Early investors in new top level domain names might get a better return if new TLDs as a whole are a mediocre success instead of a home run.
Domain investors have registered a good chunk (the bulk?) of new TLD offerings to date. Is this a good investment?
I’ve thought about the potential returns from a number of angles. There are three scenarios I see:
1. New TLDs are a big failure. They don’t take off and end up being small niche TLDs like many existing sTLDs.
2. New TLDs are a mediocre success. Some companies adopt them, similar to what they did .me and .co, but they don’t put a serious dent in the psyche that .com is king.
3. New TLDs are a huge success. Consumers adopt them in droves and start paying attention to what’s right of the dot.
Under which scenarios do people investing early in new TLDs get a good return?
Obviously not #1. But I’d also argue investments don’t pan out well under option #3.
To get the best return on new TLD investments, domain investors should hope that new TLDs are a mediocre success.
Hear me out.
It’s 2025. New TLDs are a modest success. Ones that came out in the 2012 round (starting in 2014) are doing OK for the most part. Some have folded, others have built up a nice registration base. Some brands are using new domains in limited ways. Maybe a brand or two has made a wholesale switch.
Since applicants in the first round made a decent return and some brands are happy with .brands, there was a gentle nudge to get the next round out. Not a huge push, but eventually a second round was opened. The number of “new” TLDs grew slightly; there are now perhaps a couple thousand out there.
In this case, some of the earlier registrations of new TLDs have value. True, there’s a lot of supply. Domains generally don’t sell for as much as .info and .biz have during the first decade of the century. But some targeted domains sells for five figures and many more for four figures, much like clever .me domains.
Investors have a chance at a decent return based on the good domains they snapped up early.
Now consider a scenario in which new TLDs are home run. People no longer assume .com or a ccTLD is to the right of the dot. They pay attention to what the TLD is and appreciate clever ones. Brands love them and major brands have made the wholesale switch to .brand.
Based on the early success, ICANN has opened up multiple rounds of expansion (or even a continuous expansion). With few historical costs to recoup and an understanding of expected legal costs, it only costs about $25,000 to get a new TLD.
Even some smaller businesses are jumping at the opportunity to get .companyname at a relatively low cost.
ICANN has eliminated some of the early restrictions on new TLDs.
.Com is still the most common domain, but a company wouldn’t think twice about paying $5,000 for a great keyword.something instead of $500,000 for keyword.com. They’d also rather hand register mediocredomain.newTLD instead of pay $1,500 for the matching .com.
In this scenario, early investors don’t do as well as under the mediocre scenario. There’s simply too much supply of new TLDs. Yes, some of the better TLDs came out in the first round, but there are so many “synonym” domains applied for later (not to mention singulars/plurals) that it’s impossible to command much of a premium for a domain.
Indeed, I see an opportunity for investors to make some money from new TLDs. I just think the opportunity for returns is higher if new TLDs are only a modest success.
What the big boys in the industry are not saying is that a company paying 5000 for a dot something, vs 500000 for a dot Com, is that eventually they will have to buy the dot com anyway or keep dumping money into dot something to make sure the public knows and remembers dot something.
The big boys in the domain kitchen are cooking up a lot of money with these launches and with support of registrars they’ve relationships with, I merely consider it selling a novelty dream like the gold diggers of yesteryear. It’s the rare and and not the norm of domain holders who buy in that may get a nugget -but overall it’s the bilking or milking of the American people and sad to see. Or brilliant depending on what side your on.
I was hoping to get your opinion on “Are new gTLDs working NOW”? It seems to me that’s what we are all looking at, not abstract scenarios. We are in it now…
Is it working?
You’re right that Scenario #3 would be bad for non-registry domain investors.
But the TLDs won’t succeed or fail as a solid lump. If .GURU hangs around in the wider public consciousness or .GLOBAL manages to sell a few aftermarket domains each month next year, that’s nevertheless no life raft for other extensions or those who have invested in them.
One thing is absolutely certain: If we pool all domainers’ nTLD purchases together, we’d be looking at massive net loss. Only a fraction of them can sell, and most of them have no chance due to poor quality in the domain choices themselves.
To some degree, that’s true of domainers’ combined .COMs also. But it’s very apparent with their forays into vanity extensions, for the most part.
I’ve just run web usage and development surveys for 110K domains in each of com/co/eu/co.uk/fr and full TLD (all domains in zone) for the top 10 new gTLDs. Even at this stage, some of the new gTLDs are struggling to gain registrants who actually develop websites in the TLD. The graphs are on my site and some new gTLDs have less than 10% active/unique websites. The .co ccTLD isn’t exactly a success (for other than the registry) and has morphed into a Truckstop TLD where there’s more registrations being redirected to other TLDs and brand protection registrations than active/unique websites in the TLD.
Basing the projections (or speculations) on zonefile domain counts is not a good thing because zonefile domain counts only measure on thing – zonefile domain counts. Those domain counts for some of the new gTLDs are also unreliable indicators because of registry landgrabs inflating the counts. It could easily be argued that most new gTLDs are the product of an artificially induced “shortage” of good .com domains and dropping .com domains and was enabled by an ICANN in 2005-2009 that had either suffered regulatory capture or where decisions were being made by individuals ignorant of domain registration patterns and activity (they managed to ignore Domain Tasting until shamed into doing something about it). This is the real genesis of new gTLDs and without the artificial shortages caused by Domain Tasting and Domain Kiting, some new gTLDs are finding it hard to compete.
But the real story is the side-effect of Domain Tasting – it effectively kickstarted the shift from .COM domains at a global level (the .com being the prerequisite for any business on the web either global or local) towards the local ccTLDs for local users and businesses. ICANN didn’t control those ccTLDs and it wasn’t as easy to subvert the ccTLDs. Thus while the com/ccTLD pairing (registrants registering their business name in their ccTLD and .COM if available) and new registration activity has kept .COM growing, the last few months have seen .COM’s net growth decline dramatically. And while .COM is finding it tough going, the other non core gTLDs are declining. This is the market in which new gTLDs are launching. For some, they are an idea that might have had some merit in 2008 (the height of Domain Tasting) but others are proving more interesting.
The scenarios that may play out will be a cross between #1 (complete failure) and #2 (limited success). Some new gTLDs will even struggle to become niche players. A few might be reasonable successes on the scale of .co ccTLD but there will be a KT event of consolidation within a few years. The new gTLDs, apart from regional new gTLDs, are almost completely US affairs and they have very little presence outside the US. In the US, they are competing with .COM for a share of the market. The one rather unexpected success has been .PHOTOGRAPHY. It seems to have caught the imagination of its target market but others are struggling for market share and relevance in a rapidly changing domain market. Some like .XYZ might appear to be a numerical success but that is not supported by the website usage survey results. Even those of us with the data are not sure how it will turn out.
.mobi continues its slide: from its peak of 1,198,143 in January, 2014 to 946,934 as of July 1.
We can see the trends in the number of registrations, which can be measured in the millions.
What I don’t see is the number of original web sites using any of the nTLDs. By original, I’m saying an actual web site that is not just an alias of a .com version.
I’m sure the big registrars, Alexa and Google know the exact count, but I doubt they want to publish those kinds of statistics. One key reason is it would also illustrate how many domains (including the old TLDs) don’t actually point to a unique site. Other than park pages, the vast majority of domains point to other domains. Among nTLDs, the percentage of original sites is even smaller.
Regardless of statistics, the fact that I can’t think of even one original nTLD site, we’re a long way from public awareness that they even exist.
That said, I’ve got a bunch, and in some cases, I paid a premium price. It could be a total waste of money, but if they do catch on, I would kick myself for letting opportunities to get them while they are cheap pass me by.
I justify the whole investment with the thought that if even one of them catches on, it can pay for the rest.