Domain registrars seek new profit opportunities.
Yesterday’s news that new domain name registrations are down sharply and the total base of domains registered is stagnant is bad news for domain name registrars.
For years, registrars have been able to count on new registrations to fuel growth. Although the margin on new registrations is small, registrars earn money by cross selling other products to registrants. So the typical margin on a domain may be only $2, but the margin with “extras” may be closer to $5-$10.
How can registrars counteract falling numbers? There are three key ways:
1. Take market share away from competitors. Although new registrations are down, there were still 9 million new domains registered last quarter. Aggressive registrars can capture a larger part of this pool. Also, the drop to 9 million is somewhat overstated since many of the domains registered at this time last year were from domain tasting, which was only done in scale at a handful of registrars. Registrars can also grow their base by courting domain transfers.
2. Do a better job of cross selling. Registrars that get customers — new and old — to load up their shopping carts can boost revenue. The key is to offer something innovative on top of standard web hosting and domain privacy products.
3. Push for new TLDs. Wonder why eNom, Tucows, and Network Solutions are so keen on seeing new top level domain names introduced? Cha-ching. Even though most of these new TLDs will fail, it could significantly boost these registrars’ sales over the next 2-3 years. It’s a lot easier to sell new TLDs than to come up with innovative products for their customers.
Keep in mind that ICANN’s revenue from domain registrations is also under pressure. Its contract with VeriSign will actually result in a $6M boost in financial year 2010, but its growth will certainly take a hit from reduced new registrations. It can’t take market share from competitors and can’t cross sell. So look for it to push through new TLDs as well.