Domainindex.com Downgrades .Co.uk From AA To B: Introduction of .uk TLD “Would Massively Destroy the Value of Existing .co.uk Domains

Domainindex.com, downgraded  its rating for .co.uk from AA to B.

The step has been taken after the release on October 1, 2012 of a three-month consultation by Nominet, the not-for-profit manager of the .uk infrastructure, into a scheme that would introduce .uk as a top-level domain (TLD).

After getting feedback from Nominet meetings held in London on Nov.7and 9 Domainindex.com decided to change the .uk rating

Currently, over ten million UK domains are structured as anybusiness.co.uk; under the proposal, a competing structure would be introduced: anybusiness.uk.

Domainindex has also issued an Investors Warning for co.uk and .uk TLD, and “believes the introduction of the .uk TLD would massively destroy the value of existing .co.uk domains” and in fact Nominet´s announcement already inflicted harm to the value of .co.uk domains and the aftermarket as well as the investment climate in the .uk TLD.

Domainindex analysis of the proposal, would have several adverse effects:

  • The auction of .uk sites would preferentially favor trademark holders instead of existing domain holders, thereby representing an unprecedented expropriation of domain registrants and website of whom most do not own the trademark for their domain name.
  • The higher costs of the .uk TLD are in effect an Internet tax for businesses in the UK and especially to domainers as it will raise the cost of holding an inventory by 800% and will lead to drop of many .co.uk names that until recently have represented significant value.
  • The move will create more bureaucracy and red-tape.
  • British companies would have massive rebranding costs.
  • The proposal will create months or years of uncertainty as the issue is litigated in the courts.

(It should be noted that WebHosting.co.uk recently sold on Sedo.com for $500,000 after the Nominet announcement

Domainindex also announced the following rating changes in November:

.me up from A to AA (because of the good performance of the TLD)

.eu down from AA to A (because we expect the TLD to suffer from nTLDs and weak economy in the Eurozone)

.info down from AA to A (because we expect the TLD to suffer more from nTLDs)

.mobi down from A to B (because we expect the TLD to suffer more from nTLDs)

.tel down from AA to A (because we expect the TLD to suffer more from nTLDs)

Comments

  1. says

    I don’t think that Domainindex understands the .eu market. The effect of the ngTLDs on some TLDs is somewhat uncertain considering that they haven’t been launched and the target markets have not been identified. There’s also a drift to bluechip TLDs (.com and ccTLDs) that has been evident over the past fifteen months or so. The .uk/.co.uk issue is also an area of uncertainty and most people don’t understand the issues surrounding managed TLDs where some element of entitlement has to be demonstrated before a domain name is allocated. Managed TLDs tend to have far lower registration volume than open TLDs. What Nominet is proposing is effectively grafting a managed TLD on to what is a number of subdomains (.co.uk etc). I am not sure about UK law but there may be some elements of unregistered trademark rights. The introduction of .UK might be a mess but it could also be a smaller mess than people expect.

  2. says

    “What Nominet is proposing is effectively grafting a managed TLD on to what is a number of subdomains (.co.uk etc)”.

    No, they’re not proposing that at all. Their ‘proposal’ is to
    introduce the UK ‘root’ TLD, namely ‘.uk’. Clearly, this is
    not just another TLD that is, as you put it, being ‘grafted’
    on to the UK domain space.

    The ‘.uk’ TLD will, quite literally, blow ‘.co.uk’ (the TLD that
    is currently the highest perceived in the UK) out of the
    water, and will decimate the .co.uk aftermarket.

  3. says

    Yes, Mr T, I too heard about that sale…

    I am not clear what your point is ‘though, but spending that
    kind of money on a TLD that may lose 95%+ of it’s value in
    the next few years, isn’t the best investment I can think of
    right now!

  4. Mr.T says

    Ri.sk, it’s probably one of the worst domain investments ever, if .uk goes live. They clearly haven’t done enough research to understand the risk this investment brings to the table.

  5. says

    @ri.sk Leaving aside the issue of TLDs and second and third level registrations, are you familiar with the differences between a managed TLD and an open TLD? The growth profiles are completely different in that a managed TLD has a slower growth curve because of the entitlement and proof issues. This makes it less attractive for reg-fee domaining. It is, for all intents and purposes, the grafting of a managed TLD onto what has been a largely open set of subdomains under .uk ccTLD.

    The .co.uk sub has about approximately 9.7 Million registrations. That is a significant market share in the UK. Not all of these domains will drop. The .co.uk subdomain as a brand has a very high recognition factor and .uk is not going to undo over fifteen years or so of .co.uk being the dominant TLD in the UK because people in the UK and elsewhere think in terms of .co.uk.

    A managed TLD like .uk, especially if it is UK specific in terms of who can register .uk domains, is going to freeze a lot of smaller portfolio domainers out of the market but it is relatively simple to purchase a UK front company. I think that behind some of Nominet’s thinking is the idea that a managed TLD like .uk would have a higher level of development, more trust from the enduser as it is a UK company, and a lower level of domain name speculation and PPC parking.

  6. says

    Yes, Michael, my apologies – I missed that on the original scan, of
    the article, and it was clever and timely of you to have referenced
    that particular sale.

    Mr T, I agree, although find it hard to reconcile someone with that
    kind of money to be so remiss as to not know that ‘.co.uk’ is currently
    in No Mans Land in so far as ip investment is concerned.

    But people do make mistakes.. and I know that portfolio owners (in
    .co.uk) are considering legal action against Nominet, from various
    angles, if they don’t back down with their current proposal.

    Yes, ‘domainers’ are speculators and should expect some rough
    with the smooth, but Nominet have stirred up a hornet’s nest with
    this and that doesn’t align well with their purported goal of trying
    to boost the UK economy.

    I know that Mike, from domainindex.com, will continue to keep
    us aware of developments on this since it has implications for
    ip investors everywhere.

    :-)

  7. says

    @John

    I don’t mean to sound rude, but your last comment, like
    the one you made before it, is completely irrelevant and
    there is little difference (in practical terms) between what
    you refer to as an ‘open’ TLD and a managed one.

    Yes, most ccTLD’s have registrant requirements, and the
    same is true for ‘.com’ but none of this has any bearing at
    all on Nominet’s proposal…

  8. says

    I’m confused.

    All the right of the dot changes are “no impact” because it’s a money grab and will fail.
    Removing the co from co.uk will immediately change how everyone in the UK accesses their favourite sites and uses the internet? I know this is ccTLD sponsored by Nominet and not quite the same thing but – who does it and why doesn’t change the typical internet user behaviour without significant adoption and usage. Everything will be bought and redirected to the co.uk.

    Net result? More money for Nominet and all their friends. That’s about it, really. (Or am I missing something?)

    Lest we forget the article is mostly talking about domain INVESTING. The purpose of the .uk is anti-investing – obviously there’s little common ground.

    It’s clear webhosting.co.uk would be remiss not to make sure they get webhosting.uk but I hardly think they care about the investment potential in the name. I rather think they may actually use it and I’m even more sure that 50 million+ brits will be quite comfortable typing it in with the co.uk on the end. I’m even more certain that Google/Bing/GoGoDuck/etc. will rank the site according to its content and character and not it’s extension.

    Have a wonderful day.

  9. BrianWick says

    The entertainment level is astonishing.

    What is the difference between BendOver.us and BendOver.us.com vs. BendOver.uk and BendOver.co.uk ?

    BendOver.Worthless

  10. says

    I don’t want to seem rude but I don’t see any point or value to this index and ratings.

    This is what domainindex.com says about the ratings:
    “Domain Rating Information:
    DomainIndex is conducting research in order to rate all TLD’s from an Investment perspective. The rating reflects our estimation of the safety of an investment in domains of a specific Domain.”

    .li from Liechtenstein or .ro from Romania have AAA ratings while .com has AA which is 3 ratings below AAA. .com has a AA because a few months back the US government seized a few domains. Does this mean I should invest in .li? I hope not. If it doesn’t mean that, then I have no idea what the ratings are used for.

  11. says

    @ri.sk And I just think that you don’t understand the differences between a managed TLD and an open TLD. There are very significant differences and the most important one is the rate of growth. Because of the extra levels of entitlement and proof, it is not so easy to register domains in a managed TLD as it is in .com or other open TLDs. What maintains the value of a TLD is development and usage. Well run ccTLDs tend to have a a high level of development (and usage). The domaining element is secondary to that development. The point that domaining is of secondary importance in a well run and well used TLD is often lost on domainers.

    The effects of a .uk TLD on .co.uk will not be apparent until at least six months (if not 14 months) after it goes live. This is because of the annual renewal cycle of domain names. Development and usage in .co.uk may well continue normally. However I just don’t consider Domainindex to be reliable in predicting how things will go with .uk TLD. Nominet has some interesting proposals aimed directly (probable rejection of deposit Benelux “trademarks”) against the kind of cyberwarehousing and over-speculation that destroyed .eu ccTLD as an EU alternative to .com TLD. It is clear is that this move is geared more towards development and usage than domaining and PPC parking. However the millions of .co.uk registrations are not going to magically disappear overnight.

  12. says

    @onlinedomain

    The Ratings are currently used by few domainers that have received funds by financial institutions that require an external audit of the risk of domain investments.
    A rating of AAA for .li or .ro does not mean that the value of the TLD is any way higher or that we suggest to invest in .li or .ro domains.
    What it means is that the risk of devaluation in .li or .ro is very low, compared to the risk of devaluation in .uk for example.
    The ratings are a combination of various factors such as economic outlook, legal and technical factors. In general it turns out it´s easier to maintain a low risk profile for ccTLD than for a gTLD and .com also did suffer from worldwide economic developments.

  13. says

    @Michael Marcovici

    So you are only calculating risk of investments?
    What is the risk of owning cars.com compated to owning cars.li?
    Nobody cares about cars.li so you have no risk about ever loosing the domain?
    And cars.li has no real value compared to cars.com so there is absolutely no risk of devaluation.
    Sorry but I don’t understand the logic and how these ratings are applied even to financial institutions and audits.
    What economic outlook, legal and technical factors are better in .ro (Romania) than in the US?
    What worldwide economic developments only devalue .com but Romania stays untouched?

    There is no risk for .com. If there is then the same risk applies to all other TLDs and ccTLDs.
    AAA is the only rating for .com.

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