There’s a land rush going on right now. At least that’s how everyone seems to be describing the opening up of vast amounts of Internet real estate.
Pretty soon, there’s going to be a lot more than .coms out there, and a lot of big companies and a few upstarts are bidding huge amounts to get the new Internet addresses.
To register a domain name you typically go through a commercial domain retailer, like GoDaddy or DomainNames.com. But it is never totally clear who owns the address you’re buying.
You might think you’re buying it from the government, and that the sale of these new domain names is like selling parts of the radio spectrum for TV or radio broadcasts. It would make sense to think that since the U.S. government created the Internet in the 1980s. But, in a move with staggering implications, the U.S. gave it up to the world.
Regulating Domain Name Space
The Internet Corporation for Assigned Names and Numbers, or ICANN, is the organization that sprang up to administer the sale and designation of domain names. It is the only governing body that does this, and it developed the rules for who got .coms, .edu, .orgs and regional designations like .uk (United Kingdom) or .ly (Libya).
For the two-letter country codes, ICANN established early on that whoever presents themselves as the designated official representative of that nation’s government is allowed to manage the name space from there on.
If they want, the country or territory can just sell that space, and many have. If you tweet an NPR story, you might notice the URL starts n.pr followed by some numbers. That .pr originally belonged to Puerto Rico. TV stations and a lot of other companies buy these links because they need short URLs. They’re easier to deal with and fit in a 140-character tweet.
That’s why domains can be so valuable, and that’s why so many people are excited about the new top-level domains.
The problem with the land rush analogy though is that this isn’t land or anything like land. Land is a physical thing, and there is a limited amount. But that doesn’t apply to the Internet. ICANN can simply make more virtual real estate, which is exactly what they did.
Who Is Buying?
If you have a few million dollars to spare, and are willing to take a bit of a risk, you too can take advantage of the new top-level domains. Jeff Sass is the marketing director for the newly-minted .CLUB. He can say that now, because his company successfully bid on the .club domain.
“The fee alone was $185,000,” Sass tells NPR’s Arun Rath. “And then of course there’s [the] legal costs and financial papers and other things that have to be done as part of it.”
After paying hundreds of thousands of dollars for the application and legal fees, they then had to bid for .club in a private auction. The auction went on for several days, but in the end they were victorious. Sass wouldn’t say how much exactly they paid for the name, but that his company has raised $8.2 million to date and spent in excess of $5 million so far on obtaining the name and the marketing.
So is shelling out millions for the perfect name space a good strategy? On the Internet, property value is what you make of it.
“If you start thinking about these top-level domains we see that .com is valuable. Will .soda, for soda pop vendors, will that be valuable?” says Charles Severance, who teaches information technology at the University of Michigan. “I think it’ll be more about how they make it valuable rather than just getting it.”
Severance says there are some people who do get lucky from speculating on and buying domain names, sometimes known as cyber-squatting. But he said that’s rare.
“In general, just holding onto a four or six character string, unless you’ve made it valuable, you have to invest in making it valuable,” he says.
In other words, this may not be the kind of land rush that opens up opportunity for the little guys. In fact, ICANN spokesman Brad White doesn’t think you should look at it like a land rush at all.
“Land rush sort of in my mind infers this everybody running in at the moment and seizing property in the hopes of getting rich overnight,” White says. “I don’t know that that’s necessarily what is happening here.”
In most real estate sales there are winners and losers. But White says he wouldn’t necessarily structure what’s happening with Internet domain names in that “over-simplified sense.”
“The addressing system is pretty big and pretty open and there’s room for a lot of expansion,” he says. “One of the reasons that we launched into this program is because there was some concern that some of the most popular top-level domains, like .com for example, some of the prime names were hard to get that people wanted.”
There have been cases of businesses changing their name so they can have a website that matches. By some accounts, Internet real estate is tight.
Despite the new name spaces opening up, that doesn’t mean there won’t be some losers. David Mitnick, an intellectual property lawyer who advises companies buying and selling domain names, says the biggest one is a company called Verisign. Every .com site out there was sold by Verisign.
“I think 80-something percent of all domains right now exist in the .com space; about 280 million,” Mitnick says. “And the dot com registry operator, Verisign, was not thrilled about this idea that there was going to more competition. There were only 22 top-level domains that existed before this program was started. Now, there could potentially be an infinite number.”
However, there is one change in the new Internet address system that is certain to have a huge impact. Imagine that whenever you went online to do a search or buy something, you had to type the web address in Arabic or Mandarin or Tamil. Well, that’s what the rest of the non-English speaking world has to go through when they go online.
“When you start thinking about doing things that are appropriate for consumers [like] publishing URLs in Korea. Why is it you can see everything in Korean, and suddenly this URL has to use a Latin character set?” says Charles Severance. “That’s jarring.”
Severance says kids looking at educational resources won’t have to learn a foreign language just to find them on the Internet, and that is the kind of positive benefit that’s not really a speculation.
“We’re not making a bunch of money here, but we are changing what’s possible,” he says.