In 2014, about 1,000 new generic top-level domains (gTLDs) will be added to the Internet's root. Given that there are currently fewer than 300 TLDs total (a mix of country code TLDs like .CA and generics like .COM), it's almost cliché to say that the domain name industry is in the midst of one of the most significant changes in its history. A change of this magnitude isn't just rare – the term disruptive comes to mind.
As the head of the registry for .CA, my competition will increase by more than 400 per cent. This is a sign our industry has matured – domain names aren't the ‘domain' of Web geeks anymore, no pun intended. We've gone mainstream.
Our once quiet and relatively invisible industry has become a mainstay in the media. Our products are even advertised in prime time and on the Superbowl. That's a world apart from what we're used to. For the past two decades, the domain name market has been characterized by high demand and relatively few competitors. Frankly, this combination has meant that selling domain names has not been overly difficult.
Registries offered a product – domain names – that Registrars sold on their behalf. There was very little customer-focused activity on behalf of the registry. Even with minimal investments in marketing and sales, a registry could enjoy a reasonable market share. Double digit growth rates have been commonplace.
In this new market, we can't assume we're going to sell domains based on high demand alone. There's going to be more than enough choice to meet that demand. To that end, some of the registries for the new gTLDs are approaching the industry with radically different business models.
As the Internet has become more important in the day-to-day lives of many of the world's citizens, we're selling more than just domain names. We're selling an identity, an experience, and not just a virtual address. Traditionally, new domain names became available following a standard pattern: a sunrise period (for trademark holders to claim their names), land rush (for keyword names) (PDF) and general availability (first come, first served). In the current delegation of new gTLDs, this pattern has been revamped. The sunrise period still exists, albeit in a minimal timeframe. Pre-registration is being offered for some domain names that do not even exist yet, often for a very high price.
Some registries are using declining scales for this pre-registration period: if you're interested in a domain name, it can be yours in the first phase of the scale for a high price (say, $10,000). If it's not picked up in the first phase, the fee for pre-registration drops, and so on until it is registered. Some registries are taking this a step further by offering pre-registration for TLDs that have not successfully been awarded by ICANN yet. Each new gTLD application came with a $185,000 USD fee (plus additional fees for reviews, infrastructure costs, etc.). To date, registries have not realized any revenue from these new domains.
Offering a new gTLD is a pricey endeavour, and the applicants are looking to make that money back as soon as they can through pre-registration. There have been TLDs with defined markets since the earliest days of the Internet. For example, many ccTLDs have residency requirements (.CA included) and there are industry-specific gTLDs such as .MUSEUM.
With the exception of ccTLDs, history shows limiting the potential market for a TLD has not been a recipe for success. There are a few registries that seem to believe that will no longer be the case. In fact, some of the new gTLDs are hyper-focused. Never mind ccTLDs that limit registrations to a nation's citizens, there are city-specific domain names like .NYC that are only available to New York City businesses, organizations and residents. Apparently, it's no longer enough to identify as an American using a .US domain name when you're a citizen of the city that never sleeps:
“Increasingly, the Internet is not only about what you are, but where you are. A .nyc address tells the world you are located in NYC.”
Some new gTLDs can set a registrant apart from their competition in other ways. TLDs like .PLUMBING and .CONSTRUCTION are profession-specific. .CEO appears to be counting on exclusivity to stand out in a market with 1,300+ competitors. The potential markets for these TLDs are limited, but the registries behind them are counting on the fact that the sheer number of domain names out there (265 million and counting) makes finding a plumber, NYC business or whatever else difficult.
By moving the thinking from the ‘left of the dot' to the right of it, these registries have found an innovative way to stand out from the crowd. Bulk registrations are now offered by Donuts, a registry that is behind hundreds of gTLD applications (307 to be exact). They have a list of about 200 new gTLDs – if your organization wants to register all of them for a particular domain name (i.e. domain.bike, domain.camera, domain.wine, etc.), it will cost you a fixed price, not domain by domain as it has traditionally worked.
For the domain name Registrant, domain names are about to be a larger expense for many organizations who wish to have an online presence – or prevent others from creating that presence in their name. A number of the new gTLD registries are offering their products with a variable pricing model. ‘Premium' domain names – those domains that are viewed to be more in demand – will have a higher initial registration fee. While this isn't exactly new – similar pricing models have been in place for TLDs in the past – what is new is the fact that the renewal fee will also be higher for premium names.
For those on the higher end of the spectrum, this could mean many thousands of dollars per year for a single domain name. There are some well-known newcomers to the domain name business. Google has applied for 101 new gTLDs, and Amazon has applied for 76. I find it difficult to believe they are looking to expand their already very successful businesses into domain names.
Is it possible a company like Google is entering the market with a completely different business strategy? I'd say it's not just possible, it's likely. They have a history of entering a market and offering a product for free that was previously charged for – think about Google Public DNS, Google Analytics (how many people pay for website analytics anymore?) or Google Drive. Google's profits come from ad sales – they're going to be one of the domain name newcomers to watch in the near future. Whatever their plans are, I can guarantee they're serious, and will be a departure from traditional domain name sales.
The changes I've discussed above are neither good nor bad, they just are. While the incumbent domain names, country codes and generics, have enjoyed limited competition for many years, new gTLDs are changing the world we operate in. In a sense, it's a daunting prospect for the incumbent TLD operators, CIRA included. But it's also an exciting time for the industry. Interest in TLDs is at an all-time high. Competition is healthy in any industry, and it will result in new and innovative ways of running a registry and marketing TLDs. We're on the cusp of a new era in the domain name industry and I'm pleased to be a part of it.