Spinning a $135 Million .WEB

Many new Generic Top-Level Domains (gTLDs) have emerged as potential challengers to the Big Three (.COM, .NET and .ORG) but were quickly exposed as pretenders to the domain name throne and summarily ignored by the majority of businesses and investors. The only new gTLD to gain any sort of traction in the public and market consciousness is also the most unattainable, but the ethereal .WEB has the potential to challenge, or even surpass, some of the old guard gTLDs.

The .WEB domain space has long been the crown jewel of the new gTLD crop, and is viewed by many experts as the only extension with any possibility of competing at the very top of the domain name world. Out of almost 2,000 new gTLD applications, .WEB is widely viewed as the top contender by a significant margin. Its domain preregistration numbers are always at the top of the list and even many hard-line domainers (who despise anything new gTLD-related) feel that if any has a chance at success, it will be .WEB.

In an Internet Long, Long Ago

Some may not know this, but .WEB has been in semi-official use since the mid-90’s, when Image Online Design (IOD) operated it as a prospective registry. In the wild-west, pre-ICANN era this was standard operating procedure and in court documents IOD stated it had registered over 20,000 .WEB domains. But once ICANN was formed in 1998, it refused IOD’s request to launch .WEB as a new gLTD and therefore, these 20K of registered .WEB domains never resolved onto the primary DNS, and the company was forced to use alternate DNS root systems. After being rebuffed by ICANN through various avenues, IOD then launched a .WEB trademark lawsuit that was also denied.

Oh What a Tangled .WEB We Weave….

Although .WEB has a bizarre past, its present may actually be even stranger. On July 27, 2016, ICANN ran an auction for the .WEB gTLD and the $135 million winning bid (by Nu Dot Co – later revealed to be bankrolled by Verisign) raised more than a few eyebrows. Certainly, the new gTLD market is a competitive and potentially-lucrative one, but the previous high of $41 million (for the .SHOP auction sale) was less than 1/3 of what .WEB sold for. This was also a public auction (at the behest of Nu Dot Co) which means ICANN receives the proceeds, rather than having them divided up among the losing bidders, as would happen in a traditional gTLD private auction.

Since Verisign already controls the two big dogs on the digital block in the form of .COM and .NET, spending $135 million on .WEB seems like a smart investment, if only to protect their current assets. The .COM market is solid enough to withstand any .WEB assault, but .NET looks vulnerable as the “second-best option” for domain names. If one of their competitors like Google or Donuts had  control of the .WEB property and started to eat into the top-end market share, it could be a nightmare for Verisign and their almost 16 million .NET registrations.

The $135 million dollar price tag is also understandable due to motive. The other companies taking part in the .WEB auction were setting their bids based on profitability factors like return-on-investment, renewal percentages and break-even point, while Verisign may rationalize the seemingly-outlandish auction price as just the cost of doing business. Stranger still is how many new GTLDs are viewed as also-rans in the marketplace, where in the same auction, Vistaprint Ltd took one look at .WEBS and said “I’ll buy that for a buck”.

Referring to this $135 million winning bid as unprecedented would be a rank understatement, and when you add Verisign in as the “man behind the curtain” of Nu Dot Co. it gets even more interesting. It was so interesting that the US Department of Justice (DOJ) antitrust division launched a probe into the .WEB auction proceedings.

Is .WEB Past its Prime?

In the early days of the internet, terms like “web surfer” “webmail” and “webmaster”, or even older nuggets like “Information Superhighway” and “Cyberspace”, were common ones but as time passed, many of these fell by the wayside – even the venerable “website” is steadily being shortened to just “site”. With “web” becoming an increasingly passé term, and as the .WEB gTLD is still even not released yet, it can only grow more dated.

Another potential issue is that.WEB is viewed as superfluous, given that the “www” is already there. This is an interesting argument, as .WEB looks nice by itself with a secondary level domain (SLD) like domain.web, but when you fully vocalize the entire “worldwideweb.domain.web” combo, it does seem repetitive. Then again, the “web is dated” argument helps negate this concern and the current marketing trend is to dispense with the “www” part of the URL anyway, so the double-web phonetics may not be an issue going forward.

A third problem is that we’re sitting near the end of 2017 and the .WEB release date is still showing as TBD. The old “Wild West” internet is long gone and with every passing day the limited number of startups and rebrands are forced to choose new domains that are not based on the .WEB gTLD. Domain investors continue to buy and sell domains, none of which are .WEB, and time is certainly ticking away on .WEB as a viable contender in the domain market.

A .WEB by any Other Name Would Sell Just as Sweet

This brings us back full-circle to what everyone seems to be wondering: how much will a .WEB domain cost? In the current market, I think it’s safe to say there will be a set of premium domains (2/3-characters, words and brandables) that will cost more upfront and will also have a higher renewal cost. That’s standard operating procedure for a domain that is expected to launch, at the earliest, in 2018 and follows along with other similar gTLDs like .tv and .news, with some premium renewal prices hitting 4-5 figures. One ultra-premium .TV domain that was at auction had a stated renewal rate of over $60,000 per year. Verisign and other gTLD registries took a lot of flak for this, and in response, have tweaked their pricing structure to make it a bit more palatable for new buyers.

The new gTLDs are not price regulated like the old guard is, and while Verisign is not allowed to increase .COM prices and is limited to a 10% annual increase with .NET, the sky is literally the limit for .WEB. The danger is two-fold, as there will certainly be a wide range of premium .WEB domains sporting high registration and renewal fees, but there is also no guarantee that this isn’t just the tip of the iceberg. If .WEB turns out to be popular, Verisign could easily double or triple renewal fees in the future and hold domain owners hostage – just imagine what some ultra-premium .COM renewal costs would be (i.e. a single-letter .COM) if Verisign had full control on pricing. I’m thinking up to 6-figures per year, easy.

Grab Your Torches and Pitchforks

Although you are not obligated to buy a .WEB preregistration, this level of unpredictability may take .WEB out of the running for many startups, as we really have no idea what the registration or renewal prices will be when the new gTLD is eventually released. Verisign is an old hat at the premium domain game, and helped bring it into the mainstream with their .TV gTLD. Some .TV domains had premium registration prices, while others also had premium renewal prices and the whole structure was quite random and difficult to understand. By going the ultra-premium route with .WEB, Verisign could make more money while creating lower market penetration, which might strangely be a win-win scenario for the company.

The tiered domain pricing structure is very unpopular with end users, as it costs more at the beginning and then creates an ongoing and potentially volatile investment in terms of high renewal fees – kinda like a divorce. The .XYZ new gTLD went in the other direction, increasing registrations to over 6 million, but doing so by selling a good portion on heavy discount, many at only a penny each. But they had to do it in order to build market share, so don’t expect penny sales on .WEB anytime soon. Premium pricing is one of the major areas of contention with the new gTLD market, and with a $135 million price tag, let’s hope that the .WEB hype train isn’t chock full of luxury seating.

When Seeking a New gTLD, Bring Two Shovels

It may seem like an odd statement, given the vast economic potential of the .WEB gTLD, but there is a remote chance that Verisign may not even release .WEB, or at the very least, drastically extend its launch date. The unprecedented $135 million bid was at least partially a protective measure for its existing .COM and .NET properties, and one train of thought is that since Verisign now controls .WEB, why not just bury it instead of introducing yet another gTLD that dilutes the marketplace even further? Like Rose dropping that priceless diamond overboard in Titanic, Verisign’s motivations are just as potentially murky and confusing to many outsiders, but to solidify their already-lucrative .COM and .NET holdings, it might be worth $135 million to toss .WEB overboard.

Of course, this scenario will likely never come to fruition, as the defensive domain registration market alone is lucrative enough to make a .WEB launch a near certainty, and I don’t think either Verisign or ICANN wants the additional scrutiny from the DOJ that a controversial .WEB burial might entail.

One .WEB to Rule them All?

Although we anticipate a successful launch, Verisign will likely not position .WEB as a direct competitor to .COM or even .NET. A challenger like Google or Donuts would certainly go for the jugular, but Verisign will almost certainly market .WEB as a complementary gTLD to their current .COM and .NET properties, offering it up to their existing customer base as a brand protection strategy and selling premium domains to startups who could not get the corresponding .COM or .NET. While the entire story is still to be written, no gTLD release has been so deeply scrutinized and anticipated, so this unique combination means that no matter how the upcoming .WEB launch pans out, it will be anything but boring.