GMO Registry’s outlay for .shop is difficult to rationalize.
I’m still trying to wrap my head around GMO Registry paying $41.5 million for the .shop top level domain name. .Shop is a monster TLD, but it’s hard to justify this upfront cost for any top level domain name.
I’m not alone. Of the seven participants in yesterday’s auction for .Shop, only two were willing to pay more than $15 million for the domain name.
Clearly, GMO is in this for the long term. Any company that invests $41.5 million plans to be in the business many years from now.
Yet, with short-term results for new TLDs where they are, it’s difficult to figure out how GMO will earn a good return on investment.
Couldn’t GMO just sell a million annual registrations for $40 each? That might be one justification. But that’s much easier said than done.
Every single top level domain name that has over 100,000 registrations has given away domains or charged very little, such as a buck or two.
Additionally, every one of these top level domain names has only boosted its numbers by getting speculators to buy their names.
GMO has different plans for .Shop. It plans to forbid the purchase of .shop domain names for the purpose of selling them. It could create a loophole or two in its final terms, but this will dramatically reduce demand for .shop domains.
Additionally, the company hopes to work with registrars to offer additional services on top of the domain name. Think Shopify or BigCommerce subscriptions, and suddenly the monthly revenue per domain can be much higher.
But registrars have been hesitant to offer additional registry-offered products with domain names. They’d much rather sell their own e-commerce platforms and hosting.
And this begs the question: Would you rather own .shop or have .store and millions more to invest in marketing? I don’t know how much .store sold for. But it probably seems like a bargain compared to .shop.
In its application, GMO says that it “anticipates that a significant number of business owners who are currently operating under domain names registered in existing TLDs will switch to using a .SHOP domain name as their primary online identity.”
This is doubtful. The company might be able to convert some companies with bad .com domain names to .shop, but history tells us they’ll have to count on new registrants, not ones switching from .com. (Note that GMO Internet, an affiliated company, paid $6.8 million to buy Z.com for its global expansion.)
A lot of new TLD applicants have privately questioned people paying even $10 million for a top level domain. I wonder what they’re thinking about $41.5 million.