Changing Domain Names Market Conditions: No-boring insights by CENTR community
A domain name is perhaps the only thing a person can truly own online. Still, changing a bit Seth Godin’s quote to reflect our specific industry:
“ People do not buy domain names and services, they buy relations, stories and magic!”
So why do we still sell domains, as domains? That is a good question for us registrars, despite the fact that most of us have already spent a lot of money and resources on marketing and trying to better communicate our services. But this is our role, as the ones responsible to sell to end customers.
The interesting part of the story is that better end-customer approaches and the concept of websites-not-domains were also mentioned quite a few times during the CENTR Registrar Day 2017 in Brussels. From registries… not registrars! I find it very interesting and I am explain the reasons = below. But let’s start with the basics. What is CENTR and what does that have to do with me and Papaki.
CENTR and Papaki
CENTR is the association of European country code top-level domain (ccTLD) registries, such as .de for Germany. .gr for Greece or .si for Slovenia. It has 54 full and 9 associate members responsible for over 80% of all registered domain names worldwide.
I was invited in a panel discussion by Giovanni Seppia, International Relations Manager of EURid, the registry operator of the .eu. I was happy to have next to me Jimmie Eriksson and Michele Neylon, very active in the community and involved with various ICANN and GNSO groups. We discussed about the changing domain names market conditions, growth and new challenges. Moreover, we touched several topics with the event’s attendants actively participating with questions and comments. Finally, we talked openly and constructively about the following points:
1. Our thoughts on New gTLDS, their strengths & weaknesses, if they were really needed after all, as well as if we are supportive of a second round of new gTLDs
2. The future of ccTLDs, geo TLDs, IDNs, brand TLDs growth and opportunities
3. How registries can help registrars sell more
1. Our thoughts on new gTLDs
Facts: Within 4 years since their first launch new gTLDS managed to reach a 7% global market share, which is an impressive piece of the pie. There are 1224 new gTLDS delegated today, with 23.3 million domains registered in the world, comparing to 124.9 million ccTLDs and 161.5 legacy TLDs (.com, .net, .org etc.). In Europe new gTLDs market share is around 2.7%
Discussion: As discussed by my fellow panelists, new gTLDs were a big failure because registrations are very low (a couple of hundreds) for many registrars and it didn’t worth the effort spent on promoting them in the first place. I didn’t agree with that 🙂 Moreover, the awareness in many markets is still very low. Another weakness discussed was the very low renewal rate and actual usage, due to huge discounts offered by new registries in an effort to increase growth.
However, they were a good reason for registrars to communicate a new domain product to their customers. A breeze of fresh air in our boring domain name industry. Other new TLDs strengths include:
1. communicatively stronger names, since availability in short .com character combinations is very low
2. better MRK with new gTLDs being a better representation of market segments other than location
My views: As a product manager, I believe new TLDS were needed by both end-customers and registrars.
– From a customer perspective, registrants were offered something new, alternative, and more segmented. We saw small business owners adopting new extensions, as they found more available options, better names and targeting.
– From a registrar perspective, we were given the opportunity to touch base with our customers on something fresh in the domain industry. We had a good reason to start sending informative and promotional newsletter month after month! And everyone loves newsletter conversion rates, right? We also got access to new promos from new registries that could pass to our customers.
Moreover, we saw new different pricing models developed by domain suppliers, at least for retail registrars like Papaki that did not choose to get accredited for every new gTLD 🙂 We saw membership plans paying a yearly fee for the platform and not per domain, which forced more wholesale domain suppliers to lower their costs.
At Papaki new gTLDs domain registrations are going well and we have a few thousands already! Although new gTLDs comprise a bit less than 2% of our total domains registered, we registered 120% more domains this year (until September) comparing to the previous year! We are happier with our margins and our customers are happier with their new domains 🙂
For a registrar to see successful results with new gTLDs today, it definitely required a good marketing strategy back then! At Papaki we introduced new TLDs with newsletters and educative blog posts, and we followed a standard communication pattern throughout all launches. Each month we introduced via newsletter the upcoming new TLDS communicating the value our customers were getting: content included a detailed description of each new gTLD, its ideal target audience and suggested uses. We opened and communicated our pre-registrations before the prices announcements, and then contacted the interested ones once more with a call to action to purchase. It worked quite well.
We do not offer extreme discounts! Personally, I find huge discounts as one of the laziest paths to customer conversion, with significant consequences on long term product economics and customer perception of product quality. Many new TLDs aimed at fast growth when launching, offering extreme discounts. The result? Horrific renewal rates, millions of domains expiring, close to zero revenue for registrars, a damaged reputation for registries, their TLD and all new gTLDs. Oops!
How about a second round of new gTLDs?
Oh well!
We still have a lot to learn from this round in terms of renewal rates, strategy and the realistic future growth potential of the existing new tlds. I wouldn’t like to see another TLD round coming soon. We should give a bit more time to the existing 1000 plus new tlds to bloom or die!
2. The future of ccTLDs (geo TLDs, IDNs, brand TLDs)
Facts: ccTLDs have a combined market share of 40% globally with 129.5 million domains registered (CENTR report Q1 2017). In Europe there are 56 ccTLDs and around 69.7 million domains registered. Presently, ccTLDs are the best way to promote national identity and location.
Discussion: Growth has flattened with 0.7% being the highest globally for ccTLDs. As a result registries are looking for ways to help boost registrations by helping registrars sell more. We discussed about registrars needs for support by ccTLD registries in Marketing, market insights with stats and research, and information on sectors where domain names are not widely used yet. Registrars do not find discounts on ccTLDS any helpful, and as discussed registries can try to make it easier for customers to register ccTLDs by changing their policies or by initiating co-funded Marketing initiatives.
About IDNs and geo TLDs. As discussed with a few registries during the speed sessions, they seem not so relevant for Europe. Papaki offers .GR IDNs and registrations are at about 0.9% of total .GR registrations. That is a very low number. However, IDN’s probably make a lot of sense in China and Arab speaking countries. Regarding geo TLDs, the city ones are pretty relevant and thrive in big digital economies and cities, e,g. ,berlin, .NY, .london. For smaller cities we didn’t really discuss whether total registrations would worth the investment. Personally I don’t think so, considering that small local businesses need to first see the need for a website, and bigger ones such as ecommerce websites are covered by the ccTLD.
My views: I totally agree that ccTLDs are the best way to promote national identity and location especially for SMEs, which actually form the backbone of the european economy. Verisign called micro enterprises (<10 employees) the undiscovered web continent in a 2014 research, and at Papaki we are soon launching services tailored to SMEs and Professionals. Presently, .GR, our ccTLD in Greece, represents around 67% of total registered domain names with Papaki. It is the most popular and profitable product we offer. To see that changing in the future, would mean that national identity and or location would matter less, which might not seem to be the case presently with crisis still going on in Greece, Brexit, refugees and the recent situation in Catalonia.
On the other hand there are factors that in the longer term may contribute in making borders less important, at least for SMEs which is an important, if not the most important ccTLDs target group. One factor is e-Commerce. The European Commission of President Jean-Claude Juncker is already implementing policies to: a) boost e-Commerce within EU with its Digital Single Market strategy, and b) promote SMEs with the Small Business Act (SBA). The Digital Single Market strategy aims at tackling geoblocking, making cross-border parcel delivery much more affordable and efficient and promoting customer trust through better protection and enforcement. Facilitating cross-border eCommerce among SMEs may impact the way SMEs do business, target markets and thus register domains. And at this point the .EU ccTLD may start playing a significant role.
Regarding the. EU, I agree with Kieren McCarthy’s latest article that points out the mistake people make about the .EU. They are looking at it as a single TLD, when it is really a set of country level markets. These country level markets are dominated by the local ccTLDs and .COM, whereas .EU rarely gets more than 5% of the domain name market share. However, it is plausible to expect .EU registrations and usage to grow based on factors such as:
- Reduce of the anti-EU sentiment with time
- The US presidency situation
- GDPR
- a stronger EURO
- the soon-to-be-applied EU eCommerce policies boosting SMEs activity outside their local borders
3. How registries can help registrars
As discussed there are ways registries can help registrars to increase registrations. One of the most significant ways is their policies. For example .PT, the Portuguese ccTLD, since it liberalised its registration policies in 2012 has been growing consistently above the European average. More specifically, .PT had the highest growth over the 1st quarter of 2017, at 3.3% and reached 900K domains. Liberalising policies can be a very effective strategy to boost growth of a ccTLD. Other ways include Market expansion by targeting new audiences, which makes total sense considering the market is mature
What I personally find very interesting is that ccTLD registries acknowledge the importance of SMEs and were discussing about ways to reach the offline ones, and/or SMEs in sectors where domain names are not widely used yet. As registrars we can’t put sales people going around the neighborhoods, margins do not allow that, and at the end of the day we are privately held businesses despite our vision for a greater online good. On the other hand ccTLDs, which in most cases are NGOs or governmental organizations and have access to funding, could contribute greatly in citizens education.
Vuksan Rajkovic (.ME by doMEn Ltd ) suggested that registrars do not need to directly contact end-customers, but rather target professionals, the people who SMEs will turn to, when they are ready to build their online presence. And registries could support registrars achieving that by providing market research statistics, predictions, best practices and co-funded marketing funds.
How beautiful is that 😉
What to expect in the next 5 years?
What we expect is a stable, mature domain names market, but also more segmented! We expect a modest growth of legacy gTLDS, with New TLDS growth to continue being higher. Competition between new gTLDS and ccTLDs or legacy gTLDs such as .com will mainly occur on 1st registration, but we don’t expect a switch (replace or let it expire) from an existing .gr .eu or .com to a new gTLD. However, we see the “Not-Com” revolution growing or perhaps even going mainstream especially among SMEs. New TLDs with their availability in names and being an alternative expression of locality (e.g. cretan.wine) will continue to have a high growth. We should keep in mind that after all, a domain is one of the few things that users can truly own on the Internet.
It’s safe to predict that by 2019 and as soon the 3-year continuity plans of most new gTLD expire, we will see more consolidations of registries rather than retired new TLDs. In my opinion, for established registries with the technical infrastructure already in order, a domain can be a low-cost & high-profit product with the potential to scale, a recurring revenue model & global reach. Not bad! I believe that mostly brand TLDs will be retired, considering that even now the ones that have retired are mostly related to brands (The guardian, McDonalds etc).
Despite the above, if a second round of new TLDs is happening around 2020, we expect more brands taking a registry role. I assume more companies in related or not industries (hosting, website building, telcos, huge ecommerce brands, huge eCommerce sites etc) will invest in own TLDs. From a registry perspective, a domain could be a low-cost, high-profit investment, but I would seriously advise brands to think realistically about future potential growth of their brand TLD as well as its actual use and value.
Finally, we also expect prices to gradually increase, aiming at higher renewal rates, despite the fact that new gTLDs are offered for a cent or two. Due to aggressive 1st registration promos, renewal rates and actual use for new TLDs will remain low, reinforcing legacy tlds, cctlds and only genuinely valuable new gTLDs growth and usage. At the end of day, it’s all about creating value, for companies, customers and society 🙂
How about you dear reader, do you already own a domain, and would you switch to a new TLD? Do share with me your thoughts!
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