June 2008                 DNJournal.com               The Domain Industry News Magazine

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ICANN Plans to Introduce an Unlimited Number of New Domain Extensions Starting Next Year - So What Does That Mean for Today's TLDs?

Without a doubt the hottest topic in the domain business this month is ICANN's decision to allow an unlimited number of new domain extensions (for newcomers, extensions - the letters to the right of the dot - are also referred to as top level domains or TLDs). The first new extensions could start appearing as early as next year. Those who want to start their own TLD registry are expected to have to pay ICANN a six-figure fee so at this point in time, there is no telling how many new registry operators will step up to the plate or what the new extensions might be.

The fact that they are coming has triggered a wide ranging debate on what throwing the TLD floodgates open will mean to the existing domain extensions, in terms of their market values and their status at the top of the domain food chain. Will the currently dominant extensions, .com, .net, .org and major industrial country ccTLDs continue to be the preferred choices or will the myriad new choices cut into the market shares they now enjoy? 

An unlimited number of new domain 
extensions could start rolling off the 
ICANN assembly line before the end 
of 2009.

My personal opinion is that a flood of new extensions will have little impact on the well established TLDs that preceded them (I elaborated on why I think this will be the case in a pair of posts in our Lowdown section June 26 and June 27). In a nutshell, past history has not been kind to new TLDs and I see little reason to believe that dumping a massive number of them on the market at once will be any more or less successful than ICANN's previous strategy of releasing new extensions in a slow, deliberate manner. The domain buying public and the major corporations (whose advertising and promotion of their .com domains made that extension the business standard and, by far, most popular extension in the world) failed to rally around any of the previous new TLD releases in a significant way, preferring to stick with the extensions the man on the street is already familiar with.

Rick Schwartz

T.R.A.F.F.I.C. conference co-founder Rick Schwartz, who has a pretty good track record for predicting future trends in this business, told members of his private discussion board (printed here with his permission) "This is the biggest nothing I have seen in quite some time. It won't affect anything for 10 years and when it all kicks in, it will cost traffic to .com...ZIPPO. It may even increase it as folks become more aware of the browser bar and direct navigation."

"I am amazed with the energy going into this, but that same energy would be better spent dealing with the here and now while our "Partners" are giving us the shaft. THAT my friends is 1,000,000,000 times the threat that this nonsense will ever be. This is not happening tomorrow. Odds are it won't even happen next year. There will be serious opposition. There may be lawsuits filed. The devil is in the details and this is not user friendly. Much ado about nothing from where I sit right now," Schwartz concluded.

Schwartz's reference to "Partners" being a bigger threat to domain investors than potential dilution of specific TLD values is related to registrars and other service providers that Schwartz and others believe are competing unfairly against their own customers. One specific and currently high profile example of this allegation is a dispute between registrar Tucows.com and several of their customers over domains Tucows auctioned off, then, claiming a mistake had been made, took back from the winning bidders. One of the bidders especially angry about that situation is attorney Michael Berkens, a pioneer domain investor, who has generated a lively discussion about this incident on a pair of threads at his popular blog, TheDomains.com. The first thread is his account of winning 23 domains in a Tucows auction then having them all taken back by the registrar and the second centers on the response from Tucows. 

Back to the topic at hand - many of those who welcome a wave of new domain extensions are hoping this development will open up new investment opportunities and perhaps even break
.com's stranglehold on the public's affection, giving latecomers a bigger share of the domain aftermarket pie. 

Brian Berke of MCB-TV, a forum member with the handle Poodlejoey, started a busy thread at DomainState.com, saying about .com, "What is considered “beachfront today” is not guaranteed forever. The virtual world is governed by different standards then the real world. If .RealEstate takes off and is marketed nationally by agents, then guess what? Now this is “beachfront property” for this very valuable niche that suddenly erodes the value of .com real estate related domains. This is business 101. If .NYC is used and developed and branded by the City of New York and it takes off, then suddenly that is “beachfront property.” Content, development, real world marketing and branding is what will carry the day."

Will ICANN's wave of new TLDs open 
up new beachfront property on the web?

Of course those are some big "ifs" and some of those who own great .com geo domains that could face competition from new extensions like .nyc don't believe those ifs will ever be realized. Dan Pulcrano, the CEO of Boulevards New Media (owners of LosAngeles.com, SanFrancisco.com and Dallas.com among others) told us, "ICANN should be creating order

Dan Pulcrano
CEO, Boulevards New Media

out of chaos. They should be managing the system like Ben Bernanke at the Fed. This will be a boon for IP lawyers, arbitrators, domain auctions and registrars, from whom ICANN presumably gets upstream benefits. It is good news for premium brand holders. The more clutter, the more fractured and divided the addressing schemes, the more the gold standard is worth."

Pulcrano added, "I recently dissected the Quantcast 1000 (a ranking of the top 1,000 U.S. websites). Of the 1,000 most visited domains, more than 88% are .com's. 3.9% are .net, 2.5% are .gov, 1.8% are .org, 1.5% are .us (all but 2 are state government sites like ca.us and ny.us)...In short, among the most visited sites, US consumers prefer dotcoms over its distant second, .net, by more than 20 to 1. And, among sites in this group, they prefer .com over all other TLDs combined by more than 10 to 1. The TLD .travel doesn't even appear on the radar. Even in the top 25,000 sites they have yet to make an appearance. This should give pause to the cluttermongers, who want to litter the net with a proliferation of new suffixes that will be hard for consumers to remember, spell and use."

Michael Castello, the CEO and President of Castello Cities Internet Network, Inc. (owners of PalmSprings.com and Nashville.com, as well as many others) told us, "The new TLDs will be the death knell of the domainers name game in my opinion. It is basically a kill pill. The markets within markets of domain speculation are timing out and so many new extensions will only confuse the masses. Most domainers only talk to domainers and do not understand the logic on the street. Domainers are thinking way too much and in reality success in this business is very simple. Search engines will help with the clutter of these new vTLDs ("vanity" TLDs, a term coined by Michael's brother and CCIN partner, David Castello) but in the long run .com is the easy way for people to navigate. They will drill down more to relevant content with a trusted name. There will also be some great .tv, .us, .org, .space, etc. that will succeed but they will be exceptions."

Castello added, "Here is something of interest. When you think of a movie star or a prominent contributor in history these are some of the names in "memory"; Elvis, Sting, Madonna, James Dean, Marilyn Monroe, Frank Sinatra,

Michael Castello

Cher, Ted Williams, Bob Hope, The Beatles and a list that goes on and on, every one of them has a great .com site. The public understands it and these businesses understand it. They have met half way and the perception is complete. That is not going to change, it is going to advance much further into the future."

When well established .com owners like Schwartz, Pulcrano and Castello make their points about new TLDs, a common retort is that they are just trying to protect their territory - but their expectations are shared by many who don't own high profile .com assets. 

One of the top young domainers, Kevin Ohashi, who will be heading to Sweden next fall to begin his Master's Degree program in entrepreneurship at Lund University, has a personal blog on a .info site at Ohashi.info. In an extensive and well thought out article there titled Why New TLDs Don't Change a Thing, Ohashi wrote, "The late night commercials really reinforce what I believe anecdotally. I see this "make money from home" stuff at 4 am where they use some set of keywords of their brand with a number in .com. They could use anything, but they are using .com and buying bunches of them to track, because obviously, they, whether consciously or unconsciously, believe that users will be more likely to go to the .com. It's that notion and behavior, a familiar feel, even a sense of trust that makes .com and why it will keep it's crown for years to come. No newcomers, no matter how successful, will really impact it."

When it comes to the idea of a new extension replacing .com as the king I have to agree, it's too late - that train has already left the station. I say that as someone who also appreciates several of the previous new TLDs (I own many .info, .biz and .us domains and .us happens to be a personal favorite as I believe ccTLDs are in a great position with local search and identification becoming increasingly important on the Internet). It would certainly benefit me personally if new TLDs achieved more widespread recognition and did it quickly, but I also think you have to look at things realistically

Well chosen names in new extensions can certainly be profitable as recognition of those TLDs gradually increases (returns from mine have grown year after year), but this is a process that takes time. Another thing I have learned is that growth for any new TLD does not come out of .com's hide. 

A lot of my fellow new TLD investors root for .com to be knocked off the throne, thinking 

that will enhance the value of their assets, but in my opinion .com has been much more of a friend to new extension owners than an enemy. A primary reason why you can make money with well chosen names in some of the new TLDs is that as .coms have gotten more expensive, many small businesses and individuals elect to go with alternate extensions to get the keywords they want at an affordable price. .Com is the engine that has been pulling the entire train, including the boxcars filled with new extensions. When the big wave of new extensions starts hitting the beach, in my opinion that is not likely to change.
No matter what happens it will be an interesting new era to watch unfold. As a reporter, change always keeps things fresh and exciting and I'm looking forward to seeing how things will play out. There are many different opinions out there and it will be years before we know whose opinions prove to be closest to the money on this topic. 

Too many things beyond our control can happen for anyone to be sure what lies ahead (if any of us could do that we would be at the horse track right now rather than reading - or writing - this article). Because of that I don't spend a lot of time debating what the future holds. In general I consider it a waste of time that could be better used on more important issues that we face right now. However the fact that I, and so many others, are debating it, shows how the concept of unlimited TLDs stirs the imagination. So, even though it doesn't amount to much more than an entertaining parlor game, I had to take a turn at the ouija board too.

If any of us could really tell the future 
we would be at the horse track

My wish is that all of today's commentators, no matter what they see over the horizon, enjoy great success in the years ahead. We're pretty much all on the record now, so let's come back in five years (and then again in ten) and see how things have played out and which observers, back in 2008, made the most accurate predictions. If I end up missing by a mile, it won't be the first time and I'm glad that's the case - things would be pretty boring if we didn't have some surprises along the way. We are all fortunate to be journeying through a business that is like a great book that you just can't put down. I don't know about you, but for me every new chapter is so interesting I don't want to know exactly how it ends until I get to the last page.

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