The Big Money Behind the Expansion of Web Domains

What's in a name?

We're about to find out.

The Internet Corporation for Assigned Names and Numbers (ICANN)announced a dramatic expansion of the number of possible domain names. The response has been dramatic, with the probability that the number of new domains will grow exponentially.

The first question that arises is whether this will have any discernible impact on the economic or social fortunes of those who think they have cornered the ultimate domain name. Porn. Food. Car. Cloud. Boy. Girl. The list is endless. Whether this will ultimately prove to be a sophomoric exercise in ego gratification or a financial treasure trove can not yet be determined. Which leads to a second question: so who is going to profit from this? And it turns out there is a pretty good answer to that one.

Firms are springing up to register, manage and broker domain names. A market in such names may develop with values set by demand, experience or interest. How sustainable this market may be is not yet certain, but the early indications are that it may take several years to clear up the confusion and conflicting claims. Making money off of greed,desire, envy and fear is something business people have been perfecting for eons. JL

Carl Franzen reports in TPM:

In June 2011, the future of the Internet as we know it was forever changed by a group of 16 people in Singapore.

The group, which made up the board of directors of the Internet Corporation for Assigned Names and Numbers (ICANN), a nonprofit Los Angeles-based organization that is in charge of the Internet’s domain system — web addresses — voted 13 to 1, with 2 abstaining, to expand the number of generic top-level domains from 22, including the most-familiar “.com,” “.org,” and “.net” addresses, to basically any short construction of letters that anyone could think up.
The ramifications of that decision have yet to come to full fruition, as the process for applying for new generic top-level domains, or gTLDs, as they are called, is still underway. ICANN recently released its initial list of applications for new gTLDs to the public online.

The 1,930 total applications that have been filed in the first round, which range from the logical — Google wants to control “.google,” Apple wants “.apple,” and a whole bunch of companies want “.app,” and “.cloud” — still need to be reviewed and approved by ICANN before the gTLDs can come into effect, a process which ICANN says takes 9 months at its quickest but could take up to almost two years if a gTLD is contested between multiple parties, in which case an auction must take place or an agreement reached between those vying for the gTLD.

But already, even before any new gTLDs have been approved, companies are moving in to take advantage of the newfound business opportunity. One such firm is called the Registry Hub, based in Oslo, Norway.

The new firm was created by Rolf Larsen, the CEO of another Norwegian firm, CloudNames, which was launched in 2011 to provide top-level domain “turnkey” services to customers. That is, if a customer wanted to own their own top-level domain, CloudNames would go about getting it for them and would also handle the technical side of running the domain, letting the customer sell space on it or do with it what they would.

Now, Larsen hopes to take that same idea even further with his new firm: He wants the Registry Hub to become the go-to broker between the owners of the new gTLDs, referred to as “registries,” like the Googles and Apples of the world, and registrars like GoDaddy.com and Namecheap, who will carve up the domains and sell addresses to individuals.

“In order to solve issues from both parties, we decided to start developing a go-between hub,” Larsen told TPM in a phone interview. “It will function like an exchange and handle all transactions between the parties.”

Here’s the Registry Hub’s example diagram of what the process would look like if it were not involved, a chaotic mess.

Larsen envisions the Registry Hub as a one-stop-shop where registrars can come and fill out one form, creating one account for all of the “.anything” domains they wish to acquire from the gTLD owners, the registries, and sell to individuals.

“We aim to have them all,” Larsen says of the 1,930 applications for gTLDs that have been filed with ICANN, though he notes the review process will likely whittle the total number of gTLDs down to somewhere between 1,200 and 1,500.

To be clear, Larsen said that he has not exactly received ICANN’s blessing to set up the site, but nor does the organization or any law permit him from setting up such an intermediary. In fact, as he told TPM, all needs is the consent and agreement of the registries — those applicants that will win their desired gTLDs from ICANN.

Already, Larsen said he had some agreements from firms looking to use his new website, but declined to specify which ones, saying announcements would be forthcoming.

But Larsen thinks that ICANN’s decision to open the floodgates to any number of gTLDs has also fundamentally reversed the economics of the domain purchasing game from that of a seller’s market, which it is currently thanks to the scarcity of total names provided by the 22 gTLDs in service, to that of a buyer’s market.

And so Registry Hub will charge transaction fee to the registries — those who own the gTLDs — even though they are the ones that will be giving their address space over to the registrars, like GoDaddy, to sell.

“Registries will need to pay a small percentage,” Larsen told TPM. “They are the ones in the greatest need to build up their sales channel.”

Still, under Larsen’s model, the registries could actually wind up recouping the fees, as his company will offer selective equity and dividends to those registries and registrars that agree to let his company broker their domain transactions.

“There will be no private investors, only industry players,” Larsen told TPM.

Still, Larsen acknowledges that his company will likely face competition but that they are ready for it, telling TPM: ” I certainly don’t think we’re going to end up being alone [in offering these services]. The need is so strong.”