Fears For Underperforming gTLDs. What Happens When They Fail? And What Does It Cost To Run A New gTLD?

ICANN new generic Top Level Domains logoThe world of new gTLDs is going very well for some. Registration numbers are booming, usage and renewals are going well. And internet user acceptance is high. But there are some that are, to be polite, struggling.

And what happens when these underperforming new gTLDs go dark? The issue was raised in a recent news release from IID, a cybersecurity company, who “anticipates an unprecedented series of domain registry failures as a result of the lack of gTLD popularity by 2017 in the form of bankruptcies and abandonment.”

“Most new gTLDs have failed to take off and many have already been riddled with so many fraudulent and junk registrations that they are being blocked wholesale,” said IID President and CTO Rod Rasmussen. “This will eventually cause ripple effects on the entire domain registration ecosystem, including consolidation and mass consumer confusion as unprofitable TLDs are dropped by their sponsoring registries.”

Should a gTLD go down, the company notes, it would take any resident websites, email or other services with it, forcing their owners to scramble for new virtual real estate. There is a process in place to continue support of struggling registry operations until a larger registry or organization buys them in auction and rescues them. However, questions abound as to who would risk an investment in poorly performing TLDs, especially as they start to number in the hundreds. “That’s why eventually some are going to just plain go dark,” added Rasmussen.

The writing is already on the wall. For instance, in its original Fiscal Year 2015 budget draft, ICANN predicted 33 million new gTLD domain name registrations — a number it later revised to just 15 million. According to ntldstats.com, the final tally for FY2015, which ended June 30, 2015, which IID wrongly states as only 4.9 million registrations, but was actually 6.323 million. Today registrations across the 833 delegated domains, including brand gTLDs, stands at 10.495 million.

So while the predictions by IID are probably exaggerated as they hope to drum up business, they do raise a good point.

So Domain Pulse reached out and spoke to an industry source who prefers to remain anonymous. In short, our industry source estimates that to run a new gTLD costs at least $400,000 per year. So if a registry wholesale’s domains to registrars at $1,000 per domain, well, it could only need 400 registrations. But at $10 per domain that’s 40,000 registrations.

These costs include the running of the registry, either internally or outsourced, which would be around $90,000 to $140,000 per year for the cheaper outsourced version.

Staff costs, at a minimum would be for a CEO and at least one full time equivalent for administration, marketing, technical and registrar support. So there would be little change from $200,000 depending on the location. And costs could even be higher. Office costs and travel of $30,000 to $40,000, again location dependent. And then there’s PR, marketing and lobbying costs of $25,000 to $30,000.

And to survive a gTLD has had costs such as application costs, payments to ICANN once registrations reach a certain level and operations cost in getting started for a year, at least, prior to launch. So a gTLD would probably have to bank on an income of $450,000 per year to keep their heads above water.

So registrants need to think about their TLD when choosing a domain name. A business could suffer real difficulties if their online presence goes down overnight. No bookings or sales. No emails. To many customers it would be like they went out of business, when in fact it is not they, it is their TLD that has gone out of business.