After I did so, a number of associates replied to my note, asking for my thoughts on what this might mean for our clients. Rather than respond to colleagues individually, I thought I'd post a blog entry on this topic (what better way to fire up my long-dormant blog).
Our clients (with our help, or via their own internal resources) have, over the years, secured a variety of domain names representing their company name, brands, products or services. The majority of our digital solutions for clients revolve around use of the .com Top Level Domain (TLD, or the last part of an Internet Domain Name; that is, the group of letters that follow the final dot of any domain name). This list describes of all current Internet top-level domains [TLDs].
For example, Dow AgroSciences' parent, the Dow Chemical Co., owns approximately 600 domains at the current time, each one requiring an investment of $15 - $100, depending on when acquired, the registrar used, and how long the domain was reserved for. Additional domain names secured (e.g., dowagro.net, dowagro.org) are often used to redirect web traffic to a primary .com domain, but they're also often deployed in their own right to support digital initiatives on behalf of individual products or brands. A 'bonus' advantage to owning a large collection of related domain names is that our clients can protect trademarked or copyrighted property by guaranteeing that competitors can not secure those names for one, five, ten or more years.
Of the 177 million-plus domains in existence today, the .com TLD represents more than 80 million of them while .net and .org respectively have roughly 12 million and 7 million active domain names. While several new TLDs have been introduced in recent years, these have achieved only limited success in attracting registrants and Internet activity. For example, .info and .biz, both introduced in 2001, have attracted roughly 5 million and 2 million domain names respectively.
So what's this all about and why should we care?
After a lot of discussion and planning, the Internet Corporation for Assigned Names and Numbers (or ICANN, the organization responsible for managing the assignment of domain names and IP addresses), is proposing new top-level domains. ICANN claims that these will allow for more innovation, choice and change to a global Internet presently served by only 21 generic top-level domain names. Because they're a not-for profit, ICANN isn't doing this to add money to their company coffers. Rather, promoting competition and choice is one of the principles upon which ICANN was founded.
In a world with 1.5 billion Internet users (and growing), diversity, choice and innovation are key. The Internet has facilitated enormous increases in choice, innovation and the propagation of ideas, and expanding new TLDs is an opportunity for more.
Dennis Carlton, Professor of Economics at the University of Chicago, was asked by ICANN to analyze from an economic perspective ICANN's anticipated introduction of new generic top level domain names, and to identify and address the benefits and costs associated with ICANN's proposal.
Dr. Carlton prepared two preliminary reports relating to the introduction of new gTLDs. In one report "Preliminary Report of Dennis Carlton Regarding Impact of New gTLDs on Consumer Welfare", he wrote:
"I conclude that ICANN's proposed framework for introducing new TLDs is likely to improve consumer welfare by facilitating entry and creating new competition to the major gTLDs such as .com, .net, and .org. Like other actions that remove artificial restrictions on entry, the likely effect of ICANN's proposal is to increase output, lower price and increase innovation. This conclusion is based on the fundamental principles that competition promotes consumer welfare and restrictions on entry impede competition."
ICANN and their supporters propose that an increase in the number of TLDs increases the number of alternatives available to consumers, and thus offers the potential for increased competition, reduced prices, and increased output.
It won't be long before we'll be asked by our clients for an opinion on this matter.
Detractors to the current proposal claim that too much is at stake from a user, security, and economic perspective for ICANN's proposal to extend the TLD schema to make any sense. These detractors say that:
- ICANN has not yet shown that the market demand exists for more domain extensions.
- With an almost unlimited number of new TLDs, Internet users will be even more vulnerable to online fraud and brand owners will be forced to defend an even bigger space.
- Few if any of these new top level domains will ever be put to use; most of them will be purchased for purely defensive reasons and it will remain exceedingly difficult to get anyone to go to addresses that don't end in .com, .net or .org.
I have to agree.
Most of our clients have already made significant investments in the acquisition of domain names, the occasional legal defense of those domains, as well as the design, development and ongoing management and administration of a myriad of Web and other Internet properties associated with those domain names. Although it is certainly compelling for clients like Ball Horticultural, Merial or Dairy Management, Inc. to own top-level domains like .horticulture, .animalhealth or .dairy (and to prevent major competitors from doing same), I believe there's a good argument for being patient and watching how things shake out over the next year or so, at least.
Getting a grip on the economic (the currently proposed application fee to own a single unique TLD is $185,000, plus an annual "continuance" fee of $25,000) and branding impact of investing in new TLDs is important - ICANN's VP of Corporate Affairs suggests that "it could translate into one of the largest marketing and branding opportunities in history." We'd be perceived as good stewards of our client's brands if we understand all of the ramifications (pros and cons) implied here and are able to communicate these effectively to our clients.
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