Competition in the domain industry

Some parts of the domain name business lack competition.

Let’s talk about competition.

Competition and choice are good for consumers.

An example of a competitive market is that of domain name registration. There are hundreds of domain registrars competing for your business. That’s why domain registration prices remain fairly low, registrars create new products and services, and the cost of value-added services remain low (or even free).

A great example of a non-competitive market is for internet service. In the U.S., most people have a choice between just two wired broadband companies. It’s usually a cable company and a telco.

You don’t hear many people say they love their internet service provider. These companies have little incentive to compete on price and service since the alternative is just as bad.

We have some non-competitive markets in the domain name business, and we have seen the effects of this first hand.

There were a lot of reasons that revenue from domain parking plummeted. One of these is because there were really one two companies providing ads for parked pages.

Yes, there were lots of parking companies. They competed intensely for your business. But these were middlemen.

At the wholesale level, it was always just Yahoo! and Google. Much like internet providers, this duopoly was able to start turning the screws. Then, when Yahoo basically disappeared from the scene, Google was able to do whatever it wanted: change policies, reduce payouts…you name it.

While we have lots of competition with domain registrars, we are still quite limited when it comes to domain investor service providers. Thankfully, it’s not the internet provider situation in which they are taking full advantage of their situation. But it could become that way.

Earlier this week Payoneer announced it was leaving the escrow business. I doubt Payoneer ever ran huge volumes of domain escrow transactions, but it played a key role in keeping Escrow.com on its toes. Domain traders had a viable alternative for escrow with a big brand.

I don’t think Payoneer’s exit will have a huge impact on escrow. After all, Escrow.com has been doing whatever it can to try to win customers who had issues with its know-your-customer procedures. Even before Payoneer came on the scene, it kept prices in check. There are always alternatives like lawyers to handle escrow.

But look at some other types of services.

One that concerns me greatly is the domain aftermarket. There are basically two big marketplaces: Sedo and Afternic. Marketplaces are difficult to create, and it will be hard for anyone to challenge these companies.

Each of the companies has its own strengths and weaknesses. But it’s important that both remain strong. If one flounders, the other could easily raise its commissions. For that reason, I hope that registrars partner with both Sedo and Afternic, not just one of them.

Although they aren’t marketplaces, I’m also excited to see services like Efty and Uniregistry out there that can at least compete on generating leads from landing pages.

The expired domain market also concerns me. Generally speaking, there have always just been two players for the direct-transfer expiry market. Right now those two players are GoDaddy and NameJet.

GoDaddy has innovated a lot in this area. As a result, it has won over a lot of the business that used to go to NameJet. GoDaddy deserves to get this business based on its innovation. Let’s face it, NameJet hasn’t done much to invest in its platform and compete.

But if all registrars decide to send their expired inventory to GoDaddy, then NameJet will die and Godaddy will get to dictate the terms to play in the market. This includes the terms for domain registrar partners as well as bidders.

There are always winners and losers, and the best companies should win the business. As consumers, though, we need to encourage healthy competition.