Participants in the recently released Global Consumer described new generic Top Level Domains (gTLDs) as being "innovative", "trustworthy", "interesting", "informative", and "cutting edge". With such impressive descriptions, it appears that the industry has made significant progress in reaching the tipping point. Although Q3 reflects growth, it also highlights the varying degrees of performance and need for further advancement in developing consumer awareness and in turn, the health of the industry.
September ended with 753 delegated new gTLDs, a significant increase over the 476 delegated at the beginning of the year. Processes have become more efficient making it easier to launch a new Top Level Domain but is the industry really making progress? The Q3 analysis will assess industry performance by first describing the basis of the analysis, differentiating the tiers of TLDs and how they are performing along with a few additional insights.
Before diving into the details, it is important to understand which TLDs were included in the analysis. TLDs included have been in General Availability for at least 60 days, to eliminate initial registration upswings, are open TLDs, not single registrants and brands, and have not offered free or significantly low registration prices. While a low price, high volume model has its merits, sufficient renewal data and comparable TLDs are required to form meaningful conclusions. Projected registry revenues do not include premium name sales as consistent, reliable data is not available. Average retail prices were based on three registrars and in the cases where the TLD was unavailable at all three, alternative registrars were relied upon.
Overall, the average daily volume remains consistent from Q2 with 33 domain registrations per day with an average retail price of $58.30. To gain greater insight, separating the TLDs into four quartiles or 'tiers' has been utilized with tier 1 being the top 25% and tier 4 being the bottom 25%. Each tier has its own unique characteristics and are distinct from other tiers which are described below.
Tier 1: TLDs include .club, .company and .design with an average volume of 101 registrations per day, an average retail price of $68.65 and an average yearly registration revenue of $964k. In tier 1, the caliber of the TLD is propelling registration volumes, not price. This reoccurring theme highlights the notion that registrants will pay for a meaningful, relevant TLD over a lower priced TLD. Registration volumes in this tier have increased by 14% over Q2 and 6% over Q1. Thus, postulating that TLDs in tier 1 are understood by registrants and/or promotions have improved registrant recognition producing increased registrations. As the new gTLD industry continues to develop, tier 1 TLDs are more likely to gain in registration volumes and revenues further increasing the performance gap over tier 2.
Tier 2: .digital, .cool, .ceo, .bar are in the second tier of TLDs. However, there are considerable differences from tier 1. Tier 2 TLDs have an average retail price of $45.45 and a significant decrease in registration volume to an average of 23 daily registrations with a projected $287k in annual revenues. This tier is distinct, as it is the only tier with a strong correlation between price and registration volume. Additionally, it has an overall reduction in volume and average retail registration prices. This reflects the notion that a decrease in price will not necessarily be offset with an increase in volume.
Tier 3: .toys, .tours and .dating are a few of TLDs in the third quartile with an average daily registration volume of 13. Average retail registration price is $83.82 resulting in a projected yearly revenue of $145k. While the average registration price is significantly greater than in tier 2, the volume is not sufficient to offset overall revenues. This tier has more niche TLDs such as .creditcard, .pharmacy, .archi, .vet and .school, speculating that these registries projected lower volumes and rightfully, increased prices. In the long-term, these TLDs will likely be financially viable. However, tier 3 TLDs without sufficiently large niches will need to utilize resources to build registration volumes. Tier 3 registrations have a slight increase over Q2 and Q1 but most notably, the average retail value has almost doubled from Q2 and tripled over Q1 due to TLDs shifting from Tier 4 highlighting again, relevancy and value over price.
Tier 4: The final tier consists of .guitars, .rip, .bingo and .fail and have the lowest average retail registration price of all the tiers at $35.16. Average projected revenue is $58k with a daily registration volume of seven. This tier contains clusters of political and military TLDs such as .democrat, .republican, .vote, .voting and .army, .navy and .airforce. A registry in tier 4 may wish to cautiously consider a low cost registration price in exchange for renewals, the creation of other TLD benefits or improved promotions. Overall registration volume has increased over Q2, yet the average price has dropped, as the higher priced TLDs have risen to a higher tier.
Interestingly, three quarters of geographic TLDs are in tier 1 and 2 likely due to inherent domestic trust or localized promotions. Additionally, similar TLDs such as .career and .careers, or .gift and .gifts who were first to market are 75% more likely to be in Tier 1. Interestingly, focusing solely on volumes and ignoring revenues, .work utilized a low registration pricing model entering General Availability in February 2015 has reached almost 74k registrations, whereas .works launched in February 2014 has just over 8k registrations. If .work achieves a renewal rate of at least 6% it will exceed .works projected volume a year from now.
While most tiers are improving, it's imperative to keep the big picture in focus. Based on today's numbers, 75% of TLDs are projected to be operating at a loss for the next year. Average revenue per TLD is currently $365k based on the industry average of 11,400 yearly registrations. The top 25 TLDs account for over a third of both registration revenues and volumes. Additionally, more gTLDs are hatching which will increase competition for both shelf space and registrants pocket books. So while the industry is gradually moving in the right direction, it still need to garter greater attention with the outside world to reach the tipping point.
The full analysis can be found at www.dottba.com.
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