ICANN’s recent rule change will have mixed results.
ICANN recently moved a step further to changing how it handles refunds for domain names in conjunction with the registry. Currently, ICANN charges a 20 cent fee per domain name registered. However, this fee is refundable along with the entire price of the domain registration if the domain is “returned” to the registry within 5 days. With the new rules, the 20 cent fee won’t be refundable after a registrar returns more than 10% of its domains in a month.
The idea is that domain tasters will be stuck with the fee and tasting won’t be profitable anymore. Not so fast. Someone didn’t do the math on that. Here’s a look at what will and will not happen as a result of this change.
Domain Tasting. ICANN’s change will stem but not eliminate domain tasting. Even with the 20 cent fee it can still be profitable. CADNA ran some (errant) numbers that sort of prove the point:
According to the results of the CADNA study, a registrant that registers 100,000 domain names would keep 6,600 of them on average. At $6.20 each, the cost of these domain names would be $40,920. Paired with the 20-cent ICANN fee for each of the 93,400 domains that were not kept, the total cost of the domains would be $59,600. In other words, the taster would have spent $9 per profitable domain name that was identified via tasting and kept beyond the Add Grace Period (AGP).
I’m not sure if the guys at CADNA have kept up with the domain industry lately, but you can’t get domain names for $6.20 anymore. The wholesale price of a .com is $6.42 plus the $.20 fee, making it $6.62. (That price increases again later this year.) So that makes it $6.62 times 6,600 or $43,692. Also, the 20 cent fee will only apply to domains above the 10% threshold.
But CADNA’s point, that tasting will be more expensive but still profitable if done smartly, is correct. A bigger detriment to mass domain name tasters is the falling value of parked domain names and trademark lawsuits.
Poor Man’s Tasting. So-called “Poor Man’s Tasting” is a deal set up by registrars to let their customers taste domain names on a one-off basis. Registrars usually charge a fee of 25 cents or so for this privilege. Given that there’s already a cost to this, I don’t see there being an effect on this type of low-scale tasting.
Domain Kiting. ICANN’s move will eliminate “domain kiting”, which refers to companies that register a domain and serially drop it and re-register it within the 5 day grace period to avoid the annual registration fee. Now they’ll have to pay 20 cents per 5 days (over the threshold), which costs more than an annual registration. If companies still kite domains, they’ll go ahead and register them once they know the domain gets enough traffic.
Frontrunning. A number of people and companies have suggested that ICANN’s rule change will eliminate frontrunning. Frontrunning is when someone gets a hold of queries people make for new domain registrations and registers the domains. The person who wanted the domain comes back to register it later, only to find it has been snapped up. (For the record, an ICANN committee said no one has provided it with good evidence that this happens at the registrar or registry level.) I doubt a 20 cent fee will stop this. The potential to sell the domain to the interested party, or the assumption that the term will become popular, makes frontrunning a profitable game.
Network Solutions’ “Customer Protection Measure”. Network Solutions “protects” its customers from frontrunning by preemptively registering any domain searched for on its web site. Because NetSol takes advantage of the add grace period for this “service”, it will end this practice with the rule change.
Recently NetSol tried to play good guy by saying that it would stop reserving domain names if ICANN made its rule change, since that would end frontrunning. I guess they thought we’d forget that they said they couldn’t afford to continue the practice if they were charged 20 cents for each domain name reserved.
