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Domain Registry is Capitalism with a Big C. How it affects your venture

Wed, 21st May 2014, 16:10

A followup to an earlier story on the new top-level domains available- we found an interesting question floating around the web that basically questions: why are domain registration so expensive? ICANN, the non-profit responsible with coordinating the global DNS, only charges 18 cents for any given domain. But the price for, say, a typical .com address is about $10.

Suck it up. It’s only ten bucks!

While the annual fee paid for ‘renting’ that domain may pale in comparison to the ransoms paid in domain auctions, or to those pesky domain squatters to initially acquire a web address, many businesses today are forced to expend small fortunes registering and renewing domain names to protect their brands. Not only are businesses peremptorily registering the dot com, dot org and dot net, but also anything else that is remotely close, along with every conceivable misspelled typo.  

As an example, Poor Webhosts are compelled not only to register the domain poorwebhosts.com, net, org, biz, along with a country specific domain ie dot us, but also to prevent a competitor from creating brand confusion, a prudent entrepreneur would register pourwebhost dot com, biz, etc. Then you need the poorwebhosting and poorhost.. then there are typo squatters so .. well you get the point. Brand protection is an expensive proposition.

So where is that money going?

The truth of that matter is that there’s a fairly interesting process going on beneath the registrar you go to for a domain name. Your $10- or $25, or $50 (editor's note: maybe hundreds.. or even thousands) as it may be with some of the newer, more inventive TLDs, is really just a big money pie, and there’s both a rhyme and a reason to the way that pie is divided.

So there’s the little ICANN fee right there, almost half of the equally small processing fee. It turns out, not much of the pie ends up going to your registrar in the first place, regardless of who they may be. The majority of that money is going straight to VeriSign- not the registrar, but the registry beneath it all.

Your registrar has its work cut out for it. First off, in order to become a registrar, you need a business with cash reserves, all of the capabilities online and ready to go, and at least five employees. Furthermore, competition is healthy. ICANN has a list of countless registrars, and none of them have real control over the market. So that healthy slab of the pie is being shaped by market forces, just as the rest of the small fees make sense in context. It’s VeriSign’s Pac-Man sized slice that boggles the mind, and if it seems excessively large to you, join the club.

You see, VeriSign is the registry- they’re in control of both the .com and .net domains. It’s a monopoly in the purest sense of the word, due to a lack of appreciation for the massive importance of domain registry back in the 90s, followed by some fumbled legal back-and-forth with ICANN. The monopoly VeriSign enjoys over the biggest TLDs on the entire internet means that for years, they’ve been able to hike up prices on .com registration, earning them an enormous war chest- we’re talking upwards of a billion dollars in yearly revenue, here.

ICANN (and consumers) won a real victory in 2012, in which VeriSign was forced to stop increasing the price of .com registry until 2018. But .net and .name still belong to VeriSign, and are set to balloon in price during that time, guaranteeing growth for the already bloated VeriSign anyway.

It’s possible that, with the last vestiges of control over the internet being relinquished by the US government, VeriSign will lose their long-enjoyed monopoly over the .com registry, and that would certain cause prices to fluctuate from competition. Along with those thousands of new TLD extensions entering the market are now alternative to the dot nets.

Regardless who you pay, You will pay

Which takes us back to Poor Webhosts. Some of these new TLD extensions are nothing more than ridiculous money grabs. Brand protection by registering multiple domains has become prohibitively expensive. It may now be cheaper to hire a lawyer, register a trademark, and enforce that mark with every clown attempting to cash in on your brand. Stealing your business, or your cash, it's the cost of doing business.