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1 © 2014 Architelos and/or its affiliates. All rights reserved.

Myths & Facts

New gTLDs, Registries & Registrars

www.architelos.com

September 30, 2014

Agenda 1.  Se<ng the Stage 2.  Prior gTLD Launch Models 3.  New gTLD Myths & Facts

•  Pricing •  Brands •  MarkeJng •  Technical IntegraJon •  New Entrants •  Market Share

Myths: What were generally held beliefs going into the program circa 2012

Facts: Nine months into the new gTLD program what data is emerging

Premise of the Discussion:

We Encourage Dialogue…

Alexa Raad, CEO

John Matson, COO

© 2014 Architelos and/or its affiliates. All rights reserved. 3

Ex: “What was your 2013 DUM growth?”

Ex: “What impact will new gTLDs have on your business?” Source of greatest threat or

opportunity. Its what: •  makes new companies, or

makes others obsolete •  brings unanGcipated OR

unintended consequences

What you know

What you know you don’t know

What you don’t know You don’t know

Setting the Stage


What you know



Setting the Stage

Sources: •  New and/or disrupGve tech •  New compeGtors •  Regulatory forces •  Geo-‐poliGcal forces •  Economic factors •  Changing Consumer tastes,

trends and behavior •  Customer driven changes


What you know



Reduce uncertainGes

Ideal Outcome

Expand & Monitor


New gTLD Launch Profile Differs from Past

0"

500,000"

1,000,000"

1,500,000"

2,000,000"

2,500,000"

'4" '3" '2" '1" 1" 2" 3" 4" 5" 6" 7" 8"

Comparison*of*gTLD*Prior*Launches*&*New*gTLD*Program*(DUM)*

.biz"(2002)" .mobi"(2006)" .guru"(2014)" All"New"gTLD" Donuts"


Circa 2002 Registry Revenue Model

SpeculaJve

Defensive

ProducJve

Immediate Secondary Market

Source Registry: All domains – single price

Lost Registry Value (Cash)



Premium Names

Sunrise Brand Defensive

ProducJve

Delayed Secondary Market

Premium Names Captured More Cash Value Earlier for the Registry

Renewals at GA Price regardless of value SpeculaJve

Similar Business Over Time



Tiered Names

Minimal Brands

All Names Released with Higher Pricing via Permanent Tiers or Early Premium

? Secondary Market Unclear

Significantly Less Cash Early

More & Different Pricing Models


“Brand Registrars will Sell Lots of Defensive Registrations”

General Market ExpectaJon Before Launch: •  Brands would have to spend billions of dollars to protect in new gTLDs •  ANA, Fairwinds/CADNA & IP lawyers waged campaign to delay/stop new g’s •  Trade Mark Clearing House planned for millions of registraJons •  Few brand new gTLD applicaJons

Results aier 9 months: •  Brands did not show up to purchase large numbers of new gTLD names •  TMCH registraJons at ~30,000 and significantly below expectaJons •  Brands are conscious that traffic drives value – no need to purchase •  CSC ranks 25th (0.48%) & Markmonitor 28th (0.44%) market share

•  Average of 30-‐35 names sold per TLD with ~300 TLDs acJve •  Over 600 brands applied for new gTLDs – many in wait mode •  Donuts DPML – gave brands ability to block names in all 150+ TLDs


Slow Uptake of New gTLDs by Brands

!"!!!!

!20!!

!40!!

!60!!

!80!!

!100!!

!120!!

DUM/TLD!(100)! DUM/TLD!(200)!

Average'Brand'Domians'Sold/New'gTLD'for'CSC'&'MM'

CSC!(10,447!DUM)! Markmonitor!(9,578!DUM)!


“Domain Prices will Have to be Similar or Less than .com to Compete”

General Market ExpectaJon Before Launch: •  TLDs would follow prior gTLD launches with 1 wholesale price for all names •  Pricing would be low to compete with .com – the market leader •  Premium name programs would aucJon some, hold back other for later

Results aier 9 months: •  Some pricing very high: .luxury @ $999 & .shijie @ $200,000 •  Tiered pricing introduced that keeps renewal price higher •  Early purchase pricing rather than premium name model •  Mostly all name inventory released for market to decide – RAR’s pleased •  Premium name aucJons show poor results: .global ~$60K for xx names •  Pricing complexity requires new technical soluJons between REG-‐RAR

•  EPP command holds only one value for price of all names

Myth: Renewals follow previous rates. Current facts have yet to be determined, but as current ccTLD renewals are generally under pressure, they will likely not follow the past.


Case Example: Minds+Machines Pricing Tiers

•  M+M ignored the one price for all GA & premium name aucJons •  Created 8 Jers of names •  Manually sorted over 100,000 names into the 8 Jers •  Registrar gets 20% of Tier pricing plus any markup

•  E.g. $500 price Jer •  Registrar sells name for $650 •  Registrar gets 20% of $500 plus margin over $500 •  $100 plus $150 for $250 out of $650

•  Requires registrars to be able to handle new pricing methods •  Renewal occurs at Tier price so future revenue is maintained •  All names are released to market so no inventory held back


CENTR Member Survey 1) Have new gTLD sales:

a.  fell far short of your expectaJons b.  fell short of your expectaJons c.  about what I expected d.  exceeded my expectaJons e.  far exceeded my expectaJons

2) Five years from now how will this round of new gTLDs be remembered:

a.  An user failure b.  An interesJng experiment, nothing more c.  Introduced confusion at first, but gained awareness and moderate

success d.  Was the start of something big, many thriving niche TLDs e.  Changed the industry fundamentally


Results….

6%

19%

45%

10% 19%

Fell far short of my expectaGons

Fell short of my expectaGons

About what I expected Exceeded my expectaGons

Not sure or too early to say

New gTLDs Sales have: 31 responses

6% 16%

59%

6% 6% 6%

An uZer failure An interesGng experiment, nothing

more

Introduced confusion at first, but gained awareness and

moderate success

Was the start of something big, many thriving niche TLDs

Changed the industry

fundamentally

Other

5 years from now, new gTLDs will be remembered... 32 responses


“The Path to Market is Through Us (Registrars)" General Market ExpectaJon Before Launch: •  Registrars are THE path to market – registries will have to accept terms •  Registrars will be able to pick and choose who they list •  “Pay to play” to be on a registrar’s first page •  Large registrars will carry all TLDs – Some smaller registrars are choosey

Results aier 9 months: •  Mixed results •  Strong basle between parJes on terms – slight nod to registries on pricing •  Larger registrars are more choosey: Tier 1, Tier 2, Tier 3 slo<ng •  Smaller registrars seem to be chasing everything – lack of focus •  Not much “pay to play” – big discounts expected for GoDaddy page 1 •  Registries pursuing much more direct markeJng to target registrants

•  Registrars are not able to effecJvely target narrow segments


GoDaddy-‐ Homepage


GoDaddy-‐ Domain Search


1&1


EnCirca – Example of Smaller Registrar


“Registrars will Market New gTLDs Effectively" General Market ExpectaJon Before Launch: •  Registrars have been selling domain names for over 15 years •  Registrars have hosJng & other services dependent upon name sales •  Registrars will invest in some strings like GoDaddy did with .co •  VerJcal integraJon to be an opportunity for Registrars

Results aier 9 months: •  1&1 had generic television adds pre-‐new gTLD program – now ceased •  Lisle to no custom markeJng for new gTLDs by registrars •  Registries creaJng their own registrars to market strings

•  Keep more margin for the contract holder •  Developing niche markeJng programs based upon narrow segments •  Equal access rules sJll apply

•  Registrars did not fully appreciate that registries would exploit opportunity offered by their own registrars


“Registrars will Enforce Standard Technical Integration of New gTLD"

General Market ExpectaJon Before Launch: •  Registrar technical onboarding of registries clearly defined •  Registries will work with registrars to conform to exisJng EPP protocols •  Registrars hold the power and registries will conform

Results aier 9 months: •  New pricing models by gTLDs have challenged registrar technical systems •  Primary issue has been one price per TLD •  EPP command passed one price for all General Availability names •  Out of band pricing tables & caching soluJons to handle new pricing •  Nexus requirements require addiJonal steps in registraJon flow •  Some but limited standardizaJon of new pracJces

•  More collaboraJon needed to define “new standards”


“New Registrars will Emerge – Mostly Niche" General Market ExpectaJon Before Launch: •  There will be some niche registrars but no big compeJJon to large •  Technical & markeJng requirements lei for later •  New registrar soluJons being developed to add new gTLD inventory (Fly9)

Results aier 9 months: •  Google enters the market as a full funcJon registrar – impact sJll TBD

•  Has access to the largest billboard ever known to man: google.com •  New registrar front end soluJons emerged for brand registries

•  E.g. Brandshield, AuthenJcWeb •  Niche registrars sJll have not emerged, but major strings yet to come

•  E.g. .music, .realtor, .broker, .art


“New gTLD Market Share will Follow Industry" General Market ExpectaJon Before Launch: •  Registrar market share of global industry will be reflected in New gTLDs •  Difficult for smaller registrars to integrate many new gTLDs

Results aier 9 months: •  Although the top 3 registrars sJll dominate, the ranking has changed

GoDaddy is #2 •  Uniregistrar (New) is in #8 spot, but it is the registrar procurement arm of

Uniregistry and thus focused on buying Uniregistry names •  We are seeing smaller exisJng Registrars taking more new gTLD market

share


“New gTLD Market Share will Follow Industry"

Source: Architelos analysis of ntldstats.com data 9/8/2014

Registrar C/N/O New.gTLD Registrar New.gTLD C/N/OGoDaddy 1 2 NetSol 1 3eNom 2 3 GoDaddy 2 1NetSol 3 1 eNom 3 2TUCOWS 4 11 1&1 4 51&1 5 4 United 5 Not:in:Top:15MIT 6 Not:in:Top:15 PSI 6 Not:in:Top:15Wild:West 7 Not:in:Top:15 GMO 7 Not:in:Top:15Register.com 8 Not:in:Top:15 Uniregistrar 8 Not:in:Top:15Resellerclub 9 Not:in:Top:15 Hexonet 9 Not:in:Top:15KeyNSystems 10 Not:in:Top:15 XinNet 10 Not:in:Top:15Moniker 11 Not:in:Top:15 TUCOWS 11 4FastDomain 12 Not:in:Top:15 RESERVED 12 Not:in:Top:15Strato:AG 13 Not:in:Top:15 Name.com 13 Not:in:Top:15Onamae 14 Not:in:Top:15 Mesh 14 Not:in:Top:15OVH 15 Not:in:Top:15 101Domain 15 Not:in:Top:15


Summary Observations: Market Still in Flux… •  Old success metrics (e.g. pure DUM volume) are misleading •  Registrars will need to update their focus and approach

•  Focus on selling soluJon packages vs. domain inventory •  Specialize in a demographic or industry niche

•  (ex: Godaddy now focusing on soluJon packages for SMEs) •  Adjust expectaJons:

•  Most new gTLDs are hard pressed to invest in a lot of markeJng $$ •  Less willing to pay for placement •  More willing to pay for sales (i.e. pay for eyeballs vs. commission)

•  Already seeing evidence of the 1st wave of new gTLD failures •  Will not go to EBERO but rather to public aucJon/sale •  Expect aucJons and M&A acJvity/consolidaJon •  Will create fallout especially for retail registrars

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