How should registries price their new domain registrations?
We’ve seen many new top level domains (and some commercialized country code domains) hit the market over the past decade. They’ve taken various pricing strategies — from sell-if-for-a-low-price-to-boost-registrations to .com equivalent pricing to premium pricing. We’ve even seen variable annual pricing on premium domains.
How should you price your typical domain registration fee? Here are several ideas along with the upside and downside of each*.
Free
“Free” domains can fall in to multiple categories, and there’s a big difference between them.
On the one hand is the idea behind .free, where you can get a limited number of .free domains. This, to me, is a bad model. Without appropriate safeguards, your TLD will be like a free web host. It will be abused, landing you on security company sh*tlists. And maybe even Google’s bad boy list. Listen to Matt Cutts. You will also have a decent revenue hurdle since you owe ICANN fees on each domain registration. Parking expired domains and upselling may not be enough.
The other type of free is offering free domains to customers, distributors, association members, etc. For example, eBay might offer myuserid.ebay to customers for their stores. (As an aside, eBay doesn’t need a new TLD to do this. It’s cheaper to do it as a subdomain or directory of eBay.com.)
I could even see something like .bank being free to members of a large banking organization.
This model could spur widespread use but still retain the quality of your overall namespace.
Cheap
The next pricing option is one positioned to be a cheaper alternative to .com. VeriSign keeps raising the price on .com, and we’re starting to see registrars push annual registration fees to $12 or more. If your domain is priced at $5 a year retail, would someone register that as opposed to .com? I suppose it depends on the customer. More likely is the .com is taken and someone considers an alternative. If you’re priced cheaper than .com, .web, and .somethingelse, you might win the customer.
If a registrar charges $5 retail, you’re probably charging $1-$3 wholesale.
You might also consider pricing your registrations higher but then doing specials with domain registrars. This will make it easier to raise prices later, as you can just stop the “sale” prices.
Still, I have reservations on cheap pricing. .Info got a bad rep for its first year specials. They retained a lot of registrants and it worked out for them, but a lot of spammy sites were set up on .info.
.Com pricing
I’d consider .com equivalent pricing to be about $10-$15 to the end user. This probably means you’re charging a wholesale price of $5-$9. Customers are used to paying this amount. Pretty straightforward.
Premium
Premium would be something like .co (wholesale price $20) or .xxx (wholesale price $60).
There’s a good business model behind this, if you can draw attention to your TLD. I know it’s simple math, but if you’re .co and you hit the 1 million domain milestone you’re looking at $20M in annual registration revenue. If you charge just $7 it’s just $7 million.
This type of pricing should work for TLDs that have a since of community. I can also see it working for some city names, such as .nyc. A new york pizzeria may be willing to pay $50 for a .nyc name instead of .biz. (But would they opt for .food instead?)
Uber Premium
This would be for exclusive domains. These domains likely have additional services such as authentication and may require group membership. If .bank isn’t given away for free, it would probably fall into this category. You could be looking at prices of hundreds or thousands of dollars, depending on the services offered along with the domain.
*I’d love to see some analysis on the elasticity of demand for retail domains registrations.
John Berryhill says
“Free” and “bundled with another service”, like your eBay example, are two different things.
An automaker could, for example, include (VIN).brand as a repository of warranty service and recall information for each car.
Unfortunately, the ICANN model itself makes assumptions about “domain name as a website address” which precludes low-marginal cost applications relating to serialized goods and services.
John Berryhill says
The other problem is the preclusion of synthetic DNS results.
For example, a service like CARFAX could run .vin in which Vehicle Identification Numbers constitute the “second level domain”, but instead of being served by a nameserver and a zone file, would route DNS queries to a process a process which treats the SLD as input to that process.
It’s unfortunate that the TLD framework defined by the Guidebook precludes doing really innovative stuff.
gpmgroup says
@ John
What advantage would a TLD that didn’t use name servers have over just using any (second level) domain like vin-numbers.info or vin-numbers.com etc.?
Thies Lindenthal says
Thanks for the interesting read.
Yes, the demand elasticity would be very interesting to know. I bet it is hard to single out the pure price effect. Probably the best thing would be to look at registries changing their pricing strategy (and keeping everything else equal) – didn’t info had a period where they boosted registrations by massively lowering their prices?
I did research on the link between number of registrations and prices at secondary markets. The result is very much common sense: the more domains are registered, the higher re-sale prices for domains from this TLD (last figure in research paper at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1885465).
In real estate terms, if you have a lot of inhabitants, house prices in a city center increase, even if land is “free” in the periphery.
If you are a new TLD and know a way to populate your “suburbs” the prices for juicy “down town” addresses will soar.
So in addition to either/or approaches, we will see mixed strategies as well: Identify and sell the core assets at premium prices while offering low priced/free space to create enough buzz and build a broad user base.
Domaintrar.com says
Hi Andrew, lowering the 1st year registration price is a pretty common strategy that big domain companies like GoDaddy uses! This usually brings a different set of challenges for new upcoming companies as the margins get purely negative. Chances of recovery happens if the user renews the domain at higher price covering all the losses which is a rare thing. Because if the user is a technical person on seeing the high prices the user jumps to another registrar offering better pricing proposition.