Verisign's spent the best part of 2016 putting out warnings. The .COM operator and domain industry heavyweight highlighted its Q3 earnings report with a stern "Ending Q4 '16 Domain Name Base expected to decrease by between 1.5M to 2.8M registrations from the end of Q3 '16". A forecast which the company said was based on "on historical seasonality and current market trends."
As 2016 drew to a close, the downturn seemed to materialize with specialist blog The Domains running a story on December 29 entitled ".Com Registrations Loses Another 1 Million Domains In Less Than 2 Weeks; Now Under 127 Million".
So after years of growth, is the domain industry about to suffer bleaker times?
What do the numbers say?
Using Verisign as the authoritative source for global domain name stats, and looking at mid-year numbers from 2008 on, the trend remains clearly one of growth.
H1 2008 ended with a total of 168 million domain names, 67 million of which were ccTLDs.
H2 2009 showed a growth of 9% overall (to 184 million) and 14% for ccTLDs (to 74.4 million).
H2 2010 had 7% growth overall (to 196.3 million) and 2.5% for ccTLDs (to 76.3 million).
H2 2011 had 8.6% growth overall (to 215 million) and 8.4% for ccTLDs (to 84.6 million).
H2 2012 had 11.9% growth overall (to 240 million) and 18.5% for ccTLDs (to 100.3 million).
H3 2013 had 8% growth overall (to 265 million) and 14% for ccTLDs (to 119.5 million).
H4 2014 had 7.5% growth overall (to 276 million) and 13.1% for ccTLDs (to 127.1 million).
H4 2015 had 5.9% growth overall (to 296 million) and 8.2% for ccTLDs (to 138 million).
The chartist view
The half-year numbers for 2016 aren't yet published, but first quarter figures show a world total of 326.4 million with 148.2 million ccTLDs. So the growth trend certainly appears to be holding. For now.
In recent conversations, two major registrars told me they had experienced a serious downturn in demand in Q3 2016. When I asked why, they admitted to not knowing… and being surprised by the severity of drop. So a blip or a trend? And what about 2017?
Truth is, no-one knows what's in store for the domain industry this year. What if we use charts like financial analysts do to try and understand where the markets might go next? For example, the charts on new gTLDs seem very positive. The specialist website ntldstats.com puts the number of new gTLD domains at around 1.4 million in July 2014, rising to 6.4 million a year later and to 22.8 million in July 2016.
That's a strong upward trend on any chart!
But how much of that is real demand, which would point to solid long-term growth potential, and how much is opportunistic speculation?
Looking at ntldstats.com rankings, the top 3 new gTLDs alone account for over 45% of total new gTLD registrations. These 3 TLDs, .xyz, .top and .win, have at times used heavy discounts to generate sales. But are they still speculative now, or have they now gone mainstream?
Today, using leading European registrar 1&1 as an example, they seem to be offered at standard industry pricing (£19.99 first year for .win, £6.99 first year for .xyz and .top — by comparison, 1&1 is currently running a £2.99 promo on .eu first-year registrations).
It's the economy, stupid!
Whilst low-cost models are sometimes frowned upon, other approaches to TLD operation and domain use seem to aim at providing value to users, rather than being price-centric and therefore more amenable to domainers.
Two examples are brand TLDs and City or Regional names. In these instances, the focus is not on the DNS side of the equation. The TLD becomes what some argue it should always be: a means to an end. Brands have issues of control over their security (be it legal or technical) and sales (including marketing and community management) which are powerfully addressed by operating their own TLDs. If the king of search Google is ready to promote its new corporate identity Alphabet through .xyz (www.abc.xyz) rather than one of the hundred-or-so suffixes the company applied to operate directly, that's got to be telling you something. Similarly, cities are finding political and public service advantages to controlling their own piece of the virtual real-estate.
Real demand, brought on by providing real value, may yet strengthen the domain industry. There are whispers of more difficult times ahead, but that seems to be due to speculators leaving the market. The intrinsic core value of a domain name is not at question.
The strong growth seen last year has been identified by Verisign and others as coming from speculative domain registrations out of China. The same people are now telling us they expect this wave to peter out.
It's also true that ICANN has done nothing to help the new gTLD industry grow. If anything, by imposing artificially high fees on new gTLD operators and not spending on promoting general awareness of the new Internet suffix opportunities, the de-facto regulator of the DNS has actually shot its newly contracted parties in the foot.
New and ever more complex rules have been imposed by ICANN on such things as WHOIS or domain transfers, as if the ICANN-land policy-makers were oblivious to the fact that outside, in the real world, not one non-professional domain owner really understands the WDRP-related emails they get every year (that's short for WHOIS Data Reminder Policy in case you were wondering). Let alone proposed new developments like the Draft Registration Data Access Protocol Operational Profile for gTLD Registries and Registrars (!).
Search over identity
But even if rules were simpler and support for the industry more forthcoming, the only real growth factor remains need. If domain professionals like those investors from China continue to see rewards in putting their money in this market, and the idea of owning one's online identity continues to seem important to the Internet user in general, then perhaps 2017 won't be the year the domain industry breaks with growth.
And surely the economy plays a part here as well. The better the times, the more likely businesses and individuals are to want to own their online identity. Or are they? In a recent article in The Atlantic, Lindsay Gellman posits that search and the move towards mobile devices is "killing clever URLs", i.e. domain names.
This is probably no more than informed conjecture at this time. But 2017 will be an important year for the industry. If registration volumes break, or worse reverse, domain professionals all around will need to start asking themselves real questions about the product they are selling and how they are going about selling it.
By Stéphane Van Gelder, Milathan
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