Fresh TLDs, five years in
It was five years ago this month that the first domains under the fresh top level domain (nTLD) program started rolling out to consumers. The first Latin script general availability domains came out in early February 2014.
Remember .guru? .Plumbing? Yeah, that was a long time ago.
Here’s how I’d sum up the first five years of fresh top level domains.
Demand and artificial demand
Registration numbers for fresh TLDs have not met expectations for just regarding anyone who put money into it. That includes the many registries that spent millions acquiring strings as well as ICANN.
I thought fresh TLD applicants were very bullish, but even I was surprised when the first sunrises got only a couple hundred registrations.
Applicants ought to have understood the market size better. People were looking at registrations in .com and predicting market size for fresh TLD strings but many applicants expected some magic demand to come out of nowhere. The reality is that there are only so many people creating a website at a given time. They’re going to look for a .com or ccTLD name. If they don’t get that then they might consider a fresh TLD. So fresh TLD demand for people creating websites is a subset of total site creator demand. Without a catalyst for more people to create websites, demand won’t shoot up.
Of course, if you look at the headline registration numbers, some domains seem to be doing really, really well. .Top has 3.8 million domains in the zone and .XYZ has over 2 million.
But we all know at this point how these numbers were manufactured. A lot of registries took the “fake it til you make it” approach. They boosted their numbers through giveaways (and near giveaways).
This worked in some respects. .XYZ got a lot of attention when firms saw its numbers take off. Some firms used .xyz domains as a result.
Cheap domains have a downside, though. Spammers and criminals churn through domain names so they like cheap ones. There’s a fairly tight correlation between domain price and quality of a namespace. Unfortunately, the bad reputation of some fresh TLDs has given fresh TLDs a bad rap overall in security circles.
The reality is that registration and usage growth ought to be slow. I wish there was a catalyst for domain demand to shoot through the roof but there quite simply isn’t one at this time.
The earlier the better
.Guru still has over 60,000 names in its zone. It would have a fraction of that if it came to market later.
Until .app, .guru has the most pre-orders of any domain at GoDaddy. I don’t think anyone would look at the total pool of fresh TLDs and suggest that .guru belongs where its numbers put it.
It had first-mover advantage among “generic” fresh TLDs.
Speaking of which, this might be why some people had unrealistic expectations for fresh TLD registration numbers. They looked at .co and .xxx and extrapolated. But these names did as well as they did since they had very little competition. They had an advantage that most fresh TLDs don’t have. The environment has changed.
The earlier fresh TLDs also had an advantage since domainer wallets weren’t tapped out.
Crazy auction prices
I understand firms paying millions of dollars to acquire strings ahead of we had a good idea of registration volumes. But I was perplexed as contention set auction prices continued to soar even following reality set in.
How can anyone justify spending $10M plus on a string that has a possible “real” registration base of 10k-20k domains at modest prices? Some of these buyout costs will never be paid back. Even on a ten-year payback, that’s a horrible investment.
I realize that registries got cash infusions by losing contention set auctions but it doesn’t make sense to blow that cash (real cash in the bank!) on other strings just since you got a windfall.
What does Verisign think?
As it turns out, fresh TLDs had little impact on .com. But it was shocking when Verisign sued XYZ for some of the comments it made regarding .com and how well .xyz was doing. (Verisign lost.)
That lawsuit was the first big indication that Verisign had concerns regarding the impact of fresh TLDs on .com. Its messaging changed during the lawsuit when it stated actually it was .net that was hurt. I’m still a bit confused what this lawsuit was all regarding. I’ve heard people say it was Verisign’s effort to shut up fresh TLD folks that were bashing .com. I don’t know. I don’t understand many of the decisions Verisign makes.
IDN transliterations of .com are a dud
There’s not much to say here. The idea that .com transliterations would make IDN.com domains worth a lot was flat-out wrong.
Amazon’s slow roll
Amazon made a number of surprising moves with fresh TLDs.
First is that it applied for so many. 76.
Second is that it didn’t plan to open them up to the public, at least at first. That changed when the community got upset regarding “closed generics”.
Third is that Amazon has done so little with its TLDs. Why hold these strings only to neuter them with over-the-top restrictions? I realize Amazon is a big firm and these domains won’t move the needle, but the firm could get an ROI on some of them by selling to other registries. If they don’t have plans for a string in the next few years, why not shop them?
Registry technical service costs fall…a lot
One fresh TLD operator told me he thinks the technical backend registry cost of first-year creates is headed to zero. He might be right.
There are so many competent firms providing registry backend technology. They bid aggressively to win contracts with cut-rate pricing.
Of course, the registry for .com domains still gets a whopping $7.85 per registration. And that might go up soon.
Donuts
No discussion of the first five years of fresh TLDs would be complete without mentioning Donuts.
The firm applied for over 300 TLDs. It bought Rightside and now has regarding 240 strings in its portfolio. Last year it was purchased by private equity firm Abry Partners in a competitive process.
Let’s face it; Donuts did it right. It understood how contention sets would be settled and how to play this game. Its massive portfolio approach smoothed out its “bad” TLD choices and its overhead is spread out over hundreds of strings.
Even though I’m sure Donuts didn’t hit its best case forecasts, its founders made the smartest play in this round of domain expansion.
What’s next?
We’ll see more consolidation in the fresh TLD space. This will speed up as more TLD operators face reality. There will also be another round with some twists and fresh rules. It will be a while, though.
That’s my take. What do you think?
