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There’s an all out war for dropping domain names

…and it’s expensive.

It costs expired domain drop catchers $8.03 for every .com domain name they catch for you. So why are they charging customers so much money?

A good place to start is by looking at how much they pay to amass the firepower necessary to be successful drop catchers.

When a domain name deletes, all of the expired domain name services interested in the domain name start pinging Verisign’s servers to try to register the domain name. Many factors go into success rates, but a lot of it has to do with how many registrars they have to ping Verisign for the massive amount of domains they’re trying to snag each day. Think of each registrar as a phone line that goes directly to Verisign. The more lines, the more domains you can catch.

I recently analyzed a list of all new domain name accreditations from February 2012 to September 2016, and the numbers are a bit shocking. Roughly 1,250 new registrars were added, and most of these are solely for drop catching purposes.

DropCatch.com has been the most aggressive. It added 300 more registrars in October 2015, bringing its total to over 750.

Since February 2012, Web.com (SnapNames) has added at least 186 new accreditations. This is on top of ones that it has acquired. It acquired about 100 registrars from Rightside this year for $1.3 million as part of a tie-up between NameJet and SnapNames. (SnapNames has been around longer than its competitors, so it probably has the most accreditations from before 2012.)

Pheenix added at least 180 registrars during the same period.

While the basic costs of running a registrar are fairly low, it adds up in a hurry. Application costs are currently $3,500, and there’s an additional $4,000 fee per year. Registrars also pay a quarterly variable fee that’s usually less than $1,000. Although very small registrars can get a discount on their variable fees, the discount is designed to not apply to registrars that try to catch dropping domains.

Assuming DropCatch.com’s registrars don’t qualify for the discounted variable fees, it comes out to a staggering $6 million per year in ICANN fees. Add to that servers, software, etc. and it gets very expensive.

New accreditations have slowed to a trickle this year, ignoring Web.com’s big acquisition. Have the established players built enough firepower?

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  1. todd says

    Do you think DropCatch is adding registrars to benefit their customers or benefit themselves? It doesn’t seem like to me that DropCatch is the number one reason for adding registrars. I think HugeDomains adding more inventory is more important than DropCatch profits. DropCatch is just an added bonus for them in my opinion.

  2. Mark Thorpe says

    DropCatch.com seems to be the one that raises the bar with dropcatching. Plus they own a lot of names that they caught for themselves.
    I don’t know where they get the money to do it all, being a private company.

    Someone will have to blink eventually and downsize or sell. My guess is Pheenix will be the first to do so.
    Dropcatch.com is the wildcard here and SnapNames (Web.com) is not going anywhere anytime soon.

  3. Luc says

    Verisign made a pretty major change early this year which effected drop catchers. They placed a hard limit of how many “availability” queries can be performed during the drop cycle per registrar.

    The limits are very low, something like 4500/entire drop cycle (please don’t quote me, this number may be off), when before it was possible to send hundreds of thousands of queries. This turned drop catching into a numbers game where a ridiculous number of registrar connections are required to perform the same number of queries as before.

    Verisign controls com/net and you must be accredited with ICANN and Verisign in order to dropcatch com/net. If they lowered query limits to 500 per drop they would have even more accredited registrars paying their dues.

  4. DomainBELL says

    I have always wondered how a company such as HugeDomains can have so many names for sale over reg fee pricing and not be considered to be cybersquatting ??

  5. JZ says

    less quality domains than ever hitting pending delete and there are also more people than ever fighting for the scraps.

  6. Rubens Kuhl says

    Pheenix seems to be losing the war… after participating in a few drops, DropCatch.com got one, SnapNames got most, Pheenix got no one. I still have all the ones i’m interested into in SnapNames and Pheenix, and will also try DropCatch.com if/when one of them gets into PendingDelete.

  7. Joseph Peterson says

    Backorder customers absorb the escalating cost of this arms race.

    If the underlying cause of this registrar explosion is a query limit imposed by Verisign, then Verisign might do well to reconsider. With backorder prices increasing from $59 to $69 to $79 to whatever’s next, domainers cannot afford to maintain as many domains.

    Ultimately that means many of Verisign’s domains aren’t renewed, since the money to backorder them has been squandered indirectly on extra registrars for the drop catchers.

    • Andrew Allemann says

      I’m curious if it means they aren’t reregistered as quickly, or not reregistered at all. Verisign watches its data closely, and I doubt it would have done this if it saw a drop in registrations.

      • Joseph Peterson says

        @Andrew Allemann,

        There are so many confounded factors at work in re-registration patterns that Verisign could easily miss this, if the effect is there at all. Particularly since we’re talking about human behavior. There’s a lag time involved for consumers to feel the pinch of higher costs. We don’t change our buying habits immediately in response to higher costs; but ultimately we do have less to spend. That lag smooths out such transitions, making it harder to notice a change, let alone determine cause and effect.

        Backorder costs went from $59 to $79 – up 33%. If domainers spend the same total amount on drop catching domains (excluding those that go to competitive bidding), then domainers can only afford to catch 75% as many. Also, with higher costs come thinner profit margins; so domainers will ultimately have less money to spend on backorders.

        It’s all quite muddy. Simultaneously, market demand is changing. Simultaneously, the number of domainers in the industry is changing. Simultaneously, domainer participation sloshes around amongst a variety of venues. Simultaneously, domainers experiment with different TLDs.

        I’d be surprised if Verisign or anybody else, for that matter, could see the cause and effect relationship of any 1 factor very clearly.

    • AJ says

      They also don’t allow private sellers to auction/sell their domains on their platform unlike the other 3. IIRC, it was mentioned somewhere that they took a strategic call to not provide both!

  8. Ivan Rasskazov says

    Curious if DCs will ever adopt an option-like pricing structure where you could also trade your backorder until expiration. Obviously time decay and value of the domain itself would go into valuation of the order.

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