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08|05|2011 12:27 pm EDT

Who Will Be The Big Winners and Losers of the New TLDs?

by Mark Jeftovic in Categories: Editorial

We’d like to welcome Mark Jeftovic as a guest author. In the domaining world he’s known for stirring up some controversy in the past. Mark lives in Toronto, Canada with his wife and daughter, he’s the founder and president of easyDNS.com – the DNS hosting provider & domain name registrar, a libertarian and former Director to the Canadian Internet Registration Authority (CIRA).

When one looks at the track record of introducing new Top Level Domains it is perplexing to see where all the enthusiasm around unlimited new TLDs comes from. So far every attempt to roll one out owes it’s sustenance to purely defensive registrations (.biz, .info) or else it’s degraded into an utter fracas (.jobs) or just plain flopped (.pro)

The latest TLD that isn’t a country code tarting itself up as a pseudo-generic is probably a good indicator of what to expect going forward: .xxx – reviled by the industry it extorts , err, purports to serve and first new TLD that we are seriously considering making a conscious decision not to “grab our name before somebody else does!”. I’m certain it won’t be the last. I believe one of the first things we will see as all this unfolds is a buyers strike in defensive regs. Once that happens everything will go sideways.

So despite the near frenzied hype around these things, I have already gone on record to predict failure for the vast majority of them.

The forthcoming onslaught of TLDs can be divided into roughly three categories:

1. Generics: these are where “the next .com”‘ TLDs will position themselves. Most will fail because there will be a buyers strike in defensive registrations and the speculators will get crushed. None of them will ever become “bigger than .com”, and I’ll be surprised if one ever catches up with .net.

2. Specifics: these are TLDs which exist for a reason (which I’ve been calling for), but that reason is just a thin premise based on naming. .jobs is a great example of this, because quite frankly, the premise was dumb. That companies would go out and register the .jobs version of their names to post job openings, as opposed to just adding /jobs onto their URL was weak from the outset. There are a lot of these in the pipe: .music, .eco, .money whatever – the ostensible reason for the existence of the TLD is to be the apex of some category vertical. What
I’ve found over the years in this business is that people tend to not order themselves into the categories you set up for them. Once again, the only thing that will hold these TLDs up are defensive registrations and speculators (who will get crushed).

3. Brands: this is where some entity with deep pockets sets its own TLD up to prove that “they’re serious” about their brand. So if Paul McCartney created .beatles and the only 4 domains under it were john, paul, george and ringo, it would be an example of a brand TLD. It would also provide zero value to the brand and probably even fail as call-to-action URLs as people habitually keep adding “.com” onto the end of everything when they type it into a browser location bar.

Still, we cannot stand in the way of .progress, this evolution is inevitable, and I think necessary. This is who I think the big winners and bigger losers will be…because as per usual, the consensus projections for where this is all going are the outcomes that are likely precluded from occurring.

See the losers and winners of the new TLDs after the jump.

Let’s start with THE LOSERS

Business Owners: people who run businesses on the web, or businesses with a web presence will be expected to pony up for non-refundable sunrise claims and landrush pre-orders, at jacked up prices and inflated
minimum terms, all to defend their names. This may work when it happens once a year or so, but anybody who expects to keep working when brand owners get hit with this 10, 20 or 100 times a year better rethink that
calculus. Because I don’t think it will. What is more likely to happen is they decide to just start suing the squatters as they surface, and it will probably culminate in some legal action against the registries themselves, possibly in the form of class actions.

Brand Owners: This hoopla around .brand is stupid. You probably don’t give a crap about your breakfast cereal’s twitter feed. You think it needs it’s own TLD? There are very few brands that make any sense as a
TLD. Something like .Mac comes to mind, but they are an exception. Whatever brand you own, probably isn’t. Don’t waste your money.

Investors: As I’ve posited, most new TLDs will fail. Once the defensive-name buyers’ strike kicks in, most of the new TLDs will not even make it past that initial cashgrab phase which makes them look so lucrative. Couple that with an abysmal renewal cycle as the speculators realize that nobody wants to pony up xxx,xxx for “business.business”, and you have a recipe for epic value destruction. (Memo to VC’s: you can use this as a filter: anything you are pitched that contains a slide that says “and then we get our own TLD”, you can just move onto the
next prospect.)

Programmers / Network Engineers / Operators: Will find their jobs become ever more vexing once it becomes impossible to encapsulate the known universe of top-level namespaces and their syntax rules in a usable
format. Think about the present-day intractable problem of trying to create a bulletproof regex for a valid email address and amp up the complexity from there. This will cause all kinds of bugs and usability issues, but hey, that’s why those guys get paid the big bucks.

But it won’t be all bad news, these losers will have their gizards eaten by…

The New TLD WINNERS:

TLD & Registry Providers: When there’s a gold rush on, the people selling picks and shovels make out like bandits. Companies that enable and provide infrastructure to Top Level Domain operators will probably
have an initial wave of success.

DNS Providers: At the end of the day, it’s all just names-to-numbers and for that you need DNS. To run a TLD you would need at least a modicum of global redundancy, preferably anycast deployed and able to withstand DOS attacks. Enter the DNS providers, because they’re the ones who have those capabilities. (Do I have to disclose that I run one at this point? I don’t expect a flood of new TLD applicants to be banging down my door to handle their rootzone DNS).

Dispute Resolution Providers: will enjoy a booming business. As the buyers strike gathers steam, companies will find it is cheaper to “take out” an offending name in an unfashionable TLD than trying to defend
their name in all of them at exorbitant sunrise rates.

Domain Litigation Lawyers: Not only will there be an endless selection of second-level squatters to sue, they can form class actions and snuff out entire registries deemed to have egregious disregard for the IP
rights of others. For them it will be a Golden Age of prosperity.

and finally, the single biggest, winningest winner of them all…..

ICANN: They run the golden goose, they collect the $185,000 per successful application, they get to keep the non-refundable portion of the application fee from all the losers and then the $25,000 in annual
fees per TLD, Nice work if you can get it.

Conclusion:
Beyond that, everything I’ve been saying about the new TLDs hinges around this concept: that the days of “register your name under .etc, before somebody else does” are over. I expect out of the first 100 or so TLDs, maybe 1 or 2 will initially do something outside-the-box, something that will change the game and actually add value at the root level.

I don’t know what that is yet, but those are the new TLDs that will succeed, while the rest crap out. Off the top of my head, something different, like maybe .gps, where domains under .gps actually represent GPS coordinates and thus real world locations; or .rfid where domains under that root would carry meta-data about RFID tagged items such as location or status. Who knows. But it will go far beyond that “yourname.bs”.

Those new TLDs will be the signal, everything else will be noise.

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16 Comments

Adam Strong

August 5, 2011 @ 12:44 pm EDT

Great post Mark. I really enjoy your perspctive on things. Although I don’t always agree with some things you’ve written, this time I agree with you across the board. Thanks for the contribution and reality check.

David J Castello

August 5, 2011 @ 12:55 pm EDT

Great article. 100% correct. And I find none of it controversial. Just plain common sense.

The ANA came out yesterday vehemently against this and these guys don’t mess around. They will drag ICANN into court. I believe the new TLDs will be allowed, but not by opening the floodgates. It puzzles me why ICAAN hasn’t endorsed this more prudent approach. Could it be that the mortality rate in the first round would be so high that it would scare off most of the rest?

JS

August 5, 2011 @ 1:11 pm EDT

Excellent piece

TAG

August 5, 2011 @ 1:37 pm EDT

.info , .biz , .us – all nicely profitable registries.

New businesses coming online will have the option of buying a short memorable name under a new tld for $20 rather than hundreds, or thousands for an obscure .com. Many will make this choice.

A vertically integrated registry can make several million $ per year with less than 50k names registered. With hundreds of millions of new sites expected to come online in the next five years, many will achieve this threshold.

‘success’ is not only defined by speculator’s ability to monetize or flip names.

Adam Strong

August 5, 2011 @ 3:12 pm EDT

@Tag

“. . . a new tld for $20 . . . A vertically integrated registry can make several million $ per year with less than 50k names registered.”

That’s some interesting math. $20 x 50,000 = $1m revenue (not net profit). You’re nowhere close to “several million” there. The only way to make more is to auction off the premiums at higher prices, and then we’re right back where you started “rather than hundreds, or thousands for an obscure” new TLD.

You clearly have an agenda to push and that’s ok by me, but let’s try to be realistic too.

TAG

August 5, 2011 @ 3:35 pm EDT

$20 is just a domain registration, doesn’t include hosting and value added services like security, privacy, site builders, shopping carts, etc. Average hosting customer is worth $150 to $200 per year, all in.

Godaddy didn’t just do a deal for 2 billion based on registrations.

Vertical integration allows registries to act as registrar also. It doesn’t depend on auctions, but end users. Adoption and use are key.

Business models are being developed around this.

David J Castello

August 5, 2011 @ 4:01 pm EDT

@TAG

Correct me if I’m wrong, but aren’t these new TLD owners going to be held to a higher level of liability? In the past, trademark owners only went after the owner of the domain in arbitration or court. Now I’ve heard the registry will also be held liable.

Steve

August 5, 2011 @ 5:37 pm EDT

Most of the new tld program is a cash grab.

I think the biggest winners are all of the non-English speaking web surfers and soon to be web surfers that can type domain names in their native languages. IDN.IDN is the sleeper in this program. .com and .net will be Chinese.Chinese, Russian.Russian, Spanish.Spanish

The next question is how much is Hotel.com, Insurance.com etc. etc. in Chinese/Russian/Arabic/Spanish worth?

Theo

August 6, 2011 @ 2:29 am EDT

I agree that alot of new gTLD’s will fail. Main reason willbe the traditional domain business model. This model with a flood of new TLD’s is doomed to fail.

.JOBS a failure, yes this couldbe considered a failure but who is to blame here ? The TLD operator, simple as that.
Some consider .Aero a failure , i beg to differ. This is a TLD that is targetted to a specific group of users. That the result is that it is not intresting for the domaining/investors among us is another discussion. But the business model is not flawed here. It is a choice.

I expect more new TLD’s targetted toward what i call niches. If AC/DC wants to setup .ACDC and their fans are willing to forkout 10 USD each year then i expect this TLD tobe very proffitable for the TLD operator. After all they got tons of fans. And i expect the average age of the AC/DC fan is prolly 40+, a group with money so to speak ;)

When it comes to .brand i think the big companies are going to have a field day when they operate their own TLD. The marketing chances are almost endless. Tons of business models can be applied here, even the one where they choose to hand out free domain names.

Trademarks and issues. The current setup for the URS needs more tweaking. Registries being liable is a first also.

Do i endorse this new gTLD program ? No i don’t. And it it’s current form i see alot of issues down the road. Issues that should have dealt with already but ICANN moved along anyways.

And i totally agree with the last comment about ICANN being the golden goose. The first TLD’s i do not see them released in 2012 , maybe late 2013. Fact remains the landscape WILL chance. Question is.. What are you going todo as a domainer ? Complain that it all sucks (it does) or move along and see how it all plays out and see new chances and grab those chances ?
As a domainer you still have a large advantage and a greater skill set compared to new people entering this market.

Thank you for reading my early morning blur. Time to get some coffee ;)

David

August 6, 2011 @ 5:35 pm EDT

Just another keyword (which is how search will probably see it them at first). Dot XXX will have some strong names for this reason. After that its all about basics, short extensions that are meaningful will have uses, but the only winners will be in particularly deep and well marketed extensions. Unless of course the extension owner is just buying it to monopolize a keyword for their own uses. At six figures this is going to be an attractive option for some businesses compared to some of the top level dot coms. There is a price point where owning the extension is going to get you the best bang for your buck.

Btw your in post link has a typo in the url

A.Jackson

August 8, 2011 @ 9:50 am EDT

Our HR dept had me register a .jobs domain for them. At job fairs, etc, they had to explain to savy 20+ college job canidates what it was. We went back to using careers.domainname.com and the alias domainname.com/careers. The .jobs domain had maybe 50 visitors for the entire year in traffic, despite heavy good promotion by HR. Careers.domainname.com received about 15,000 visitors. We did not renew the .jobs domain.

Christopher

August 11, 2011 @ 12:32 pm EDT

Great post…very sensible points. For some reason though I still love my tarted up country code pretending to be generic. She may be a disingenuous little harlot but she’s so beautiful I can’t stay away from her.

elliot noss

August 11, 2011 @ 2:09 pm EDT

what a great opportunity to be a contrarian! (and mark you know I love you!)

first, I definitely agree there will be more losers than winners BUT that is about where I end in agreement.

two important points for me, both are things that I see time and again. first, people always confuse bad execution with bad strategy. theo is exactly right that .jobs is a failure in execution AND, like .info and .biz, a victim of overly restrictive policies, poor policy choices and limited rollout.

when something bad happens people always look to change the strategy. 99 times out of 100 the execution just sucked. to me this is relevant with respect to .jobs, .travel, .tv and a number of others. I think .co is a nice counterpoint. great execution, nice results. and if you think the typo thing is the reason look at google, amazon, twitter and others who have adopted it for usage.

second, we always underestimate secular change. here I like to use .brand as the example. if people are looking for the “failure of .brand” they will almost certainly get to be right for a couple years post launch. I STRONGLY believe they will be deeply wrong beyond that. changing user behaviors takes time. people tend not to be patient in their assessments.

the good news for me with the above is that by the time I am susceptible to “I told you so” you will have forgotten to tell me so! ;-)

Ron

August 14, 2011 @ 3:00 pm EDT

Most new TLD’s are useless. Even .net domains are useless since they are really only a carbon copy of .com and lead to lost traffic to the owners of a dot com if you brand with them.

It really comes down to the meaning of a new TLD. Country level TLD’s are extremely valuable in those zones, no one should argue that. Telnic’s new domain the .tel also has a distictively different meaning of what it represents to a regular .com hosting domain.

Ignoring all new TLD’s is ignorant but any TLD that clones the same meaning of .com will never reach the same values and will only be good for flipping in auctions for a short term profit. Anyone that builds on a .net, .biz, .co, .info, .me etc is bound to give up over time because of the fact that they lose too much traffic to the .com version.

Eine eigene Domainendung für jedermann? Ab Januar 2012 kommen die neuen generischen Top-Level-Domains…

Nach langwierigen Diskussionen sollen sie ab Januar 2012 doch eingeführt werden, die so genannten „New Generic Top Level Domains“ (gTLD). Ich hatte vor kurzem das Vergnügen, mich durch das 350 Seiten umfassende Regelwerk “Applicant Guidebook……

[…] Who Will Be the Big Winners and Big Losers of the New TLD game? (Guest post on Domain Name News) […]

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