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2014: Here is Our Thoughts On The New gTLD Program & Some Predictions for 2015
#1
TUESDAY,6 January 2015 THE DOMAINS

According to the news from Domain Forum of China on January 6th,the new gTLD’s were certain the talk of the domain industry in 2014.

I thought it would be a good time to take a look at where the program is in our opinion and make a few predictions for 2015.

The new gTLD ‘s ended with lets call it 3,650,000 domain name registrations just to round the numbers off.

We did an analysis when the new gTLD’s hit 3.5 million and backing out the free domains and domains registered by the registry or parties related closely to the registry we figured there were about 2.7 million paid registrations to third parties.

At the end of 2013 there were 112 million .Com’s registered.

At the end of 2014 there are 115.3 million .Com’s registered.

So basically .Com gained more paid registrations than all new gTLD paid registrations/unrelated registrations. As a raw number all the new gTLD’s combined wound up with about 400,00 more registrations than .Com did.

There were certainly some big winners in the new gTLD game.

Donuts did a remarkable job and IMHO made a lot of money.

Obviously as a private company I don’t have access to their books, but Donuts finished with around 1,150,000 registrations which is over 30% of all new gTLD registrations, at an average retail price of $25, that is a nice chunk of change.

Add in all the money Donuts took in on the brilliant Early Access Program (EAP) where people paid up to $12,500 just to get early access to a domain registration (Registrations fees not included).

.XYZ domain registrations are over 20% of all new gTLD’s registrations.

So between Donuts and .XYZ they have more than a 50% market share of the new gTLD’s in terms of registration.

.XYZ has said publicly that they are profitable even with the free domains given away by Network Solutions.

Outside of Donuts, .Club is doing very well with over 160,000 registrations adding a few hundred every day. .Club also leads in terms of reported domain sales however the number of reported new gTLD domain names in the aftermarket are few and far in between.

Radix has a few popular strings most notably .website.

.NYC, .London and .Berlin all did pretty well with each getting over 50,000 paid registrations.

But some of the other portfolio players, look like they are still waiting to play

Google has just a little over 5K registrations, Amazon has none.

Minds and Machines has over 103,000, which includes clients for which it is acting as a back-end provider alone, and even at that over 1/2 of those are from .London domain names alone.

Uniregistry has 175,000 registrations but 87,000 or so are owned by people related to the registry.

As far as the aftermarket, .Club sold 6 out of the top 10 new gTLD sales on Sedo for new gTLD in 2014.

.Global held an auction in London and generated some $63,000 in sales.

.NYC seemed to generate well into the six figures in Landrush Auctions.

TLD Registry held a highly successful auction with Sedo in Macau with over $500,000 in sales, but I don’t think any official numbers were ever released by Sedo.

However in general there were very few public new gTLD sales.

Of course Godaddy hasn’t reported any of its sale since June which doesn’t help.

But A slow aftermarket in 2014 was expected.

I always said i if you are looking for serious money lets call it $10K or more for any new gTLD plan on waiting for 5 years, although there are always exceptions to the rule.

According to the last Published Domain Industry Brief, there were 280 million domain names registered of which at that time 1.5 million were new gTLD.

So although the timing doesn’t exactly match up lets say that new gTLD’s represent around 1.5% of all registered domains as 2014 closed.

As for my company we acquired somewhere around 1,500 new gTLD’s in 2014 and rank 83 on the list of the top registrants of new gTLD domain names and have around 80,000 domain names.

Paul Stahura of Donuts recently published two pretty interesting piece in CircleID.com how he see’s the domain world though Donuts eyes and made some bold predictions for 2015.

I wanted to review a few of the statements and predictions made by Paul in his articles:

“New .COM quality is abysmal. The quality of newly registered .COM names is dropping and has been for years. And there is nothing Verisign can do about it. So welcome to the fire sale.”

Well we are mixing apples and oranges.

The choice consumers have isn’t to register a new .Com or a new gTLD.

For one, there are around 75,000-100,000 .Com domain names that drop everyday of the year

These domain were registered by someone else and some are as old as 20 years.

Everyday there are around 10,000 .com domain names that have been registered for 10 years that drop.

There are millions of .com domain names for sale on the Aftermarket which continue to sell from the hundreds of dollars into the seven figures and those are just the public sales.

When you’re talking about spending hundreds, thousands and even five figures a year in registration fees on a new gTLD, then the option of buying a registered .com on the aftermarket becomes much more attractive to the consumer. As in any business the consumer will decide.

Take one of our domain names RealEstateAttorney.com as an example

It will ultimate be up to the consumer if they want to pay $60,000 a year to register realestate.attorney (available at enom.com as of publication) or pay our current asking price of $350,000 one time, with a $10 renewal fee. (Yes we increased our price based on the new gTLD price in 2014)

Of course we might consider leasing the domain name realestateattorney.com for $50K , thereby under-cutting the retail annual registration fee of $60K for the .Attorney domain.

Who will win, who will lose?

Bottom line if you’re a new gTLD registry and hope to get someone to register a domain for $60K a year you better hope that the matching .Com domain doesn’t fall too much in value. It’s a Double edge sword guys, if .Com values fall on the aftermarket dramatically, those premium renewal fees on the new gTLD’s are going to have to come down dramatically too.

Do you really think someone would register realestate.attorney for $60K per year if they could buy the .com version for $20k for a one time price especially with other new gTLD’s of .Lawyer. Law, .Esq, .Legal to name a few coming on the market?

Domain names are an ecosystem.

The new gTLD guys better not hope it’s a zero sum game where you can win if only someone else loses.

Otherwise it could be an everyone loses scenario.

“It’s only just started! Only a quarter of new TLDs are out, for an average of just six months, yet they have done 3.5 million new registrations at an average retail price of $25 (counting the free ones). ”

I don’t know how Donuts can know the average sales price of 3.5 million domains, without knowing what each domain cost to register across hundreds of extensions.

I see retail prices of $2 or $1 or less for new gTLD’s all the time.

Many registrars have offered heavily discounts on some of the new gTLD’s.

I have been offered prices of a dollar or less for many new gTLD’s if I registered them in bulk.

Godaddy.com will discount seemingly any domain 20% if you leave it in your cart for two days.

Donuts can certainly speak as to the average retail price of its own extensions, and it would be nice to know if that amount included EAP fees and premium domain registration fees, which we will assume they do until we are told otherwise, but they can’t know what the retail price paid for each registered domain was for all 3.5 million.

But even assuming the average “retail” price is $25, the average wholesale price, the amount the registrars pay the registry, I would say can’t be more than $20 and is probably lower.

We do know if that each extension had to pay ICANN $25K per year minimum, not maximum against a $.25 per registered domain name fee.

For .XYZ for example at 725K registrations they have a bill with ICANN not of $25,000 but something closer to $200,000.

We also know that each registry needs a back-end to operate the registry.

Except for Google, Uniregistry and Donuts/Rightside, which built their own registry all the others are using some other companies back-end and are paying on a per domain basis, somewhere between $1-$4 per domain.

Some registries have minimums to their back-end provider as well.

The deals vary tremendously.

For those that have built out their own back-end, it’s not a cheap process to build and maintain the back-end, so anyway you slice it there is a cost for the back-end operations.

We know that each new gTLD or extension has a $25K minimum guarantee to ICANN and therefore needs at least over 1,200 registrations just to pay the annual ICANN fee at the $2o average wholesale cost.

Take into account of operating the back-end lets just say a registry would need about 2,500 registrations a year at $20 average wholesale, just to cover the annual back-end fees and ICANN fee, not including any salaries, travel, promotion or other business expenses.

Take into account that each registry would love to recoup their start-up costs which were $185K for the application fee alone for uncontested extensions, and amounts that have gone regularly into the millions of dollars, even into the $10 Million + range to settle contention sets for new gTLD’s that were applied for by more than one party.

As we sit today, I see 91 new gTLD’s that have less than 2,500 registrations and therefore have to be losing money on just based just on the ICANN and back-end provider fee.

So based on that less than 300 new gTLD have been fully launched, you have 1/3 of all extensions breaking even or losing money just paying ICANN and their back-end provider fees.

In the case of the portfolio players losers mix in with winners and the profitability of each are not that important.

Still a new “industry” where technically 1/3 of registries are not covering the very basic cost of the back-end provider and ICANN minimum fee isn’t doing great.

If the new G’s can reach the .Com traditional amount of renewals which is 72% it still means those with 2,500 registrations might be knocked down to 1,800 after the first renewal period.

So realistically IMHO if you have a registry and consider each as its own business, you need to be at 5K registrations if you launched in 2014 to have a chance to breaking even in 2015.

So if 5,000 registrations is the realistic break even point for basic operations, 130 of 300 launched new gTLD’s look like break even operations.

So if we round the fully launched strings to 300, at the moment, 170 would be breaking even or better and 130 would not.

In any event the total number of new gTLD’s is about 5 times less than just .net registrations and hasn’t even gotten up to .info levels

Bottom line, yes many new gTLD are going well but a substantial portion are not.

The new gTLD have 3.6 million registrations.

.tk has 25 million registrations which hasn’t changed anyone’s life in the domain space

So lets calm down guys.

In another CircleId.com post Mr. Stahura “conservatively predicted an initial renewal rate of greater than 80% for Donuts gTLDs”

We respectfully disagree.

An 80% + renewal rate is a bold prediction.

There are several issues that could affect renewal rates especially on those domain names that have higher or premium renewal rates in the hundreds or even thousands of dollars per year.

People Are Confused

There are people who registered a new gTLD domain in 2014, with a premium renewal rate of say $400, have no idea that they are expected to pay $400 a year again next year.

I can’t tell you how many people who are out there that had no idea that the registration fee would be the fee required t0 renew the domain in the following years but I can tell you they are out there

Not every registrar made the renewal fees perfectly clear.

Some of the new gTLD registrants are not experienced domain buyers.

I can’t tell you if the number of premium domain registrants that didn’t realize that the domain would carry a premium renewal is .001% of the registrants or 1% or 5%, but they are out there and will fall off their chair when they get the bill in 2015 from their registrar for $200, $400, $800, $1,500 or more.

The Variable Pricing Model Has Already Failed

Donuts uses variable premium domain name registration and renewal pricing as some other new gTLD registries do.

In the past the only domain name registry to do this was .TV which abandoned the practice years ago.

Maybe the .TV model, which is also the Donuts model was ahead of its time or maybe is was too hard to get adopted only by one string rather than on hundreds.

All we know is that the only time variable pricing time was used by a major registry it failed.

People Got Swept Up in the barrage of new gTLD’s

When the new gTLD’s started getting released, it came hot and heavy.

We saw 5-10 new gTLD coming out each week.

Now that hundreds of extensions have launched maybe a guy who registered a .Guru for $400 a year was able to get a just as good .Expert for $200 or a .Ninja for $40 or will grab a free domain in 2015.

For those single domain buyers that is not an issue.

But for those that have bought more than one domain which again I guess represents a good chunk of the paid domain registrations, they will be assessing what they acquired in 2014 before renewing for 2015.

Included in this are what used to be rare one letter domain names, these became widely available when the new gTLD’s launched.

People rushed to the gate to grab these up at $400 a year or more.

y.holdings

Is that worth holding at $400 or more a year ongoing?

Not to me.

Yes I registered it but will not be keeping it.

The gate is wider now.

There is vertical competition.

.Dental launched months before .Dentist

.Hosting launched in November .Host launched in September.

There are many more examples just like these.

As I have said many times before, until we have gone through the first cycle of renewals for the new gTLD’s we know nothing. We probably need to go through the second renewal period after all the new gTLD’s are released which will be a year later before we can start to predict where things will be.

We are all just Guessing at this point.

The Pink Elephant in the Room: Domain Investors


Domain investors buy or register domain names with the idea they can sell them for a higher price in the future especially when as Paul even points out, the new gTLD’s unlike .Com have no traffic.

As we sit today there have been some nice .club sales reported and a handful of other sales.

Personally, in 2014 we sold into the 7 figures in domain names once again.

We are truly blessed.

As you will learn a little later today we already booked a sale of $800,000 for 2015 for a .Com

As I look back on 2014, 97% of my sales were in .Com.

The rest was .Me, .TV a few .net and .org’s.

I would loved to tell you I sold lots of the new gTLD’s that I had registered, but I didn’t.

Honestly I didn’t get that many inquiries on the new gTLD’s I registered.

However as I said before, I didn’t expect much action.

I do believe that many of these domains will sell in the future to aftermarket buyers.

So I will renewing a lot of new gTLD domains I registered, but not all of them.

According to ntldstats.com the top 100 new gTLD domain names registrants account for over 520,000 of the 3.5 million registrations, or 15% of all registrations. It takes 1,087 domain names to make the top 100 list.

So I’m just going to guess that of the 3.5 million domains registered at least 1.5 million are registered by someone who registered more than 1, which becomes important when we look at renewal rates below.

Bottom line there are a substantial number of new gTLD’s that were purchased by domain investors, old and new.

That is not surprising to us or most domainers.

For those new gTLD domain held by domain investors, at the end of the day, they are looking for a return on their investment.

The percent of return, the expected time of return, varies drastically domain investor to domain investor. Many domain investors are not built for comfort but rather for speed, and they tend to dump domain names as quick as they spend the money to acquire them if they don’t see the return coming soon.

Domain investors including myself typically review their domains when they are about to come up for renewal.

That is going to happen with their new gTLD domains and those which carry a premium renewal fee will get an extra hard look.

Can a domain name with an $800 a year renewal price be sold on the aftermarket?

That is yet to be determined.

So if Donuts hits or exceeds an 80% renewal rate God bless and I owe Paul a nice bottle of Champagne. For now I would say they will be lucky to match .Com’s rate of 72%.

Finally on a different note, registries should understand that the only one’s who care about how much their registries make, are the registries and their investors.

If you own shares of Donuts, you point to the registration numbers and dollars pouring into the registry and proclaim success.

However I don’t own any shares of Donuts and it’s not publicly traded.

Those companies that are publicly traded in the new gTLD space had a horrible year with investors seeing losses of 50% or more in share price.

At the end of the day the only company in the domain space that is publicly traded that maintained its stock value in 2014 was Verisign which fell by only 4%.

As a registrant of a new gTLD’s, the profitability of the registry isn’t my concern. Nor really is the amount of domain names registered by each registry. As a blogger it’s all very interesting and newsworthy to report, but as a domain investor, I want to see domain resales on the aftermarket.

For example it doesn’t help me one bit that the .tk registry has 25 million domain registrations, which represents about 8% of all domain registered in the world (remember new gTLD’s are 1.5%). As far as .tk domain names, I never registered one and I have never seen one sold in the Aftermarket.

So .tk could have 5 registrations or more than .com, doesn’t make a difference to me. New gTLD’s need to stop the .Com bashing because its going to hurt them in the end. Pounding your chest telling everyone you scaring the $6 billion dollar company to death when there registration numbers did as much as 300 new gTLD’s is just silly.

I think it bothers people who aren’t new gTLD registries and this leads to stories like today: Inc.com story entitled Will New gTLD’s even matter in 2015?

If new gTLD’s want to get an 80% renewal rate, they better pay attention to the domain investors and hope for their success.

Several new gTLD registries have been making statements and writing articles for at least a couple of years now to the effect that .Com is going down the crapper, along with their values and the new G’s are going to thrive.

Remember the Minds + Machines proclamation that .Com will be dead in 10 years?

Remember Frank Schilling’s comment that .Com will be like the AM radio?

These type of statements do not help domain investors, which as we chatted about earlier, are a huge percentage of the registrants of new gTLD’s. Most of the money that domain investors used to buy new gTLD’s came and will come from selling other domain names, mostly .com domains on the Aftermarket (that is where my money came from). If you want to espouse the position that a substantial portion of your own customers revenue will fall off the cliff in a celebratory manner, then those domain investors , which are also your customers, won’t have any money to buy your product or renew you product.

Moreover some domain investors will never be your customers after hearing or reading statements that they soon will be holding worthless assets. That is not endearing.

In a comment that was posted to Paul’s last CircleID post, Fred Kruger who made the comment we cited above that .Com will be dead in 10 years said:

“The huge elephant in the room is high volume name domain holders sitting on 10s of millions of .com names with the expectation that future sales will cover their cost of carry. When the tide shifts the other way, these players will shift their capital into newer TLDs or different asset classes altogether. Even general individuals, with third tier domain names in .com will think twice about renewing.” Nice thoughts.

If those domainers shift their assets into “different asset classes altogether like stock, bonds or real estate, how the hell is that going to help the new gTLD’s? If people lose money in .Com it will make them more likely to buy a .horse domain? or .Rodeo?

So how about this for the new year. Guys you have a product. New gTLD’s I have invested into the six figures in them as a domain registrant hoping you guys will market your product. Now go market your product. Go tell the world what these things are, why they should own them in a positive way. Market, advertise get out to the people who are willing to buy your product now, domain investors. Start getting the word out to end users again with a positive message. Don’t stand on a destroyer in the middle of the ocean and tell every how you won a war, because when the war is still going on 5 years later, it doesn’t make you look that good. and it still didn’t end the war.

New gTLD’s have their place in the ecosystem and will continue overall to grow, as will the number of domain names will continue to grow in general.

So for those in the new gTLD space that continue to bash .Com and make it an us against them argument, all you’re doing is trying to hurt your biggest customers.

We still see a bright future for many of the new gTLD’s and will be increasing our holdings in the new G’s but also in .Com and we are always open to a good .me, .tv, .co and although we don’t own any .io still seems popular to new VC backed companies as does using other ccTLD’s for domain hacks.

In 2015 the new gTLD’s will be looking forward to launching the most contested strings, those that had the most pre-registrations including .Web, .App, .Online, .Fashion to name just a few.

In 2015, the new G’s will get to sell previously blocked domains that were on the ICANN collision list.

In 2015, it looks like the some of the new gTLD registries might be able to sell some of their two character domains.

In 2015 we might start to see what Google, Amazon and the Brand applicants have in mind to do with their extensions.

I will predict in 2015 the overall number of domain names will continue to grow including ccTLD’s.

.Com’s will continue to grow in numbers.

I’ll predict there will be more than 115.3 million .Com’s registered at the end of 2015.

I’ll also predict that all other legacy extensions will continue to fall, unless they engage in some aggressive price promotions.

As to winners and losers in the new gTLD space and the new gTLD space itself, we are in the bottom of the first with a man on first base. Now step up to the plate, take a swing and hit it out of the park.
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2014: Here is Our Thoughts On The New gTLD Program & Some Predictions for 2015 - AmayTian - 01-06-2015, 08:39 AM

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