Home / Blogs

New gTLD Applicants Must Reduce Cognitive Biases

Alex Tajirian

To improve the viability of your application for the recently approved launch of new generic top-level domains (gTLDs), you must reduce decision biases in estimating a new gTLD's expected revenues. To do so, you must either delegate the responsibility to an independent multi-disciplinary team within your company, or seek input from a consultant.

Cognitive researchers have identified two modes of thinking: intuitive and reflective. The first is referred to as System One, while the second is referred to as System Two. System One is a mode of thinking that gives us a stable representation of the world around us, which allows us to perform certain actions without much thought. An example of this would be walking and contemplating something else at the same time. System Two, on the other hand, is a mode of thinking that is reflective and analytical. Professors Thaler and Sunstein popularized this distinction in their book "Nudge".

Cognitive biases arise due to System One thinking. The essay deals with reducing such biases by looking at the decision process through a Systems Two lens. Experts need System Two thinking to complement their intuitive thinking, as they are unable to fix errors that they do not recognize. The essay does not deal with errors in strategic and marketing analyses. (I have outlined such biases when appraising domain names.)

You are obviously better off with reduced bias than with irrational exuberance when it comes to your profit forecast. After all, the total cost of an application can easily top $400,000. You will not want to throw away that kind of money.

You must work to assist the group in charge of estimating profits to reduce cognitive biases. You and/or your consultant must play the delicate role of not being seen as a quality control boss. You do not want to appear to question a witness's expertise or integrity. Instead, this complementary role you and/or your consultant will undertake is intended to stimulate discussion and debate.

Eliminating biases becomes an especially curtailed process when you do not rely on prediction markets to estimate demand for your proposed gTLDs. Nevertheless, even when using prediction markets you can reduce operating cost estimation biases that are estimated more accurately using internal methods.

Below are some questions that your System Two team needs to ask the team estimating your new gTLD profits:

1. Have you rejected the potential value of new gTLDs based on the performance of existing TLDs? Such an outright rejection might be based on comparing apples and oranges, i.e., using the wrong analogy and cognitive biases by not focusing on niche vs. scale gTLD markets.

2. Have you fallen in love with the idea of jumping on the new gTLDs bandwagon? (This bias is called reference class forecasting. See, for example, "Delusions of Successes: How Optimism Undermines Executives' Decisions," by Dan Lovallo and Daniel Kahneman, Harvard Business Review July 2003.)

3. Are your analyses taking into account the cost and scope advantages of incumbent registries?

4. As an incumbent registry, are you unconsciously motivated to "build an empire" in the gTLD space? Or does your unbiased analysis suggest value creation?

5. Were there any dissenting opinions within the profit estimating team? What was the team's motivation to converge on the presented recommendation? These questions are intended to reduce the possibility of the group thinking and/or converging on a position simply because it was gaining momentum.

6. Are the demand numbers of domain name registration under your proposed gTLD very optimistic/pessimistic? Or are they based on prediction markets? Pessimism can arise, for example, when you incorrectly rely on data from current TLDs.

7. Is the worst-case scenario overly optimistic? Conversely, to assess whether the recommending team is overly cautious, ask yourself if your company tolerates unpredictable failures or if such failures result in unjustifiably firing the deciding team?

By Alex Tajirian, CEO at DomainMart

Related topics: Registry Services, Top-Level Domains

 
   

Don't miss a thing – get the Weekly Wrap delivered to your inbox.

Comments

Indeed John Levine  –  Jul 10, 2011 12:52 PM PDT

The only new TLDs that have gotten big enough to be viable based on registrations are .BIZ, .INFO, and maybe .MOBI. That is, cynical clones of .COM and .ORG for people who missed the good names the first time around, and an industry sponsored domain targeted at mobile users, the only significant new kind of users to emerge since the dawn of the Internet.

How many more of those will the market accept?  My money's on none, since we don't seem to have much interest in a cynical clone of .NET.

To post comments, please login or create an account.

Related Blogs

Related News

Explore Topics

Dig Deeper

Afilias

DNS Security

Sponsored by Afilias
Afilias Mobile & Web Services

Mobile Internet

Sponsored by Afilias Mobile & Web Services
Verisign

Cybersecurity

Sponsored by Verisign

Promoted Posts

Now Is the Time for .eco

.eco launches globally at 16:00 UTC on April 25, 2017, when domains will be available on a first-come, first-serve basis. .eco is for businesses, non-profits and people committed to positive change for the planet. See list of registrars offering .eco more»

Industry Updates – Sponsored Posts

Radix Announces Global Web Design Contest, F3.space

Global Domain Name Registrations Reach 330.6 Million, 1.3 Million Growth in First Quarter of 2017

.TECH Gets Its Big Hollywood Break

.PRESS Supports Press Freedom Day for 3rd Consecutive Year

5 Afilias Top Level Domains Now Licensed for Sale in China

Radix Announces Largest New gTLD Sale with Casino.Online

2016 Year in Review: The Trending Keywords in .COM and .NET Domain Registrations

Global Domain Name Registrations Reach 329.3 Million, 2.3 Million Growth in Last Quarter of 2016

A Look at How the New .SPACE TLD Has Performed Over the Past 2 Years

Neustar to be Acquired by Private Investment Group Led by Golden Gate Capital

Startup League Reports from WebSummit, Lisbon

.SPACE Becomes the Choice of the First Ever Space Nation Asgardia

MarkMonitor Supports Brand Holders' Efforts Regarding .Feedback Registry

Why .com is the Venture Capital Community's Power Player

The .cancerresearch TLD: Search for Cure Drives Digital Innovation

New TLD? Make Sure It's Secure

Radix Launches Startup League at TechCrunch

Celebrating One Year of .online

LogicBoxes Launches the New Elite Reseller Program

Afilias Acquires Premium TLDs .ARCHI, .BIO and .SKI