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The Empire Strikes Back: "New" Verisign Hums a Familiar Tune

Paul Stahura

Losing your monopoly must be hard.

True, few companies ever experience that particular breed of angst, but if Verisign's reply to even modest success in the new gTLD marketplace is any indication, it must be very hard to say goodbye.

We understand why they're worried:

  • New .COM quality is abysmal. The quality of newly registered .COM names is dropping and has been for years. And there is nothing Verisign can do about it. So welcome to the fire sale.
  • New .COM is as cheap as .XYZ. The average retail price of such .COM names has dropped to about $2.50 (one tenth the average retail price of new TLDs, and that price factors in the free new TLD names).
  • New .COM renewal below 50%. The 2012 cohort of .COM new registrations renewed at just above 50%, the 2013 cohort at 50%, and the 2014 names will renew at below 50%.
  • .COM is affinity-less. New TLDs such as .CHURCH and .PHOTOGRAPHY appeal to specific communities. Verisign cannot change the meaning of .COM to appeal to a community.
  • Here come Google and Amazon. Meanwhile, Google applied for 101 TLDs, and Amazon for 78, with near zero of those launched in 2014, not to mention all the other large corporations launching brand and generic TLDs in 2015. (Johnson and Johnson paid over $3 million yesterday for the brand spanking new .BABY TLD.)
  • Low consumer awareness... today, but not tomorrow. Consumers are not broadly aware of new TLDs, yet still there are 3.5 million names registered in them.
  • The registrar channel is improving regarding new TLDs. Registrars are developing their search and purchase paths. These tools are improving as new TLD awareness and demand increase.
  • It's only just started! Only a quarter of new TLDs are out, for an average of just six months, yet they have done 3.5 million new registrations at an average retail price of $25 (counting the free ones). In fact, I signed the .SCHOOL, .NEWS, .FOOTBALL and .GOLF registry contracts yesterday. You'll see these launched along with hundreds of others in 2015.
  • The best are yet to come. That is 3.5 million names on mostly single-applicant TLDs. What will the highly contended TLDs that launch in 2015 do?
  • Their own clients have jumped into competition. Verisign's clients applied for 220 new TLDs. Those clients think new TLDs will succeed even if their back-end provider, Verisign, does not.
  • Usage of names in new TLDs is going up. We are monitoring usage on a month-to-month basis in Donuts TLDs and every month, usage increases.
  • Registrars can do math. $25 retail with greater than 80% renewal for new TLDs vs. $2.50 retail with less than 50% renewal for new .COM — it's obvious that ancient .COM renewals are on autopilot and easy money for registrars, but regarding new names, registrars will figure out the long term customer value of new TLDs is greater than with new .COMs.
  • Check out .NET. If you don't believe what's going to happen in .COM, look at what's already happening in .NET.

Maybe they don't see their own predicament because they're focused on generating fear, uncertainty and doubt, like the following:

1) "We've always had alternatives to .COM"

What is the fantastic alternative TLD that photographers always had before .PHOTOGRAPHY? Verisign says .BIZ, .INFO, .TV, .ORG, NET etc., are as attractive to photographers as . PHOTOGRAPHY. That .BIZ, .INFO, .TV, .ORG, .NET etc., have the same affinity to florists as does .FLORIST. That .BIZ, .INFO, .TV, .ORG, .NET etc., work for churches as well as does .CHURCH. They're really saying that??

It's understandable, since Verisign's pre-new gTLD marketing tag line could have been: ".COM: Because What Choice Do You Have?"

2) "The number of UDRP/URS cases in new TLDs is more than 15x higher than all other domains."

Apples, meet oranges. Of course there are more URS cases in new TLDs than .COM — the URS is not available in .COM. But it should be.

3) "Plurals and synonyms of new gTLDs [are]… making it difficult and confusing for registrants"

Verisign's registrant customers disagree. They use millions of synonyms and plurals in the .COM namespace apparently without much confusion. Verisign does not ban their usage there. People have been able to differentiate these words in English and other languages for centuries. I think they can cope with them in the Internet namespace.

We actually thought it would take a little longer to catch the attention of the 800-pound gorilla in the naming industry. The tired old thinking embodied in Verisign's response to our early success is one of the best validations yet that Donuts and other new registries are on the right track.

By Paul Stahura, Founder and CEO Donuts Inc.
Related topics: Domain Names, New TLDs, UDRP
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Paul,You make some good points. I am Constantine Roussos  –  Dec 18, 2014 1:25 PM PDT

Paul,

You make some good points. I am shocked Verisign considered it a good strategy to attack new gTLDs so prematurely.

"New .COM quality is abysmal": With over 150 million registrations, it is safe to say all the desirable .COM names are registered. However .COM has been growing every month from 111m to over 115m registrations in the last year, but that could be because of their aggressive low-pricing promotions over the year.

"New .COM is as cheap as .XYZ:" In order for .COM to grow from 111m to 115m registrations they had to be aggressive with their pricing to thwart the competition from new gTLDs. However, price wars are not sustainable strategies. Free is not a great sustainable strategy either unless there is upselling that creates enough value for registrants to open up their wallets. The formula is always the same: Profits=Revenues-Costs.

"New .COM renewal below 50%:" If you decrease price to $2.50 for a new .COM registration the financial risk is very low. This will have a negative effect on renewal rates when the registrant is asked to pay the full retail price. This comes to no surprise. It is likely renewal rates of retail-priced .COM domains are much higher than lower-priced new .COM domains.

".COM is affinity-less:" I agree to an extent. One can make an argument that the Donuts factory approach is not good enough to break the novelty name value proposition as a key differentiating factor for registering. Commoditizing is not the way forward. Each TLD is specific to the needs of its community and for maximum effect it needs to be custom tailored to each community. This is why .EDU, .GOV and ccTLDs with appropriate restrictions work and others do not.

Big brands/Johnson&Johnson;:  Diversity is great for the new gTLD Program. Sometimes Donuts losing some TLDs (e.g. .BABY to Johnson&Johnson;) can be a blessing in disguise because diversity and new business plans can unravel new value propositions for the new gTLD program and create more awareness for all new gTL Dplayers.

"Low consumer awareness:" You need adoption and usage for awareness. With low differentiation beyond the novelty name of strings it will be hard to market the value proposition. Some gTLDs such as .PHARMACY are clear in their mission and goal: safe, verified and trusted pharmacies. If communities do not see the benefit and value proposition or mission they will have a lower propensity to register even with awareness.

"The registrar channel is improving regarding new TLDs:" Yes they are but with such an influx of new gTLDs the issue is one of shelf space. Why would one registrar market one gTLD over the other? This is why the "factory" commoditized approach does not maximize adoption and exposure. This is the problem that most registrars will face. Is there a mission and branding message that each new gTLD stands for beyond what the string is defined to mean? Differentiation and value must go beyond just merely the name to help registrars in their mission to market effectively.

"It's only just started".. "The best are yet to come:" Exactly. It is too premature to make an assessment on new gTLDs. Many have not launched yet (including the string we applied for) and the jury will be out in the next few years to make a fairer assessment on new gTLDs.

If new gTLDs are going to be a success then Donuts and all new applicants/registries must work together to increase exposure, awareness and diversity. While many have been competitors in contention sets, the objective is a united one: one's success will be another's shared success as well because it will help exposure and awareness of the new gTLD Program.

Happy Holidays,

Constantine Roussos
.MUSIC (DotMusic)

PaulYou reference a story I wrote on Michael Berkens  –  Dec 18, 2014 4:55 PM PDT

Paul

You reference a story I wrote on TheDomains.com in your post.

Not only did you fail to cite me as the author, but you are taking my story and putting it into the "Verisign" camp of arguments.

Now I know Verisign cited my post properly in their post on Circle ID:

http://www.circleid.com/posts/20141217_the_real_facts_about_new_gtlds/

saying that:

The number of UDRP/URS cases filed in new gTLDs is more than 15x higher than all other domains, indicating that brands are not going to play the defensive registration game (For more info and a list of UDRP cases filed, read The Domains' article)."

My article is still my article it does not become Verisign's article because they cited it in their post

By the way the number of new gTLD UDRP/URS cases to all other extensions are not apples and oranges.  The percentage of new gTLD disputes are extremely high in relation to all other extensions including the 128 million operated by Verisign and the 140 Million or so country codes domains having nothing to do with Verisign.

"The percentage of new gTLD disputes are Constantine Roussos  –  Dec 18, 2014 6:05 PM PDT

"The percentage of new gTLD disputes are extremely high in relation to all other extensions including the 128 million operated by Verisign and the 140 Million or so country codes domains having nothing to do with Verisign."

Michael,

It is almost certain that this trend will continue and will become a larger problem for sensitive strings. Open "wild wild west" strings without appropriate safeguards for regulated sectors will only make this issue worse. And the many of those sensitive strings are yet to launch.

Happy holidays!

Constantine Roussos
.MUSIC (DotMusic)

And then there was the Return of the Jedi. Colin Campbell  –  Dec 18, 2014 7:35 PM PDT

Paul,

Nice article. The entire new program has been under attack by interests resulting in convoluted policies by ICANN. (think Domain Collision) The new gTLDS have had to steer through it all.  Despite all of the issues, we will not stop. All the new TLDs with meaning will come together to be a credible alternative to .com. I give them credit for dominating the generic. Even .net is going to decline because they are simply are a generic competing with .com. Domains with meaning will be a viable alternative to .com.

Can't wait to see the Return of the new gTLD Jedi.

Colin

Michael, apologies. You're right about the Mason Cole  –  Dec 18, 2014 8:23 PM PDT

Michael, apologies.  You're right about the citation.

Your 128 million and 140 million numbers are registrations those registries accumulated in the past 20 years.  New TLDs have had about six months to accumulate registrations, 100% of which are new.  Not the case in .COM.  More UDRPs happen in new registrations than old because disputes from names registered 20 years ago generally have been long settled.  Keep in mind as well there's no URS in use for .COM.

In addition, with new TLDs such as Donuts’, brands are able to use DPML to block their branded terms across all our TLDs, so therefore they don't show up as registered domains.  Plus with the new fast and cheap RPMs such as URS in new TLDs, it's possible brands don't see a need to defensively register (part of the idea of a URS as well).  So while it may look like brands are not going to play the defensive registration game in actuality, they are, through mechanisms like URS and DPML.

We still maintain its apples to apples.

"Brands are able to use DPML to Constantine Roussos  –  Dec 18, 2014 9:25 PM PDT

"Brands are able to use DPML to block their branded terms across all our TLDs, so therefore they don't show up as registered domains"

Brands can only use the DPML if they pay for it right? Don't they have to pay Donuts $2,995 for the first 5 years, or am I wrong? The DPML seems to add value to Donuts because it generates income fro Donuts. The cost effective option for brands to defend their names (by not registering their brand name across all of Donuts gTLDs) is to get a "protection bundle" from Donuts. Seems to be an effective business model to generate revenues based on the defensive registration dilemma of brands. Makes sense from a financial perspective. Only problem is I cannot see the value for brands. Defending one's brand and incurring unnecessary costs on brand protection does not add value to their product/services. But it is cheaper than UDRP and URS.

Constantine Roussos
DotMusic (.MUSIC)

MasonThanksIt wasn't an ego thing but I Michael Berkens  –  Dec 19, 2014 9:50 AM PDT

Mason

Thanks

It wasn't an ego thing but I don't want the readers to think that story came from verisign, it was something I undertook on my own

We are working on a year end summary

I think you will be surprised how many UDRP's that were filed on extensions that existed before 2014 were filed many years after the domain was registered, meaning that many new gTLD's that were registered this year may not get hit for another 2-3 or more years, but I want to make an apples to apples comparison and hopefully will have that done by the end of January 2015.

I still believe looking at these cases everyday the number of gTLD filing compared to Legacy extensions will be disproportionally high.

I don't think having a lower cost URS for .com, .net or ccTLD's would result in a substantial number of cases filed that would not have been filed under the UDRP.  I think we can agreed that a TM .com is or a typo thereof is going to have a lot more traffic then a new gTLD domain.

Appreciate the correction although Paul who authored the story should have stepped up to acknowledge the error.

Apples to oranges Mason Cole  –  Dec 18, 2014 8:24 PM PDT

Sorry, typo.  We maintain it's apples to oranges still.

Competition Daniel Negari  –  Dec 18, 2014 9:52 PM PDT

Well written Paul - I would buy into Donuts if I could, have been doing the next best thing buying $NAME, just leave them with a couple good strings - I was hoping as a $NAME shareholder .NEWS would have made it to the covered side.

Verisign is finally feeling the competition. I believe .xyz has had a big effect on lower new .com price to the levels they are at now. I just got an email from one of my registrars about a .com domain we are letting expire to renew it for $4

.com is a great extension. I still have a significant .com portfolio (which I am actively selling) For new internet users, the combination of competition and choice brought on by .xyz or most other new gTLD is something that can not be overlooked. Watch out .com your about to be .net'd

It's actually even worse than that Fred Krueger  –  Dec 19, 2014 7:01 PM PDT

All your points are valid, and then some.

The huge elephant in the room is high volume name domain holders sitting on 10s of millions of .com names with the expectation that future sales will cover their cost of carry. When the tide shifts the other way, these players will shift their capital into newer TLDs or different asset classes altogether. Even general individuals, with third tier domain names in .com will think twice about renewing.

The party has just begun. Any observer of tech trends will recognize these 3.5 million domain names as just the early phase of an S curve which has yet to hit its first inflection point. When it does, adoption will be quick, and .com will start to look unappealing, quaint, obsolete.

The end of vertical separation will also hurt Verisign. As it stands now, Verisign can't, even if it wanted to, buy a registrar like GoDaddy. But GoDaddy could buy Donuts, or any other registry. New registrar models are certain to emerge over the next few years with an integrated direct-consumer focus. Google has already started to show their hand, and if Verisign is the 800 pound gorilla, then, based on Market Cap, Google weights about 80 tons.

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