New gTLDs—The Challenge for IP Professionals
ICANN’s announcement that it would expand the Internet with thousands of new Top-Level Domains was accompanied by a burst of hype: a new Gold Rush will dawn. Entrepreneurs lined up to make their fortunes. But the hype was met with a mixed reaction from IP professionals responsible for defending brands who wondered if these new fortunes would be made at their expense. ICANN addressed these concerns by creating the Trademark Clearinghouse (TMCH). But would brand holders still face a new surge of cybersquatting—this time with far too many TLDs to attempt an old-fashioned strategy of “register everywhere just in case”? Where should they focus their time and money? The TMCH is a good tool, but how can it be used to best effect? (See our recent post on best use of the TMCH). Now that some 250 new TLDs have launched and are starting to develop real-world track records, what lessons can the IP professional learn?
The first step is to distinguish between protecting a brand and registering a domain for use. If you want to use a URL, it’s simple: first and last, does the domain fit? How many of today’s URLs, even company names, are the result of trying domain after domain, less and less attractive, only to find them all registered—until you end up with one that you would never have considered at the start of the process? For example: you make furniture and you cannot get your brand or marketing term in .COM. Your team is growing desperate as they consider second, third, fourth choices—awkward variants or obscure international country code TLDs. If ‘yourbrand.furniture’ suddenly makes them cheer up, it has clear and substantial value. Register it! Use it! Who cares if the TLD itself has few registrations if the domain serves you well?
The issues are different when you’re protecting a brand. How do you choose where to register and where to watch? Granted that no TLD is too obscure for a cybersquatter, the relative success of a new TLD will affect its popularity for all uses, benign and malign. You need to understand the business models being tested in the new gTLD industry to see where it will go and what to look for. You are coping with somebody else’s Gold Rush, after all—you’d best know the territory so it doesn’t happen at your expense.
First, Review the Basics
ICANN’s New gTLD Program will add over a thousand new gTLDs to the root zone to enhance competition, innovation, and consumer choice. The “first round” will create a maximum of 1,409 new TLDs.
Some are single-registrant TLDs, so-called “.BRANDs” (e.g., .YAHOO, .IBM, .STATEFARM, etc.) in which a company runs its own private registry. Not many have launched yet, but we have seen the first company to jettison its .COM for its .BRAND. The state-owned Chinese company CITIC now forwards its .com to .CITIC. Some are gTLDs open to multiple registrants; these come in a wide range of restrictions, from none at all to tightly vetted professional affiliations. Some are geographic (“geoTLDs”) with or without a local presence requirement.
About 250 new TLDs are now live, with hundreds more to come. We recommend you pay close attention to our New gTLD updates, which present this information in a digestible format so you can make reasoned decisions about where you should—and should not—register.
Understanding the Industry Today: A Gold Rush, With Approaching Consolidation
The new gTLD value proposition is not just in bypassing the fact that almost all useful .COMs are taken. it’s that .COM is a neutral, colorless term that is powerful only by historical accident. The idea, learned from the explosion of social media, is that a next-generation TLD will tap into more durable affinities—identity, industry, geographic location. Facebook spans the earth, but an enormous number of its users lose interest every month. The business model of a new gTLD registry is not just to collect registration and renewal fees, it is to create smaller but more durable online communities intuitively attractive to web users, and to give higher priority to search engines and higher value to advertisers.
New TLD founders are entrepreneurs gambling that they can anticipate which communities will form— “build it and they will come.” Getting a single TLD through the ICANN approval process costs a quarter to a half million dollars so it’s an expensive bet. Some players, like Donuts, have the capital to apply for hundreds of TLDs and see which ones take off and which fail, but many are so small that they must bet everything on a few applications, or just one.
The most promising TLDs attracted multiple applicants and the subsequent bidding wars between applicants are won by the deepest pockets. Because the ICANN resolution process involves winners paying losers to go away (sometimes for large sums) there are some happy losers out there. Some of them use what they are paid to win a bid on another TLD. But the result is that small players often end up with riskier TLDs because nobody else applied for them.
Many of these small registry operators underestimated their costs to get this far and find themselves undercapitalized to build and market a working registry. Most operators overestimated their registration numbers and many know they will not last for the long haul. They look to boost their registration numbers as much as possible in order to sell their “community,” so they sometimes resort to giveaways which provide a distorted picture of real success.
Not even unsuccessful TLDs will shut down; ICANN mandated that each successful application include a party committed to take over if the original applicant fails. Already successful registries are eager to take over the TLD even if its registrations are few once the price is low enough. It offers easy registration and renewal revenue plus a marketing opportunity without adding staff or infrastructure. Registrants need not worry much.
A wave of consolidation is widely anticipated once investors have a chance to see which registries succeed and some realistic benchmark for market value evolves. These consolidated operators will provide investment vehicles large enough to satisfy Wall Street, which has no use for the small operators.
So Where Does Real Long-term Value for the Brand Holder Lie?
Real long-term value exists in TLDs that are registered and used by consumers, not just domain speculators, cybersquatters, and brand holders fighting the first two. Some TLDs with high numbers of registrations have very few registrants who actually want to use a domain (remember .XXX?). But search engines are not fooled; they are adept at tracking real users and TLDs without them will get low rankings. Some TLDs will develop over time and some will taper off. It’s too soon to be sure what success means, but not too soon to talk about what we are looking for.
Ranking by the Numbers
The number of new gTLDs registered now stands at 2.2 million. Despite the new gTLD operators complaining about their numbers, the trend is steadily upward.
.XYZ is now in first position with over 500,000 domains registered to date, followed by .BERLIN with 139,000, and .CLUB with 105,000.
But simple total registration numbers can be misleading, because they partly reflect how long the TLD has been operating. And not all registrations are the same. For example:
• Network Solutions gave away about 377,000 free .XYZ domains to registrants unless they opted out (Source: TheDomains.com). How many will renew? But even without those it would be in the lead. Viewed as a social media “play,” what matters is whether having “.XYZ” at the end of your domain name will sound hip or ridiculous in two years’ time. We’re in no position to say. Before you judge, consider that a single Japanese registrar accounts for 55,000 .XYZ registrations, a single Chinese registrar for 26,500. Can you predict this TLD’s appeal in those countries? Given that .XYZ has already defied expectations (not to mention condescending predictions of immediate and embarrassing failure) we’ve begun to advise clients to register in it, if only for defensive purposes at this point.
• .BERLIN gave away domains too, but it’s very likely that .BERLIN will be a hit nonetheless. We maintain that major city TLDs are among the best bets in the new gTLD space because they build on longstanding communities. How many nation states have come and gone while Berlin and Berliners remained?
• .CLUB is in third place and it seems to be a good fit for the social network business model, offering online hubs for small but committed communities. It’s noteworthy that .CLUB has now surpassed the .XXX extension which had an almost three-year headstart.
A new gTLD’s prospect for success is shaped by who operates the registry, by which we really mean Google, Amazon, and Microsoft. Never mind where their registration totals stand. Who doubts that these brands will bestow instant credibility on their TLDs in consumers’ eyes? Above all, Google will lead in adoption because it’s going into retail domain sales with Google Domains (sorry, GoDaddy) and its customers will be prompted to try a Google gTLD. Brand holders would be prudent to track which TLDs are assigned to the Big Three as the ICANN process unfolds, so we’ll highlight this in future NgTLD Updates.
What should you do next?
Corsearch advises you to watch your inbox for our regular announcements of new gTLD news. We’ll do our best to keep current on approaching launches with the context you need to help you tell the wheat from the chaff. ICANN is expected to announce its schedule next year for the “second round” which it won’t launch until it has evaluated the first. Keep an eye on the rollout of .BRAND TLDs, to see whether you should consider one in the second round. In the meantime, leverage the TMCH to best navigate the new gTLD Gold Rush. Note that the first TMCH renewals are already coming due; if it’s worth registering your mark in the TMCH at all it’ll be worth keeping it there for the second round, so consider a multi-year registration.
Stay tuned for information about our upcoming webinar, “The nTLD Survival Guide”, coming soon.