Just how hot can the new gTLD sector get?

By Stuart Fuller


The last few weeks have seen unprecedented growth in domain registrations, on a level akin to the original gold rush of the first dotCom era nearly twenty years ago.  The massive growth isn't being fuelled by any one compelling event, but more so a pandemic of demand originating in the Far East.

Whilst over a million new TLDs have been added in February alone, last week we saw a daily record set with over 287,000 registrations added; 239,000 added in the dotTop zone file alone.  Whilst the TLD may sound as English as they come, it actually belongs to Jiangsu Bangning Science & Technology and is currently the second most registered new gTLD behind dotXYZ although with growth like this it is likely to pass that TLD within the next few weeks.

Virtually every registration has been made through Chinese registrars.  The rules around which domain name registrars are able to offer TLDs such as dotTop, dotWang (fifth most popular TLD) and dotRen (11th) are quite prohibitive, meaning that many big brands who use Western corporate registrars haven't been able to secure their trademarked names, opening them up to cybersquatting.  For instance BMW, PayPal and MasterCard all have their core brands cybersquatted in the dotTop gTLD already.

The tactic to offer TLDs such as dotTop at prices as low as 50pence per annum has encouraged a raft of new domain name investors, willing to take a chance on some high returns for very low initial costs.  The concept that domain names are scarce, because each one is unique, works in pure economic theory that the seller can control the market price, but perhaps a look at history here may suggest otherwise.  The secondary domain name market was once seen as a wiser investment vehicle than stocks, precious metals or even real estate.  However, with one key player controlling the dynamic few saw the crash before they could liquidate their positions.  Google’s long history of making algorithm changes essentially drove out a lot of the value in the secondary market with updates such as Panda essentially penalising domainers who had bought names and were trying to monetise them by pointing them to websites with often duplicate content.

But it isn’t just the Chinese registrar-owned domains that are suddenly experiencing that post-pubescent growth spurt.  Afilias’s dotRed was launched nearly two years ago and had been adding registrations without too much attention, just like most other gTLDs until 15th February when the zone file went from an impressive 89,000 to over 105,000 overnight.  In just a week it has added a further 180,000 registrations, an impressive growth rate equivalent to 8,916% per annum.  Even some payday loan companies will have to take their hat off to that kind of rate!  Over 250,000 registrations in the total of 336,000 have come from Chinese registrar West263 International, around 75% of their total registrations to date (interestingly, all of their top five most registered domains are Afilias names).

For some new registries the gTLD programme was seen as a short-term play.  Gain investment create a substantial customer base by offering low cost (or even free in some instances) domains, gather customer details and then sell the business as a going concern.  For some, with high levels or automation and low levels of customer interaction, the “pile them high, sell them dirt cheap” model will work, although it will still take tens of thousands of registrations to break even each year.  One thing is sure though – registries who are yet to launch their TLDs will certainly look more favourably than adopting the low-cost, high volume approach that has taken the Chinese market by storm, than some of the other new gTLD registries who have tried to market more expensive suffixes with their “exclusivity” messaging.  GMO Networks, for instance, which has just paid over $41 million for dotShop is more likely to offer this at low cost, hoping that they will catch another massive Chinese wave than price it at the previous “acceptable” market rate of around $20.

It is hard to see what measures are in place to fan the flames of growth.  There will come a tipping point in the programme where speculative registration becomes counter-productive but for now registries and registrars look to be the big winners, whilst brand holders could well be the ones left with problems to clear up.