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Japan Domain Market Demystified

Darshaun Nadeau

Ever sat at one of the VeriSign "State of the domain" meetings at any of the ICANN meetings? Or read their reports about countries with the greatest opportunity in domains? Almost without question you will learn that Japan is earmarked as the country with the greatest opportunity for growth in the domain market. They take into consideration important factors such as GDP of a country, internet population, and current domain registration levels. With this they compare registrations with nations from around the world to come up with some predicted level of domain registrations a country should have.

Most European countries and North America come within some kind of expected range of registrations. But Japan with strong GDP, one of the highest internet-use-countries (by percentage) in the world and their broadband connectivity their ability to access and use the internet is among the highest ranking in the world. But for some reason earlier this year when the total number .jp registrations crossed the 1 million mark for the very first time, Japan Registry Services (JPRS), the registry for .jp domains, threw a large party to celebrate their great success. But 1 million domains for the second largest economy in the world… a great success?

Having been one of the only non-Japanese to have a moderate success in domains in Japan, I will attempt to demystify the situation. I am commonly asked at ICANN and domainer events about the Japanese market, so I decided to try and share some of my thoughts, opinions and findings (which in no way whatsoever represent anyone's views but my own personal views). This article has been running around my head for some months, but this week a trip to Tokyo pushed me over the edge when I saw Microsoft's new ad campaign plastered all over the subway system. I checked every ad poster I could find and was not able to locate "microsoft.com" on any of their ads. I even checked the fine print at the bottom. Instead, you can find a Japanese-language keyword equivalent, clearly posted at the bottom of all the posters. I hate to offend or hurt the feelings of any true domain registrar, domainer or just domain lover, but the fact of the matter is that keywords are beginning, if not already, becoming more important than domains. If you are in the SEO business, there is probably not a more lucrative market in the world than Japan.

Many Japanese who are oblivious of what the registration levels are in comparative markets such as the United States, Germany, France, and United Kingdom, threw up their arms with pride in their accomplishment. Other Japanese, savvy to what is really going on, continue to shrug their heads in frustration with the continued price gouging and poor management by JPRS. So one might just say, well why don't we just open up operations in Japan and sell domains for less than anyone else? Well that is what Network Solutions thought in 1998 (press release) when they opened up operations in Japan. Or how about Dotster.com who made the Japan operations attempt in 2001 (press release). These are just a couple of examples of failed attempts to market entry into Japan by major domain registrars.

Short history lesson on domains in Japan

Japan was one of the earliest adopters of domains in the world. JPNIC started registering domains in 1992. Not knowing what form the internet and domains would take in the future, the Japanese government started with a very regulated system for registration. By the late 90's it was obvious that domain business should be moved into the private sector and not be an organization under government control. Through a very controversial process, .jp domains were privatized and the monopoly was given to JPRS (Japan Registry Services) in 2000. But let's back up to earlier events in 2000. That is the year that VeriSign launched Internationalized Domain Names (IDN) for Japanese, Chinese and Korean domains. Unfortunately these were domains that really could not be used. Coming from countries that use the Latin alphabet, we do not often consider the repercussions of what VeriSign did in these markets. Let's think of a scenario where the tables are turned. Imagine an internet where ONLY Japanese language domains can be used. Americans, Germans, French, Indians, etc. who have some limited knowledge of Japanese are the few privileged who get to buy and use a domain. Then one day, a company called VeriSign announces that they have Latin alphabet domains. Wow! We are all excited. And when registrations begin, we all rush and register over 1 million of them in the first 30 days (which if I recall correctly is about how many Japanese, Korean and Chinese domains were registered in the first 30 days of launch in 2000). We patiently wait for the day that we can use our precious domains in our own language. But after years of technical trouble, companies failing (see below) and backward domain politics, the user is what I call domain-raped.

If the Latin based character domain world was subjected to this treatment, I think we would be outraged and calling it a scam. Which is exactly what most Japanese customers who bought the domains were saying. Where did all the money for these unusable IDN domains go?

You would think that the mess VeriSign generated with these IDN names would lead to a great opportunity for newly founded JPRS, a Japanese corporation located in Tokyo, to come in as the knight in shining armor and save the day with a solution for Japanese users. "Great, someone on our own team, not some foreign company", was the thought of many Japanese I talked to. When IDN Japanese domains were launched by JPRS in the spring of 2001, they worked properly and resolved when using Microsoft's IE browser. But when trouble hit Real Names (the company supplying the technology for IDN resolution in IE) and Microsoft did not renew the contract in May of 2002, the Japanese people were once again domain-raped. JPRS contended that it was not their problem that the product they were selling absolutely would not work, and did not offer any discounts, grace periods or anything to the over 60,000 domains which were registered in the previous year. But luckily for the registry, they did not have to deal with the irate customers and the pain of having to explain that like the VeriSign IDN fiasco, they left the brunt of that battle to all the unarmed .jp accredited registrars.

So essentially the issue is that if given the choice, I believe people would rather use the alphabet/language they are familiar with. Japanese use Kanji, Hiragana and Katakana alphabets, thus their preference of language use on the internet is Japanese. Imagine if you were forced to always have to type in Japanese rather than your language of choice. I also did not mention the high prices that JPRS was charging for these unusable domains that people could not get refunds or grace periods for. Back in 2002 the typical price for a Japanese .jp domain name was somewhere around $70 per year of registration. 60,000 X $70 X 3 years of total unusable domains = a lot of ripped off Japanese.

It is my belief that due to the failed IDN launch by VeriSign and the even more inexcusable greedy acts of JPRS when Real Names failed, that the Japanese developed an allergy, a rash if you will, to IDN domain names. I also believe that ASCII domains have never exploded due to the simple fact that English is not their native language. There is also the issue of how registrars who offered IDN domains to customers feel. My company dealt with so many irate customers that we finally put a huge notice saying something like "JAPANESE IDN DOMAINS DON'T WORK! BUY AT YOUR OWN RISK!!!" Most registrars I know have their own top 10 list of bad IDN customer support problems. So most registrars I know in Japan just don't want to deal with the angry customer of a product that cannot be used. Although with the new browsers, IDN domains do work these days, the bad after taste of yesteryears still remains.

So if domains are not the answer in Japan, what is?

Japanese domains could have been the answer, but as mentioned before, Japanese have developed an allergy to domains because of their terrible experiences in the past. So domains are beginning to be taken over by SEO keywords. Just starting this year, I have noticed more and more television and poster ads of prominent companies TRYING TO GET PEOPLE TO VISIT THEIR WEBSITES, but NOT using domains in their ad campaigns. You might ask, how can you possibly try and drive traffic to a website without publishing or using a domain name. The answer is to hire an SEO company and optimize for a particular phrase or keyword that gets your company a #1 ranking in Yahoo (Google is not as strong in Japan). So in North American or European markets where a company might have 10 different domains for 10 different services or campaigns, Japanese companies optimize #10 keywords for sections within their top domain to get picked up in the search engines. I think this shows by the fact that domains in ads seem to be dwindling in Japan and keywords are on the rise.

I hope this has helped to somewhat demystify why when Japan has so many strong economic factors, it still trails behind in domain registrations. At this point I think consumer confidence (and registrar confidence) in IDN Japanese names is so low that it will take significant time (and a lot of effort — possibly some registry willing to offer free IDN names) to somehow try and regain this consumer confidence. Otherwise I believe we will see a continued trend toward the 1 domain-multiple keyword optimization method of doing business.

By Darshaun Nadeau, President, WIXI, Inc.
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PPC and SEO business is certainly very mehdi  –  Sep 22, 2008 9:09 PM PST

PPC and SEO business is certainly very lucrative in Japan! companies would hire an SEO company to optimize for a keyword, then go to search engines and buy that same keyword (PPC advertising) and to top it all, they would forward traffic to search engines using print ads and TV commercials! so basically companies would pay (a lot) for TV commercials and print ads and pay for SEO and again for PPC!
I just believe that whoever convinced these Japanese companies that this is the way to advertise online, is a genius!

Some would argue that most young people (the target audience) access the Internet with their mobiles and it is "troublesome" to type domain names and also, the use of search engines is wide spread, so it makes sense to advertise keywords instead of domain names! but doing it this way is just stupid!

The idea of optimizing 10 keywords for sections within top domain makes sense to large companies and multinationals in terms of brand image, but to small businesses it will take them some time to realize that they can advertise online differently and cheaply and that would stimulate the domain name market, especially if the IDN domains pick up with no glitches again.

Darshaun, interesting to read, nice article!Even if Dirk Krischenowski  –  Sep 23, 2008 11:05 PM PST

Darshaun, interesting to read, nice article!

Even if there's a lot of money invested in particular keyword optimization, it's a temporary business and does not create sustainable traffic to the advertisers websites. Search engine rankings also depend on links, I don't see how just a keyword can get reputation by liks from others.

I agree mehdi comments that the Japanese PPC7SEO business is something for large companies or companies in a very nice, but for the majority of SME businesses, which by the way have often generic or surname company names, it does not work well.

Policy trumps other factors Antony Van Couvering  –  Sep 28, 2008 11:16 AM PST

Hi Darshan, good to see this intelligent article.  While domain name growth and usage clearly correlates to Internet penetration, GDP, and other factors — domain name policy can trump everything else.  At least, it can function to retard growth.  The so-called "closed" registries in Europe have all opened up after many years of watching their natural registrants bypass them in favor of .com.  They seem to have recovered somewhat, though they may never get back many of the lost registrations.  I believe there are advantages to domain names (e.g., ownership) that a keyword cannot supply, so I'll be interested to see if the situation you describe in Japan will change with the appearance of a responsive provider....

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Buying or Selling IPv4 Addresses?

Watch this video to discover how ACCELR/8, a transformative trading platform developed by industry veterans Marc Lindsey and Janine Goodman, enables organizations to buy or sell IPv4 blocks as small as /20s.