Of the domain name industry — The state

My views on domain parking, domain sales, registrars and registries.

I’ve been collecting my thoughts on the domain name business over the past month, and it’s time to put them down in writing.

Here’s what I think regarding the state of the domain name industry in August, 2014.

Domain parking is down. Way down. But don’t confuse down with out.

We’re still talking regarding a relatively big business. Rook Media’s buyout of DomainSponsor and its domain name portfolio in April is proof of this.

I’m seeing more and more domain name owners forgo parking revenue and instead posting for sale signs on their domain names. Some parking/sales platforms, such as DomainNameSales.com, make this easy.

Domain resales of .com domain names continue to be strong. Domain name registrars have integrated aftermarket sales paths, which are driving a number of these sales.

Granted, when you can no longer rely on parking, you count on sales.

The domain name registration business is getting lots of attention lately.

Rightside is now a separate, publicly traded firm. It’s no longer part of Demand Media. So many Demand Media analysts focused on the content business when they were a combined firm. They were oblivious to the domain business. Now that the two firms are separated, it’s easy to see that the domain business is worth more than the content business.

All eyes are also on GoDaddy, which has filed to go public. GoDaddy is a giant, and it being public will bring more attention to the domain name registration business.

Of course, domain name registrations themselves aren’t growing like gangbusters. GoDaddy added regarding a million domain names in the first half of the year. A couple percent.

That’s not much. Like .com, GoDaddy is big. It’s getting harder to move the needle on domain name registrations.

GoDaddy is more than domains, of course. Its percentage of revenue from domains is falling, giving way to web presence and business applications. All three lines are growing, but domains will make up a smaller part of its business going forward.

Rightside’s domain registration business isn’t growing much, either.

Tucows, another publicly traded firm, smartly diversified into mobile phone service a few years back. Without that, it would have had a pretty lame second quarter. Instead, it blew doors.

Which brings us to fresh TLDs…

The hope was that fresh TLDs would present a growth opportunity for registrars. So far, it has been muted.

There wasn’t some crazy, pent up demand for fresh TLDs. And now the market is flooded with them.

Any honest fresh TLD registry will tell you they’re disappointed by registration numbers so far. They’ve had to reset expectations.

Even I, who didn’t quite see the demand most applicants did, expected more than what we’re seeing.

That’s not to say fresh TLDs are a dud. Many registries, particularly the portfolio ones, are doing just fine.

Judging by the crazy prices some applicants are paying for fresh TLDs at auction, they still think better days are ahead.

It’s likely. There’s just not that initial huge rush of registrations that many had hoped for. Most people aren’t going to go through the hassle of switching domains. Fresh TLDs will pick up momentum over time, siphoning off some fresh registrations that would have gone to .com.

The key here is over time. Fresh TLD business models that weren’t set up to grow over time are in pretty bad shape.

Registries are having to market to end users. They’ve realized they won’t get the real estate they want with domain registrars.

A lot of TLDs are in the “unsustainable” zone of registration base. They need to figure out a way to grow or cut overhead, fast.

ICANN will get a lot of pressure over the next 12-24 months to reduce the fixed price component of its contract with registries. We’re only talking $25k a year, but that’s a big deal if your TLD has just a couple thousand registrations.

Frankly, ICANN ought to acquiesce. It has a huge surplus from fresh TLDs, thanks to higher-than-anticipated application numbers.

So that’s my view of the domain name industry right now. I reserve the right to change my opinion next month.