A look forward to 2015 for the domain name industry
If you didn’t know it already, the domain name industry is a diverse and multifaceted one.
When we approached a range of DNA members and asked them what the coming year would bring and what would the industry would need to do in response, we expected the same broad range of answers: improve ICANN’s processes; increase sign-up of new gTLD registrations; raise the industry’s overall profile.
Instead, we discovered an incredible range of concerns from broader internet governance issues to shifts in domain registration habits to a delayed wave of trademark issues. The one thing that each person did have in common was a sense of optimism. Even though 2014 was a tough year for the domain industry, and though no one feels that the problems are behind us, there remains a sense that through coordination and sheer hard work, the future looks bright.
So what’s on the horizon for 2015?
“Most of it is about transition,” he told DNA, referring to the transition of the IANA contract from the US government. That change has been a decade in the making and much of the ICANN community has been furiously working on solutions for the current deadline of September this year.
Disspain is not sure that deadline will be hit although he does think its existence is proving very helpful in spurring conversations long in the making. “I think this has been a catalyst and we should see improvements at every level of the community on transparency and accountability.”
Even though ICANN’s Board has been the focus of much of that conversation – particularly with respect to trust – Disspain says it is just as applicable to ICANN generally. He is concerned however at the lack of engagement from registries over the IANA transition: “We need to have their representation. I’m not sure why they’re not more involved.”
A second piece of ongoing work that should be finished up by the end of 2015 is the new gTLD program. “We can see the light at the end of the tunnel,” he told us. “There are a couple of things outstanding: GAC advice; contention sets; the PICDRP (the arbitration process for public interest issues). And there is the issue where you have a generic top-level domain but one applicant gets exclusive access, we have not got to that yet. But there are no major roadblocks. We should be able to put it to bed by the end of the year.”
Last but not least on Disspain’s mind is the broader topic of internet governance. The annual Internet Governance Forum (IGF) is up for renewal at the United Nations for a second time this year. Although it is expected to be extended for another five years, the issue of how the internet is run globally continues to be a highly political one.
Disspain points to efforts to organize funding for the IGF that would make it less reliant on the United Nations but notes that there remains a “level of angst” over the future of the body. “The internet governance debate is not mature enough yet that it’s not going to be an important year every year,” he notes.
The new gTLD issue and market changes
Although he is also the CEO of a country-code top-level domain, Jay Daley of .nz Registry Services has a very different set of priorities for 2015.
Daley is focused on the impact of new gTLDs on the domain name industry and what that means both for his business and the industry as a whole.
“There are a lot of new gTLDs that are not making the numbers and so are not going to do well,” he notes. “So what I think 2015 will bring is a lot of consolidation in the market, down to three basic business models: large portfolio companies like Donuts or Uniregistry; gTLDs that are able to charge very high prices for their domains; and then the Above: Kieran McCarthy, Editor-in-Chief, IoN Magazine occasional wildly successful one for whatever reason, like dot-guru or dot-club.”
Apart from those groups, Daley believes other new registries will struggle and that will have a whole range of repercussions for the industry from reduced attendance at ICANN meetings to contracts being renegotiated with back-end suppliers to people complaining to ICANN about their fees. Overall, he sees it becoming a two-tier market with those doing well and those doing not so well.
Daley sees another potentially industry-changing shift: the exit of speculators. “I don’t think we’ve ever really seen the size of speculators in the domain name market because many of them are so small.” He posits that a very large number of domains are held by people with just one or two other domains and so don’t appear on the industry’s radar. But the new pricing mechanisms of new gTLDs have largely shut speculators out.
This is not necessarily a bad thing, he notes, but it could have significant knock-on impacts, including given established registries a market advantage. New registries will need to drastically change and improve their marketing in order to stay viable and if they don’t manage that and find their niche that 2016 will start to see the collapse of registries, which in turn means that the industry has to ensure there are sufficient safeguards in place.
It terms of what has to happen in the industry, Daley feel that greater industry coordination is key. “The registry industry needs to organize,” he argues. “There are too many things that are important to us and we are not getting together as an industry to influence them enough.” He cites the needs for standards of behavior and shared technical standards as well as the need to get “some level of resolution” over how the industry deals with granting access to law enforcement.
The drop of dot-com and other market changes
As Chief Marketing Officer of Afilias, one of the industry stalwarts, Roland LaPlante unsurprisingly agrees with Daley that marketing is going to be key in 2015.
“Registries and registrars are going to have to learn how to do targeted marketing,” he argues due to the increased level of competition with new gTLDs. “They are going to have to step up their game.”
That said, LaPlante sees a healthy 2015 for the domain name industry overall. “The global recession took its toll on domains but we’re still seeing six to seven per cent market growth.”
He does see some significant changes coming though. “Dot-com is still king but since 2007 it has been losing market share: a share point a year, which gives the rest of us hope.” As it gets ever harder to find a good dot-com there is space for more and new domains but that still won’t be enough for some new registries and he expects some significant industry consolidation.
“There will be a bunch of new registries for sale. Some will run out of money; some will find the volume they sell won’t be enough to reach their requirements; and of course some people’s original plan was to flip their registry.” These registries will be picked up by existing industry players who understand the market and its risks, he predicts, and for whom running an additional registry will not be a huge additional cost. He does note though that some registry operators are going to be surprised when they discover how little they are really worth in the marketplace. “It may be that not all of them are worth the $185,000 they spend on applying,” he warns.
In terms of other big trends, LaPlante sees several things happening: an increase in domain prices as registries start validating registrants to fit with their particular TLD; Asia taking the lead in terms of growth rate; and perhaps more importantly, the launch of big-name brands with their own namespace. “Success in the brand TLD world is very different to gTLD-land. It’s nothing to do with the number of registrations and it’s all about how a registry can be leveraged from the marketing standpoint.”
His biggest concern lies in vertical integration. “Afilias has long been concerned with vertical integration over possible abuse. Registries have always been very careful about separating [registrar] accounts but with vertical integration there is an enormous incentive to share information, and it will be difficult to tell what got shared. I expect we will see some of that but whether we see so much that it causes people to question the decision, we will see.”
As the main go-to company for domain protection in the Japanese market, Brights Consulting is naturally focused on the impact of new gTLDs on trademarks. Yoshitaka Murakami advises global companies such as Sony and Toyota about what to do with new domains.
After many years of fears that the launch of hundreds of new domains would prove to be catastrophic in terms of brand abuse online, the launch of new gTLDs has so far been very quiet. But Murakami thinks that is unlikely to continue through 2015.
“The issue will grow bigger and bigger,” he argues. And that is going to cause some problems with the systems put in place to protect trademarks. “ICANN is going to face some big problems with URS as it’s not working properly. The point of URS was that it would be quicker and cheaper than UDRP but when you have to spend $5,000 on a URS, people are saying that for $2,000 more you can have a UDRP.” While the URS system only allow for the suspension of a domain, UDRP hands the domain over to the trademark holder.
He also highlights the large cultural difference over trademarks and domains between North America and Asia: while US companies tend to view trademark protection as a cost of doing business, Asian companies view it as a pure cost and that informs how they see new registries and trademark protection mechanisms that require them to pay money without receiving anything in return.
The trademark clearinghouse charges companies a fee to register their trademark but doesn’t prevent anyone from purchasing their trademarked name (although some have noted that many registrars simply refuse to make such names available rather than re-develop their systems to work differently).
Murakami is positive about systems introduced by Donuts and Minds+Machines to protect trademarks by taking them off the market but he also notes that such a system does not reflect the trademark system that has developed over many years where you are able to register under different classes of trademark and so are able to use the same name without fighting with one another in the market.
All of this means that more work needs to be done within the domain name market and ICANN in particular needs to work out how to move faster. “The ICANN process is slow, which goes against how the internet works,” he notes. “We have to do more to try to help ICANN have a faster process. Brands are already queuing for the second round of new gTLDs but the estimate is that that will be in 2018 – which is three years away.”
One thing he think we could start to see in 2015 is both greater innovation and greater confusion around IDNs. Not all browsers and certainly not all email programs are able to handle IDNs, and many of the policy decisions made with new gTLDs reflect a very Anglo-Saxon view of words such as singular and plural names being broadly equivalent.
There is also the fact that there are different pronunciations of particular names and that much of Asia uses voice recognition as a way to navigate the internet, rather than typing. We could see some innovation around this aspect, he feels, with the same word pronounced differently leading to different websites.
The Chinese perspective
Simon Cousins as the CMO of TLD Registry agrees with this need for the domain name industry to think a little differently in 2015.
TLD Registry has two Chinese IDNs and has been actively marketing both to those inside and outside China as a way to better communicate across cultural and linguistic lines. Like LaPlante and Murakami, he views China and the broader Asian market as critical in the coming year.
“We’ll see an increased awareness of Chinese IDNs. Don’t forgot that 23 per cent of humanity lives in China.” Cousins sees this huge and largely untapped market in complementary yet opposite ways: there will be a logarithmic increase in interest but at the same time the market is so huge that it will take a few years before that impact becomes noticeable by the larger industry.
It is also a radically different market. The number of domains under management (DUMs) has been the traditional measure of success in the industry but TLD Registry thinks in terms of “name years” – how long someone has decided to register your domain for. “That’s a vote of confidence to us,” he explains, perhaps highlighting that point made by Jay Daley about the gradual exit of speculators from the domain name market.
Cousins also reflects a comment Daley made about where new customers are coming from: small business (SMEs). A strikingly small number of small businesses have their own domain name, even though the evidence is that more and more people are making purchasing decisions through online search.
“There is an almost complete lack of awareness,” Cousins notes. “And I don’t think really understand the benefits.” Getting the message and highlighting the benefits to those businesses that do not have domain – and websites – is going to be a key consideration for the industry in 2015.
And that process will require a range of things to come together to improve the market overall.
New innovations in providing domains and related services. Marketing campaigns that target specific groups with names that have real meaning and value for them. And technical improvements, from websites, browsers and other software handling new domains correctly to industry wide technical standards and standards of behavior.
If the industry can get all these things right this year, then it will be well on the way to a successful and prosperous 2016.
–By Kieren McCarthy, Editor-in-Chief, IoN Magazine
(This article was originally published in the State of the Domains, Issue 2: February 2015 premiering at ICANN 52 in Singapore)