It’s Domaining 6.0 & It’s Is All About Branding
I promised I would be writing a few post this week about the new gTLD’s, the current state of the domain industry where its has been and where it’s going.
As far as I can see we are now in the age of Domaining 6.0
Before trying to figure out where we are going, lets do a quick recap of where we have been.
This goes way back, before ICANN, before Google, back to the day when domain names were free.
It wasn’t until 1995 that Network Solutions was allowed to charge to register or renew a domain name and the charge was $100 for two years.
After a lawsuit, the fee was dropped to $70 for two years in 1997.
So until 1995 the entire universe of domains were available; Yes all ending in .com, and they didn’t cost a penny to register or renew.
There were just a handful of people who even knew what the internet was, even less what a domain name was , or even how to register one.
Those who knew what the internet was, what a domain name wand how to register one, had a once in a generation opportunity to own the internet yet not many registered more than a few free domains.
There was no way to monetize any traffic to the extent the was any.
The late 1990′s some people woke up to the fact that domain names were virtual estate.
In 1999 Network Solutions monopoly over domain internet registrations ended, other registrars came online and the domain world changed when our friends at Tucows lowered the price of a domain name registration/renewal to $10 only one year required, in January 2000.
People saw how business were built using just a great vanity phone number like 1-800-flowers, and realized that a whole business success could hinge on a great domain.
The fact that an exact match domain could create a tremendous business opportunity fueled a growing number of domainers who sort to register and buy domain names for resale.
Monetization of domain names was very limited except for adult domains, which monetized like crazy.
This was the period of the dot com crash of early 2001/ to mid 2003 in the domain world and in the financial world, the perceived value of the internet as a business model and therefore .com domain names as well greatly diminished by not only domainers, but by investors, the stock market and the general public.
Company’s invested and lost hundreds of millions, billions of dollars in the .com bubble.
Although domain names could be had for $10 a year renewal fee the vast portion of domains especially the older domains were still at Network Solutions and still $70 for 2 years.
Domains started dropping like flies.
Some really smart domainers who had the guts to against the entire market, sweep in and bought everything they on drops and privately believing that the trend would reverse and that domain name would not only be invaluable for a presence on the web.
Monetization of domain names was very limited except for adult domains
The monetization era started with Goto.com and FindWhat.com.
For some 6 years, a fortune of money poured into the domainer channel from parking and sales.
Monetization of domains led to sales, not only for the great “bang on category killers” domains but for typo traffic domain as well.
Parking revenue drove domain sales and domain sales drove more domain purchases.
Live Domain Auctions were measured in the tens of millions, just millions.
Monetization started to decline and then fell off the cliff.
We can dedicate a whole series of posts to the cause for the decline in Monetization but for sake of keeping it short lets cite a few factors including, Google’s Smart Pricing, Yahoo Quality Score combined with Google squeezing the domain channel getting the same traffic while reducing payouts to domainers, and Yahoo’s failure to stay competitive in market as well as the overall recession.
.Brands started enforcing their trademark rights and UDRP’s and lawsuit’s followed taking away a lot of the typo traffic market, which in turn took more money out of the sales channel.
Domainers and end users were still buying a lot of domains for six and seven figures.
SEO guys jumped in knowing that a keyword rich domain, even non-com’s could get you ranked in the search engines. The aftermarket for .net and .org’s rocked and we saw six figure sales for such domains in the aftermarket.
So here we are in 2012 and things have changed again.
Google algorithms change like the wind leaving SEO guys trying to figure out how to game the system keyword rich domains are selling but at a much lower rate and non-.com’s at a much lower prices.
Sales are brisk but the average prices have come down.
I mean really go check it out now and come back.
So we are half way through the year and you will see just one domain selling for seven figures in 2012, and that was at $1,000,000 even.
Only one other domain name has sold for $500K – $1M and that one was at an even $500K.
Only 4 domains have sold between $200K-$499K
3 sales of $1M or more.
9 of $500k or more.
18 were between $200K-$500K
7 sales of $1M or more and two for over $5 Million.
There were 8 Sales between $500K-$825K.
12 between $300K- $450K
16 between $200K -$300K
You get the idea.
Its not that the resale market is dead.
So far in 2012, there are over 25 sales between $100K- $325K
There are a lot of sales between $20k-$100K and actually it still takes $42,500 to make the top 100 list for 2012.
So stuff is selling and the resale market is far from dead, but the top of the market has dried up to a large extent.
Look at the weekly Sedo.com report or the Afternic.com report in general, we publish it every week.
You will see a steady weekly $2.5 million in combined domain name sales but over 90% of the transactions priced $3,000 or under.
That’s what the state of the resale market is for the vast majority of domainers.
“47% of traded domain names during 2011 were sold at prices at or under $500.”
Only 6% of sales were $10K or more.
So where do we go from here?
We know that we are facing a world with 500-1,500 new gTLD extensions in the next few years, from the 22 we currently have.
Choices for consumers are going to increase for some verticals exponentially, will all domain prices hold steady?
Will a New York Personal Injury Lawyer that might pay $10K for NewYorkPersonalInjuryLawyer.com in 2012, still pay that much when he could register for $50-$100 anyone of a number of new possibilities like NewYorkPersonalInjury.Law, NewYorkPersonalInjury.Lawyer, NewYorkPersonalInjury.Attorney, NewYorkPersonalInjury.Esq or NewYorkPersonalInjury.Legal or even PersonalinjuryLawyer.NYC?
We can and have argued for now a couple of years what the effect of these new gTLD’s will have on the value of existing domains and extensions.
The truth is as we have said from day one of the announcement that these new gTLD’s might be coming, is that NO ONE Knows what will happen when the market expands from 22 TLD’s to 522 or 1,022.
But there are some hints out there.
The biggest domainer of all applied for 54 new gTLD’s committing $60 million towards the process.
Google applied for over 100 new gTLD’s
What Happens if Google gives away domain name for free in 2014.
Yup just about 20 years to the date, we maybe back to where it all started, with free domains.
What happens to the $10K domain NewYorkPersonalInjuryLawyer.com when someone can register NewYorkPersonalInjuryLawyer.Web for free?
In the world of 1,000 new gTLD and what we have already started to see is for domainers is going to be all about branding.
It’s not about the domains or the extension but about brandable domains which would give an end user an memorable internet presence.
If you read Techcruch.com regularly you will see a lot of companies being funded by big VC firms in extensions like .Me, .Tv, .Ly, .It .Es and among others.
As more and more brandable and intuitive extensions come on board, its going to be even more about brand potential.
Look at this week’s top sale on Sedo.com
Last week’s ArtDeco.com
The week before, Cruise.me
All highly brandable intuitive domain names.
When 500, 1,000 1,500 or more new gTLD’s are on the market sometime in the next few years, the internet will become what was a one trick pony of .com to one of infinite choices and possibilities.
Highly brandable intuitive domains will continue to be in huge demand.
When seeing hundreds of new extensions all hitting the market, Internet users won’t just be confused, there heads will be spinning like Linda Blair in the Exorcist.
More the reason that end users will want and need a brandable, memorable domain.
The domain name space and the Internet is all about branding, standing out from the crowd, making a memorable mark regardless of extension.
On a personal note, some have accused me of being biased towards the new gTLD’s because of my involvement in RightoftheDot.com which was founded in just 2011, although I own some 75,000 domain names, none of which end in a new gTLD.
I feel like I need to address this.
Personally I was perfectly happy if my domaining life continued like it did in 2004, 2005, 2006, etc when parking revenue was measured into the six figures every month, live domain name actions were measured in the tens of millions, not the one’s of millions.
I worked less and made more.
I could have done that forever and I would have been quite happy.
But the numbers are the numbers.
So you can either live in the past or try to make a proper assessment of what the future will hold.
Part of being a good businessman is being fluid; to assess news and developments, not only in the industry you’re are in, but in the economy and world in general and adjust your thoughts and plans as events warrant.
People change their positions based in change of facts and circumstances.
The world is consistently changing and blinding holding on to positions based on facts no longer in existence is a fairytale.
Of course, many people will interpret the same facts differently and that is as they say that makes the horse race.
I remember when one of the hottest businesses in the US was pay telephones.
You paid to put a phone in a location or bought an existing location, and you would never have to worry because people would have to always make phone calls and a location that did $100 a day would always do $100 a day.
Well that didn’t exactly work out that way did it?
Throughout the history of the world, those who have, usually opposed change.
Its human nature to hold on to what we have, especially if what we have is valuable
However the only consistent in the history of the world is that the world keeps changing.
So now we are at the time where our world of 22 TLD is about to expand to 522 or 1,022 or 2,022 in a few years.
It could be 2014 or 2015 or 2016 but it’s coming.
It’s not my decision.
I didn’t get a vote on it, but i saw it was coming in 2010 and decided I couldn’t afford to ignore the disruptive influence that the new gTLD could bring.
Although I had no idea how what my involvement would be in the new gTLD’s there was no doubt I was going to be involved.
Now as you see I wasn’t the only domainer checking out the new gTLD space.
Those domainers who are now trying to move into the registry business came to the same conclusion.
For them its an evolution rather an abandonment of being a domainer.
The biggest of new gTLD’s advocates wouldn’t suggest that .com’s will be replaced in total number of registrations by any new extension.
I have talked to almost every new gTLD applicant and I will tell you no one expects to see .com dethroned in their lifetime by a new gTLD, even all the new gTLD’s put together.
Yet that doesn’t have to happen for the domaining world to change.
However with 500, 1,000 or more new gTLD’s coming into the market backed by new companies, with new money, with different pricing options, including possibly free domains, when you see people who used to be the biggest buyers of .com’s becoming registry operators, it’s just naive to expect business to continue as usual.
We have already gone through many versions of domaining as outline above and we will go through several more in just my lifetime and I’m an old-timer in this business.
It’s Domaining 6.0 and its all about branding; be it a .Com., .Me, .TV, .NYC, .Law, .Music, .Miami, .Poker, .Berlin. .Inc., or hundreds of other extensions.
If a domain is its intuitive and brandable it’s a winner, if not your running uphill against an avalanche of endless domain combinations.