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Premium TLDs, Real Value for Money

Stéphane Van Gelder

There is an intrinsic value proposition to new gTLDs. They mean to give users fresh naming possibilities and provide more meaningful Internet addresses. And to do so at much reduced prices.

Premium names before TLDs

Reduced prices? Really? This is where eyebrows start being raised. How so?

Well before the advent of new gTLDs, few suffixes offered any real ability to differentiate. Users thus looked to the second level, not the top level, for a way to get their web addresses to stand out from the crowd. So began a vicious circle of value going to the limited number of meaningful second level names since at TLD level, the only string with any real equity was .COM.

This is where the concept of a premium TLD was born. Not with new gTLDs, but with second-hand .COM domain names changing hands for sometimes very large sums, just because of their rarity factor.

So "premium", for a web address, began to mean those names that were specific enough to carry meaning despite being attached to a nondescript TLD.

Taylor-made

Today, with an influx of new TLDs, the part of the web address to the right of the dot can start to add value again, through specificity and meaning.

There are now close to 400 new gTLDs with at least 1,000 registered domain names, in other words, which can truly be considered operational. Internet users are spoilt for choice like never before. But more importantly, they no longer have to trade meaning for availability and reluctantly adopt a one-size-doesn't-fit-all strategy for their Internet naming needs.

New gTLDs have allowed the notion of community to be a feature in the domain name ecosystem once again. Say I'm a ski-loving architect. In the dot-com era, I would either have had to fork out a fortune for a key-word type domain such as architecture.com, or registered several names with low meaning potential, such as the-name-of-my-architecture-business.com and i-ski-in-my-spare-time.com.

This is where new gTLDs, and more specifically Premium new gTLDs, really make a difference. Now, in the not-com age, just by adding .ARCHI on the end of my domain name, I am telling current and future customers, search engines and, well, the world, that I am a bonafide architect. And for my hobby, registering a .SKI address will send a much stronger message than a second-rate-because-that's-all-I-could-get .COM.

Value for money

Cherry on top, both these domain names will most likely be available, and extremely cheap to register. Compared to a premium .COM domain that is. Because like the travel or the automotive industries, domains have their business class. Yes, a standard .COM domain will be cheaper to buy than a premium new gTLD. But with any product, the real value is not in the initial purchase cost, it's in what the product ends up doing for the person buying it.

Is there really any comparison between a low cost car and a premium one? High-end cars are engineered to the max. I would argue they are safer than low-end cars, because their chassis, brakes, ancillaries and engines are capable of so much more.

So buy any old .COM domain name and you get to be what you paid for: a drop in the ocean.

Buy a premium new gTLD and now you're talking to a specific community, or standing out in a way that the audience YOU want to target can actually notice.

Cheap is not low enough

The new gTLD market is not all premium of course. It is segmented, like any other market. It has generic low-cost products as well. At StartingDot, as an operator of premium new gTLDs only, last year we looked to quantify what that sector really means. Every quarter, we produce a Premium 50 index where we identify the best-selling non-brand gTLDs retailing at over $40 a year.

We think premium new gTLDs bring real change. But unquestionably, the domain ecosystem has yet to mature into that new paradigm. If your only sales strategy is low prices, then you'll never be cheap enough. Because ultimately, the cheapest price is zero.

The highest volume new gTLDs remain committed to generating consumer interest through hard-hitting promotions rather than attempting to boost the actual value of their products by making sure their serve a real purpose.

Premium TLD operators work to market their products directly to their intended communities. Their USP is not the lowest possible price, it is the highest possible meaning. Taking StartingDot as an example, we naturally spend as much time building awareness for .SKI, .BIO and .ARCHI with registrars as we do with the skiing, organic and architecture communities.

Get customers, and keep them

We've seen the benefits of the premium approach both in building awareness and customer retention first-hand.

Take the .SKI marketing plan. For a year and a half we worked with leading ski industry bodies to take awareness levels to 60% amongst ski resorts just prior to the mid-2015 Sunrise. The figures aren't ours, they come from a Snow Industry Association survey. We ended up with 90% of the top 50 resorts in the world (by market share) having registered at least one .SKI web address.

Looking at the sector overall through our Premium 50 ranking, the data is also very encouraging.

The 10 best-selling premiums are in the top 100 new gTLDs by registration volume.

Premium new gTLD renewal rates are above 80%. Such high levels of customer retention point to them associating greater value with premiums new gTLDs.

Also, by generating more value across the distribution chain, premium new gTLDs are working for the whole industry. In this business just like in any other, margins are key. Hard-hitting promotional sales strategies generate very little margins for registries and registrars alike. It's all well and good selling thousands of names a day, but if doing so only generates a few cents in margins, or even actually ends up costing in client acquisition because the registry and the registrars are having to sell at or below cost, where's the real value?

Margins are good

Generating actual margins is better for the industry. It means registries and registrars can invest in marketing, technical infrastructure, customer service and, yes, even get involved in their sector's governance by participating in ICANN and other fora.

All of these are so important to ensure Internet users stay spoilt for choice and enjoy even more new gTLDs in the future.

Registries and registrars need to have sturdy computer systems to offer their customers the very best user experiences. But beyond that, the new gTLD program itself has to find people ready to champion it in the governance sphere. And that can really only come from the industry itself, or the users.

So far, instead of doing all it can to support its star program, ICANN has only acted as a de-facto regulator to the industry bringing it to consumers.

As an example, ICANN has maintained a fee structure so heavily biased in favour of incumbent TLDs, and especially .COM, that some new gTLD operators end up paying "ICANN taxes" several factors higher than those imposed on Verisign, the .COM operator.

What ICANN hasn't done is invest in building global awareness for new gTLDs. Apple invested $50 Million in advertising to launch the iPhone in 2008. Despite new gTLD application fees bringing ICANN an estimated $350 Million, there's been almost no marketing spend.

So right now, it remains up to the industry to spread the word.

Low-cost operators are doing it by paying for customer acquisition through price promotions.

Premium operators are doing it by spending on targeting their specific communities to build awareness for their TLDs.

All are working to realise the new gTLD program's intrinsic value proposition of not only giving users more choice, but also bringing them products that are better suited to their needs.

By Stéphane Van Gelder, StartingDot, MILATHAN

Related topics: Domain Names, ICANN, Top-Level Domains

 
   
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Comments

Not so fast... Francis Augusto Medeiros  –  Jan 06, 2016 5:22 AM PDT

This article relies on the premise that the new gTLD's will aggregate value to the DNS and will replace the .com as the de facto standard for bona fide domain name registrations. While the argument is credible, the article fails to acknowledge that the new TLDs are barely known by most internet users, and that .com still is perceived as the truly international (and reputable) TLD, where the new ones are perceived, in my opinion, as just an eccentric novelty.
Of course, this might change, and maybe the .com will shift from its privileged TLD status to become a legacy one. But so far this hasn't happened.

Quite the contrary Francis, the article underlines Stéphane Van Gelder  –  Jan 06, 2016 5:53 AM PDT

Quite the contrary Francis, the article underlines the lack of awareness and talks about the need for ICANN to invest in new gTLD promotion. So whilst I agree with your point that awareness is still not what it should be for new gTLDs, I disagree that "the article fails to acknowledge" that.

ICANN awareness programme Christopher Hofman Laursen  –  Jan 08, 2016 4:03 AM PDT

I agree on your point of view here. It's not sufficient that ICANN is shadow boxing with their global awareness surveys. The official line from ICANN not to "promote any TLDs over others" is in my opinion not a valid argument. For all I care they can promote the classic extensions as much as the old ones. But it's obvious that no matter how great a product is, you need to push the marketing button as well, and the new TLD registries need help spreading the "Meaningful domain extensions'" concept more widely.

Agree 100% Christopher. It's the domain name Stéphane Van Gelder  –  Jan 08, 2016 4:08 AM PDT

Agree 100% Christopher. It's the domain name as a product that needs to be promoted. The Internet user remains far too unaware of what domain names are and what benefits having your own domain name can bring.

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