Healthy Market

TLDR

  • New domain registrations benefit from significant market competition.
  • Competition for new registrants helps restrict renewal prices.
  • There is a 10-year price guarantee that helps restrict renewal prices.
  • The price controls for .com help restrict registration and renewal prices.
  • Domain speculators help restrict renewal prices.
  • An uncoordinated, third-party aftermarket sets market values and captures most of that value.

Overview

Registrants benefit from significant market competition when registering domains and this, among other things, has a collateral effect on the long-term renewal pricing for standard domains. Standard domains have a reasonable balance of market forces that help create limits on renewal pricing for registrants without putting significant restrictions on registries.

The registrar portion of the market is extremely competitive, almost to the point of detriment.

Standard Domains Only

The market competition and balance described on this page only applies to standard domains on gTLDs.

Registration Competition

Registrants that are choosing a domain for initial registration benefit from significant competition between registries. There are hundreds of gTLD and ccTLD registries competing for new registrations. The term initial registration refers to the registration of a new domain.

An image of domain registration choices.

New Entrant Impact

Uniform pricing protections ensure that registries cannot increase renewal pricing for existing registrants unless they also increase renewal pricing for future registrants. This has the effect of deterring registries from significant price increases because higher renewal prices will push new registrants towards competing TLDs. This deterrent is most effective when new registrants look beyond low introductory prices and consider long-term renewal costs. This is especially true if a price increase is significant enough to cause long-term reputation damage to a TLD.

This should hold true as long as a registry does not abandon growth to focus on extracting value from existing registrants.

Price Lock

Price lock protection gives registrants an opportunity to lock-in the current price for 10 years if a registry increases prices. This increases the risk of a registrant exodus if a registry increases renewal pricing significantly since the extended timeframe makes it more pragmatic for registrants to mitigate the negative side effects of switching TLDs.

  • The original domain can be forwarded to a new domain for an extended period of time.
  • The new domain can be switched to as the primary domain for email and other communications.
  • Apps dependent on the original domain can be migrated to the new domain without abandoning users that cannot upgrade immediately.
  • All of the above can occur over an extended period of time and still leave a buffer for the registrant to “black-hole” the original domain for a period of time prior to letting it expire.

Dot Competition

The .com TLD is the undisputed market leader, so the price protections for .com domains have a collateral effect across the industry. Registrants that believe “.com is king” will balk if prices for a seemingly inferior product, aka alternate TLDs, are noticeably more expensive.

Speculators

Domain investors, aka speculators, add a bit of ambiguity to the market when registries are considering a price increase. Domain investors are not beholden to the switching costs associated with switching to another TLD, so it is easier for them to abandon a TLD if the registry imposes an unreasonable increase in renewal price.

The Aftermarket

Requiring uniform pricing for all domains on a TLD will always result in mispriced domains. Poor quality domains may be overpriced while domains using high-value keywords may be significantly underpriced. This is especially noticeable with the .com TLD where domains can sell for millions of dollars in the aftermarket.

Even though domain investors are disliked by many would-be registrants, there is a case to be made for letting them capture most of the market value for any given domain. Minimal barriers to entry ensure the aftermarket always has a large number of participants and healthy competition.

An image of an optional aftermarket.

Participating in the aftermarket is optional. Plus, as the number of TLDs increase, along with the adoption of those TLDs, registrants get more choice and speculators are forced to factor that into their pricing. Adding TLDs should cause downward pressure on aftermarket pricing.

Most importantly, when wholesale pricing is commoditized and value extraction exists in a highly competitive aftermarket, it improves the market for registrants.

  • Market values are set by the aftermarket and upfront, one-time pricing makes it easier for registrants to understand the premium they are paying for a high-value domain.
  • Uniform pricing obligations eliminate future price discrimination for domain renewals.

This creates a low-risk, long-term, stable market even for registrants that do not understand the market structure.