How a $135 million auction affects the domain name industry and your business

The cost of protecting assets and creating a new revenue stream

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On July 27, the Internet Corporation for Assigned Names and Numbers (ICANN) ran an auction for the generic top-level domain (gTLD) .web that culminated in a winning bid of $135 million. Nu Dot Co LLC produced the winning bid and on August 1, Verisign, a global leader in domain names and internet security, confirmed in a #4f81bd;">press release that they provided the necessary funds for Nu Dot Co’s successful bid. But wait one second, let’s back this up - $135 million for .web?

The previous highest public price for a gTLD happened just over seven months ago when GMO Registry of Japan acquired the .shop gTLD for $41.5 million. While not a number to sneeze at, Verisign blew away the previous record high. And while we’re making comparisons, remember that $100 million venture capital investment in Shopify back in 2013? Shopify is now a public company and an absolute force in the e-commerce game while its value is soaring past a billion dollars.

So that brings us back to Verisign and their brand new $135-million baby. What exactly are Verisigns plans for .web? To turn the new investment into a billion-dollar web sensation?  According to their press release, “as the most experienced and reliable registry operator, Verisign is well-positioned to widely distribute .web.” They plan on utilizing their “expertise, infrastructure, and partner relationships to quickly grow .web and establish it as an additional option for registrants worldwide.” This can certainly hold true as .web is widely considered the gTLD with the most potential out of 1,930 applications for new domain extensions ICANN received to battle .com and .net for widespread adoption.

In the past 30 years, Verisign has registered over 127 million .com domain names and nearly 16 million .net domain names.  These are two of the most popular top-level domains available while the most adopted new gTLD, .xyz, has garnered over six million registrations since entering the market a little over two years ago. If Verisign is able to average three million .web registrations year-over-year, like .xyz, at a guesstimated price of $10 USD, with an annual renewal rate of 50%, they would break even on their investment in about 3 years ($30,000,000 in year one, $45,000,000 in year two and $52,500,000 in year three). Of course, if renewal rates are lower or Versign cannot achieve three million domains a year, it will take longer to reach break-even.

The runner-up in the .web auction, potentially a giant with immense resources such as Google, could eat into Verisign’s top-level domain market share, taking aim at its .com and .net properties. Let’s say Verisign bowed out of the auction early and allowed another registry to directly compete against .net with a synonymous .web domain name. With a stagnating stock price, Verisign would not be in a fantastic position to improve on that with a strong competitor nipping at its heels. From this perspective, the cost of doing business for Verisign is more than worthwhile, even if they happen to not generate a single dollar of revenue from .web for years to come.

What does this all mean for your business and web presence?

.Web will not be publicly available for some time; and while Verisign may or may not have acquired the gTLD mainly to keep competitors away, most pundits believe that they will make it publicly available. Once released, it would be prudent for all businesses that already own a .com and/or .net to register the .web variation for their business to avoid resellers from scooping them up and charging a premium.

Be sure to #4f81bd;">pre-register for .web domain names as soon as you can so that you are alerted as soon as .web launches and becomes publicly available.

If you are a trademark owner, be sure to register with the #4f81bd;">Trademark Clearinghouse in advance to ensure that yourtrademark.web can be secured during the "#4f81bd;">sunrise period." This stretch of time is designed specifically for trademark holders to reserve their domain names before anyone else has access.

Perhaps you missed out on the .com or .net variation of your business; now you have an excellent opportunity to grab the .web version of your domain name and once you register the domain, a simple 301 redirect from your existing domain to the .web variation will provide a seamless transition to your ideal domain name.

Put your thinking cap on and begin generating lists of relevant generic domain names for your industry that will not infringe on another businesses’ trademarks. Once .web launches, consider registering these domain names under the .web gTLD. These could be incredibly useful as landing pages for search engine marketing tactics or as a new revenue stream for your business as others may start knocking on your door looking to take these domain names off your hands for a price.

If you have a .com or .net domain name, keep a close eye on the costs of these as Verisign might be looking to boost their margins on these assets. While #4f81bd;">Verisign cannot increase their price for .com under their current contract with ICANN which ends in 2018, they are able to increase the price of .net by 10% every year until the end of that agreement in 2017.

Cybele Negris (cybele@webnames.ca) is president, CEO and co-founder of Webnames.ca, Canada’s original .CA registrar. She serves on the boards of Small Business BC, Small Business Roundtable of BC, Capilano University and the Capilano University Foundation.