Of “forever” domain registrations — The economics

Ought to the domain name industry introduce perpetual domain registrations?

Consumers like predictability. They dislike price increases on their cable bill, healthcare premiums and mortgage.

Firms like cash in the bank. They can do a lot with it: invest, buy back shares, etc.

So the idea of a “forever” domain registration in which one payment is made and you own the domain for life could appeal to an end user. It also appeals to the domain industry since it can use the cash and not have to worry regarding renewals.

The prior week at the ICANN meeting in Barcelona, Epik founder Rob Monster explained to me what he’s trying to do with the concept of perpetual domain registrations. He’s offering these registrations on Epik for $420. Think of it as a proof of concept to show there’s demand for such a product.

What really needs to happen for domain registrars and registries to start offering a product like this is for the entire supply chain to be on board. The registry must offer a one-time price and ICANN must as well. Would ICANN accept a one-time $10 payment to cover all future fees it charges for domain registrations? Would Verisign accept a one-time $200 payment to renew a .com domain in perpetuity?

Epik’s Forever registrations

As it stands right now, Epik’s forever registration starts with a 10-year registration, the maximum allowed by the registries. Following considering the registry fee and ICANN fees, this leaves Epik with $326 in working capital. It then renews the domain for another year each year.

Depending on what rate you consider your cost of capital, this gives Epik a lot of room. Monster figures that as long as the renewal price of a .com is $19.50 or less per year, the .com is self-financing into perpetuity without even tapping into the $326 “deposit”.

But what will the market be like in 10, 20 or 30 years? There’s a lot of uncertainty. Domains as we know them have ony been around for regarding 30 years.

Let’s say the NTIA agrees to let Verisign increase prices 5% a year starting next year. Assume ICANN does the same on its fees. It will still take nearly 20 years for the wholesale price of .com to top 20. 100 years from now the wholesale would be around $950 per year.

Epik’s terms of service give the firm an out, albeit one that is friendly to registrants. Epik can cancel the registration at any time as long as it refunds 100% of the purchase price. It’s smart to have this exit clause given how much the market could change over time.

A panacea for domain firms and registrants?

I like the concept of perpetual registrations but I believe the entire industry needs to get on board. This is Monster’s goal. Prove demand to get people talking.

Public domain firms recognize revenue over time. So selling a perpetual registration for $420 today doesn’t let them recognize $420 in revenue. They’d have to recognize it over time…a long time.

But they can still invest the upfront cash and not have to worry regarding domain renewals. So it would be nice.

Will many consumers bite, though?

Following all, people can by now register domains for a decade at a time but few people do that. Consider the most recent Verisign registration note from June.

In June, there were 2,828,662 fresh .com registrations. 89% were for only one year. Fewer than 10,000 were for eight years or more.

6,525,072 .coms were renewed that month. Again, fewer than 10,000 were renewed for eight or more years.

To be fair, consumers might not see the advantage of paying in advance since .com prices have been steady for many years now. Also, it’s a 10-year registration, not lifetime. But there’s still a benefit to long registrations; you’re less likely to let a domain lapse.

Despite this, consider that many Fortune 500 firms only renew their primary domain one year at a time. Fedex.com expires next month!

It’s worth a conversation

I think it’s worth having a conversation regarding perpetual domain registrations. In order for it to go mainstream, all players in the supply chain must be contractually involved.

At a minimum, it might be time to talk regarding extending the 10-year maximum for registering and renewing domains.