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My views on domain parking, domain sales, registrars and registries.
I’ve been collecting my thoughts on the domain name business over the past month, and it’s time to put them down in writing.
Here’s what I think about the state of the domain name industry in August, 2014.
Domain parking is down. Way down. But don’t confuse down with out.
We’re still talking about a relatively big business. Rook Media’s acquisition of DomainSponsor and its domain name portfolio in April is proof of this.
I’m seeing more and more domain name owners forgo parking revenue and instead posting for sale signs on their domain names. Some parking/sales platforms, such as DomainNameSales.com, make this easy.
Domain resales of .com domain names continue to be strong. Domain name registrars have integrated aftermarket sales paths, which are driving a number of these sales.
Granted, when you can no longer rely on parking, you count on sales.
The domain name registration business is getting lots of attention lately.
Rightside is now a separate, publicly traded company. It’s no longer part of Demand Media. So many Demand Media analysts focused on the content business when they were a combined company. They were oblivious to the domain business. Now that the two companies are separated, it’s easy to see that the domain business is worth more than the content business.
All eyes are also on GoDaddy, which has filed to go public. GoDaddy is a giant, and it being public will bring more attention to the domain name registration business.
Of course, domain name registrations themselves aren’t growing like gangbusters. GoDaddy added about a million domain names in the first half of the year. A couple percent.
That’s not much. Like .com, GoDaddy is big. It’s getting harder to move the needle on domain name registrations.
GoDaddy is more than domains, of course. Its percentage of revenue from domains is falling, giving way to web presence and business applications. All three lines are growing, but domains will make up a smaller part of its business going forward.
Rightside’s domain registration business isn’t growing much, either.
Tucows, another publicly traded company, smartly diversified into mobile phone service a few years back. Without that, it would have had a pretty lame second quarter. Instead, it blew doors.
Which brings us to new TLDs…
The hope was that new TLDs would present a growth opportunity for registrars. So far, it has been muted.
There wasn’t some crazy, pent up demand for new TLDs. And now the market is flooded with them.
Any honest new TLD registry will tell you they’re disappointed by registration numbers so far. They’ve had to reset expectations.
Even I, who didn’t quite see the demand most applicants did, expected more than what we’re seeing.
That’s not to say new TLDs are a dud. Many registries, particularly the portfolio ones, are doing just fine.
Judging by the crazy prices some applicants are paying for new TLDs at auction, they still think better days are ahead.
It’s likely. There’s just not that initial huge rush of registrations that many had hoped for. Most people aren’t going to go through the hassle of switching domains. New TLDs will pick up momentum over time, siphoning off some new registrations that would have gone to .com.
The key here is over time. New TLD business models that weren’t set up to grow over time are in pretty bad shape.
Registries are having to market to end users. They’ve realized they won’t get the real estate they want with domain registrars.
A lot of TLDs are in the “unsustainable” zone of registration base. They need to figure out a way to grow or cut overhead, fast.
ICANN will get a lot of pressure over the next 12-24 months to reduce the fixed price component of its contract with registries. We’re only talking $25k a year, but that’s a big deal if your TLD has just a couple thousand registrations.
Frankly, ICANN should acquiesce. It has a huge surplus from new TLDs, thanks to higher-than-anticipated application numbers.
So that’s my view of the domain name industry right now. I reserve the right to change my opinion next month.
Professional poker player and domain investor Dutch Boyd publishes Poker Tilt.
A key reason I like the domain name industry is that I get to meet people from very different backgrounds.
One of these people is Dutch Boyd, a three-time World Series of Poker bracelet winner who also dabbles in domain names.
I met Boyd in person during a TRAFFIC conference in Vegas many years ago. He was a fan of the blog and we started chatting. We ended up heading to the poker tables where he taught me a trick or two. (I lost money, so it didn’t work.)
Boyd has an interesting past with many ups and downs. After his latest “down”, he decided to raise money on Kickstarter and publish a book called Poker Tilt.
Poker Tilt tells his interesting story, from his early days growing up with a single mom, to his (ultimately) failed online poker site and battles with mental illness.
Dutch is a smart guy. He graduated law school at 18, when most people are just graduating high school.
He then started online poker site PokerSpot, which busted and created a number of enemies for him. In the book, Boyd blames the downfall primarily on credit card processors withholding funds. But for players who had deposits with the site, all they probably care about (understandably) is that they didn’t get their money back.
Boyd later started to suffer from depression. He was diagnosed as bipolar and went through multiple manic episodes, which left Boyd with even more failed relationships and enemies.
It was perhaps during one of these manic episodes that he initiated some failed domain name acquisitions, leading to complaints on domain name forums. In his book, he explains that he wasted money on domains during one of his episodes:
I started sleeping less, wouldn’t stop talking about random nonsense, and slowly sunk deeper into full-blown mania. I went through a buying splurge where I wasted thousands of dollars on worthless domain names…
Aside from his personal struggles, I found the book interesting as Boyd explains the declining state of the poker industry right now. I tried swapping out “domain” for “poker” in his descriptions of the industry, and found lots of similarities.
Certain aspects of the domain name business aren’t what they once were. Yet many domain investors ignore this reality. They press forward, assuming everything is the way it was and will remain this way forever. They pat each other on the back for big scores they made a decade ago, ignoring what’s happening in the past few years.
The same goes for the poker industry, as Boyd tells it, although the reasons for the retreat in poker are different.
Fortunately for domain name investors, there are plenty of ways to reinvent themselves and shift their business models to take advantage of the new landscape. The same might not be true for poker players.
If I have any complaint about Boyd’s book, it’s that he uses a lot of poker terminology that non-poker readers won’t understand. That said, the book flows even if you don’t understand the references.
Boyd’s book is worth a read. It’s available on Amazon.com in both Kindle and paperback versions.
No surprises in initial launches of four medical-themed domain names.
As I previewed earlier this week, the only four domain names entering true general availability this week were medical-themed domains from Donuts.
Here are how many domains are registered in each of the four after the first day, based on zone file numbers:
The numbers are about where I expected them to be. As I mentioned earlier this week, three of the four domains are in Donuts’ highest price tier, which limits investor speculation. Also, the medical community tends to be slow to respond to domain names.
.Dental gives a lot of promise to .Dentist, which Rightside is launching later this year. I think .dentist is much better than .dental.
Well known online marketer starts a blog that uses his inmate number.
You might not know Shawn Hogan by name, but it’s possible you’ve heard about him.
He runs the Digital Point marketing forum. He also made a mint from affiliate marketing.
How he made much of that money in affiliate marketing ended up landing him in prison. He made tens of millions of dollars from eBay’s affiliate program, but eBay later said that he did it by cookie stuffing.
Hogan alleged that eBay knew exactly how he was making money all along.
He ended up facing criminal charges and did a plea bargain that sends him to prison for 5 months.
Inmate numbers as domain names. Now that’s a market I’ve never thought of.
Parked domains make up the bulk of new TLD registrations.
Verisign analyzed registrations of new top level domain names to determine how second level registrations under these new domain names are being used.
The analysis determined that just 3% of domains registered so far are being used for a “business website” and the majority of domains are parked:
The breakdown is much more nuanced than what the company presents about its own TLDs, .net and .com. When it decides to report the numbers, the company splits .com/.net into three buckets: one page websites, multiple page website and no websites. The breakdown amongst these groups is typically around 20%/65%/15%. (I’ve asked Verisign if it will run the same analysis it ran for new TLDs for .com.)
Verisign provides a number of caveats and points out outliers in the data. For example, the parked page percentage would be much lower if Web.com wasn’t registering and parking .xyz domain names on behalf of its customers.
It’s worth noting that every new top level domain name registration is less than 8 months old. I suspect the numbers for .com domains registered less than 8 months are even more skewed to parked pages than the slash line I noted above.
Verisign is careful not to draw any conclusions from the data, only noting that it’s “early days for new gTLDs” and that “this analysis offers an interesting snapshot of the first few months of new gTLD general availability.”
Of course, we all know where Verisign stands on new TLDs.