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Where is the next bubble? Domains, here’s why.

There are currently 240,000,000 domain names across some 260 TLD’s (Source domain name brief Oct 2012). You all know the most popular one; .com. Almost half of all domains (over 100M) are .coms. They are all active as you read this, which means someone payed for them around $10. That’s a billion dollars right there, just for .coms.  Not to mention, .co is sold for $29,99, and .me for $19,99 (when they are not a specials). Rarely can you register a domain name for less than $10, so lets say the other $140 M domains account for at least another billion dollars.

Top TLD's by Zone Size
Top TLD’s by Zone Size

Thing with domain names is they expire every year, which means you have to renew them. Despite all this expiring, total number of domains keeps growing ever since symbolics.com was registered on March 15, 1985. That’s a 27 years growth. Paul Stahura, one of the industry veterans said that domain names will not go away within our lifetime and that they are more entrenched than the electricity plugs!

Can it grow even more, and even faster?

Yes, here’s why.
Point 1, everything around domain names is growing. Internet usage – going up. Mobile Internet usage – going up. Global Internet speed – going up. The number of websites, blogs, accounts – going up. Number of IP addresses, not that it’s going up, we’ve used up all the IPv4 addresses like 256.256.256.256, now we issue IPv6 address like 2001:0db8:85a3:0042:1000:8a2e:0370:7334. In laymen terms, IPv4 allows for only 4,294,967,296 unique addresses and we’ve used them all! We are more and more connected in every possible way you can think of. And boy do we love labeling things. Humans like it easy. They want to access their fridge on a cloud service called fridge.com, not http://2001:0db8:85a3:0042:1000:8a2e:0370:7334/Gh78$#whatisthis, right? The only thing that is going down is domain price (do you know that .com domains used to be priced at $100 a piece / per year?).

Point 2.
Humans love to make a quick buck. They love to buy low, sell high. Do you know what are the 2 most popular jobs where you buy low, sell high? Stocks, real estate and drugs (at least that’s what I saw in the movie American Gangster). Domains have been called online real estate ever since a first news article was written about them. And they have so many similarities. First of all, they are the address. If you have a good address, there’s a good chance you will have more people “passing by your store”. In return, this means more $$$ for your business.

Domain names have similarities with stocks
Domain names have similarities with stocks

Domain similarity with stocks is not just “buy low, sell high”. Ever heard about IDNX.COM? It seems that when stockbrokers are selling high those high tech stocks from Silicon Valley, people and most companies also buy domains high! And this is something that has been going on for the past 6 years! Good news is, you don’t need to be a licensed stock broker, or a licensed real estate agent to buy or sell domains. You just need a proper tool to find a great name, and signup to SedoGodaddy Auctions or Afternic, and you are ready to go. Sedo reported over a million users. So, the supply is growing, what about the demand for great domains? Well, that’s growing too, everybody wants a domain/website that has targeted traffic. What helps an ordinary user build a website with targeted traffic? Tools like Wordpress, Adwords, SEO and social media. Wordpress currently holds around 20% of the entire web and Adwords brings in 99% cash that Google makes. How are SEO and social media doing? Just check your inbox and count how many SEO and social media offers you get. This adds up to point 1, that it’s also growing. I mean, Google stocks hit an all-time record high this October and their income is constantly growing, and Facebook is the second most visited website on the planet!

Google's gtlds
Google’s gTLDs

For the grand finale, I give you point 3. Companies applied for 1930 new gTLD’s according to ARStechnica. According to NewgTLDSite just the application price costs quarter of a million, and in practical reality it will cost you around $500k – $2M for an uncontested basic gTLD. So companies were prepared to shell out over $348M just to stand in line? How much do you think they are prepared to invest in advertising, building the systems… You already have companies like Domain Diction with Alan Pinkard Brand. They are a marketing consultancy, solely dedicated to Top Level Domains. They are specialists in delivering critically effective marketing and usage programs for existing and new TLDs. If you are thinking about squatters, think again and wake up! Lawyers are getting better by the day, and to keep out the jargon (like UDRP) to the minimum. Let’s just say the judges are getting better, these aren’t the nineties anymore. Not to mention there are now companies with 10 years of experience in protecting companies from squatting.

And who are the companies that made the 1930 applications? Godaddy and other registrars? Not really, as you can see from the picture, Google made quite a few. Amazon is here, Apple made a few. But most of them were made by new company Donuts, put together just for this. You had a chance to read an interview with their CEO Paul Stahura, they are in with 307 TLD’s.

By now, you must be aware that this industry and complementary services are about to grow exponentially.

What determines a great domain name? What domain information is most important? How do you determine credibility, how do you determine relevancy? I think Google solved the relevance problem pretty good, and they found a way to profit from it. But what about domain credibility? They solved this, by default when they solved relevancy. So I think there is room for progress.

Can a domain be credible if the website is hacked or down often? Packed with trojan viruses, hosted on an IP address that’s blacklisted constantly? Is it the same if your website is hosted in New York with secondary power, and Internet connection, or in some third world country in an apartment? I believe that in the world of IT, technical information deserves to play a more important role. I also think that serious companies cannot have a Wordpress website that is not regularly updated! This harms the users, and there’s no way they can protect themselves from the companies they are buying from! You visit a website and you get a virus, this has to stop. If you are visiting a website that is spamming, experiencing downtime every few days, has phishing problems, this should be prevented.

Written by Goran Duskic

I am the founder and CEO at WhoAPI. Entrepreneur for more than a decade in the hosting and domain industry. Sold my previous company. 500 Startups and StartLabs alumni. Author of a white paper "Domain Disclosure: Dirty Dozen" and eBook "26 Fundraising Questions for Startups".

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