Dan Warner, who many in the domain industry know is a numbers/stats guy, has some interesting thoughts on winners and losers of the new gTLD’s in the “sports” category which he recently published.
Mr. Warner has done guest posts for TheDomains.com and you can read more about his background and domain experience here.
Its an interesting read but you would have to agree with Mr. Warner’s basic theory which is “The very best indicator on market size for new gTLDs is the number of contextually related .Com domains in existence. ” to buy into the winners and losers list
Market size is a critical part of any registry valuation, and if a valuation cannot be clear and concise with references to the actual data used to form an opinion – it isnt worth much.
“The data is there if you know what you are looking for and have the experience to understand it. ”
What you need to know is what revenue the business will generate.
It doesn’t make sense buying a business that will always be a loser but you won the auction.
“The first thing you look for in doing valuations are the benchmarks.
Demographics, market shares, contextual contribution to total market size, search volumes, previous sales, existing customers, and more. ”
The very best indicator on market size for new gTLDs is the number of contextually related .Com domains in existence. ”
If you are applying for the .Golf registry then knowing the total number of golf related domains already in existence is fairly important.”
Com is the king of registries.”
The most accurate source of information for data mining and comparisons come from the .Com root zone file (all .com domains owned). ”
“This has led to approximately 105 million .com domains being owned. ” (actually the number is currently over 109 million-MHB)
The domains in the .com zone file are a clear indication of the domains that are likely to be purchased in new registries.”
The market size can be approximated by measuring the number of domains which have already been registered as a .com and then estimating the number of domains that will comparably be registered for domains with similar character strings. PaintingArt.com = Painting.Art.
.Rugby is a good example.
Rugby is a term that can’t be realistically shortened, it is rarely used as a plural, and without the inclusion of its 5 characters makes little sense. It is used as a category qualifier.
If an existing domain includes rugby it is almost certainly is going to be about rugby.
So the next thing to find out is how many .Com rugby related domains are there?
The answer is only 13,311 domains are in existence.
These domains include a massive amount of diversity in domains.
Included are denverbarbariansrugbyschedule.com, driving-lessons-rugby.com, fishbirdrugby.com, e2v24rugbyfeminin.com, and newyorkrugbysevens.com. These are from a fairly random sample but they do represent the depth and diversity of the domains which have been registered.
Considering .com is the overwhelming market leader, has been around since the 1990s, is analyzed by the worlds greatest statistics junkies, and everyone who every felt they really needed a domain has probably already bought a .com – what percentage of the existing .com market should a new gTLD registry expect to get?
The million dollar question is by comparison to .com how many domains will be registered?
Do you believe that as a newcomer registry that your brand is big enough to topple .com?
Are people going to throw out all their business cards, forms, and stationary to change their brand for an unproven new gTLD?
Are new buyers that haven’t had an interest in the last 20 years all of a sudden going to decide they have to buy a new domain name?
The answer of course is that each new gTLD will capture a share of the existing market.
That many existing domain owners will also want the new domain brand – but not all of them.
Change comes difficult to many and it is still the global financial crisis so let us be factual and realistic.
You can’t create markets that don’t exist – so understand the market that does exist.
If rugby currently has 13,311 .com domains and they capture 20% of the .com market that equals 2,600 domains. Not nearly enough to justify a registry or its costs.
In contrast another example Sport (and Sports) have just over 700,000 .com domains which are registered with the “sport” character string in the .com domain name. A great generic brand with strong contextual relevance to the category.
If this new gTLD captures 20% of the market over 5 years that equals 140,000 domains.
That would be a conservative and outstanding achievement.
That registry after five years (not at auction) might be worth $15 million then if it meets those targets, but right now it would using a discount rate of 35% would be more like $2.5 million.
The chart above is a segment of the full chart which can be downloaded here.
The full chart PDF contains 156 different variations of sport related character strings and their .com domain counts.
You may be astounded by the number of domains each concept represents.
There are also a lot of false positives.
“Fit” as example would include Fitzsimmon, Fitness, and Confit.
It would have an extreme amount of false positives that need to be vetted out before meaningful conclusions could be drawn from it.
However, on the other end of the spectrum if a character string like “cricket” which only has 12,349 domains registered as .com’s and your registry expects it will be selling 500,000 domains in the first 5 years – we are afraid you are headed for a train wreck.
So take the high positive counts at the top of the list with a handful of salt and take the low counts at the bottom to mean that is probably the whole market.
Dan Warner’s favorite for the sports category are .Sport (and .Sports), .Golf, .Fitness, .Dance, .Bike, .Yoga, but you can see the entire chart for all the winners and losers.
Dan did not include .Football, .Baseball, or .Hockey on his list saying “Consider that for these sports they rarely are played as adults, don’t require frequent tuition (services), and have very little equipment (products) to purchase. Not that many domains are purchased when you can only sell a ball, glove, or have a market which is too small. Understanding the market economics are the key to valuing where your registry will be at in 5 years.”
Not sure I agree with that assessment but here is Dan’s chart, to see a large picture of the list click here