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How solid is the customer relationship with the new gTLDs? Is any registry making decent money?

Some new domain extension (new gTLD) registry operators may be doing OK or even much better than OK despite lackluster volume. Unfortunately for more than a few, not so much.

DOMAINER LOOKING AT COM VS NEW GTLD

It’s not just the number of domains under management (DUMs) that may indicate the relative health of a particular TLD registry operator and/or its future relationship and up-sell revenue potential with the end user.

Just because a new gTLD registry has 1 million+ names under management does not confidently indicate to me that they have a solid long term relationship with the majority of their end user customers, and thus solid prospects for long-term continued recurring renewal revenue.

Cases in point: Some of the top 10 selling new gTLDs have average create terms of just barely over 1 year.  Like 1.01 and 1.02 years.

That means they are going to have to work even harder and spend money or giveaway a lot of marketing dollars/incentives to keep that business at renewal time—and hopefully for more than a few dollars per name year.

I’d bet that barely 6 months after selling a 1 year create they have to start thinking about how they are going to get renewals in place. In my mind this takes management/investor focus away from developing a proper name product that demonstrates value to the customer, and that has decent margins for everyone involved in the value chain, vs. having to focus on short term domain renew goals and bother the hell out of registrars and others down the line.

Sure some have reported decent renewal rates. But we’ve heard frank comments coming from experienced operators recently warning to expect lackluster renewals in the coming months.

It’s not easy out there in the new gTLD name space. But you already knew that.

So what other metrics can one use to measure the relative health of a particular new gTLD and prospects for long term relationships with their end users?

One metric I look for is Average Term in order to estimate Total Name Years under management—then at what average net wholesale price per name year after all rebates/credits/free name years/marketing etc. are taken into account.

Unfortunately most registry operators do not publish such metrics for a variety of reasons. However if you dig around a bit sometimes you can find data points to help you do the reverse math to get some idea how someone might be doing.

I submit that there are new gTLDs with seemingly insignificant numbers that may be making decent money from a registry operator standpoint, although on the surface their low DUMs number might make it look like their staff is just wasting time converting oxygen into CO2.

For example, there is in fact a new gTLD registry operator with a little over 9,000 DUMs that might not look like a long-term player at first glance based on that number alone, but appears to be banking decent revenue.

According to NameStat this registry operator has an Average Term for all those names equalling just slightly greater than 8 years, the highest of all the new gTLDs. So doing the math it indicates they have about 72,000 name years under management.

If a new gTLD registry has an average term that is 1.25 years or greater then something is going well.

Unless they are giving away multi-year registration or renewal terms for zero or little change then I submit they may be doing well with direct B2B sales to actual end users willing to pay upfront for much longer terms than the average domainer. Of course some registrars may default their GA create offers to 2 years and that can also be a factor.

I dug further.

This operator is largely selling direct at ~$430.00 retail per name year in the mid-range of their pricing/service offers. The lowest retail price product is $185 retail per name year.

Yep you read that right.

There are also extra one-time service fees on top of the registration fees, and even charges for periodic changes to registration information.

Impossible you say?

OK. I did notice they were giving away some extra name years that can apply to a second name registration if you purchased or renewed a certain minimum term to start. If you only apply the lowest retail fee they are offering, which appears to be $185 per year and multiply by the average term of ~8 years, there’s potential for $13,320,000 in upfront direct retail sales revenue with no pressure to have to worry about renewals for nearly a decade.  And that’s still not including mandatory service charges and other fees.

Not too shabby.

Which guys with less than 10,000 DUMs are possibly getting those kinds of numbers? Well, it is a Chinese IDN that is mostly selling direct.

An IDN???  Are you kidding???

Nope.

A Chinese IDN that’s very restrictive. In fact more restrictive than many ccTLDs.

It’s .商标 (DOT SHANGBIAO). Translated to English it’s the “trademark” domain.

It’s first come, first served, but they apply a serious validation process. Within China there is 2-layer authentication, where the registrant must first pass the registry’s real name registrant authentication (real name verification) and then a trademark verification process.

Over 90% of the registrants are from within China. The rest are foreign registrants doing business in China. (e.g. Gucci, Starbucks).

trademark web site home pageThe registry operator is Huyi Global Information Resources (Holding) Company Hong Kong Ltd. They also have offices in Beijing and Guangzhou, China. The parent company has deep experience in directory services, intellectual property protection services and B2B trading platforms in China. They’ve got more than 200 trademark service companies working with them right now to help sell DOT SHANGBIAO domain names…presumably for multi-year registration terms mainly via two Huyi controlled registrars.

I recently corresponded with Walter Wu, the President of the registry operation. He’s a soft-spoken and long-time industry friend of mine.

Walter is no stranger to the domain name business.  He was co-founder of China Springboard, which provided managed DNS, online advertising, domain name investment and online media development services leveraging direct navigation. He also was founder and President of NameRich, one of the early leading pioneers in the China domain aftermarket.

Walter confirmed the retail pricing indicated on their website and corroborated average term and total domain name years.  Of course the actual wholesale price is going to be lower than the retail price.  Still, if you look at the direct sales model there’s plenty of room for margin in the value chain. I’d imagine it’s better than what some of the top 10 ASCII new gTLDs are depositing these days to their bank accounts.

I asked Walter: “Why do you feel that enterprises are starting to purchase IDN’s? And in particular why do you think they are purchasing [your TLD] .商标?”

He opined “…IDNs provide an opportunity to let an enterprise use their core brand name for their online entrance.”

He added: “…before the IDNs launched, Chinese users could only use their indirect brand name (maybe in Chinese pinyin, or maybe their English name). But those types of names are not easily remembered by Chinese users. IDNs provide the solution for Chinese brand owners to use their core brand name as their domain name which is easily remembered in 3 seconds by customers. Recently the value of traffic is very high. SEM costs too much to get the traffic for enterprises. So applying the IDN, it’s easily remembered. Expanding the IDN direct type-in traffic is a good best practice for Chinese enterprises.”

Do the math and you can start getting a feeling for the potential by selling just a couple of thousand new names per year with an average term of 8 years.

If you take a look at NameStat you will find that as of today 8 of the top 10 new gTLDs (ordered by average term length) are Chinese IDNs. The only exceptions are .MMA (a brand TLD) and .CODES (a Donuts TLD).

I caution that just because a TLD has a high average term it does not necessarily indicate a particular level of revenue, or that they have a solid long term relationship with their end users. It is theoretically possible that some TLDs are assigning inventory to certain registrars for extended terms at lower costs to later resell to end users. However in the case of DOT SHANGBIAO this is not possible due to the registration restrictions.

In conclusion, yes it seems that some new gTLD operators are making decent money. It appears to me that direct B2B sales can work for some new gTLDs depending upon the domain product and access to a related database of customers.  Designing a TLD registry operation business plan so that sales organizations sell high average term lengths at decent margins will enable management to focus on new customer acquisition growth and product innovation vs. spending dollars and time to convince registrants to renew year after year at insanely slim price points and margins.

It appears that Huyi and .商标 (DOT SHANGBIAO) are able to leverage customer relationships that already exist in the value chain and offer an extremely restricted domain product that customers are willing to spend thousands of dollars for upfront—and use. The long term relationship will enable future potential to expose other complimentary services to the customer base.

 

 


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The Great Domain Correction of 2017?

There were only 1.8 million registered .com names when I joined the NSI (Network Solutions) Marketing Team in the summer of 1998. ICANN was formed just a few months later.

By the time we were acquired by Verisign in June of 2000 there were roughly 14 million names in the .com database. I recall predictions that one day there would be 100 million registered .com names. Some thought that was a craaaazy number and wanted to know what we were smoking.

To me achieving that number seemed possible, but that it might take a decade or more. The market then paused for a few years. Looking back it was incredible buying opportunity for those that understood the long term value of good generic keywords in the form of .com names. Today Verisign manages roughly 128 million registered .com names.

Relative to today’s lean operations at many domain registries and registrars, it’s hard to believe that back in 1998-2000, with a monopoly position and .com practically selling itself, NSI employed 50+ people on the marketing team pumping out the .com message day and night.  Messaging that included how .com could be used with this incredible “killer app” called “email” where you could have an address such as mary@flowers.com instead of marysflowers582@aol.com.

Now it seems that some TLDs are at a growth pause or experiencing negative growth, particularly in the cases of some new gTLDs that were heavily promoted in China, or where promo deals were done with greater China area registrars. I don’t need to call them out. You know who they are.  

Today’s market and regulatory conditions surrounding the creation and trading of domain names is quite different from market conditions that existed in the past. The China bubble has burst and the free-to-nearly-free domain create promos don’t seem to have worked. 

Some registry and registrar operators seem to have never adjusted to the new realities, or figured out how to leverage all the incredible data, tools, and experienced human intelligence available to them today vs. relatively little that was available to us 15-20 years ago, not to mention common business sense.

Some registry operators have latched on to a PR huckster type of introduction to the Chinese market that might please inexperienced applicants and domain name investors at first, but does little to demonstrate value compared to .com or the local ccTLD (such as .cn) and how to achieve scaled up real business and end-user utilization of a particular TLD via the registrar channel.

I’m not immune to this and have learned tough lessons via my personal and business experiences in China over the years. Sometimes the best way to gain traction in a foreign market is to say as little as possible publicly and really learn how the market and culture operate before you press on with operations, marketing and sales.

Especially for China. China is HARD.

You will not be successful there, as a foreign registry operator, at a minimum, unless you understand that you will likely lose money or barely break even for several years and are prepared to deal with that reality. You must be in it for the long term. Long term, at a minimum, is 5 years of sweating it out (flying back and forth on a near monthly basis) before things *might* work out.

Over the short to medium term the domain industry is likely to shed inefficient registry and registrar operators and investors, especially some of those who banked on new domain extensions (new gTLDs) that have no real consumer traction—which are many— and can no longer, or are just unwilling, to fund the basic holding/operating costs, let alone fund any marketing team or person.

For sure there is an easily foreseen correction—if not outright registration numbers recession—going on right now for some in the domain industry. Perhaps a short growth pause for .com and some ccTLDs, but their long term outlook to me is strong (same for some generic IDNs) as they do not need explaining to their primary target markets.

In case you didn’t read the latest Verisign Domain Name Industry Brief, the 294 ccTLDs make up about a 43% share of total global domain registrations, with the top 10 ccTLDs composing nearly 65% of the overall ccTLD count.  This has been rather consistent over the last 8 years, nudging from about 40% of the total market in 2009 to today’s 43%.

By comparison, the roughly 1,224 new gTLDs have only managed to capture about 7.7% of the overall global domain registration total, with the top 10 new gTLDs composing 64% of the total count—and that top 10 list is likely to shift around a bit in the coming months.

In May of 2013 I posted my thoughts on Zone file size of the average new open gTLD in 2016 and stated:

“…if applicants, the channel, and the industry as a whole do a bang-up job educating, marketing and selling their value props through existing and new channels—essentially hit the ball out of the park—we could see the global market share for new gTLDs in aggregate reach 18% by the end of 2016. I mean they/we/you would have to *kill* it to get to that point. That would be an achievement that means at least three times better performance in 3 years than what the legacy sponsored TLDs have achieved in the past 12 years.”

It is clear now that the new gTLD industry has not “killed” it.

Don’t get me wrong. There is money to be made with non .com TLDs depending upon your portfolio size, function and purpose to the industry. Even in China. There will continue to be plenty of opportunity there, and risk. (Disclosure: I provide consulting services to registry operators doing business in China or that have China on their radar.)

I think some new gTLD portfolio holders and backends are in a position to take advantage of the situation if they can carefully manage expenses for the next two years and don’t bet the farm on China. This includes ICANN, that may need to shed some personnel as a result of what may be “The Great Domain Correction of 2017.”

Last, I’m thinking some domain types that had dollar signs in their eyes just a few short years ago may be now wishing they invested the same funds into bitcoin!

Speaking of bitcoin, its status in 2017 reminds me of .com in 1998. It’s a relatively new digital asset that sells itself and appears to be enjoying rapid traction in a relatively unregulated “wild west” type of market. The “killer app” seems to be the blockchain and big time household names are paying attention. It doesn’t need much of a marketing team and the general public still doesn’t quite understand its future significance. 


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2017 Global Domain Industry Summit slated for 7-9 July in Xiamen, China

One of the largest domain conferences in China will proceed with its second act this July in Xiamen, China.

UPDATE: The conference website seems to be only in Chinese at the moment. However according to English documentation that I have obtained, the conference will be held at the Swiss Grand Hotel.  It will feature multi-platform real-time auctions. They are stating “Ten platforms: 10,000+ bidders…” Auction items will include “user submitted quality domains and reserved quality domains from registries.”  Besides new gTLD auctions, they are indicating domain names will be on auction for “Double Pinyin, NN, NNN, LL, LLL.”

Ticket prices range from an incredible $19 for a “Common Ticket,” which gets you in the door to the entire meeting and even the “closed-door” sessions, plus the chance to network and get invited to non-published events by sponsors and such.  However if you’re looking to attend the lunches, welcome wine party, round-table dinner and want your 4 or 5 star room included in the deal, it will set you back anywhere from $199 for a “Silver Ticket” to $299 for a “Gold Ticket,” or $399 for a “Diamond Ticket.” That’s a steal by western standards. 

Xiamen is a lovely metropolis with fabulous outdoor markets and attractions. It’s known as China’s “domain island” where several domain name registrars and domain investors are located.

It’s on the coast and about an hour and a half flight NE from Hong Kong, or about three from Beijing. Last I checked, it will take you 1 or 2 connections to get there from the USA or Europe.   You lose a day when traveling there from overseas, so for USA folks that means you can still enjoy the 4th of July, leave on the 5th or 6th, and get there in time for the start, although you may have to deal with the jet lag.

I’ve been to Xiamen several times in the summer and it can be rather warm and sticky, even for someone like me that’s originally from Houston. But don’t worry, they have A/C.

I have to say that everything seemed well-organized last year for a conference with over 1,000 attendees, at least from an attendee point of view.

So last year, on behalf of ChopChop.domains, I put together a video summary of the first event held in Hangzhou that will give you a little taste on what a Chinese domain name conference is all about. I also had all of about 7 minutes to grab the person that ran the entire conference on behalf of the main organizer, BizCN.com, and do a quick video interview with her. It sheds some light on the increasing role of women in the China domain name industry.

The site for this year’s conference is at www.GDSday.com


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39 days on the road

Back home in Austin after 39 days, 7 countries/territories, 13 flights, 7 hotels, 2 rental cars, countless meetings, Ubers and taxis—and 1 carry on for the whole shootin’ match.

It’s the longest I’ve been away from home in years, although some of that time was spent working from my “second” home in Ireland, where I was a resident for five years.

All told I’ve spent nearly three months total in China alone in the past year. It’s been rewarding learning so much from my Chinese colleagues and friends.

Here are a few pics from various meetings and events with registrars and others in the domain biz in China over the past few months. Some of the friendliest and hardest working people you’ll ever meet in the domain name industry.


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VIDEO + PHOTOS: 2nd China Domain Name Development Conference

*The following is a courtesy republishing of an original blog post by TLD Registry Ltd.

Just a few weeks ago, on January 10th, TLD Registry was a proud sponsor and invited speaker at the 2nd annual China Domain Name Development Conference held at the Beijing New World Hotel.
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The event was co-organized by the Ministry of Industry and Information Technology (MIIT), the China Academy of Information and Communications Technology (CAICT), the Internet Society of China (ISC) and the ICANN Beijing Engagement Center.
Attendance was reported to be over 300 (triple vs. last year), consisting of registry operators, registrars, domain investors, the media and representatives from MIIT, CAICT, ISC and ICANN.
There were plenty of content and networking opportunities to keep one busy the entire day. This is just a partial list of some of the topics that were covered:
  • Domain Name Industry Regulation.  Review of 2016 and outlook for 2017.
  • Internet development trends in China
  • Domain industry development trends in China
  • UASG: Where are we now.
  • Report on Chinese IDN Universal Acceptance
  • Roundtable: Domain names in the new era
  • TLD entry license and review
  • Evolution of DNS structure and security practices at China Telecom
  • Trends of new gTLDs in the China Market
  • Analysis of the Digital Assets ecosystem and its future
Our CEO, Mr. Arto Isokoski, presented on “Providing innovation to the Chinese domain name marketplace.” He offered comments on the China opportunity, the importance of the digital economy, and upcoming Chinese IDN email initiatives.
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Our VP, Mr. Pinky Brand, participated in an extensive roundtable discussion: “Domain Name Market: The Next Step” with representatives from CONAC, Rightside, GMO, 190.com, West.cn, Yuwei, Domain.cn, RITT, and Afilias.
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As at any domain name conference, one of the best benefits of attending is the opportunity to network! There was no shortage of opportunities to do so in Beijing, especially at dinner, where many of the “who’s who” of the China domain name industry were on hand to talk shop and visit with old and new friends.
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In addition to the photos posted above, we’ve also created a short 3 1/2 minute video and photo montage to give you a taste of our day at the conference. We look forward to participating again!  Enjoy.
*The above is a courtesy republishing of an original blog post by TLD Registry Ltd.

New gTLDs – The Movie

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Here’s a video trailer I produced and edited for DomainDiction. It’s a tongue in cheek take on the new gTLD program. The ending graphic might make you think a bit more, assuming you heard about Fadi’s comments last week at the regional ICANN meeting in Amsterdam.