The Royal Bank of Canada (RBC) published a fascinating report (pdf) today on the gTLD business.
The report is entitled: “Say .anything – Opening Up the gTLD Landscape” and subtitled: “Examining the potential value the new gTLD initiative creates for Demand Media, Inc. (DMD) and Web.com (WWWW)”
Its a 17 page report which you of course should check out in its entirety since it is a very interesting look into the business of domain name registrar and registries and offers some huge estimates of the valuation of these new registries.
Of course we can debate the numbers and some of the facts stated in the report but it should be an eye opener for many in the space.
Here are some of the highlights and we will have comments after:
“The new gTLD initiative could be a game-changer for the domain registry and registrar businesses. ”
“With potentially 100s more gTLDs becoming available for use in the next year or so, we think DMD and WWWW – two companies in our coverage universe with major domain registrar operations – will be longer-term beneficiaries through the expansion of the domain name-space.”
“We estimate a registry that reaches 10mm domains in 7 years (with moderate growth thereafter) could be worth ~$260mm. ”
“We estimate a registry with 5mm domains (reaching that level by year 6) could be worth roughly $140mm and a registry with 15mm domains (reaching that level by year 10) could be worth roughly $340mm.”
“We have a favorable view of the domain registry business given its high-margin and stable/growing cash flow characteristics. ”
“We do note that assessing the potential size of a gTLD is more art than science.”
So here is what we know.
There are 250 million domains including ccTLD’s.
We know there is around 120 Million .com and .net domains.
There are over 1 Million .Mobi’s
There are over 8 Million .info domain names.
There are over 2.2 million .Biz domain names.
So when they are talking about a registry doing 15 Million, 10 Million or 5M annual registrations they are not talking per string but per registry and some registries appear that may wind up with 10, 50 even mover 100 strings.
When you consider someone who spent say $10M in application fees on 50 extensions, well you can see what the end game is.
A $10 Million investment into a business worth $140M-$340M in 10 years.
Of course there are other costs associated with running a string including the cost of obtaining a contested string and the marketing costs but the rewards are tremendous.
One thing clearly missing from the report is the increase cost in marketing that new gTLD’s will have in comparison to Verisign which is the registry whose numbers they are using to compare future registry operators to