Have you already read Verisign Inc's blog "The Real Facts about new gTLDs." It can be read here, if you haven't. It is now a year later since this post was written, so a much clearer gTLD picture is now developing…
The crème de la crème, the good, the bad, even the ugly of the Domain Name Industry are attending NamesCon in Vegas this week. 2016 will be a very challenging, absolutely critical year for those attendees and their corporate employers as the Domain Name System (DNS) faces a massive shakeup. In 2015, 287 global brands, worth $trillions headed by Google, Amazon, had their new TLD Registries delegated into the root zone of the Internet. In December 2015 .author .like .room .call .safe .book .circle .read .pin .jot .fast .got .buy .jot .bot .smile .zero were all delegated. They are all part of the Amazon portfolio. Amazon had previously bought .buy for $4,588,888 in an ICANN public auction where sale proceeds are disclosed. Google paid $25,000,001 for .app through the same process. All proceeds go to ICANN.
It has taken four years of ICANN delays, controversial decisions, but finally during 2016, potentially 500 of these closed .brands will launch their ICANN evaluated application strategy that they prepared on application in 2012. Some may well become the next .COM. The main raison d'etre of ICANN's gTLD programme is to increase consumer trust, consumer choice and competition as stipulated by ICANN's Affirmation of Commitments, 9.3.
Currently consumers are entrenched owners in the .COM .NET global brand, epitomising trust and security, known to billions, run by Verisign for the past 30 years. The key question is, can these new open and closed TLDs compete, offer viable alternatives, let alone start to break down Verisign's monopoly. According to Registrarstats there are 138,819,259 .com, .net, (92%). The other 14 legacy TLDs set up since 2000 have 21,490,076 second level registrations. Clearly these other legacy TLDs have not been a roaring success, which does not bode well for these new TLDs.
According to nTLDStats there were 11,168,472 new open TLD Registry registrations @ 31 December 2015. Our own financial stats and analytics indicate there are 421 open TLDs in a General Availability status, so second level domains can be bought by the end user through an ICANN 2013 accredited Registrar. There are over 1000, with huge variances in retail prices and product offerings. As a result it is hugely difficult for the end user to make a reasoned choice and it is extremely time consuming. Donuts launched the first seven into GA on 5 February 2014.
So in 2016 ALL new TLD Registries, whether open or closed, need to identify trends and produce analytics in order to revise their financial and marketing strategies. They all need to develop a vertically integrated registry/registrar business model structure. .Brands need to utilise Spec 9 and Spec 13. Crucially all TLDs need to get new global customers/consumers on board, on message by justifying the value add/net cost benefits of switching away from their trusted .com or ccTLD. Furthermore they need to decide whether to counter or cooperate with this paradigm shift from closed global .brands, let alone competing against the incumbent, tried and tested, secure monopoly that is COM. These will be key and a huge ask.
So what has been going wrong and how can it be turned around by those NamesCon attendees to ensure .SUCCESS in 2016?
To date ICANN's gTLD programme, hugely delayed with many controversial decisions, now playing second fiddle to ICANN's IANA transition proposal, meant its rollout and launch of hundreds of new TLD Registries being described "as a coming out with a whimper", added to consumer confusion (especially with singles and plurals), lacked any credibility, lacked trust with consumers, lacked global awareness, not to mention adoption. Other financial gTLD.experts will agree with me and it is increasingly becoming evident that these new open gTLD registries overestimated the demand in their 2011/2012 ICANN application business models for new Top Level Domain name extensions. However global awareness is still seriously lacking, not to mention adoption. Currently 7996822 (71.6%) of all registrations according to nTLDStats are parked domains with a parking page and without content. Registrations of the 421 open TLDs in General Availability have been very disappointing so far, causing ICANN to downgrade its budget expectation from 33M to 15M target. Some would even go as far as to say, to date it is one BIG.FAIL and a Round 2 @ 2017 distinctly unlikely and unnecessary.
ICANN - Funding a global awareness campaign
As part of the contention set resolution process 14 TLDs were resolved in a last resort ICANN public auction. You can see the list here. Currently these proceeds, $60M, have been held in a separate bank account. ICANN and its community has still not decided how, where, to whom to distribute the money. It makes huge sense to pump the money into a gTLD global awareness promotion campaign. This is a win win situation, since ICANN would receive 25 cents on each new registration from a Registry (in the event that the Registry exceeds 50000 registrations p.a.) as the Registry Agreement Article 6 Fees illustrates.
As ICANN's financial results show, there is an excess of income received ($357M – 1930 applications @185K) over costs to run the programme. Unrestricted net assets show $58.6M at 30 June 2014. ICANN is a not for profit. Surely this excess should be ploughed back into an awareness campaign, perhaps in the BRIC countries.
What is the registration data revealing?
Let's start by crunching the publicly available registration numbers from nTLDStats and NameStat. We have been tracking registration data from TLD zone files, nTLDStats and NameStat then "deep diving" to develop financial analytics, trends, a financial TLD Z score, TLD valuations (for acquisition and sale), since the start of the launch of the first few new TLDs by Donuts in October 2013.
Registration Data Stats:
The Headline Numbers at 31 December 2015
|11,168,472||Total Registrations, Dec 2015 - Month 26.|
|789,940||Registration Increase in Dec 2015.|
|8%||Percentage increase in Dec 2015.|
|9,980,078||Total registrations (89%) with TLDs over 10K Registrations.|
|138||Number of TLDs with Registrations over 10K - All in GA Status (32%).|
|72,319||Average no of registrations.|
|841||Total Number of TLDs with one or more Registrations i.e. Delegated.
Broken down by:
|421||Total Number of TLDs in GA Status - Open TLDs.|
|1||Total Number of TLDs in Early Access Period-7 Days premium name auction pre GA.|
|7||Total Number of TLDs in Sunrise Phase (usually 60 days pre Landrush/EAP premium name auction Phase).|
|287||Closed .Brands. 2 Launched:
Barclays, home.barclays & Cern, home.cern
|125||Total number of Open Generics, Geos, IDNs, Community, delegated but not launched.|
|1,188,394||Total number of Registrations (10.6%) of TLDs with less than 10K registrations.|
|283||Total No of TLDs with less than 10K registrations - All in GA status (68%).|
As at 31 October 2015 we assumed a realistic (average/mean) break even target of 10000 registrations in the First Year from the start of a TLDs General Availability (GA) date. Using a complete year (actuals) or a projected Oct 15 registrations *12 we had a staggering 60.4% of TLDs not reaching a break even registration target and so are operating at a loss.
Realistically an average TLD has incurred $500,000 of sunk costs (ICANN application fee, applicant consultant costs, escrow fees, LOC fees, COI calcs. fees, backend providers, legal costs, contention set auction costs, salaries) prior to any marketing spend on launch.
Of course there are many assumptions.
Clearly a portfolio player can spread its costs with the incremental costs of adding a further TLD increasingly reduced.
Clearly there are (some) TLDs operating at a profit, despite not reaching 10000 registrations.
Clearly some TLDs have sold premium names outside of the GA period at considerable premium to the wholesale price.
What trends are developing
With (10000 yearly b/e) 833 registrations per month the TLD Registry long tail is kicking in fast @ month 4 after the initial interest. Only the top 65 TLDs had over 833 registrations in the month.
The top ten + movers, .XYZ, .Club, .Ren, .Top, .Win, .Bid, .Loan, .Red, .Online, .Space generated 604058 of 789932 net new registration (76%). The top 65 generated 803127 registrations, with remaining 776 generating a net decrease of 13195 registrations.
What's the renewal rates looking like
We took six of Donuts very early launched TLDs with the first year of GA ending in Feb 2015. Here are our results, taking the month end in which they peaked and registration volume at 31 December 2015. (NB: Typically registrations will start to dip and not been renewed/recorded until 45 days after the first year renewal date due to the redemption period.)
Two big geo TLDs .London and .NYC had a net loss in December 2015.
So how are these new TLDs fairing against the .com monopoly
According to RegistrarStats:
* Source: nTLDStats
Please note Verisign reports Q4 2015 financials Feb 16 2016.
Conclusions and Prediction for 2016
Early indicators suggest already many of these new TLDs are in junk status, not viable as a Registry business. ICANN's compliance then has the unenviable job of deciding when, how, if to call in the EBERO (Emergency Back End Registry Operator) when "junk status" has been reached. The EBERO, costing and wasting lots of money then keeps the Junk TLD resolving for three years. Then what happens?
Of the open TLDs there are very likely to be a few winners and many many losers. It is the way of the market and Pareto's 20:80 rule.
Underperforming, underfunded, undervalued single TLDs will be bought out by one of the portfolio players, domain asset stripped, remarketed, rebranded, made profitable. As a result there will be an even greater concentration of TLDs in the hands of the portfolio players, possibly leading to competition issues.
Open TLD Registries will continue to acquire and own their own ICANN accredited registrar(s) and so exploit the vertical market, affecting pricing and competition.
There will be a merging of same single and plural TLDs under the same roof by acquisition.
Registrars will start to lessen the number of TLDs offered, by concentrating on particular niches like .photo, .photography, .photos. This will focus their end users, cause less confusion and help in pricing techniques and bundling similar TLD products.
End users will switch out of failing TLDs for fear of non resolution and price hikes — compounding the problem further.
Finally there will be a "twerking moment" when a global brand launches causing registrations to hit 30 million by the end of 2016.
Our own prediction is that 2016 will be a very challenging year, much consolidation in the whole sector, but ultimately deemed a year of .SUCCESS with end users having more choice, trust, and competitive prices in these new TLDs. .Brands that didn't apply will need to start preparations for a Round 2 in 2016, with ICANN's Round 1 Review Team making recommendation to start a Round 2 in January 2018.
By Phil Buckingham, CEO, Dot Advice Limited. Phil can contacted at . Happy to take your questions on TLD financial stats, analytics, trends + reports that you may require.
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