New TLDs are here to stay. That doesn’t mean they’ll make money the way they’re being operated right now.
“New top level domain names are dead! New top level domain names are dead!”
That’s been the common chorus from commenters on domain name blogs over the past couple weeks since news broke that Frank Schilling was jacking up the prices on many of his top level domains.
At the time, I asked if it was a death spiral. Upon further reflection, I think Frank’s move was a capitulation. I think he miscalculated the effects of this change, but he also faced the facts about many new top level domain name business models.
The reality is that most strings will be niche players happy to have 5,000 strings for many years.
I think this has been evident for the last year (or even two?). This is why I was so surprised at the money some new TLD operators were throwing at domain names in new TLD auctions.
How can you justify paying $5 million for a domain when the market has already told you that similar domains have about 5,000-10,000 potential registrations that make sense?
Some new TLD operators looked at it as funny money. If they were paid millions for losing other auctions, why not apply the winnings to another auction?
This doesn’t make business sense. Each individual TLD should be looked at as a business investment. What business says “Let’s waste $10 million on a business line that will never return that cash because another business just returned $10 million in easy profit?”
Another odd response has been “we spent so much because we’re in it for the long haul”.
That’s great, but what exactly is the long hual? If you expect a payback period of twenty years, why would you make the investment?
I’ve also seen lots of examples of new TLD companies thinking they were different. Only they had figured out the right string. The right business model.
They were wrong.
New TLD operators are going to have to face the reality of the market. Some are still keeping ridiculous premiums on their domain names because they think the domains will be worth that much someday. When is that day? Are they comfortable not selling domains until that day? In many cases, registries should give away domains they’ve priced at a premium to someone who will develop them.
I think the premiums are like lottery tickets to some registries. Every once in a while they have the matching numbers and someone pays $50k or $100k for a name. That makes up for a lot of $10 registrations. So maybe it’s the best model in this environment.
Still, whenever I see a “matching” .com sell for a fraction of the annual renewal price of a new TLD, I scratch my head.
Now, does all of this mean new TLDs are dead? No. But there’s a reality that registries need to accept.
Most of the strings out there have a total addressable market of about 5,000-10,000 names. They need to adjust the cost structure accordingly.
I’ll give an example. Earlier this week I saw a van with Tree.house on it.
That’s a good domain. It’s an intuitive domain. It works perfectly for .house.
But how many other domains work well with .house? And, in how many cases is a reasonably good .com not a better alternative for the .house domain?
.House currently has 15,000 registrations with 40% at GoDaddy. That’s pretty healthy.
Every once in a while you’ll see a domain take off when it’s adopted by a particular industry. But that’s a rarity.
It’s a simple supply and demand issue. The domain industry can try to stimulate demand by recommending forwarding domains and new uses for domains. The effect will be marginal and it costs a lot of money to do this.
I also want to address another issue.
I don’t personally cheer when businesses fail or hit hard times. I’ve had my share of failed businesses, both as an operator and an investor. It sucks.
The majority of internet businesses fail. It’s really hard on the people that put their sweat and money into the venture.
I think some of the visceral reaction in the domain business has been because of new TLD operators “putting down” .com in their marketing. If you’re heavily invested in .com domain names then you might look at this marketing as an attack on your assets and your business. So when you see the people that you viewed as dissing your own business fail or struggle at their own, it could be a good feeling.
Still, some people take it too far. I’m shocked when someone cheers that a company had to lay off a lot of employees because of a strategy failure. Like those employees were evil people? Most were just trying to support their families.
As for the future, I predict a growing number of domains under new TLDs being put to use. There’s no way but up. The question is how quickly this number grows. Right now, it doesn’t seem to be very fast. As a result, you’ll see a lot of smaller registries gobbled up by the companies that can spread costs across many strings.
Nick says
Some may not die, but I think their original dream will die. I think 10 years from now the ones that survive will be pretty much in the same light as .biz and .mobi are today. They make money , but they are not desirable.
Brian Chiyama says
Strangely I saw a new TLD put to use by a local business today. I must say it looked a bit strange. True, new TLDs will become common after a while and I believe they will be adopted mainly by small businesses which cannot afford to buy the DotCom equivalent of their name. The only question is whether they will be willing to pay a higher registration fee for a new TLD or rather create an unusual DotCom like 568Buypizza.com than pay a high fee for 568.pizza.
Colin Campbell says
Not all TLDs are the same. There are pure generics like .online, .web, generics with meaning like: .club, .shop, and niche TLDs like .house or .yacht. Each can have a very different model and still succeed. Generally the more niche the higher the price point to support a profitable model.
Andrew Allemann says
That’s absolutely correct. .Club is one of the few single-TLD companies that’s successfully making a run at it, and it wouldn’t have worked for a TLD that’s too niche.
scrivener3 says
Half the people i the world would not know trhat gamblers.club is a domain name. Nearly everyone would recognize gamblersclub.com as a domain name.
I don;t mean to be gratuitously negative but ICANN screwed up not understanding the power of .com .net .org as made up new “strings” that signified Internet. I an make any word internet in countless, maybe a majority, of minds by adding .com to the word. It is like iphone; a new word for a new product in a new world.
Snoopy says
Yep, .whatever doesn’t mean “web address” to people outside of the domain community.
People can never be trained to accept that anything after a dot is url because most of the time it won’t actually be a url.
I’m a domainer and half the time with these addresses I have no clue if something is really a domain or not, mostly it is isn’t.
James Stevens says
Never forget, dot-COM went from virtually unknown to universal acceptance in less than five years. Smartphones went from nowhere to everywhere in much the same time scale.
But unseating an incumbent in any market is always an uphill struggle. You need to identify your strengths and sell to your USP(s).
“We’re like dot-COM, but we’re not dot-COM” automatically places you as a second-class choice, so was never going to end well.
Snoopy says
Meanwhile .club numbers have been declining for for last 2 months and looks like another 10% of .club’s are set to drop in coming weeks also. Maybe the 99 cent pricing will need to drop to 50 cents?
https://ntldstats.com/tld/club
Ron says
.club penetrated hard in china with the chips, and numerics, that market doesn’t have a leg to stand on, and they are falling from grace from every extension.
Jean Guillon says
Good read.
And no, “.com” does not sucks 🙂
Ron says
We only need to ask ourselves why nobody puts an value on .biz .us .mobi .co, and .net values are falling hard etc…
History has proven there can only be 1 real survivor, nobody wants to own second best.
The GTLD’s are a liability because effectively they can be vacated by huge price hikes, and resold again.
John says
.US is in a completely different class from those and the reasons for its lingering state are not the same. It could easily become as great as people would normally expect and as one would expect it should be.
Snoopy says
No it isn’t, it has exactly the same problem as .mobi, .biz etc, the extension is completely unnessesary and illogical. The USA already has a country code, .com!
John says
No, you’re wrong.
Snoopy says
I think with the Tree.house example the majority of people wouldn’t recognise that as a url. You’d need to put www. in front, but still a lot wouldn’t get it even with that. When I see that kind of usage I I often type them in and in 50% of cases they aren’t web address at all, just a business name, “dot” doesn’t mean internet once you get out of domainer circles.
For example the other night I went out to a restaurant called itali.co, their web address is http://www.italico.com.au.
John says
“I think with the Tree.house example the majority of people wouldn’t recognise that as a url.”
Definitely.
scrivener3 says
Exactly. A period in a set of words that make sense means an abbreviation, not an internet address.
Is this a domain: I.love.you ?
Is THIS a domain: iloveyou.com ?
scrivener3 says
Yup. I went to treehouse.com trying to see their site.
Darryl says
.RIP
John says
This was an enjoyable read, but one thing I would question is the thought about having nowhere to go but up.
Recently I mentioned the iconic NYC “Crazy Eddie” phenomenon of yesteryear on another blog. When I was much younger and less experienced, someone and I felt that as its stock had plummeted and a well known “turn around” guy was coming to help, the stock had nowhere to go but up. Sure enough, that idea didn’t exactly pan out. I still have the stock certificate.
Similarly, with speculative registrations potentially dropping like bombs come renewal time, not so sure the gTLDs have nowhere to go but up either.
As far as business models go, said it before: the “Money Grab” model is simply deeply flawed. The way in which they were released to the world essentially forced a lot of players to engage in the “money grab” model as well.
The “money grab” model appears to have been one of the greatest gifts to .com ever. Had things been done differently, we might be looking at a very different scenario now.
Snoopy says
John, I think Andrew is simply talking about “usage”, not registration numbers. In my view usage is near zero so I’d agree the only way it can go is up.
As far as raw numbers, 80% of registrations look to be extremely doubtful, robo registrations, names owned by the registry, names priced at 1 cent-99cents for the first year. I suspect over time the number of registrations is going to decline closer to the “real number”.
The only question market would be can some of the very large chinese registries such as .top (which will soon be the biggest ntld by volume) keep pump priming the cheap reges, as that could outweigh the declines that are currently happening with everyone else.
John says
Fair enough. Indeed, usage.
Andrew Allemann says
Yes, I was talking about usage. With so many current registrations being penny or quarter registrations purely for speculation, the numbers can go down significantly from where they are today.
John McCormac says
There is a rather strange usage pattern in some of the new gTLDs, Andrew.
The heavily discounted registrations in some gTLDs have made a kind of domain tasting scenario with affiliate landers economically feasible. Some of the new gTLD registries are locked into boom and bust cycles due to discounting and they are going to be chasing the next registrar to offer a discount to their users. The renewal rates on those heavily discounted domains are extremely low. Some China market dominated gTLDs when viewed through Western eyes may seem to have very different usage patterns than a Western TLD. But there is usage. Due to some gTLDs running discounts in the Chinese market, some other gTLDs have noticeable Chinese usage patterns. The renewal rates also varies across country level markets. Consequently, gTLDs with high Chinese market exposures are going to be a lot more volatile than higher registration fee Western focused gTLDs.
Vinod Reghunathan says
Very thoughtful analysis. As others have suggested many of the new strings will just be vanished or bought over, It’s just a matter of time. As with any business in the end there should be profit that is the whole point.
As far as my understanding it’s mainly not the issue of price increase that people are all over Uniregistry. Its the breach of “Trust” factor that is in play. Frank being a domainer and was highly bullish about the New G’s and asking everyone to jump in the boat, just sank it without caring for others in the boat.
If Donuts or any other registry was to increase its prices,personally I don’t feel that there would be this much response.
M. Menius says
“If Donuts or any other registry was to increase its prices, personally I don’t feel that there would be this much response.”
I can assure you that there would be. Businesses and individuals have a right to expect price stability. Breaking that trust with your customer is a serious failure.
John says
Indeed, it doesn’t matter who did it this time.
This *is* the lesson, the no-brainer lesson the others don’t even need because they already know.
Just Marketing 101 here while Icarus decided to fly up to the sun.
Snoopy says
“This *is* the lesson, the no-brainer lesson the others don’t even need because they already know.”
How is it a no brainer lesson? You think others won’t follow? The price rises will help them get profit and is 100% with the rules ICANN formulated. The “no brainer” part is putting up prices significantly for most extensions.
Brian Chiyama says
Sorry guys. I meant to give you an example of the small business I came across using a new TLD. Like previously stated they had to write the whole address on their shopfront to show people it is a web address.
These are pawnbrokers using Pawnit.world.
Ted Mahoney says
There dead, Frank Shilling greed destroyed the trust of the whole market, RIP. GTLD
GetWithTheTimesPeople says
Tree.House is a great example of the type of GTLD that will eventually be gone forever. Not many words that can go with it. A domain extension that is going to stick around forever is one like .center. What words can’t you put with it?
Tyler says
I think you’re right. Many of these extensions will live to be successful with just a few thousand registrations at much higher prices. It will will be a special thing to have a name in one of these niche’s. Not every name will work for every business. But tree.house works and if that was the name of my business i’d pay $1000 a year to have a really cool hack that’s shorter. I think the reason people bid so much at auction for these is because nobody knew what would be successful and competitive bidding to keep the name away from a competitor just like .com auctions on Namejet don’t always add up. In the end I think new gtlds will find their place and be successful.
Snoopy says
if that was the name of my business i’d pay $1000 a year
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That is because you are a new tld domainer.
Joseph Peterson says
Must we discuss whether or not “The nTLDs are Doomed!” 24 hours per day, 7 days per week, 365 days per year on every blog, in every forum, even now, more than 3 years since they were released?
No, the nTLDs won’t conquer the world. No, the nTLDs won’t vanish. Yes, some nTLDs will fail. Yes, some nTLDs will enjoy moderate success. Yes, many more nTLDs will see only very limited registration numbers. Yes, some nTLD failures will be retired, while other registries are bought up in large consolidation efforts by operators with sound scaleable business models.
This isn’t news. People have been expressing the same opinions for 3+ years. The community is stuck in a rut.
Our industry CAN talk about other topics, can’t it?
Nick says
Nope, not really, there are not that many topics. I would imagine it would be hard for a domainer to write new articles daily.
Soothsayer says
Thank you for being honest with “Yes, some ntlds will fail”, something that until recently noone seemed to admit.
Until now comments suggesting that all was not well in the state of newgTLD-land were shouted down. No one listened to Rick Schwarz’s predictions except the boy who spotted that the Emperor wasn’t wearing any clothes.
Now that it is recognised that some ntlds will fail, the question now is which ntlds will fail? and which ntld will fail first and how soon. DomainNameWire should run a poll.
Joseph Peterson says
@Soothsayer,
” … something that until recently no one seemed to admit.”
Depends on which people get listened to. Plenty of people have been around from the beginning predicting failure or success for the nTLD program. Easy to take up either extreme position. For my part, I always foresaw mixed results; and my own position has – as far as I can tell – never changed.
August 25, 2014:
“Some TLDs have already failed due to negligible market demand.”
http://blog.europeandomaincentre.com/expert-roundup-on-new-gtlds/
January 1, 2015:
“[E]ach TLD has years ahead in which to flop, boom, fail, regroup, put down roots, blossom, spread, or go out of fashion.”
http://blog.europeandomaincentre.com/expert-roundup-on-new-gtlds/
John McCormac says
Reading some predictions years after they are made is interesting but successful new TLDs tend to find their niche. The problem is that some of the new gTLDs are not at all like what people evisaged. Some of the heavily discounted gTLDs are full of content networks only made feasible by heavily discounted registration fees. Without those discounts, these gTLDs would have a very small fraction of their currently registered domain names.
What is interesting is that there’s a curious ratio of approximately 3.5 (overall) in the drops of domains with websites with content versus domains having websites with no content/development It varies massively thoughout the new gTLDs but domains with developed sites are less likely to drop. Each gTLD effectively has its own metric on this. There’s also a curious aspect to Uniregistry’s move in that while domainers are obviously screaming over the price rises, losing PPC parked and for-sale domain names with no content will actually make a gTLD healthier in terms of end user experience. It will require Uniregistry to take the hit on registration numbers though.
Contrary to what most people think, there are signs of life in some of the new gTLDs. Some of the new gTLDs are, so far, incredibly sticky as regards renewals. Others have serious pending renewal issues that are the direct result of making discounting a core element of their business model.
What the domain market saw with the compressed launch of the new gTLDs was effectively a poorly thought out (by ICANN management) mass fragmentation of what had been a relatively stable market. The next stage, which has already started, is the consolidation.
Joseph Peterson says
@John McCormac,
Would like to sink my teeth into that renewal-rate data.
Steve says
Disclaimer: I own a few GTLD domains. Not many.
Also end-users, in 2015, 2016, seeking to purchase a few of my .com domains used GTLDs as bargaining tools, claiming if i “didn’t accept” their “final offers”, they’d just get a GTLD. I’m sure this happened to many others. Please keep in mind these were not 6 or 7 figure domains. More like 5 figure and high 4 figure domains.
Bottom line for many non-GTLD owners (.com, .org, .me, etc). A solution (GTLD) was created for a problem that really didn’t exist, at least in most of the strings.
Perhaps there could be enough demand for some strings to warrant their existence: .club, .app, .web, .shop
But for a string like .horse.
No, I’m not going to go there. Why beat a dead.horse?
Snoopy says
if i “didn’t accept” their “final offers”, they’d just get a GTLD.
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I used to get this sometimes up until about a year ago, haven’t heard it lately though. If they buy a matching ntld though like domain.tech instead of domain.com then that is good news for the .com owner, they’ll be looking to upgrade if successful. I think often though it is just an attempt at a bargaining tool as you say. Going back along time ago I had people say they’d buy the .net if you wouldn’t sell them the .com for the right price, good luck to those people.
steve says
@snoopy
You’re right. I haven’t heard the “I’ll get a GTLD” in negotiations for a while. But it did annoy me. & I’m sure this happened to many.
Of course I realized this was a ploy, but keep in mind, many actually drank the GTLD Kool Aid (new extensions are better & cooler, blah blah blah) and actually thought domains like private.cloud, money.link could be superior to privatecloud.com & moneylink.com
Lots of folks promoting GTLD dog-food as the “coolest on the market” never had any intention of feeding it to their own dogs.
Snoopy says
Steve,
Regarding “new extensions are better & cooler, blah blah blah”, yes I agree but I think that was almost entirely inexperienced domainers who thought like that.
Many endusers would have heard of these extensions but I think very few would think they are better. Even if they say in an email they could buy a new tld, very few ever would and even then only if it were reg fee.
Brent says
Running a new gTLD registry is not as cheap as everyone thinks, it’s not like just the 25000 USD plus registry backend operator and some marketing funds. Most new gTLD registries are making loses even though there’s some sales for premium names. Premium names just don’t sell in long run. We are seeing some consolidations, ultimately a big chunk of new gTLDs may have no buyer and unable to sustain. The dynamics of the business relies on registrars and eventually registries to pour out millions of dollars to make their own TLD notice and it’s really not affordable.
IT Geeks Helpdesk says
This is why I was so surprised at the money some new TLD operators were throwing at domain names in new TLD auctions
joesaba2014 says
The rules of the game are Premium purchase prices $ 42 for two words and .vacations, now renewal $ 118 or $ 240 in other .rentals.
I will not discover domain registrar, although I can write that other domain registrars give the price of premium purchase and renewal.
The answer is that Donuts give the highest renewal prices to the domain registrar.
Never before succeed with the premium domains that I still have and sell two years later with extensions from this company.