Domain Name Land Rush: More Room for Companies, Competition and Scam Artists

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In the Internet’s early days, there was .com, .org and the like, followed over the years by a total of 22 categories of website addresses, known as top-level domain names. But now, with the virtual world expanding ever more rapidly, the Internet Corporation for Assigned Names and Numbers (ICANN), the non-profit gatekeeper of the Internet address system, is fielding applications for a new generation of generic top-level domain (gTLD) names – that is, the letters to the right of the final dot in the name of a website. Examples include .book, .movie, .pizza, .architect, .sexy, .游戏 (Chinese for .game) and on and on to, presumably, .infinity.

Domain registry companies such as Donuts Inc. of Bellevue, Wash., are snapping up names, all for $185,000 a pop, and selling them to registrars who, in turn, are selling web addresses to businesses and organizations that will end with these generic top-level domains.

“The over-arching theme is choice – customer choice, business choice, competition, creativity and choice in the market place,” says James Cole, an ICANN spokesperson. The idea has struck a chord. “We expected to get a few hundred applications,” he notes. In fact, in this first round, it received 1,930 submissions – 911 from North America, 675 from Europe, 303 from the Asia Pacific region, 24 from South America and 17 from Africa. Some of these top-level names are still in development, and others are in dispute. But 263 are already operational, the first buds of what many say is the most significant growth of web properties since the earliest days of the Internet.

Catharine Findiesen Hays, executive director of the Wharton Future of Advertising Program, says the shift has major implications for brands in the digital age. The Internet “is a wild and woolly place, even after all this time – if not more so now. For a brand for whom reputation is everything, to be able to take back control of its top level domain is huge,” she says.

Companies’ ability “to brand their site and those associated with them is almost like a good-housekeeping seal,” she states, adding that this could “create a part of the Internet that has the potential to be more trusted and more structured. For consumers, knowing where to go and what you are going to [find] when you get there is a good thing.”

Roland LaPlante, senior vice president and chief marketing officer at global registry service Afilias, said in a recent Wharton speech that these new options for web addresses represent “the largest expansion of the [domain name system] in the history of the Internet,” adding that it “will change the way customers find you online.”

Others, however, fail to see the new gTLDs as useful. Wharton marketing professor Peter Fader considers the new generation of suffixes as downright retrograde. “This is 1999 technology,” says Fader, co-director of the Wharton Customer Analytics Initiative. “If you think about it, back in the day, if you wanted to share your web address, you had to say, ‘http, www, slash, slash, etc.’ We have whittled it down and gotten to the point where our email knows when you type in a .com, it says, ‘Hey, it’s a URL.’ I really can’t see a legitimate upside where new benefits outweigh costs, and everyone I mention this to feels the same way. People just shake their heads. It’s all about the money. They are creating these extensions because they can.”

Companies’ ability “to brand their site and those associated with them is almost like a good-housekeeping seal.” –Catharine Findiesen Hays

Yet many businesses are climbing aboard. By the middle of May, registrations had crossed the 700,000 mark across all gTLD names. Launching this month are .nyc, .financial and many others. In the lead is .guru, with 52,927 registrations.

Whatever ambivalence they may have, many businesses are betting there may be a messaging advantage. “The more your brand has a strong signature voice that people find appealing, the better,” says Wharton marketing professor David Bell. “You might find more large companies owning several sub-domains, and there could be strategic reasons for it. In the same way that Procter & Gamble” sells detergent under one name and paper towels under another, “being a house brand is an idea that has been around a long time. This is an extension of that concept.”

It can also allow organizations to manage the conversations on topics of particular interest. The National Rifle Association, for example, has filed an application to control .nra to foster better cohesion among what is says are its hundreds of affiliated partners, “and [to] create and host new online services and products with close association to NRA’s brand,” its application states.

More Gatekeepers, More Control?

In anticipation of even greater growth – and in an effort to thwart the kind of domain name squatting that has sometimes bedeviled the “wild and woolly” Internet – ICANN, at the urging of various users, has put in place a number of safeguards. A Trademark Clearinghouse, defined as a verified catalogue of registered trademarks eligible to receive rights protection, has been complied, and rights holders are given access to a “sunrise period” – a 30-day span during which the rights holder can register a domain name before it is made available to the general public.

In addition, following the sunrise period, during a 90-day notice period, anyone attempting to register a particular brand name will trigger an email alerting that brand name or its agent that a third party is attempting to register a domain name using the trademarked name.

Disputes have already arisen. An ICANN review panel is hearing arguments between two entities vying for .africa, for instance. In some instances, disputes will be settled through an auction process, says ICANN’s Cole.

The 1,930 applications currently before ICANN fall into five distinct categories, LaPlante says: generic terms like .career; city names such as .nyc; internationalized domain names; community names around a common interest, such as .gay or .ngo; and about 600 brands. Big companies applying for new gTLD names are Amazon (.free, .game), Google (.cloud, .wow), and L’Oréal (.skin, .hair).

Smaller companies interested in second-level domain names within the new top-level categories can go through middlemen if they choose. For example, say you are interested in setting up shop in New Zealand. You can go to hello.kiwi and buy a name. Hardware.kiwi can be had for $5,392.43 (US$4,644.12), games.kiwi for $46,212.14 (US$39,799.23). Kiwifruit.kiwi is, perhaps surprisingly, also still available, and for just $1,200 (US$1,033.47).

Greater Competition, Consumer Trust and Choice

ICANN is an independent non-profit organization, but as part of a negotiation with the U.S. government that ended in a lengthy Affirmation of Commitment, ICANN agreed that the overarching goal of extending generic top-level domain names was “promoting competition, consumer trust and consumer choice.” The extent to which the project is succeeding will be gauged by an ICANN committee convening after the new generation of names has been up and running for a year. “I think some will succeed and many, many will fail,” says Jonathan Zuck, president of the ACT, The App Association — an advocacy group representing the interests of small and mid-size app developers — who will chair that committee. “One of the outcomes may be greater reliance on search engines. If there are too many suffixes, I am not going to remember whether that photographer I am looking for can be found under .photo or .portrait.”

“It’s all about the money. They are creating these extensions because they can.” – Peter Fader

On the other hand, some top-level names promise to form a more tightly regulated online community. Zuck says that in order to be included in the .bank domain, a business will have to be a registered bank. The intent is to give consumers a scam-free environment. “I think there is a good chance that will be regarded as [a new suffix] with benefit. If you click on .bank, you might have reason to have more trust,” he says. One company, Accent Media, plans to use the .ticket domain to create a vetted environment where consumers can feel protected from the billions of dollars getting scooped up each year by ticket scalpers and fraudsters.

Other gTLDs, however, are causing concern. Zuck points out that it would be a problem if a company like Google owned the .app domain and it became the global marketplace for findings apps. “And then they put their finger on the scale and only Android apps end up getting top billing in searches.” Based on suspicions that Google may give favorable placement to its own products in the company’s search engine, “there is reason to believe this could happen.”

Other problems have arisen. One registry company is seeking, but does not yet own, the rights to .sucks – but is now offering a pre-registration “sale” of $2,500 for a .sucks address. What revenue-generating potential does a top-level domain name called .sucks have? Mostly as a “defensive registration” operation. “One of the ways they could make money is by companies themselves buying that name to take it off the market,” says Zuck.

Zuck and his review team will be collecting data sets to try to measure consumer trust, pricing and other metrics “to see if there are changes in the main marketplace” and measure them against the stated mission of increasing competition, trust and choice. “I think there’s a lot of potential for misuse,” he says.

Still, what companies hope to get in return for managing their own gTLDs is a better handle on who is using the site, how and why – especially if they can use them to supplant their fan pages in places like Facebook. “It will encourage brands to bring customers to their own sites,” says Hays. “With Twitter and Facebook, [those sites] own the stats and the understanding of what’s going on.” With control of their own domain, the brands will have this information and be able to see how consumers behave online. “It’s not saying that it’s going to replace social media, but it makes for a different dynamic.”

It is not clear how long it might take for truly mass migration from .com to the new gTLD sites, but one big retailer that has applied for a gTLD name indicated in its ICANN application that this could be a long process. “Walmart anticipates that changes to the domain name industry, particularly the impact of .BRAND gTLDs, will take at least five years to be realized and assessed,” it states in its application.

LaPlante is not recommending the end of the .com era. “But in five years, I predict that most major brands will be managing their own top level domain and operating all of the Internet aspects of their business out of a space that they can control,” he said in his speech.

“The introduction of new TLDs is likely to increase the value of the gold-standard ‘dot com.’ Adding more side streets only increases the value of a main-street address.” –Karl Ulrich

A paradoxical consequence is possible, says Karl Ulrich, Wharton’s vice dean of innovation and professor of operations and information management. “I believe that the introduction of new TLDs is likely to actually increase the value of the gold-standard ‘dot com.’ Adding more side streets only increases the value of a main-street address,” he says.

Moving Beyond URLs

The unleashing of gTLDs has set off a land rush for names, and when ICANN announces its next open application period, another round is expected. But it is easy to see the ground shifting beneath this particular innovation. After all, when was the last time you typed in, letter for letter, a web address? Links from texts and emails, mobile devices and native apps tend to dilute the power of domain names to some extent.

“The suffix [top level domain] is an idea that, as people do more on the phone, may become less useful,” says Bell. “The suffix itself is not an outdated technology, but as more and more people go to mobiledevices, the way of interacting with the Internet is moving [away] from URLs.” He says the future of interaction belongs to innovations like the one McDonald’s introduced in Spain. Aware that customers in nearby restaurants were using its signal, McDonald’s changed the name of its Wi-Fi signal to a message inviting customers in for free drinks and sundaes.

Wharton marketing professor Stephen J. Hoch is likewise unconvinced by the potential of gTLDs as an enormous advance. “From the consumer’s perspective, I don’t see a lot of difference,” he says. “Moreover, with search and automatic filling in of email addresses, it is not clear that the brands, at least big brands, would be affected either. People are not really thinking about anything that comes after the period.”

“I think we have all learned by now that you have to be creative with what’s to the left of the dot,” says Fader. “You can’t hide behind the right side of the dot as a lack of creativity to differentiate your brand. Everyone aspires to be Kleenex or Xerox, and this is a way to say, ‘We stand alone.’” Fader acknowledges that given all the different ways markets and sectors work, “there must be some legitimate uses out there, but it will be a teeny, tiny fraction of suffixes to which that applies. For the vast majority, it will be an utter waste of time.”

Yet the potential for creative uses of gTLDs has not yet begun to show itself, suggests Elliot Noss, president and CEO of Tucows, which calls itself the world’s largest wholesale domain registrar. “When a large brand funnels its whole name space into a corporate TLD, I think you’ll see all kinds of innovation in the way people use domains for particular purposes.

“A better use of the name space is not going to cure cancer,” he adds, “but it does provide slightly better and more useful domain names. If you have something … used billions of times a day, that’s important. We see the traffic, and half the traffic on the Internet is direct navigation.”

At least one large organization is resisting the siren call of moving under a new gTLD name. ICANN, for its part, harbors no ambition to change where people can find it. “From what I know,” says spokesman Cole, “we’re not going to go for anything beyond .org. We’re perfectly content.”

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