How money gets made when people snap up web domains
There’s something of a gold rush happening in the world of internet domain names – specifically in what comes after the “dot” in a web address.
Amazon recently bought “.buy,” meaning it now has the rights to all web addresses ending in that extension.
The number of top-level domains – those suffixes at the end of the dot – is greatly expanding because ICANN, the Internet Corporation of Assigned Names and Numbers, began a process several years ago to increase the number available.
“The ICANN board decided to offer up a bunch of new top-level domains, dozens and dozens of them, to some controversy,” says Jonathan Zittrain, a Harvard University professor of law and computer science. “And that raised a bunch of money for ICANN and has created a bunch of new names like ‘.clothing’ that people can use.”
The nonprofit ICANN brought in $80 million from domain registration fees last year. A case can be made that having more domain suffixes available will free up names that are currently taken, but it is also the primary cause for concern, according to Zittrain.
“The reason why there would be controversy would either be resentment by people who already operate top-level domains,” Zittrain says, “and also by trademark holders who may be under the impression that in order to protect the good brand of Coca-Cola, they need to register ‘Coke-dot-everything.’ And if there’s just going to be more names, they better have Coke-dot-clothing, so that no one else can get it. I think at some point, that impression may not be true.”
The new suffixes started appearing on the Internet this year. The result has been an online land grab. (Amazon paid $4.6 million for .buy.) Other companies are amassing a number of domain suffixes, with the hope of capturing one that will take off online.
“The companies that are able to monetize and sell this new property that they’re picking up have the potential to make a lot of money,” says Blair Hanley Frank, a correspondent for GeekWire.com.
Money is made up and down the domain-name food chain.
ICANN gets paid for every domain name that’s registered. And registries, which ICANN licenses to operate top-level domains, also receives a fee for each website name registration. (VeriSign, for example, operates .com domains.) Finally, registrars like GoDaddy.com make money by selling website names.
“You’ve got a lot of different companies all vying to pick up little pieces of property and potentially make a lot of money,” Frank says. “Because, if one company happens to be the one owning ‘.photography,’ there’s a chance they could make a lot of money. There’s also a chance it doesn’t take off at all.”
Companies are trying to acquire a number of top-level domains to hedge their bets. Taryn Naidu, CEO of domain-name services provider Rightside, says his company has applied to own a vast array of domains that include .army, .democrat and .republican. In the last three months, Rightside has launched 15 new suffixes – and has had some 80,000 registrations.
But the challenge has been getting people to realize that the new top-level domains are out there.
“Right now user awareness is at the lowest it’ll ever be,” Naidu says. “So we’re pretty excited about what the opportunity is ahead of us – you know, the most transformative thing to happen to the Internet in the last 10, 15 years.”
It’s transformative and lucrative. ICANN alone expects to make $20 million this fiscal year, just from all the new top-level domains.
“It’s not like it makes the front page of most newspapers, but there is now a fairly active ‘domainer’ community,” Zittrain says. “And the expansion of the top-level domains has certainly reinforced some of that perception.”
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