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Now We Know Why It's Hard to Get a .COM

As executive director of CALinnovates, an organization that advocates for innovation and startups, as well as a new business owner myself, I know how important a .COM domain name can be to a new company's online presence and marketing strategy. That's why I read with interest a new Boston Consulting Group report on how the .COM market is changing. I have a much better understanding of why new businesses find it hard to get relevant .COM domain names.

According to a Boston Consulting Group report, domainers — speculators — are on the verge of becoming the biggest players in the .COM market. Here's what BCG said: "The net result is that, on a dollar basis, the secondary market, at $2.1B/year, is almost as big as the primary market, at $2.3B/year, and nearly double the size of the registry's wholesale revenue of $1.1B/year. In other words, nearly half of the dollars end-users spent buying new domains go to domainers."

That has broad implications for anyone trying to get a .COM domain.

First, it means that many currently registered .COM domains are locked up by domainers. That in itself distorts the market and makes it challenging for a startup, organization, or person to get a domain that closely matches their online business or purpose.

Second, the scarcity created by locking up so many domains warps prices. According to BCG, the typical domainer price ranges from $1,700 - $2,500, but the average registrar retail price is only $16.58. And the price of a .COM domain is only $7.85 from the registry.

I found this out firsthand when searching for a domain name for a venture that I launched in 2020. The ideal domain was registered but not in use. If I were willing to pay GoDaddy $119, they would try to get it for me, but they calculated it would likely cost me $5,146. That's a lot of money for any startup to pay, but it is consumers who ultimately have to pay these costs.

Speaking as a person who advocates for technology policies that foster innovation and enable new businesses to emerge and flourish, the .COM market seems upside down — it's much more likely going forward that new businesses will be forced to deal with domainers than regular registrars.

And as a new business owner myself that doesn't seem right that entrepreneurs like me will be diverted to the secondary market that charges 150-200 times the retail price (according to BCG) just to establish a preferred online presence.

I don't know what the answers are here, and I'd encourage anyone interested in the domain world to read the BCG report. But it does seem that in the future, those looking for the right domain name are likely to spend more time digging deeper to pay a domainer.

By Mike Montgomery, Executive Director at CALinnovates

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Comments

Wow By John Berryhill  –  Feb 10, 2021 12:59 pm PST

This is an alarming development which you have discovered.

Do you have any ideas on what might be done to combat this?

Oh you tease! ;-) By Karl Auerbach  –  Feb 10, 2021 7:17 pm PST

Hi! Do I detect a hint of mockery?  ;-)

By-the-way, because I tend to hang out with astronomers, I would note that the potential number of first level names possible in .com is much larger than the number of stars in the known universe.  And only about 150 million of that number is in use.  So there's no shortage of choices, it's just that a lot of 'em would be gibberish in all earthly languages.

But from a realistic point of view - there is a strong reason why many names are held but for which there are no address mappings (i.e. no A, AAAA, CNAME) records.

Here are a few of those reasons:

As we know from first year law school one of the aspects of "ownership" is the right to exclude.  A lot of folks in business know from real practical experience that competitors love to play games - maybe not trademark violating games, but games nevertheless - to draw off web traffic.  So defensive registrations for no purpose other than to derail that activity are common.  There's no obligation that names actually be used, and if there were it would be easy to fabricate plausible, but actually Ptomkin Village, uses.

And once someone registers a name and puts up a website it becomes hard to abandon that name and move to a new name without leaving an open wound that is often rapidly filled with maggot websites that live off of advertising revenue and that, as a side effect, tend to damage the reputation of the abandoning owner.

Web search engine ranking and the mesh of established incoming links tend to create lock-in effects that prevent a name user from totally abandoning/selling/releasing a previously used name.  (My own domain, cavebear.com, has incoming links dating from the 1990's that are printed in physical books or in rather immutable places like the Congressional Record.) I keep several old names in use simply to hold old websites or to host a bunch of redirects.

(It's worth mentioning that there are plenty of uses of the internet that are not simply hosting World Wide Web websites.  So there may be a lot of names being used in ways that simple eyes do not notice.)

Personally I'm really bummed out that all the good lots near Pebble Beach, CA (just across the bay from me) are owned and available only for high prices (often about $30million.) Why should I have to pay such high prices to people who merely got there before I did?!  It's so unfair!  I really do hope that whatever "solution" is found for .com could be applied so that I could buy a nice 40,000 sq ft house at Cypress Point for cheap.

Who are these Domainers? By John Poole  –  Feb 10, 2021 2:04 pm PST

Mike, you need to go back and re-read that report and then do some research on your own. Boston Consulting reports "Most new domain Dot-Coms are registered in the primary market. In 2020, there were a total of 39M new domain registrations in the primary retail market as compared to 1M secondary retail market resales" or 1/40 secondary resales vs. 39/40 new domain registrations in the primary market. The biggest "players" in the .COM secondary market are the ICANN-accredited registrars, e.g., GoDaddy et al. ICANN publishes monthly reports of the primary market .COM registrations by registrar here.  But GoDaddy, the largest registrar in the world, also runs one of the largest "aftermarket" auctions (secondary resales) of .COM domain names, whose inventory includes .COM domain names not renewed by registrants, but still controlled by registrars who pocket the proceeds. The Boston Consulting Group report failed to explain any of that, and you, of course, jumped to ill-informed conclusions about "domainers." By your, or Boston Consulting's, definition of who is a "domainer," GoDaddy is the BIGGEST ".COM Domainer in the World" and no one even comes in a close second. GoDaddy not only resells its own and other registrars' .COM domain names through its own "after market" auctions, but it buys and holds for secondary resale, valuable .COM domain name portfolios from people such as Frank Schilling who also happens to be a new gTLDs registry operator and formerly also ran a registrar and aftermarket domain name brokerage business. If you want to truly understand the domain name industry and the .COM domain names markets, you will have to do more than read one very short and shallow report from Boston Consulting Group with its erroneous and unsupported conclusions. If you are having trouble finding a reasonably priced .COM domain name for a startup, you aren't looking very hard, [e]veryday there are around 10,000 .COM domain names that have been registered for 10 years that drop. That active "churn" in .COM domain names, is the biggest misunderstanding most people have about .COM domain names. ICANN completely ignored, or more likely, was completely ignorant of the significance of that active "churn" in .COM domain names, when it designed its new gTLDs program, and now wonders why .COM registrations are still growing while its "new gTLDs" are "dying on the vine."

Invent a name By John Poole  –  Feb 15, 2021 2:07 pm PST

On second thought, Mike, for startups without funding to get a great .COM domain name for just the registration fee, e.g., currently $8.88 at Namecheap, do what 2 graduate students at Stanford did when they found out googol.com was already registered, they invented a new word, "google" and registered google.com. Naming (and branding) is art and science, and can be fun. Go to a registrar like Namecheap that offers a dedicated .COM search tool (link above) and try it out. You'll be following in the footsteps of some of the greatest startups in history, e.g., microsoft.com, instagram.com, wechat.com, whatsapp.com, etc. With the inherent inventiveness of various cultures in the world, e.g., use of Pinyin in China, the possibilities for distinctive letter and word combinations that do not infringe existing trademarks, are well in excess of one billion .COM domain names (there are only a little over 150 million .COM domain names registered today). I wish you well in your adventures in .COM domaining!

You are confusing domainers with the aftermarket By Nat Cohen  –  Feb 10, 2021 2:30 pm PST

Any registrant of a domain name is a potential seller in the aftermarket.  The BCG article mentions the voice.com sale for $30 million. The seller was MicroStrategy, a public traded software company, not what most people have in mind when you refer to any domain name seller as a "domainer". Do you also classify the Farm Bureau as a domainer since it sold FB.com to Facebook for $8.5 million?

It is not shocking that 25+ years into the commercial Internet that most desirable domain names have already been registered, and if someone wants to acquire one, it requires purchasing it from the current registrant.

Just as it is not shocking that most land and houses have to be acquired from the prior owner and are not sitting available for homesteading.

Yet as John Poole noted, you buried the lede. 97.5% of registration activity involves the registration of a new domain name, according to the BCG stats - only 2.5% acquire a domain name from the aftermarket.

You haven't identified a problem.

Yes, but... By John Berryhill  –  Feb 12, 2021 10:51 am PST

Thank goodness that just a day after this insightful article, Verisign announced another .com price increase, to make the inventory costs of those nasty speculators higher.

It's a small price for every other .com registrant to pay in order to decrease the profit margin of those atrocious scalpers.

Discussion on Twitter By Nat Cohen  –  Feb 10, 2021 2:32 pm PST

This article generated some additional commentary on Twitter:

https://twitter.com/DInvesting/status/1359589719126990849

CALinnovates cited as an egregious astroturf organization By Nat Cohen  –  Feb 10, 2021 7:07 pm PST

"Big telecom companies like Comcast, Verizon, and AT&T;have a long and sordid history of funding 'astroturf' organizations. These front groups, who often hide their funding sources, are tasked with creating the appearance of public support for policies that, frankly no one supports, because they allow cable and phone companies to screw us over more than they already do.

"One particularly egregious example of this is CALinnovates, an organization that purports to advocate for startups and tech innovation, but takes big money from AT&T;to spread propaganda against net neutrality and Internet privacy protections."

From a blog post by Fight for the Future

I wonder who could be paying you to astroturf on this issue?

A liitle over $1M/year By John Berryhill  –  Feb 11, 2021 5:31 am PST

It would be interesting to know how much CALInnovates treasurer's organization, Blockchain.com, spent for that domain name, before claiming exclusive rights in "Blockchain" and going after Blockchain.io

https://apps.irs.gov/pub/epostcard/cor/264651773_201812_990O_2020011417029694.pdf

Verisign By Kevin Murphy  –  Feb 11, 2021 10:56 am PST

Verisign has form when it comes to astroturf. I've busted two of them over the years.

Back in the day "Steven Forrest", and more recently Zeus Kerravala.

http://domainincite.com/19546-pro-com-analyst-sponsored-by-verisign-is-this-a-big-deal

https://kierenmccarthy.com/2006/07/15/steven-forrest-outed-as-bill-hobbs/

Ouch By Christopher Parente  –  Feb 17, 2021 12:46 pm PST

Used to do work in this space, including at VeriSign way back but not so much anymore. Someone didn't brief this guy that the CircleID audience really knows its stuff. You throw weak stuff out here and you will be slammed.

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