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.
There are still some gating factors to consider on new TLDs
1] Brands – As we see brands that applied adapt to using their new gTLD this will grow awareness of the new naming options available to registrants.
2] Collision Names – The powers that drove the ‘security concerns’ over new gTLD name collisions potentially breaking things that people may not know are broken did an incredibly effective and targeted poison-pill hobbling of the most attractive and useable names in the new TLDs. This cascades into registration volume and ultimately usage. Now that there is a process to help demonstrate that there are no cancer-causing dragons, those names will become available, get registered, and used.
2.5] This also effectively cancelled three TLDs that would be popular and widely adopted: .CORP, .HOME, and .MAIL.
3] Contention Sets – The contention sets (TLDs with multiple applicants) were clearly some of those more widely sought – and they will resolve in the coming year. This held back names like .web or .app and others that made immense sense as being attractive to innovation.
As we see these issues resolving themselves, we will see more awareness of the new TLDs and more organic growth.
Yes, #2 has certainly been a factor. It’s one of those things that new TLD applicants probably didn’t foresee even a couple years ago, which is part of the reason their forecasts were high.
Balanced article with some good info, Like.
Good article, thanks.
Godaddy can further increase their revenue if they provide a free service to allow domain registrant change a setting in domain registration to indicate the domain name is also available for sale at $ price. In this way, the domain registrant does not have to list domain name for sale, and people searching for a similar domain name may purchase this domain name. GD gets the commission.
I really like the way you did this. First state of the industry I didn’t have to flag to read later coz it wasn’t super long. Should do every month, would be interesting to look across later.
Nice overview, Andrew. I agree with you, and with Jothan’s comments as well. I enjoyed the read.
“Registries are having to market to end users. They’ve realized they won’t get the real estate they want with domain registrars”: this was expected…
Expected by some.
Most? Let’s say…85% of them?
It would be better to say that at least one very large applicant did not plan to market to end users. How they thought they’d get exposure for their domains is beyond me.
I think they hired someone from ICANN to market them (…). I thing internet users need to see, the feed-back that I have from those using them is not so good. Apparently it does not transform in domain name registrations.
@Andrew, I had not complimented you on this article in my previous comment, but had intended to, it is very quick and to the point and did a good job summarizing things in the industry at the moment.
@Jean and @Andrew Re marketing: Mindshare and marketplace seem to have all parties expecting the other parties to be the exposure for their TLD – Ultimately, though, it is really the registry who holds the strongest benefit from any marketing of the TLD. There was so much diversity in the pool of new TLDs, that marketing approaches are all going to vary wildly. Donuts is doing a rather competent focus into the sectors like photography, etc. Google’s marketing of . (“everyone” in Japanese) was very targeted and elegant. I tip my hat to .CLUB for their efforts in awareness and marketing.
Domain Names have a bit of a learning curve involved to them before the power and utillity and value are really clear and attractive to a potential registrant.
Probably a bit self-serving, but NamesCon is a good place for registries to get dialog going with registrars so that they are into the “stores”, and there is a good opportunity with the upcoming conference to get in front of general internet users and potential registrants en-masse given our proximity to the CES show with its 160k+ tech-savvy attendees.
great post! Nice to hear someone else’s rundown of the industry.
Thanks Andrew. Nice post. For whatever its worth, here is my personal take on the domain industry.
As an industry observer, I see the gtlds as colossal failure. This disappointment was anticipated in advance by many and correlates perfectly with the past failures of other tld’s — on a larger and more costly scale. The gtlds are not wanted, needed or called for. People have been brainwashed into typing .com, .com, com. All media, including TV, radio, internet and magazine ads are all filled primarily with .com, .com, .com. To get consumers to now type in .tattoo, .xyz or .luxury simply will not happen — not now and not ever.
A powerful black hole has been created that will effectively suck the oxygen out of any domain name that does not have a .com extension. Use it or die.
Proponents of the gtld’s claim that confusion will not take place, yet faux pas and screw-ups have been plentiful and continue to plague gtlds.
What happened to the gtld big bang? It was a dud. There wasn’t one. Now, it’s every gtld for itself. Yeah, good luck with that.
The resale market of pigeon.shit is non-existent and rightfully so. Gtlds are not in demand since they are not viable.
Compounded with the high pricing (necessitated by the ICANN fees and marketing costs involved), it is a no-brainer that they are not selling.
While domains, as a whole, continue to outpace most conventional investments, the state of the gtld is a sad one, indeed. A condition that, in my opinion, is terminal and not-sustainable over the long run.