Domain name industry consolidation is necessary, but competition is crucial.
As I walked around NamesCon yesterday, I saw the signs of consolidation in the domain name industry. There’s Hexonet, now part of CentralNic, which has gobbled up many domain companies. Enom is now part of Tucows. There’s GoDaddy, which acquired Host Europe Group. Heck, GoDaddy is now the parent organization of NamesCon.
For the most part, this consolidation is positive. There’s still plenty of competition for domain name registrars. Technical registry tie-ups make sense as margins tighten. Top level domain operators need to combine costs to make the numbers work.
Yet consolidation can be overdone. There are some areas of the domain name business with scant competition.
The key one I see is domain marketplaces. There are just two marketplaces: GoDaddy and Sedo.
True, other companies compete with these two for part of the domain sales business. For example, landing page services and parking companies siphon off some of the leads that come in from parked pages. But we only have two domain sales marketplaces that get domains in front of buyers through the registrar channel. And only two sites that attract buyers searching for domains to buy.
Competition is good. It keeps companies honest and fair. For an example of a lack of competition hurting the domain industry, look back to the duopoly of Yahoo and Google for domain parking. There were lots of domain parking companies, but they all depended on two providers. Once one of those providers faltered, the other turned the screws on domain parking.
As for GoDaddy and Sedo in the aftermarket, GoDaddy is the clear #1. It’s good to have a solid #2 pushing it to innovate and keep its prices in check, though. Domain investors should keep this in mind and make sure to support both marketplaces.