Media & Entertainment

The silent evolution of domain names

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Alan Dunn

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Alan Dunn is the managing director of NameCorp and a senior digital naming expert and brand consultant.

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Verisign recently  reported that the number of registered dot-com domain names exceeded 128 million for the first time. With a wholesale price of $7.85 each, this means $1,004,800,000 in annual fees, and that’s before factoring in reseller prices, country code domains and alternative extensions to measure the domain-name industry as a whole.

The internet has come a long way since the first domain name, Symbolics.com, was registered in 1985. Even longer when you consider it was only 1994 when Joshua Quittner (a WIRED writer at the time) contacted McDonald’s to see if they were interested in registering mcdonalds.com, and, well, got nowhere.

The state of the domain-name industry has vastly changed. Almost everyone with a business online has tried to register a dot-com domain name — only to find their first and best choice was gone. Most great domains were grabbed years ago by investors like Kevin Ham (CNN dubbed him, “The man who owns the Internet”). Even Lana Del Ray’s father is an iconic domain-name investor, and members of a Middle Eastern royal family own one of the largest portfolios in the world.

It wasn’t just people buying domain names over these two decades, either. Companies like Hearst, AOL, CBS, Salesforce and Amazon have collectively paid tens of millions of dollars for domain names; with many of them still not in use.

More recently, GoDaddy spent more than $100 million acquiring portfolios of premium domain names from private owners.

An industry that is finally maturing

What was once an industry comprised mainly of individual investors and service providers is now attracting corporate money like never before.

Industry giants have hundreds of millions for auctions and infrastructure. Big brands like Amazon, Google, Verisign and WordPress are investing heavily to own and operate entire domain-name extensions. Even company-branded extensions are now going live. Barclay’s is already using home.barclays, and new domain-name extensions for both BMW (.bmw) and Travelers (.trv) have been delegated.

One may even say it’s a natural evolution of media, where brands finally want to own the channel versus renting a space.

Will this evolution in naming work?

On the surface, it may sound crazy. After all, how many people will buy a .blog or .app domain name? How many domain names do people or companies really need? These sound like fair questions, right?

The thing is, domain names are not a zero-sum industry. Very few people believe or can make any solid case that dot-com will lose its majority status (myself included). However, success is not always defined by millions of registrations. and very profitable models exist when you own a registry.

Think about it. A low-cost, high-profit product, with cheap infrastructure, recurring revenue models, possibilities for scale, global reach and more. In a world where technology leads venture capital investment, and a 10 percent ROI will win you Wall Street rewards, owning a domain-name extension may not be one of the craziest investments around.

How big Is the market, really?

No one knows for sure. But it’s big.

Millions of new domains have already been registered, for a variety of different reasons. Some companies use them as complementary domains to an existing brand (Slack is using slack.help for support); others use them as a primary URL; some see a marketing purpose, others have defensive reasons.

Many sales are also at premium prices. DomainNameWire reported that Hanes spent $30,000 to acquire T-Shirts.store (yes, with the hyphen), Visual Dynamics purchased 3D.software for six figures and Autism.rocks fetched $100,000.

At an individual level, it becomes even more plausible that many of these new extensions can grow. There are thousands of people called Joe, yet there is only one joe.com — if you don’t have a pocketbook the size of Manhattan, then you probably will never have a chance to own joe.com. However, you can choose from joe.live, joe.social, joe.link and more. The concept of using these new domain-name extensions for personal use has never been more apparent, especially when relevant extensions provide an opportunity to brand ourselves in a way .com never did.

It’s not even just about use. Some of these domain-name extensions have become more like commodities, traded between investors, rather than having a traditional use. According to a CNBC interview, Sedo estimates that 54 percent of these new domain names are owned by Chinese registrants — a market that already owns many of the world’s best two- and three-letter dot-com domains.

Not everybody needs another website, but the numbers speak, and they say lots of people can use another domain name.

The big league

It’s not uncommon to spend well over $100,000 for a premium domain name. However, buying an extension is a whole other league — a league in which brands have only been too happy to play.

For example, the rights to .BLOG were purchased by WordPress for $19 million, Google paid $25 million for .APP, Amazon paid up to $10 million for .BOOK and Verisign backed a $135 million winning bid for .WEB — and most of these companies have acquired the rights to more than one new extension.

Now, combine these investments with the reach of these brands. They have billions of users collectively, and driving adoption to an already loyal consumer base is a lot easier than starting from scratch.

The future is already here

For Q1 2016, Verisign reported some staggering statistics, including the total number of domain names across all top-level domains has grown to 326.4 million, and the collective number of new GTLD registrations (which first launched less than three years ago) now exceeds 16 million domains, accounting for 4.9 percent of all domain names registered.

Think about that. In less than 25 months, these products, which many people doubted, now collectively account for nearly 5 percent of a product that has primarily been on the market for more than 20 years.

Five percent market share. That is huge.

And, ironically, McDonald’s now owns the .mcdonalds and .mcd extensions.

Twenty-two years later, it’s likely fair to say everybody is lovin’ the internet a little more than they did in 1994.

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