A new opportunity for domain investors is on the horizon.
Domain investing is about to enter whole new era with the launch of new top level domain names. Regardless of if they like the idea of new TLDs or not, a number of domainers are evaluating starting their own top level domain names. Consider it diversification or hedging their bets.
I caught up with Antony Van Couvering of Minds + Machines to get a run down of what you need to think about if you want to participate.
It takes money to make money
Unlike the registration of a second level domain name for $8, this is a high stakes game. You need to invest several hundred thousands dollars just to get a seat at the table.
The bottom line, as Van Couvering outlines on Minds + Machines’ web site, is that you’re probably looking at at least $400,000 to get off the ground. But you might be able to keep the average cost down if you apply for more than one TLD.
“There’s a great difference between [applying for] one TLD and five,” said Van Couvering. “Let’s suppose you put in a few applications; your application would look very much the same.”
So if you were paying Van Couvering’s company or another service to help with the application, the cost of each incremental TLD wouldn’t be as much. You can also take the TLDs to a registrar as a package to get them to offer the domains.
Some costs are fixed per TLD, however, such as ICANN’s $185,000 fee.
Once you pony up that stiff fee, you need to be ready to fight for your TLD. Be prepared to pay additional fees if there are disputes or questions about your application. And if someone else wants the same TLD as you, you’ll need to bargain with them or be prepared to head to auction.
“It’s not terrible if there are two of you” applying for the same TLD, explained Van Couvering. “Just tell them ‘pay me back my fee and I’ll go away'”.
But if there are ten of you vying for the same TLD, look out.
Van Couvering says you don’t need anything more than a company like Minds + Machines and a lawyer until you actually sign your contract with ICANN. Then get ready for more expenses: marketing, registrar liaison, someone to pay attention to ICANN rules to make sure nothing will affect your registrar, admin, bookkeeping, etc. You’ll also need a back end technical registry. This registry will not only run the backend of the TLD, but is a gateway to getting access to registrars to sell your domains.
How much can you make?
Upfront costs are one thing, but what’s your payback period? It depends on your business model.
“A lot of domainers look at this as a volume business, and are appalled when the price of a domain goes up by a couple pennies,” said Van Couvering.
But there’s a business model in higher priced domains. Look at .cat, which has just over 40,000 registrations. With a typical registry cost of about $8, that’s only $320,000 a year. But at .cat’s wholesale price of 20 EUR, it tops a million dollars a year.
In addition to recurring annual revenue, you have other opportunities, including trademark Sunrise and Landrush. .Co’s relaunch pulled in over $10 million just from these two phases. (Mind you, not all domains will attract the same level of sunrise and landrush registrations). You can also hold back premium domains for auction or sale.
Applicants should look at a number of models. Keep in mind that, unlike previous TLD launches, you’ll be facing intense competition with other new TLDs.
And for the true domainer in you, here’s another thought: you may be able to find a way to flip your new TLD applications. Van Couvering has heard speculation about getting a TLD and then selling it to another company, or doing a joint venture, after it gets past the ICANN evaluation. But he advises caution with this approach because it is sure to be viewed with disfavor by many elements in ICANN.
New TLD investing: It’s like flipping domains, but the stakes are much higher.