Morning Folks!!
Let's take a few minutes maybe even a few posts to untangle this clusterf*ck of what is coming and what the Myths and Facts really are. And if I don't know, I will make it up. I will come to an assumption. I will use what facts are available and at the minimum use that as the starting point because you need somewhere to start and assumptions are perfect until you can plug-in the actual facts when they unfold. And if you have been paying attention they have been unfolding every day. And if you have some parallels set up, you can already see what is coming and the stages they are coming in. Let's just say "Consolidation" will be the keyword for the first 5-10 years or more and we have already seen that happen. Or die on the vine.
Myth #1 "gTLD's are bad for the Industry."
Well it may be a mess and it may be a clusterf*ck of historical proportions, it will also bring awareness and tens of billions of dollars into our space. Normally I would say sales. But in this case, the #1 expenditure will likely be advertising and other means to bring awareness but does not necessarily result in sales that are strong enough to support. Not to mention employees, customer service, unexpected glitches. A rocky road. It costs money to pave the way and get to a smooth time. Many won't survive that journey and some already gave u before the trip even begins.
Myth #2 "gTLD's will devalue my .com's."
Well nothing could be further from the truth. It will do quite the opposite. Those that are saying that are likely buyers trying to get you to sell beneath market. How gullible. Are you paying attention to the after market? It is exploding! There is a reason for that but I won't argue the point, I will just state what happens before it happens and be on record so we can look back.
Myth #3 I am not sure what to quote here. But just an interesting observation. The gTLD's were open to everyone in the world. All the different languages. But extensions are dominated by English Words. Why?
Myth #4 "Somebody that owns a .com will want the other .whatevers."
As Page Howe articulated on DomainSherpa.com last week and I agree with 100%, he never goes downstream. In other words, if you own something other than .com then you want to grab every other extension and keep going after better and higher level domains until you get to the prize which is .com. But if you have the .com you are really not motivated to get the lower level extensions. Matter of fact, you can't wait for one of them to have a giant success.
Myth #5. "My .whatever extension does not leak traffic to the .com"
Sorry, fact beyond dispute. The evidence is overwhelming. So overwhelming in fact that it has the potential to sink the ship. Any ship. That's a captain of a ship that believes the ocean has no shallow spots and a few leaks won't hurt anything.
Myth #6 "Google and Amazon and the big boys are in charge"
Not true. The consumer is always in charge. Everyone chases the consumer. There are some that do it really well (Apple) and have a harness on it and there are others that fail like JCPenny and are wobbling out of control. The consumer demands certain things. And when you don't give it to them, they won't give their dollars to them.
Myth #7 "The buyer sets the price and is in control of a transaction."
Come on. The seller is the only one that can press the Red Button and make a decision. The seller has only one thing he controls, his wallet and perhaps lack of funds.
Myth #8 "Reverse Domain Name Hijacking is no big deal"
Myth #9 "Rick and his Need, Want, Desire" does not get it.
Sorry, few have challenged Need, Want, Desire" and "Value" becomes a knockout blow. Down goes Frazier! I am just saying that many of those that are doing this are unprepared for the reality of what they are going to find out. So their only play is selling the extension. And while everyone thinks they make 5X their money with a $1 million sale of a $185k asset, there are also many other fees and expenses and time and energy that the very people I talk about, don't count. Sorry, It all counts!! Ignore enough important things, minimize them like a shrinking machine and eventually collapse may be the result.
Myth #10 "We will have hundreds of thousands of registrations"
That's like the Internet guy saying that getting traffic is no problem. Until he finds out it is the 2000lb gorilla in the room and there are 699 other gorillas and some are much bigger.
Myth #11 "The success or failure of those extensions that are released first will have no affect good or bad on any other extension.
I beg to differ and did an entire post on it. It the first 10 are dogs, it won't help #11. If the first 10 are winners, then it will help #11. If it does not move the needle, it is even worse. That means nobody cares.
Like I said, it would take more than one post to go down the list. So #11 was just a replay bonus. ;-)
There will be many ways for the savvy to make money regardless of the fact that most people will lose their asses.
Rick Schwartz
J. Black
Gtld hype….the storm before the calm.
4987
One of the better posts I have read here on your blog.
On a different, unrelated note, Rick, you should consider another Hall of Shame for really bad UDRP panelists. Just a thought I had.
Patrick Hipskind
I’ve seen enough evidence already with the .la rebranding that the gTLD expansion is going to be like a circus with the big top coming down. Top tier exact match domains like art.la, fashion.la, property.la, autos.la, and hotels.la do not have websites built out. They still have parked pages.
We’re talking about a massive market. Los Angeles has a gross metropolitan product of 735.7 billion dollars. LA is the 3rd largest economic center in the world. Yet, websites aren’t being built on the top tier exact match domain names.
You don’t want to be late to market in an emerging market. Early comers establish market share. Those that come later have to have a disruptive product or service offering. Unless the majority of these firms that are launching a new extension have the cash to be able to sit and not make a profit for 3 or more years, they will have to close their doors and shut down the extension. And if they think they can then sell the extension for one million dollars, well good luck with that. Who would want to buy an extension with a Net Present Value of zero or a negative IRR.
Patrick Hipskind
Have they checked their math? If they pay $185,000 for the extension and have to spend conservatively another $50,000 to launch the extension and sell domains, they have startup costs of $235,000.
If their cash flows are $50k the first year, $75k the second year, and $100k the third year, the Net Present Value for the project is minus $45,020 (yes that is negative) with an Internal Rate of Return of -1.932%
The NPV and IRR was calculated using a discount rate of 8%, which is an average discount rate for borrowed money with decent credit.
UFO
‘Have they checked their math? If they pay $185,000 for the extension and have to spend conservatively another $50,000 to launch the extension and sell domains, they have startup costs of $235,000’.
I’d think it would be quite expensive to keep an extension going, sure that ICANN would want information, audits etc etc and there’d be plenty of IT maintenance issues. To me you’d need to have about 400k registrations at $2 a time mark up (Don’t know if thats correct)… but even just thinking about it there seems to be plenty of downside with not much upside for all the risk.
Someone is going to have to chart all these extensions with regards to registrations and watch them crash and burn like falling stars.
UFO
Opps, my initial projections were based on $0.50 a domain margin pa. Hence 400k registrations would generate 200k…I.e. not much.Valued added for hosting etc could make a difference, but I think they’ll struggle, any business thats half decent is already on the net with a domain name.
Famous Four Media, global leader in TLD. Generic Top Level domains registry » Rick’s Top 10 myths and facts about the new gTLDs
[…] ICANN new generic Top Level Domains’ (gTLDs) myths and facts are what the Domainer Rick Schwartz gives us in this article. “Rick”, also called the “Domain King”, is the CEO and cofounder of T.R.A.F.F.I.C., the premiere domain conference for the domain industry. Rick is a popular domainer who buys and re-sells domain names, one of his best sales was men.com in 2010 and for an amount of 1.3 MM. Now he is posting about the generic Top Level Domains (gTLDs) which ICANN has released. Learn out more here […]
steve cheatham
You got it right Rick. It’s just another day at the office, but with more tld’s. As always, .com rules!
Domainstock
I agree with this totally. It bothers me to see how many domainer’s are belly aching over new gTLD’s. When you ask most of John Q Public they know nothing about the new gTLD’s. Domain Investor’s YOU are shooting yourself in the foot by freaking out about the unknown! Com’s will always be first preference. Just ask Overstock.com