 100) as well as the parking revenue generated by the domaining industry as a whole and all of the other arrangements (domain leasing, partnerships, etc.), I’m reasonably confident the final amount would easily be in the mid $xxx,xxx,xxx zone.

The average domainer considers $75,000,000 a huge amount of money and rightfully so but for an entire industry, a $75 million yearly new gTLD exposure isn’t an unfathomable scenario.

That being stated, I’d conclude that yes, the domaining industry itself could support all of the new gTLDs. Again, my example isn’t a PhD paper by any means, just a hopefully interesting way of once again making it clear that the domaining industry is a *far* more important variable in the new gTLD equation than meets the eye.

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8 Comments For This Post

  1. Do Da Math Says:

    Your math is flawed, Andrei.

    The gtld’s are a terrible idea and here is why: there simply is no need for them and they serve no purpose other than providing additional inventory for registrars to promote and to fill ICANN’s coffers.

    They offer nothing to the end-user and are potentially dangerous for those who use it for numerous reasons:

    1. The registries can, and I think will, all go under.

    2. They are at least 250%-300% (or more!) the price of an available .com, both upfront and annually. If anything, they make .net look like a good deal. For example, they seek $799/year for .Luxury! By starting out with such outrageously priced losers, the entire program will be put in serious jeopardy.

    3. They are all anticipated to heavily leak visitors to the .com – just like we’ve already seen with .net, .org and each of the others.

    4. They are all anticipated to heavily leak EMAIL to the .com – just like we already see with .net, .org and each of the others.

    5. ICANN foolishly allowed both singular and plurals of the same gtld which will cause mass confusion and still more leakage. (See #3 and #4 above)

    6. Only a very few names make any real sense and serve a useful purpose.

    7. Names that actually make sense will be held back and auctioned off for big bucks by many of the registries. Of course, that makes no sense cuz this was supposed to be all about availability, right?

    8. The big bang was a big thud. Does your mother know they have just been introduced? No, mine doesn’t either.

    9. Like it or not, the public is totally brainwashed and will continue to type in .com

    10. Companies are not interested in utilizing the gtlds and are already heavily invested in their .com. Every single one of the Fortune 500 has a .com and I don’t see that changing in our lifetime.

    11. There is no more vacant land for sale for $10 in Manhattan, Miami Beach or in zip code 90210 either. Sorry. Deal with it.

    12. Some domainers are giving the gtld’s a viability of 1 year. Personally, I think that is generous. Your math is not taking a falling house of cards into consideration.

    13. The tld alternative experiment has already been tried by ICANN and is generally considered to be an overall failure involving .aero, .travel, .museum, .jobs, .mobi, .name, .tel, .pro, .cat, .biz, .xxx, and .asia.

    14. This experiment has been repeated by corporations and was generally considered to be a failure. For example, O.Co’s disastrous aborted attempt to shorten its name using a cctld for Columbia.

    15. A similar experiment has been tried by New.Net and was generally considered to be a failure ( http://en.wikipedia.org/wiki/New.net ). End users who relied on the New.Net extensions got burned in the process when their extension was ultimately discontinued. Again, your math fails to take this into account.

    16. With 1900+ tlds each competing on its own, no one is actually spending money to educate the public on the overall availability of new, right of the dot names. ICANN now has $400M, but it is reserved for legal (they will need it!) and not earmarked for any advertising or public awareness. As a result, each of the new tlds will need to fend for itself. As such, each will die the minute it tries. The dollars that will be required to overcome the .com tsunami in 2014 are, at this point, insurmountable. No one registry will be able to overcome this obstacle and still have any money left over to operate.

    17. Gtld registries will learn what it means to piss into the wind when they try to convince the public that Joes.Books is not the same as JoesBooks.Com. They will hope that little Joe will do the educating, but that just won’t happen. Instead, Joe will go out of business. If Joe is smart, he will instead buy a longer, but easily recognizable .com

    18. If your sponsoring registry goes under, your website may go with it. It is bad enough worrying about the laws of a particular country when dealing with cctld’s. Customers of each of the following have found themselves in a precarious position:

    - Zaire’s (“ZR”) renaming to the Democratic Republic of the Congo (“CD”).
    - The breakup of the Soviet Union resulting in the code “SU” being replaced with codes for the independent states, such as “RU”, “BY”, and “UA”.
    - East Timor’s code changing from “TP” to “TL”.
    - Czechoslovakia’s (“CS”) division into the Czech Republic (“CZ”) and Slovakia (“SK”).
    - The remaining components of Yugoslavia (“YU”) becoming Serbia and Montenegro (“CS”). Following a referendum, in September 2006 Serbia and Montenegro further split into two independent identities Serbia (“RS”) and Montenegro (“ME”).

    19. Have we not learned anything from such cctld fiascos? Also, don’t forget what happened to our friends at bit.ly who utilized the cctld for Libya. When the Arab country blocked its internet access in February of 2011, they found themselves in an ugly situation.

    At least cctld’s are backed by foreign governments, each with their own sovereign borders and many with their own currency. With gtld’s, ya got nothing other than the possibly-empty promises of a bunch of jelly donut guys and some dude in the Cayman Islands who may or may not be around in a few weeks. I have no idea as to their finances and it sounds like they are all financially sound, but it seems very reasonable to be concerned about this at this point.

    20. The new extensions are, for the most part, too long. One letter was not permitted. Two letters are reserved for country codes. Three letters are cool, four letters may be ok (yet all previous attempts of 4 letter tld’s have failed!), but 5+ letters, fuggetaboutit. Many are 10+ letters!

    21. Many of the gtld’s do not represent a line of commerce. This will ultimately prove devastating to not only that particular extension, but also to the program as a whole as they start to drop like flies.

    22. I think that Rod Beckstrom and his ICANN friends foolishly opened a Pandora’s Box that should never have been opened. The only way to get this ill-conceived genie back in its bottle will be to wait for it to die a painful death and then sweep up its cremated ashes.

    For the above and many many many more reasons, this gtld story will surely end like the others before it, in dismal failure. Your $75,000,000 theory is an interesting perspective, but there is no way this turd of an idea will ever reach numbers like that.

  2. michael berkens Says:

    Andrei

    So based on $75k gross the registry would not be doing very well.

    1st they have a $25K annual fee to ICANN.

    Almost all of the new gTLD’s are using some other companies backend to operate it which is costing them anywhere from $1 to $5 a registration, so based on 3,000 registrations it could cost the registry some $12K lets call it for the back end provider.

    Of course it all depends on the contract etc they have with the provider

    So now your up to 1/2 of your revenue in your example coming off the top.

    Now if a domain retails to the public at $25 through a registrar the registry is getting I would say as a general proposition no more than $20 of it so that’s another $5K out of the registries pocket in your example.

    So now they are down to $32,500

    Out of which they have to pay for promotion and advertising, travel to ICANN Meetings, normal business expenses, lots of lawyer bills not to mention more like $500K per string for start up (very conservative).

  3. Domenclature.com Says:

    Non sequitur (Latin for “it does not follow”), in formal logic, is an argument in which its conclusion does not follow from its premises.

  4. Andrei Says:

    @Do Da Math: your arguments are very interesting and I appreciate the fact that you took the time to articulate your viewpoints but most of them are beyond the scope of this article.

    Through this article, I asked just one simple question:

    Could New gTLDs Survive Exclusively Through Domainer Registrations?

    The example I went with is over-simplified but for the most part, makes it clear that our industry could “afford” it for lack of a better word :)

  5. Andrei Says:

    @Mike: I agree with you 100% that registries wouldn’t do well in such a scenario and mentioned that it wouldn’t be “an amount operators would be thrilled about by any means” but it’s enough to provide a “yes” answer to this post’s question:

    Could New gTLDs Survive Exclusively Through Domainer Registrations?

    The answer in my opinion is that yes, they could survive.

    Not thrive by any means but survive nonetheless.

  6. Andrei Says:

    @Domenclature.com: I don’t think we’re dealing with a “non sequitur” situation.

    My conclusion was this:

    “I’d conclude that yes, the domaining industry itself could support all of the new gTLDs”

    Based on the premise that as per my (again, over-simplified) calculations the $75 million amount would not represent an unfathomable domaining industry exposure to new gTLDs, I think it’s fairly safe to conclude that new gTLDs *could* survive exclusively through domainer registrations.

    Could, not will.

    Would they thrive?

    No but the bottom line is that since the domaining industry alone would be able to ensure the survival of new gTLDs, our industry is most likely considerably more important than many (including registry operators) realize.

  7. Domenclature.com Says:

    You only dealt with gross revenue, ebitda, not net revenue.
    How much did they pay, or owe on the names, and cost? Their mortgages, to support their kids, spouses etc?

    They can’t just give all that money to new G’s.

  8. Andrei Says:

    @Domenclature.com: you are 100% correct, I didn’t refer to those aspects and as mentioned in my response to Mike’s commend, I didn’t refer to the expenses registry operators have to deal with either. On the other hand, I didn’t factor in several “positive” aspects either, for example that certain registry operators went with premium pricing models for some domains and that those would therefore cost significantly more than $25.

    I decided to over-simplify because this article had one purpose and one purpose only: making it clear that the domaining industry could (not will) “afford” to support new gTLDs :)

 
 
         
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