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Usage Trumps Registrations: Why Past TLDs Failed and Why Many Will Follow in Their Path

Colin Campbell

First of all, I am biased. I am a common sense thinker who tries to analyze risk and reward based on societal trends and conventional wisdom. Watching the new gTLDs (generic Top Level Domains) launch over the last 2 years reminds me of the circus we are now seeing in the U.S. election. Myself, a self-proclaimed libertarian, can now be labeled as the establishment, while the so-called "outsiders" act and behave like they are not politicians yet seem to be masters of messaging and propaganda. Policy discussions are no longer reported. Instead, the media favors high school level brawls and name calling, which are covered 24/7. I am talking about the American election, but it's not too hard to make a comparison with the launch of the new domain extensions.

In the domain world, conventional wisdom is also being thrown out as domain investors chase the pot of gold at the end of the rainbow, registrars focus on top line registration numbers as a measure of demand and users are inundated with hundreds of often confusing options. We saw highly contested auctions for extensions like .SHOP, .APP, and my own .CLUB, require millions in investment while other extensions were orphaned, looking for someone, anyone, to pay the adoption fee of $185K. Yet some of these orphans have convinced the masses to vote for them and register names en masse. Or at least that is the spin. The fact is that a very small number of domainers account for a large percentage of these registrations. Of the top 2 registered new domain extensions, 100 users account for 44% of all the registrations (excluding those names in privacy). More significantly, for the same extensions cumulatively, Asia accounts for 72% of all registrations.

The fact is that speculation in China has been driving demand for many of these new extensions. To date, no foreign registry has been approved in China, which means that users cannot setup China hosted websites on a foreign owned extension until the registry receives approval from the Chinese government. Prices for new short character domains on new gTLDs have risen dramatically. So clearly we have a highly speculative market. Those of us who have been around the block a few times, know that hope and prayer are not an investment strategy (and on a side note, it's not a voting strategy either). To a lesser extent, .CLUB has also been a beneficiary of the active Chinese investor market for registrations and sales of premium inventory. We were one of the first to seek Chinese government approval and are hopeful that we will obtain approval shortly.

As CEO of Hostopia, a leading hosting company, I hired the former owner of Afternic to determine which were potentially the best new domain extensions to launch in the market. The study favored the highly generic but meaningful .WEB, .SHOP, .CLUB and other verticals like .LAW, .HOTEL, and .BANK. The criteria to determine success was that the names needed to be short, meaningful, unrestricted and priced competitively to .COM. The exception were names that served a specific segment like .BANK or .LAW. We even went as far as interviewing an ex-employee from .TRAVEL. This individual explained that the extension ran into problems with ecommerce systems because of the number of characters in the name. In addition, the restrictions around .TRAVEL hampered the ability for registrants and registrars to easily register the name resulting in higher than acceptable fees for their customers. I find it very telling that .PRO is now getting a new life after its similar restrictions have been removed.

I have a unique perspective on .MOBI, as I was approached almost 10 years ago to resell the names to my hosting customers. I decided that we would not launch .MOBI because we were already working with technology that identified whether a user was coming from the desktop vs. mobile. .MOBI never made sense unless the company was a mobile operator. Users registered names in droves despite concerns from actual users like myself. .MOBI managed to register 1 million names. Investors saw the flashy lights and flocked to the end of the rainbow ultimately finding fools' gold. What entrepreneur, group or brand would build an entire company around a mobile-centric name unless they were in the mobile industry?

What are the lessons domain investors can learn here? Stop following the crowds focusing on large registration numbers and start thinking about the "worst case" scenarios. Ultimately what drives value for .COM and .ORG is global usage and meaning. .COM is the legacy leader, and .CLUB a new gTLD leader. Each has demand in every country in the world for premium names. If the market crashes in one country an investor can sell the names in other countries, especially if the domain has global appeal.

Secondly, and more importantly, entrepreneurs who want great brandable sites will pay for a great name. If they can make more money with a good domain name, they will buy that name.

Lastly, it all comes down to usage and awareness beyond the investor community, the hosting companies, and the industry. People trust what they are comfortable with. Very recently, my COO was traveling in Hong Kong and went into a restaurant for dinner, looked up and saw www.TheButchers.club on the sign in the restaurant.

At .CLUB, we continue to do it the hard way, slogging it out — one tradeshow at a time, one advertisement at a time, and one sale at a time. In the current election, I am watching for candidates that run on facts and performance record, not just puffery. Usage Trumps registrations in our campaign.

By Colin Campbell, CEO
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Colin, they way you are doing it Antony Van Couvering  –  Apr 09, 2016 3:24 PM PDT

Colin, they way you are doing it is the only way.  Many registries must be appalled to find that they have to make a further investment before their TLDs return a profit.  And unfortunately for the rich ones, you can't just write a check.  Given the general lack of knowledge about new gTLDs, the only effort that will pay off is spade work — actually meeting with people, talking, helping with questions, one at a time.  All of them will relay that information to their friends and colleagues — and some of them will become evangelists.  Enough of that and you have a business.

There is nothing magical about a new TLD by itself.  A customer isn't buying the TLD, they're buying a domain name, which with a gTLD carries meaning both to the left and the right of the dot — and they have to be meaningful when paired together.

Ads aren't going to do it, ICANN's not going to do it, hoping that some brand is going to make new gTLDs an overnight success isn't going to do it either — but getting to know your distributors and your end-customers will.  It's not instant, it's not easy. It's called business, and registries that want to survive need to get into the business of being in business.

This is all about timing and a Michael Castello  –  Apr 09, 2016 4:30 PM PDT

This is all about timing and a war of attrition in business. Most of us can agree that domain names will have a large role to play in the future of the internet and virtual world. Sadly, ICANN released so many of these extensions to a market that was not yet mature enough. Its a catch-22. Where as to implement a right-of-the-dot strategy would entail making ALL extensions available BECAUSE people would be looking for TRUSTED content at those address. In doing so, it would've created a perception of viability for the masses. BUT, the world does not have a NEED for them just yet, and there are not enough entrepreneurs yet in place to simply create viable businesses with websites and content and product. As with the .com bubble, everyone knew the internet and addresses were a historically great idea. The timing was too soon and the infrastructure for both the masses and social adaptation was yet to rise to the levels that were needed to sustain them. Same thing could be happening with the new gTLDs.

.Club, as I mentioned at TRAFFIC Vegas, is one of the those that I believe could truly make an impact in the .com universe. You have done a great job for your clients by putting in place the things that are needed to succeed. It couldn't have been done much better.  We all rise and fall together on this issue. Timing is everything, and it seems it is still too soon.

New gTLD's Are Working Max Menius  –  Apr 09, 2016 5:04 PM PDT

The problem with such a sweeping indictment is that the expressed bias you have against new tld's shows you are blinded somewhat to the reality that: 1. new tld's are being adopted by real world companies, and 2. that new tld's offer real advantages. Yes, there are legitimate criticisms regarding the way the program was rolled out and that .loan and .loans were both released (definitely confusing). There is noise too with domain investors chasing gold and some media pumping going on around inflated registration numbers.

This is superfluous noise though and the real story is that real companies are using new tld's. This was always the real story and one that is slowly beginning to take shape. The frustrating aspect of discussing new tld growth & adoption is that naysayers and critics are so fully committed to being right that they ignore the real story.

I have been in the "old" market and the new market, and lost some money on .mobi too. But equating .mobi with all new tld's is not logical, nor justified. When we paint the future with yesterday's conventional wisdom, we miss opportunity and create a false narrative. The new tld paradigm will very likely take years to mature & evolve. Sweeping criticisms and generalizations really have no place. The truth exists somewhere between the extremes of instant success and total failure.

Usage = Visiblity = Credibility = Usage Joseph Peterson  –  Apr 14, 2016 8:16 PM PDT

Colin, your stomach must be lined with iron! A diet of domain industry propaganda + U.S. election politics?  My appetite for claptrap only goes as far as the first.  No dessert, thanks!  To you I leave a double portion.

Very good points.  It's frustrating that we must work uphill to make the case for common sense.  But we do.  Year after year, week after week.

Registration volume is a sideshow that fails to impress genuine end users, goes unnoticed by mainstream consumers, supplants a real marketing strategy for registries, and distracts speculators at best only temporarily.  We all know registration numbers are manipulated; and even where there's no fakery, those stats distort the real picture, showing mainly how unstable and flimsy large segments of the nTLD market still are.

Exposure to the Chinese bubble means vast numbers of domains, purchased for under $1 apiece, will be dropped in the face of full-priced renewals.  The only goal among traders in that "token market" is to sell to other traders.  Usage isn't even considered.  To be profitable, that model requires unsustainable rates of appreciation and floor prices well above reg fee.  But most Chinese-style nTLD asset classes are trading below reg fee.  And the Chinese sector has been in decline since December.  So a significant chunk of today's registrations will simply be erased at their first birthday.

Usage, of course, is what matters.  Visibility.  Recognition.  Back in 2013, I ran some correlation studies – still unpublished – looking at TLD usage rates in comparison to other market variables.  It matters.  No surprise.  And it matters from every angle – registry, registrar, domain investor, end user, average Joe.  What's most used ... sells best ... benefits brands best ... is most trusted.

During 2014, some nTLD registries were publicly distancing themselves from domainers, suggesting that domain speculators were an unwanted parasite, tying up inventory.  I argued back then that domainers ought to be respected as an outsourced, unpaid, volunteer sales force.  We help place good domains with qualified end users, pairing them with projects were the TLD is noticed.

Since the Chinese surge of 2015, registries have swung the other way.  Instead of working alongside domainers to make the case for end-user adoption, registries have thrown raw steaks into a feeding frenzy, encouraging domainers to give up their outreach efforts and throw themselves into the melee of hype, bubbles, pump-and-dump, and inadvertent pyramid-schemes.  Watching this wasted opportunity, this wasted year, has been deeply frustrating.

Every time I speak with a client about which domain options they ought to consider for their brand name, I suggest a number of nTLDs alongside the more prevalent .COM, ccTLDs, and other established gTLDs.  Almost invariably, my clients reject the idea, even though I'm advocating for nTLDs to a reasonable extent.  Usually people say the new TLDs "lack credibility".  What do they mean?  They mean: "I've never seen that suffix used by any brand I trust."

Usage => Visiblity => Credibility => Usage

Response Colin Campbell  –  Apr 18, 2016 9:26 AM PDT

Joseph,

I should have suggested you write the article. Your points are dead on. Eventually the good names, marketed well will rise while other names falter. End users will never get pulled into a domainer frenzy. This is why we see so little usage with .Mobi. If you remember at that time it had a lot of domain investors clamoring for names only to be sold a house of cards.

Colin

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