Donuts Builds Domain-Name Business Amid New Land Grab on the Web

In late February, a Google subsidiary won control of the top-level domain name .app with a $25 million bid, the highest price paid so far in an online land rush for new words or phrases that appear to the right of the last dot in a Web address.

Amazon subsidiaries scooped up .buy and .spot last fall for $4.6 million and $2.2 million, respectively. Johnson & Johnson bought .baby for nearly $3.1 million in December. And real-world real estate buyers are spending big bucks for new virtual properties, too. The Canadian Real Estate Association grabbed .mls (multiple listing service) for nearly $3.4 million.

But those are just a few of the big-time deals and prices we know about because the Internet Corporation for Assigned Names and Numbers (ICANN), which governs the process of creating new generic top-level domain (gTLD) names, handled the auctions and posted the results publicly. Many more names have been bought and sold in private auctions. Applicants paid a minimum of $185,000 to ICANN just to apply for each new domain name.

There are now some 540 new generic top-level domains (gTLDs) up and running, according to namestat.org, and at least that many more are expected before the current round of expansion is done.

One of the biggest players, by number of gTLDs, is Bellevue, WA-based Donuts, a company which has secured 307 new top-level domain names and is now marketing about half of them through its retail customers—domain name registrars such as GoDaddy, Network Solutions, and 1&1 Internet.

While there are upwards of 4.7 million websites registered with new gTLDs, you might not have seen one in the wild yet, at least not on the first page of Google search results. Only about a quarter of them have a substantial amount of content, says Donuts co-founder and chief operating officer Richard Tindal. And only 365 rank within the Alexa top 100,000 sites, according to namestat.org, though the numbers are changing daily.

 

Tindal.

Tindal.

Donuts, which raised more than $100 million to finance purchases of names like .guru, .photography, .email, and .company, expects the new gTLDs to take off in the coming years—following a similar trajectory as the two-letter country code domain names that were expanded beginning about five years ago and are now used commonly across the Internet, not only to signify national affinity, but as a way to form concise, interesting Web addresses, such as del.ico.us and youtu.be.

The headline-grabbing investments from big names like Google will accelerate acceptance of the new domains, Tindal says.

“The more successful Google is with .app, then the more successful we are with our TLDs, because they all reinforce each other—the usage of them and the promotion of them,” Tindal says. “When Google pushes .app, when Amazon pushes .free, it helps our product as well because it sends the message to the entire market and legitimizes them all.”

While $25 million seems like a lot of money, Tindal believes Google will “get tremendous value out of it over the coming years,” likely by doing more than just selling .app Web addresses. “Our expectation is that they’re going to bundle that in some way with tools and other services for the app developer community,” Tindal.

Donuts, of course, is bullish on the value of the new domains, more broadly. So much so that its pricing for the new names is two to four times higher than similar domain names ending in the standard-issue .com, .net, and .org. (So, anywhere from $30 to $50 a year for typical new gTLD Web addresses versus around $10 for the legacy names.)

“We’ve priced the product higher quite simply because we think it’s significantly superior,” Tindal says. “We think of this product as three or four times better than the equivalent .com, and at this point, the market is telling us we’re right. They’re paying those higher prices for our superior product.”

Tindal says customers picking new gTLDs are doing so because the names are “fresher, more memorable, better looking, easier to read, easier to understand, and to their customers, it looks modern.”

While some of the new domain names are broadly appealing—.club, .website, for example—others are valuable for their specificity. Professional photographers, for example, have flocked to .photography, one of Donuts’ most popular gTLDs. “If I have a .flowers at the end of my website, people are going to have no doubt about what it is I’m offering to them,” Tindal says.

That said, Tindal acknowledges that right now anyway, few people know about the new domain names.

“We’re not talking complete ignorance, but we’re talking typically about awareness levels below 15 percent,” he says. “That’s our challenge for this year, is to generate a higher level of public awareness of the product.”

Donuts just opened a new office in Chicago to run direct-to-consumer marketing. It has about 15 people in its Bellevue headquarters, 10 in Los Angeles, and a handful of others in Europe and elsewhere.

A key consideration with any Web address is how it will perform in search. Tindal says it’s still too early to make a definitive pronouncement on search effectiveness, but says a handful of recent studies found the new gTLDs perform as well as or better than similar .com names, all else being equal.

Meanwhile, as the roll-out of new domain names continues, ICANN is hashing out disputes about control of domains that have the imprimatur of specific authority or expertise.

A financial services-backed group, fTLD Registry Services, gained control of the .insurance name last month and intends to operate it “in a highly restrictive manner with strict eligibility requirements designed to ensure that the space is used by verified insurance industry members,” says fTLD managing director Craig Schwartz in a news release.

And Donuts is challenging ICANN’s plan to limit registrations ending in .doctor—which is set to be auctioned in April—to medical doctors, excluding PhDs, veterinarians, and businesses using the word in their names.

Nearly a year and a half into the new domains era, uptake is occurring faster than Tindal expected. But there’s clearly much more to come as the Internet renames itself.

Benjamin Romano is editor of Xconomy Seattle. Email him at bromano [at] xconomy.com. Follow @bromano

Trending on Xconomy

By posting a comment, you agree to our terms and conditions.

  • Charles

    This is old news. The gTLDS have already been pronounced .dead

  • The following remark by Tindal is fairly absurd:

    “We think of this product as three or four times better than the equivalent .com, and at this point, the market is telling us we’re right. They’re paying those higher prices for our superior product.”

    Ask yourself: Does someone register Party.services because they believe it’s 4 times more valuable than Party.com?

    Now think about this: The owner of Party.com pays $9 per year to renew his domain while the owner of Party.services pays (yes) $100 annually. Is that because Party.com is only worth 10% as much as Party.services?

    Listen, I like the new TLDs. I own several hundred, including many that use Donuts’s suffixes. They do have a future, although they are struggling at the moment to gain traction. The nTLDs add spice; but the main course will continue to be established TLDs like .COM, .ORG, and country codes outside the USA. Donuts is free to disagree about that. But Donuts cannot pretend that market data doesn’t exist.

    Clearly, .COM domains are MUCH more valuable for the same keyword. I don’t report on domain sales each week in order to have Donuts pretend that the sun rises in the West and sets in the East!

    There is no need to make bogus arguments. Donuts domains will be registered and (occasionally) put to good use purely on their own merits.