So what are the characteristics of a “Brand TLD”?

Please note that by “Brand TLD”, I do not mean gTLDs applied for by brands. I mean TLDs whose registrants tend to use them as their primary site and identity. They have either created themselves as, or have become a brand in the eyes of their registrants. These TLDs tend to be in the minority.

Not only do these TLDs have second level domains that are used as the registrant’s main site, but they also have domains that have been renewed by the same registrant at least three or more times consecutively. More of their domains have associated MX records than Navigational Aid TLDs.

This of course means that many of their registrants are using an email address associated with their domain names; these email addresses are printed on the business cards, and published on ads and websites. As a result, the renewal rates tend to be high, stable and less prone to fluctuations.

Brand TLDs also tend to be the first choice of new registrants; they place a higher value on domain names in a Brand TLD than the same name in a Navigational Aid TLD. As a result, the demand for domain names in Brand TLDs is highly price inelastic. Increases in price will not see a corresponding drop in sales.

When and if the registrant is forced to prioritize, he will drop other domain names in his portfolio, before he even considers dropping his primary one. The pain to change the email address and primary website, is too high of a price to pay.

On the registrar side, the situation is very different. The registrars treat the Brand TLDs as the “must have” set of TLDs on offer, because if they do not, their customers will go elsewhere.

The registries operating Brand TLDs either employ “pull” marketing, and market directly to the target registrants. The channel then simply reacts to the market demand by offering the TLD. These registries treat the registrant as the ultimate customer, and the focus of the marketing efforts; they treat the registrar channel, as a channel, but not the ultimate customer. The registrars in turn, do not face the added cost and burden of actively marketing to the target registrants; the demand is present.

If the Brand TLD provides price discounts, they may find upon closer examination that many of registrars pass none or part of the discount to the registrant as a means to bolster their margin. The retail price is then relatively stable.

These registries may also find that dedicated sales resources for the registrar channel are in fact low ROI investments. Their dollars are better spent on marketing directly to the target registrants or on better customer/tech support. Why? The channel is already incented to sell the domains in the Brand TLD.

Brand TLDs may or may not have a few registrars who sell the bulk of their domains, but they can be assured that these registrars can ill afford to drop their TLD as one of their main offerings. As a result, the Brand TLD’s revenue stream is less volatile and far more predictable.

So which TLDs exhibit more of characteristics of a brand TLD? A good barometer is to look at the secondary market: given the same name in two separate TLDs, which one will fetch a higher price? Which TLD has consistently fetched a higher price than others?

.Com is arguably a Brand TLD. Netsol and then Verisign did not create the “dotcom” brand, certainly not in the early days. But the first mover advantage and lack of choice, created the brand for them, so much so in fact that it became part of our jargon. Remember “dotcom” boom and then the “dotcom” bust?

Many TLDs have been launched on the hopes of displacing .com, but have not succeeded in switching their registrants. The barrier to switch is simply too high for those registrants whose primary site is .com and who use a .com address for their email. Many ccTLDs have successfully established themselves as a Brand TLD within their market. A simple test is to look at the top trafficked websites within that country and estimate what percentage use the ccTLD as their primary address.

However, the majority of the existing gTLDs today are replete with domain names that are simply pointers to other sites. They face the most risk in the next few years.

We expect as many as 1000 gTLDs to enter the market. The balance of power between the registries and registrars will shift. You will see new registrars emerge who will focus on a niche vertical or community, and offer specific services to meet the needs of that market. We call them Vertical Registrars. They are most likely to adopt the Brand gTLDs that best appeals to their core market.

Today, the biggest registrars like GoDadddy have a “Wal-Mart” approach, serving a wide variety of registrants from individuals to businesses, but no specialized services for a given industry vertical. With new gTLDs you will see that change.

There will be highly profitable Vertical Registrars, who intimately know the niche market they are serving. Of the 1000 expected new gTLDs, many will also have a new and inventive value proposition coupled with a very defined addressable market, and the means to reach them. Many of the previously gTLD launched did not have any of these and hence became Navigational Aid TLDs.

The influx of so much supply and choice in a previously restricted market will create competition, and render domain names a commodity, if they are not already one.

So, why wouldn’t all TLDs eventually have the characteristics of a Navigational Aid TLD, if domain names are or become a commodity? If you stood in line or pre-ordered the latest iPhone, you will understand. There is no lack of new smartphones with similar features, some with far lower price tags. Yet Apple is a brand, and its customers demand the iPhone and are willing to pay the premium price.

The new gTLDs most primed for success are the ones who will build a brand with their target market, and treat them as the ultimate customer. The existing gTLDs are best advised to determine if they exhibit the characteristics of a Navigational Aid TLD, and if so either make major changes in their approach while there is still time, or face an uncertain revenue stream in the future.