Keep This in Mind When Judging a Registry's Success | DomainInvesting.com

Keep This in Mind When Judging a Registry’s Success

27

I often hear and read critical and/or snide comments about various non-.com domain registries and how many are presumed to be failures. Some people seem to think that if a registry doesn’t have millions of domain names registered and/or if the aftermarket for a particular registry’s domain names is weak, that the registry is a failure.

One thing we all need to keep in mind is that a registry does not necessarily need millions of domain names to be a successful business, and a successful business should be all of our goals. They do not need to have a strong aftermarket or frequent large sales either. If a registry covers its expenses and makes any profit at all, by most business accounts, it should be considered a success (especially if the founder’s pay is part of the covered expenses).

Let’s think about the new gTLDs for a second.

Let’s say I operate the .xyz registry and sell 25,000 domain names a year at $20 a pop. That’s half a million dollars in annual revenue. Let’s do some back of the napkin math and say I paid my one-time $185,000 application fee and another $200,000 for annual operations expenses and commissions so I don’t have to worry about managing the registry. If I pay myself $200,000 for being fat, dumb, and happy, my registry would be profitable in its second year, after all costs are paid, assuming a strong renewal rate (likely if many are defensive registrations). Again, this is some sloppy math, but you can imagine how it would be profitable.

To the average Joe, 25k domain registrations sounds like a failing domain registry, especially if the aftermarket isn’t churning big sales. However, having a half a million dollar revenue stream with low overhead is a damn good business venture in my opinion. It might not be glitzy, and the general domain investor public may look down upon a small registry, but it can be lucrative, especially when you consider that many companies would happily buy strong revenue stream businesses at decent multiples.

That is one reason why there are so many gTLD applications, and it’s another reason domain investors need to look at the big picture to see that there are many ways to get rich in the domain industry. There are of course lots of risks and expenses, but we should all look at the big picture sometimes and see that there are many ways to make money in the domain industry.


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (27)

    BullS

    Sounds so easy, go for it!!!

    “If it is too good to be good, then it smells fishy”

    May 12th, 2012 at 1:11 pm

    Elliot Silver

    @ BullS

    It’s a big financial risk since you need to put $185k up front and have three years of operating costs held in escrow (in case of bankruptcy). It’s a high stakes game of poker, and it’s not my cup of tea. I just think we all need to think twice when saying various extensions are failures, when in fact, they are profitable and make good money.

    May 12th, 2012 at 1:21 pm

    Leonard Britt

    What obligation does the registry have to the registrants if it is losing money? Imagine for a moment that 80% of year one registrations are speculators hoping for a quick resale. Then after a couple years with disappointing aftermarket results they drop most of the names. The registry starts losing money. But there are registrants/customers so what obligation does the registry have to continue operating even though it is operating at a loss? What happens to websites launched on this TLD if the registry shuts down? Poof! or do they get picked up by a larger registrar such as Godaddy?

    May 12th, 2012 at 1:27 pm

    Elliot Silver

    @ Leonard

    I think ICANN has regulations if a registry fails. I would imagine a competitor could buy that registry. I believe that is one reason ICANN requires the registry to have years of operations expenses escrowed so it helps mitigate that risk.

    Personally, I don’t really speculate much on anything other than .com. I may have a few here and there, but I don’t want to buy a name in another extension and hope and pray the registry does a great job with marketing. I am much more of a proactive investor rather than a passive registrant.

    See the doteco comment regarding the escrowed funds in the event of bankruptcy: http://mashable.com/2011/06/20/new-gtld-faq/

    May 12th, 2012 at 1:33 pm

    Thomas

    Follow the promotion in some blogs referring to the new gtlds. Good business strategy in these times where money is limited. Quite possible that many investors take the bait.

    May 12th, 2012 at 1:48 pm

    Elliot Silver

    This is admittedly a very simplistic view of registry costs.

    May 12th, 2012 at 1:50 pm

    Thomas

    Investors: domainers, small business, end users, novice, uninformed, spenders, exited, ……….>

    May 12th, 2012 at 2:00 pm

    Brad Mugford

    First of all I think the operating costs are going to be more than $200K for virtually any registry.

    I don’t see many registries being one man operations
    You need at least some employees.

    Also, the above example had $0 budgeted for marketing and promotion.

    How many new gTLD are likely to get 25,000 registrations with no promotion? Not very many.

    Outside one like .web, 99% of these generic keywords don’t have 25,000 words that fit the extension.

    Brad

    May 12th, 2012 at 2:06 pm

    Elliot Silver

    @ Brad

    I am pretty sure that there are companies that will manage the registry on behalf of the owner of the registry. Assuming that, one employee is all that would be necessary.

    It might very well be a challenge to get 25,000 registrations, but I assume there are going to be a lot of defaults defensive registrations, which will continually renew and have a high renewal rate.

    Of course, the better tlds will have lots of applicants, so those costs will be much more high.

    That said, I have hearf that there are registries today that don’t have huge amounts of registered domain names, but they are profitable because costs are low.

    May 12th, 2012 at 2:16 pm

    theo

    ICANN requires a solid business plan when you file for gTLD.
    Startup costs are around half a million if you do it yourself.
    Though N+M could do it cheaper for you.

    When the gTLD fails there is something called EBERO.
    http://www.icann.org/en/news/announcements/announcement-29nov11-en.htm

    The big question is , will those gTLD’s have enough registrations to keep the boat floating ?
    with over 2000+ GTLD’s as it stands now it wouldbe logic to conclude that atleast half of them will do down within 3 years.

    May 12th, 2012 at 2:19 pm

    Bfitz

    Coincidence! I just registered my second .us.com. a one word city geo for a pure PPC promotional effort. Getting to the top of PPC is costly in some verticals and exact match keywords greatly improve performance and reduce cost per click.

    May 12th, 2012 at 6:40 pm

      Elliot Silver

      There was a comment from ojohn that got caught in my spam filter and I accidentally deleted the group including that one… I apologize about that.

      May 12th, 2012 at 10:39 pm

    ojohn

    At first glance the math seems to support your idea, but lets consider a few factors that might come into play.

    - As there might be over 200 new gTLDs released in the first batch there is no guaranty that any given gTLD is going to have the minimum 25k registrations in order to be profitable, only the most popular gTLDs might get to that range, the majority of the new gTLDs might get less than 5k registrations.

    - This is going to be different than the way it was in the past when TLDs such as .Co were able to get everyone’s attention because they were the only game in town, now there are going to be hundreds of new gTLDs that are going to be released at the same time and they all have to compete for all the registrants that in the past only went to a few registries.

    - A lot of the registries in the past have depended on the domain speculators and investors in order to get their registry started, but even though there is a lot of money in the domain industry, but the economy of this industry as a whole is relatively small, that means that there might not be enough new dollars to go around to all these new registries when they all open at the same time, most of the money in the domain industry is already tied up in .com and some of the other already established TLDs also some of the TLDs that were smart enough to launch in the past couple of years have managed to empty the domainer’s and investor’s pockets and so not much new money is left to sustain all these new TLDs that are going to be released in the near future.

    - Some of the big brand TLDs (such as .google) might decide that it is in their interest to give people free registrations and if there are ten other big brands doing the same thing then that is going to cut down on the number of paying registrants that are needed to sustain the other new TLDs.

    The conclusion is that not all the new TLDs are going to be the same, some (perhaps a few) will become very successful, and some (perhaps the majority) will have to struggle to survive, and some might not even become open to the public and thus wouldn’t need any paying registrants in order to function. (just my opinion)

    -

    May 12th, 2012 at 10:42 pm

      Elliot Silver

      @ ojohn

      Very good points – thanks for posting.

      May 12th, 2012 at 10:43 pm

    ojohn

    “There was a comment from ojohn that got caught in my spam filter and I accidentally deleted the group including that one… I apologize about that.”

    @ Elliot

    don’t feel bad about it since it worked after I posted it for the second time.

    -

    May 12th, 2012 at 11:01 pm

    Elliot Silver

    Thanks :)

    May 12th, 2012 at 11:01 pm

    ojohn

    @ Elliot

    Now if you want to make it up to me you can pass the word around to some of your high roller buddies in the domain industry about my domain “ForSale dot US” which I have just sent to auction at Sedo. :)

    -

    May 12th, 2012 at 11:19 pm

    Elliot Silver

    @ ojohn

    I only hang out with low rollers!

    May 12th, 2012 at 11:21 pm

    ojohn

    I thought you were a member of the domain millionaire club. :)

    -

    May 12th, 2012 at 11:31 pm

    Seb

    I thought the cost to open a registrar were in the 25K region, not 185K?

    May 13th, 2012 at 3:49 am

    Elliot Silver

    @ Seb

    Application costs are $185k.

    @ ojohn

    No comment :-)

    May 13th, 2012 at 8:26 am

    Sam i am

    I agree with oJohn that 25k is not at all realistic. Way too high. I agree with him that under 5 will be closer to the truth.

    I agree that you forgot to incorporate the $10,000,000 that will be needed to educated the public of your extension’s existence.

    You made it sound like people will line up to pay $20/year for your gtld, yet are conveniently overlooking the fact that they can easily get a preestablished .com for 1/2 that price and not worry about traffic leaks.

    The traffic leakage will be substantial. Just as overture discovered so to shall registrants of GTLDs.

    May 13th, 2012 at 9:37 am

      Elliot Silver

      @ Sam

      How many companies like Google, Microsoft, Verizon, and others do you think will defensively register trademarks? I bet it will be quite a few, and that will make up a fair amount of registrations. In addition, there will be speculators and others who buy for various reasons. I don’t think 25k is far too optimistic.

      May 13th, 2012 at 9:41 am

    BFitz

    How is starting a gtld with the intent of getting defensive registrations from TM holders any different than registering a domain that is a obvious TM infringement with the intent to sell to TM holder? Does not pass the sniff test.

    May 13th, 2012 at 10:17 am

    Elliot Silver

    @ BFitz

    I think that’s more of an ethical decision than legal since you can buy TM names without a problem, meaning that registrars are able to sell them. There are many trademarks (like Apple for example) that cover specific fields and industries but wouldn’t be protected otherwise. An apple orchard could own Apple.xyz if it didn’t sell anything related to technology.

    May 13th, 2012 at 10:20 am

    BFitz

    Fair enough but often the comments about this topic mention the high likelyhood if getting defensive regs. Even Rick, I believe, mentioned enough is enough when xxx launched.

    Maybe watching two seasons of Boardwalk Empire in two weeks has effected by judgement.

    May 13th, 2012 at 12:28 pm

    theo

    there willbe a trademark clearinghouse that needs tobe implemented by the gTLD registries.
    This will make sure you cannot register something like rolex.web

    The idea is that all trademark holder will fill this database with their trademarks and those words/names willbe excluded tobe registered.

    At the moment ICANN has not yet announced who or what willbe handling it.

    May 13th, 2012 at 3:51 pm

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