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6 Domain Name Industry Developments to Lookout for in 2014

Siddharth Taliyan

2013 was one of the most exciting and forward-looking year for our Industry, and here we are, right at the beginning of 2014. Shall we look into the crystal ball and see what the horizon up ahead likely holds for us? We hope and foresee that a lot of everyone's hard work will eventually begin to pay off this year. We also believe that the industry will witness a huge change; opportunities and possibilities that were never before thought of.

1. The Year of Internet Innovation

Never before in the history of the Internet have we seen so much innovation set to happen in such little time. A large chunk of New gTLDs are expected to be delegated in 2014! We are about to witness innovation in business models, in marketing strategies, in partnerships, in technology and more in the year ahead.

2. Make Hay until the 'Sunrises'

The Year-Over-Year Domain Market growth slowed down in 2013 compared to 2012.

The Domains market grew by only 8% (19.6m domains) YOY this year (Q3 '12 – Q3 '13) compared to 12% (26.4m domains) YOY growth last year (Q3 '11 – Q3 '12); down 4%. ccTLDs saw only a 14% (14.7m domains) YOY growth (Q3 '12 – Q3 '13) down 6.7%, from 20.7% (18m domains) YOY growth last year (Q3 '11 – Q3 '12).

This year, being the year of many launches we see two possibilities. First, there could be a slight decrease in the growth of existing big gTLDs including COM and NET, but an overall increase attributed to New gTLDs. Second, existing gTLD Registries could get aggressive on pricing and marketing efforts early on in the year, to lock-in a larger customer base.

3. The Start of De-commoditization of Domain Names

A domain name is a domain name is — wait a minute — not-just-a-domain-name! We will start to witness the de-commoditization of domain names driven by the differentiation and unique identity value that New gTLDs promise to offer. While existing gTLDs will continue to rule for a while, category TLDs may this year set the stage for rapid future growth in their respective spaces. Finally, consumers will now know that there is more to the Internet and websites than .COM.

4. Registrars will Differentiate

Registrars and Webhosts will be keen on integrating with most New gTLDs but may only invest in marketing a select few. Registrar shelf spaces will have much more variety and color, but each will have a signature set of preferred TLDs. Their choices will be based on their business goals, relevance and of course demand from within their existing customer base. So, no two Registrar shelf spaces may look the same now on.

5. Exploring New Markets

Registries will actively pursue entry points to customers such as the Web hosts and Registrar channels. Although, since New gTLDs are a win-win for both the Registry and Registrar, Registrars may also be keen to form strategic partnerships with relevant TLDs. For some niche category specific TLDs, tapping existing customer bases may only get them this far, so in these cases it will be interesting to see Registries partnering with entities outside of the Internet industry, in an effort to create new demand in uncontested market spaces. IDNs will begin to make inroads into non-English speaking markets.

6. Registry - Customer Direct Engagement

Registries will actively market directly to end-customers, automatically competing with Registrars. We will start to see Registries going so far as to position themselves as one-stop shops, providing domains within product-bundles such as website builders, hosting relevant to that specific TLD market.

It will be interesting to know whether you agree, differ, and if you have any more thoughts on these and also do share your own forecasts for this year in the comments below.

By Siddharth Taliyan, Sr. Manager, Sales at LogicBoxes
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Below, I comment on the development outlook Alex Tajirian  –  Jan 22, 2014 2:23 PM PDT

Below, I comment on the development outlook sequentially.

1.  Are you saying that these new business models are consequences of the introduction of new TLDs? Do you mean tactics rather than strategies?

2.  Unless there is a huge drop in renewals within existing TLDs, introducing new gTLDs will very likely increase the total number of domain registrations, at least for the near future. However, why will existing gTLD registries compete on price instead of service?

3.  Does it take new TLDs so that “[f]inally, consumers will now know that there is more to the Internet and websites than .COM”? Interesting that only .COM comes to the minds of consumers when someone mentions Internet!

4.  Don’t all companies have to differentiate? You note that “[t]heir choices will be based on their business goals, relevance and of course demand from within their existing customer base.” But, the only viable business goal, other than shareholder value maximization, is being socially responsible. Moreover, why would registrars rely only on “existing customer base”? Doesn’t his imply that only existing customers will buy the new gTLDs? Wouldn’t they be better off differentiating on customer service instead of price?

5.  Why do you foresee “strategic partnerships” rather than arms-length relationships of registrars and gTLD registries? Also, must you have partnerships “with entities outside of the Internet industry … to create new demand in uncontested market spaces”? I’m not sure what you mean by “entities outside of the Internet industry”? Consumers of gTLDs are part of the Internet industry, aren’t they?

6.  I am sure you are aware that vertical integration is a very complex strategic decision. Yet, with your list of registries’ product offerings, how can registrars compete with registries? Thus, new gTLDs may not be win-win to both registrars and registries, as you note in (5).

Hi Alex, thanks for taking the time to read the post and pen-down your thoughts Siddharth Taliyan  –  Jan 24, 2014 12:10 AM PDT

Hi Alex, thanks for taking the time to read the post and pen-down your thoughts.

Here's my responses to your comments:
1. Are you saying that these new business models are consequences of the introduction of new TLDs? Do you mean tactics rather than strategies?
--> Thinking of TLDs that could be used in innovative business models, say for example a TLD being used as home for a technology / platform that is accessible via a browser. Users would get their own SLD in that space and would pay to use the technology. Ofcourse, it will also be interesting to see the innovative business and marketing tactics as you have said.

2.  Unless there is a huge drop in renewals within existing TLDs, introducing new gTLDs will very likely increase the total number of domain registrations, at least for the near future. However, why will existing gTLD registries compete on price instead of service?
--> What will be interesting to see is how significant the contribution from New gTLDs to the total new domain adds will be this year, and whether / how this will impact new domain adds in existing gTLDs. Existing gTLDs, mostly being commodities, the Registries may choose to reduce prices and increase new registration volumes before New gTLDs actually launch. We don’t see a huge drop in renewals so soon really as you say, it may be a while before that happens, if it happens.

3.  Does it take new TLDs so that “[f]inally, consumers will now know that there is more to the Internet and websites than .COM”? Interesting that only .COM comes to the minds of consumers when someone mentions Internet!
--> Well, it is interesting really and the de-commoditization is something that we will witness as-it-happens in our industry. With categorization, consumers will be able associate their identity with their online presence. We must revisit and see next year whether and how much de-commoditization took place!

4. Don’t all companies have to differentiate? You note that “[t]heir choices will be based on their business goals, relevance and of course demand from within their existing customer base.” But, the only viable business goal, other than shareholder value maximization, is being socially responsible. Moreover, why would registrars rely only on “existing customer base”? Doesn’t his imply that only existing customers will buy the new gTLDs? Wouldn’t they be better off differentiating on customer service instead of price?
--> What we meant was that Registrars and web hosts will also differentiate in terms of what specific TLDs they are promoting. They wouldn’t solely rely on their existing customer base, but customer profiles (among other things) would determine what New gTLDs would most likely succeed with that Registrar. Also, a Registrar in a particular region would heavily promote a set of TLDs, and the set could be completely different for another Registrar in another region. Until now, Registrar shelves were somewhat similar across the globe, with the most popular TLDs and this is set to change.

5.  Why do you foresee “strategic partnerships” rather than arms-length relationships of registrars and gTLD registries? Also, must you have partnerships “with entities outside of the Internet industry … to create new demand in uncontested market spaces”? I’m not sure what you mean by “entities outside of the Internet industry”? Consumers of gTLDs are part of the Internet industry, aren’t they?
--> Well, in certain scenarios, for category TLDs it may make sense to establish strategic partnerships with established Registrars. Here a Registry could upsell to a very relevant customer base, or make inroads into a new market in that region with the help of the Registrar / web host. Such an activity could actually make the Registrar / web host a market leader in that category TLD Say for a TLD that represents a specific region, or a specific interest group unique to that region.

Taking this a step further some Registries may partner with entities that are not in the Internet industry, but have direct access to the TA of that TLD. Example, an education related TLD may choose to partner directly with educational institutions to access students of that institution. Again there’s a lot of innovation possible here.

6.  I am sure you are aware that vertical integration is a very complex strategic decision. Yet, with your list of registries’ product offerings, how can registrars compete with registries? Thus, new gTLDs may not be win-win to both registrars and registries, as you note in (5).
--> Well, we are talking New gTLDs, thousands in number. Most likely the generic TLDs such as .web may be a win-win for Registrars and Registries. For category specific TLDs, it won’t be the easiest for the Registry to go through existing Registrar channels. These Registries would need to ensure they populate their space and keep growing it. Here they will compete with the generics, old and new, and effectively with Registrars and web hosts. In this case, the decision for Vertical Integration would, in most cases, be a no-brainer rather than a complex one and the success of that gTLD may depend on how well it engages with its customers.

Winners and Losers in the new Vertically Integrated Market Phil Buckingham  –  Jan 27, 2014 6:49 PM PDT

Are we are agreed there will be many more losers than winners in 2014-2015 as all players, old and new, adapt their business models from the vertically separated to the new vertically integrated market. By its very nature a vertically integrated market means it cant be a win win for BOTH Registrars and Registries.It is about ownership,control and therefore pricing & profit.Ultimately this whole TLD game (theory) is about cash and lots more user confusion from the huge myriad of choices.Deep pockets will win every time.

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