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Impact of new gTLDs on competition in the domain name market and implications for brand owners

17 October 2016

ICANN recently published its first report showing the impacts (or not) of the introduction of new gTLDs on competition in the domain name market. Its research project entitled “Phase II Assessment of the Competitive Effects Associated with the New gTLD Program” highlights a number of interesting localized impacts in the market but fails to draw a clear conclusion as to whether the domain name market as a whole has become more competitive.

The report details the outcomes of a new research project and compares this new data against a baseline set of data from September 2015.

The key findings will not come as a shock to those who are familiar with the New gTLD Program. The average and median retail prices for registrations of both legacy and new gTLDs have declined. In the case of the new gTLDs this has been driven by registry and registrar discounting / price reduction. Within the legacy gTLD space this is more often driven by registrar discounting only. The impacts of price caps in the legacy TLD market mean that the overall wholesale price level of legacy gTLDs is lower than that of new gTLDs.

The report highlights that there are several reasons why the volume of new gTLD registrations remains small in comparison to the legacy TLDs Clearly, with new gTLDs having only been available for registration for a much shorter period of time and with this control on legacy TLD pricing, it’s understandable that only 9% of all gTLD registrations (16.5m registrations) are in new gTLDs, as of March 2016. Nonetheless, this still represents an increase since November 2014 when new gTLDs accounted for approximately 2% of all gTLD registrations (3.5m registrations).

Although the new gTLD program has had no obvious effect on legacy gTLD registrations as a whole, it is interesting to note that the release of geoTLDs (.nyc, .berlin, .london, etc…) accompanied a decline of registrations in other new gTLDs as well as legacy registrations in the relevant geoTLD’s region. This suggests that in the future, geoTLDs could provide competition to legacy and new gTLDs.

Another area of interest in the report is that of the market for registrars and registries where there appears to be more change occurring. The nature of the market in China growing and the focus different registries and registrars place on new gTLDs reflects in changes in the top registries and registrars by number of domains registered.

So, has ICANN succeeded in creating a more competitive marketplace, as it stated as one of its intentions with the introduction of the New gTLD Program?

In short, not yet. The study’s introduction states:

“While we are unable to draw conclusions about whether the new gTLD Program has
caused a change in competition in the domain name marketplace, some of these changes in the past year are consistent with what one would expect to see in a marketplace with increased competition.”

It’s still early days. There are many factors that will impact the new gTLD market over the coming years: strength of the registry businesses behind them, user uptake and usage, registrar practices, a potential second round of new gTLDs, just to name a few.

What is clear is that brand owners need to take a considered approach to domain registrations, particularly given that geoTLDs were able to effect registration statistics in their relevant region. Getting the right balance of registrations that are relevant to your brand portfolio whilst defending your IP is as important as ever.