Inside the High Stakes Auction for .Web

3 comments

Some very deep-pocketed internet giants are facing off on July 27, 2016 for a high stakes game of poker. The pot isn’t cash but the rights to sell the coveted .web top level domain (TLD) extension to eager website owners, domain speculators, online entrepreneurs, developers, designers and digital ad agencies. Google, Web.com, United Internet and Afilias are among the seven competing entities who will bid in real time on July 27 via an online auction conducted by the non-profit organization ICANN (Internet Corporation for Assigned Names and Number) to confer the rights to sell .web.

The auction

If you have a ton of time on your hands and want to brush up on the legal details of how the auction process works you can read all about it here. For those who aren’t lawyers here’s a tl;dr version of how it works.

Step 1 – Become eligible for participating in the auction. The criteria are basically you must have an extra large sum of American dollars (auctions are all conducted in American dollars regardless of the top level domain) and be in good standing with ICANN.

Step 2 – Login to the auction interface on the day of the auction to bid. The larger your deposit is, the higher you can bid. A deposit of $2 million gives you an unlimited bidding potential. The bids are made through a series of ”rounds” where the floor and ceiling of that round are specified. If all bidders meet the ceiling of the round then a new round is started after a short break with the floor being set at the ceiling of the previous round. The rounds continue at higher and higher floors until there is only one bidder remaining. That bidder pays the second place bidder’s highest bid.

Big money bids and big money profits

So exactly what would the rights to sell the .web TLD be worth and what might the winning bid be? Consider that on Jan. 27, 2016 a number of large firms including Amazon, were bidding via an ICANN auction for the rights to the .shop TLD. After 14 rounds of bidding GMO Registry, Inc. won the rights with a winning bid of $41,501,000. Clearly the expectation is that the revenues derived from the .shop domains would well exceed the price paid. Note also that the current champion of newly minted TLDs is .xyz which has registered a total of nearly 6.5 million domains as of July 20, 2016. At a conservative estimate of only a one year registration period and an average price of $10 per domain that works out to around $65 million so far. Clearly the current bidders for .web hope that the number of .web registrations surpass those of .xyz making it potential worth in excess of $65 million.

So what could a winning bid look like? Using .shop as a proxy – it is certainly possible that .web could fetch a higher bid that .shop ($41,501,000) – but how much higher? Only the bidders know what their upper limits are. It is clear that the bidders all have substantial funds to bring to bear on the auction. Here are the recent market caps of three of the bidders who are publicly traded:

Alphabet Inc Class A (Google) – $514 Billion
United Internet AG – $8 Billion
Web.com – $950 Million

Would Google with its massive war chest of cash even blink at paying $50 million or more? Not likely. In fact Google paid over $18 million just to submit a list of TLDs that it wanted to pursue before ever arriving at the final sale price.

Could .Web become the new .Com

Is it likely that .web will be a standout among new TLDs? Here are a few points that may indicate .web is poised to gain traction relative to other recently introduced TLDs.

1. We’re already used to using the term ‘web’ for internet-related activities. We refer to online properties as ‘websites’ or ‘web pages’ and the talent who create them are ‘web designers’ and ‘web developers’. We use ‘web servers’ and ‘web browsers’ and even ‘web apps’. The common references make a transition to a .web domain a natural activity for a mass online and mobile audience.

2. .Web is short and memorable. With the explosion of new top level domains, it’s literally hard to keep track of them all or their proper use. A short generic term like .web could cut through all the clutter. It’s just simpler to type: yourcomany.web than say: yourcompany.company or yourcompany.solutions. It’s certainly less prone to confusion as well. Was it yourcompany.solution or yourcompany.solutions?

3. Large companies set standards. Imagine if Google won the auction and decided that every time someone searched for anything related to ‘domain names’ on Google – they would suggest trying the .web TLD as an alternative to .com. Standard set.

4. Dictionary names and short phrases are still available on .web. This is true of all new TLDs so it’s not unique to .web. However, simply offering a short, memorable and generic alternative to .com could be enough if the momentum gets behind this new domain.

Stuart Melling is co-founder of UK domain name firm 34SP.com with decades of domain name experience and he offered up his expert opinion on whether .web could be the next .com.

”There’s such a huge array of new domains available to buyers now making it very difficult for them to really understand the selection on offer. Likewise, I’ve yet to see any registrar (ourselves included) deliver a domain search tool that really nails domain discovery,” he says. “It boils down to marketing might at this point. The registries that will win are most likely going to be those that have the heftiest budgets to market and promote their domains. I personally see .com being the de facto domain for any new website for some time to come. Right now, the new TLDs seem to represent a fallback, a secondary area to secure a relevant domain if the .com space isn’t viable. I’d imagine it would take years to unseat this kind of approach; but then this is the web, and making predictions is really a fools game.”

What other domain experts think

Mark Medina, Director of Product, Domain Names with DreamHost has been selling domain names to web businesses for over 15 years. Medina has some strong predictions for .web: “The winning bid for .shop was $41.5M, so I think the winning bid will definitely be north of $50M. Because there are multiple bidders, one of them being the mighty Google, I can foresee some pretty aggressive bids, which I think will take the final winning bid into the $80M – $100M range.”

”Everyone still wants a .com. We’ve done user testing on people searching for domains, where users speak their thoughts during the test, and almost all of them say ‘Where’s the .com?’ With that said, I can’t foresee .web becoming the new .com, but I think it will be one of the more popular new TLDs that could overtake .net in a few years,” Medina says. “The .net TLD has been losing its popularity, and I think TLDs like a .web or a .xyz could become more popular than .net in a few years time. .Com will remain number 1 but number 2 is up for the taking.”

Chris Sheridan is currently Head of Channel Sales at Weebly.com and has also held senior positions at domain registrars eNom and VeriSign.

Sheridan shares his take: ”When new TLDs first launched, the larger registrars had to dedicate themselves to just focusing on the integration of hundreds of new TLDs per quarter. I look at 2014 as a year basically focused on integrating as many of the new TLDs as possible so that 2015 and 2016 could be more focused on marketing and sales. What I see today is more focus by the larger registrars on marketing the new TLDs and raising their visibility to their existing customer base. Since new TLDs are typically priced higher than a ‘.com’ they give the advantage to the registrars of driving higher revenue sales and allowing them to capture more margin on each individual domain name sale as well.”

He continues: “I think the .web TLD has big potential. For starters, there is no consumer education hurdle here. I think people will just get it…so that is a major advantage. I think we will have to see how the future .web registry addresses two key areas: pricing and marketing.”

“In regards to pricing, the wholesale cost to registrars will be key to adoption by larger registrars and its inclusion in key hosting bundles managed by the larger registrars (which impacts distribution). In regards to marketing, there will need to be a big effort to raise awareness of .web globally. This will require the help of the larger registrars (marketing programs) but will also require the .web registry to be involved as well,” Sheridan says. “The manner in which the future .web registry address pricing and marketing could potentially dictate its success. The future delegation of .web to a registry provider represents the final batch of remaining new TLDs to go live. I think it is great to have a big TLD like .web being delegated toward the end of this long new TLD rollout. It generates more media attention to the overall program and re-ignites excitement around domains. So that is good thing on all levels.”

Newsletters

Subscribe Now and Get Our Exclusive Report on "The Hosting Infrastructure Ecosystem"

Enter your email to receive messages about offerings by Penton, its brands, affiliates and/or third-party partners, consistent with Penton's Privacy Policy.

Related Forum Threads

Add Your Comments

  • (will not be published)

3 Comments

  1. Its really true "Big money bids and big money profits"

    Reply
  2. Elena

    "Note also that the current champion of newly minted TLDs is .xyz which has registered a total of nearly 6.5 million domains as of July 20, 2016. At a conservative estimate of only a one year registration period and an average price of $10 per domain that works out to around $65 million so far." Average price of $10 per .xyz domain and $65 million so far? I don't think so: - There was a promotion going on not so long ago were you could buy .xyz domains between $0.01 (yes one penny per domain) and $0.02. Around 2 million .xyz domains were registered during that promotion. The .XYZ registry obviously made no money during that promotion obviously. They lost money. - Concerning the remaining 4.5 million registered domains. You can buy .xyz domains for $1 a pop at several registrars. Buying an .xyz for $10 is rare. I'd say the average purchase price is around $2. So 4.5 million domains at $2 per domain equals $9 million. - .xyz domains have a low renewal rate. So not much money that was made there either. So conservatively I would say they made around $9 million in registrations but if you subtract all their marketing expenses and their several promotions (especially their "1 penny" promotion which made them lose several millions) it's likely they are in the red right now. So they didn't make "$65 million", they probably made nothing.

    Reply
  3. "Note also that the current champion of newly minted TLDs is .xyz which has registered a total of nearly 6.5 million domains as of July 20, 2016. At a conservative estimate of only a one year registration period and an average price of $10 per domain that works out to around $65 million so far. Clearly the current bidders for .web hope that the number of .web registrations surpass those of .xyz making it potential worth in excess of $65 million." This "conservative" estimate is far from reality. The vast majority of all .XYZ have been registered for prices well under $1. .XYZ has been inflating registrations since day 1. It initially started with them putting hundreds of thousands of free unwanted domains into people's accounts via an opt-out scheme at Network Solutions. They continued to inflate registrations with a promotion in June. More than 2.5M were registered for 1 or 2 cents each during this promotion. .XYZ did not make money on these registrations, in fact they lost a lot of money when you factor in their fees (ICANN, backend, marketing, etc.). Brad

    Reply