[CPWG] Need Advise: Tokenization of Domain Names

[John McCormac]

On 28/09/2023 12:44, alexander--- via CPWG wrote:
> And that's what happened first to .info in 2001, then to almost all new 
> gTLDs in the 2012 round:

The .INFO is where a some of the landrush mentality started, Alexander,
Growth had stalled and the registry, Afilias, decided to give away free 
domain names. That almost doubled the size of the zone in a few weeks.

> All premium space (generic keywords, 1, 2 and 3 letters versions, etc) 
> snooped up by "domain investors, rendering the brand new gTLD brand 
> ".info" void of any "brand ambassadors" with impact. A Dubai where all 
> hotels, bars, restaurants, malls, etc have not yet been built, no 
> apartments or office space is for lease - because the property owners 
> haven't built buildings (just have all billboards erected with advertising).

There were some brand ambassadors for .INFO but the increase in the 
number of .INFO domain names created its own problems. There are also a 
few missing points in the timeline.

When Google launched Adsense and the low cost of of .INFO worked to its 
advantage in that a lot of people set up micro-sites of a few webpages 
on a topic and put Adsense on those sites. The people who did this 
initially made money.  Eventually, Google and other search engines 
deemphasised these .INFO websites in search results.

The registry frequently ran discounting offers that reduced the 
registration fee. This created a boom and bust cycle. However, a small 
percentage of these discounted registrations renewed at full renewal fee.

After the .EU fiasco (The European Commission was advised by people who 
were unaware of what what happening in the industry and selected an 
application from an applicant that had never run a large TLD active in 
multiple countries. It didn't turn out well and it killed .EU as an 
alternative to .COM in the European Union.), the next gTLD to launch was 
the .MOBI and this is where things really changed. Potentially high 
value domain names were reserved by the registry and auctioned off. The 
domainers effectively just got the crumbs from the table.

The .MOBI was a great idea but the launch of the Apple iPhone, and the 
Android smartphones killed it. During that time, large-scale Domain 
Tasting (where registrars would register tens of millions of domain 
names in the legacy gTLDs, test them with PPC advertising, and drop 
those that did not make money within the five day Add Grace Period at no 
cost to themselves) was beginning to get out of control. That problem 
was solved with legal action, Google stopping monetising new 
registrations and ICANN eventually introducing a cost to the AGP 
deletions. That removed the artificial scarcity in the legacy gTLDs and 
people were able to register deleted domain names again. These effects 
combined stopped the development of .MOBI as a mainstream gTLD.

The registry auctions model of high value generics was established by 
the .MOBI launch and .ASIA and .CO also used it. It made money for the 
registry and got publicity but the changing market conditions for the 
legacy gTLDs and ccTLDs on various markets would cause problems for some 
of the 2012 round gTLDs.

Domain Tasting created a shift to the ccTLDs because people found they 
could get a domain name in their local ccTLD that was long gone in 
.COM/NET/ORG. That helped some ccTLDs, which had been struggling against 
the legacy gTLDs in their markets, begin to dominate their markets.

In many countries, .COM was no longer king. The local ccTLD was the 
first choice TLD for new registrants. It was also a very different 
economic situation. With the first round of new gTLDs in the early 
2000s, the Internet was much smaller and a lot of countries had no major 
presence. The growth of broadband and Internet access meant that more 
people were getting online and many were from countries that did not 
have strong economies.

Some of the new gTLD registries held back the high value and short 
domain names for auction but this did not have a major effect for many 
of the new gTLDs.

The problems for most new gTLDs were demand, marketing and timing. 
Large-scale Domain Tasting had created an artificial scarcity of domain 
names. In that artifical scarcity, a new round of gTLDs made a lot of 
commercial sense. Taking away that artifical scarcity switched a lot of 
the demand back to the legacy gTLDs and ccTLDs.

The roll-out of the 2012 round wasn't helped by ICANN's launch strategy. 
There were too many new gTLDs rolling out in too short a time. That 
meant that newly launched gTLDs did not have a chance to establish 
themselves in the market before another gTLD was launched. That created 
confusion for potential registrants.

> Dubai solved the problem elegantly:

Perhaps for Dubai but there is something missing when it comes to 
driving gTLD adoption. Brand ambassadors might be good in the launch 
phase of a TLD but it is the adoption by ordinary businesses and people 
that makes a gTLD a success. They are the ones that give a gTLD a 
bedrock of development. They, not the brand ambassadors, create a sense 
of community for the gTLD. A use it or lose it appoach (Dubai), is a 
potentially dangerous one for a gTLD because it takes time to build 
websites. And even if someone does not have a website, they may be using 
the domain name for e-mail. It can take up to three years before 
ordinary registrants make their hold'em or fold'em decision on a domain 
name in a new TLD.

> In new gTLD namespaces the mass-grabbing of all generic namespace 
> results in a catastrophe: that gTLD brand is only being promoted by 
> domains that are visible and cerate real benefit for the Internet user. 

This did not happen in all new gTLDs. Some of the Uniregistry gTLDs were 
good examples of it but other gTLDs did not have a large number of 
domain names taken out of circulation like that. What happened in some 
of the Uniregistry gTLDs was that the registry reserved a lot of domain 
names that would have been valuable in .COM using its own registrar. 
That killed growth and development in these gTLDs but the reason is not 
immediately obvious. There was no landrush in these gTLDs.

Every new TLD aimed at the public has a landrush phase. This is where 
potential registrants try to register a "good" domain name. There is 
competition and it creates demand for the TLD. It lasts about six months 
and it is essential for a newly launched TLD. It is free advertising for 
the TLD. There is speculation but many of the highly speculative 
registrations will be deleted on the anniversary of the landrush (the 
Junk Dump). This landrush also sparks development in the TLD with small 
businesses and people developing websites on the TLD. This critical mass 
of development did not happen in many new gTLDs.

Without a landrush, the registries had to invest a lot more in 
marketing. Some of them had competely underestimated the cost of 
marketing. What happened can be summed up like this:

Less marketing results in lower visibility which results in fewer 
registrations which results in fewer websites.

> If all generic names are held by speculators – who then shall promote 
> the TLD brand? I mean: promote the brand to the common Internet user? 

Generics are a distraction for a new TLD. Real promotion comes from 
usage. It is the people, the community, that builds websites on the TLD 
and uses it for e-mail that promote it.

Forget the brand ambassadors. They are just background noise. It is the 
ordinary registrant who builds a website or uses the TLD for their 
e-mail address. It takes time.

Focusing purely on the generic domain names is wrong because they 
effectively exclude themselves from the awareness of the ordinary users 
of a TLD. When people see their friends and the businesses they know 
using the TLD for everyday purposes, that's when things begin to change 
for the better for a TLD. The market for a TLD isn't just a set of 
numbers. It is people. Successful TLDs, especially the ccTLDs have the 
registrants identifying with the TLD as being *their* TLD.

> It’s a Dubai where ALL the land is owned by speculators – and not used 
> for anything. On top: most domainers won’t even sell their loot for 5 to 
> 10 years in a new gTLD – they are “waiting” that “others” create brand 
> awareness for the gTLD brand.

It is not a Dubai situation because the land in Dubai is not ultimately 
owned by the property developers. Registrants in successful TLDs have a 
sense of "ownership".

The masterclass in disaster is the .EU ccTLD. What happened was almost 
exactly what you describe above and it wasn't helped by politicians and 
their situationally unaware advisors, and an understaffed registry. 
Those conditions combined to allowed the ccTLD to be plundered. It 
killed the ccTLD as an alternative to .COM in the European Union and the 
speculators lost millions and dumped most of their registrations within 
the following five years. The echo of the .EU landrush is still visible 
in the graphs for .EU seventeen years later.

The .EU registry has worked hard to try to recover from the this 
disaster and the web usage rate is jst over half that of most real EU 
ccTLDs. (The CENTR methodology on attempting to measure web usage is not 
reliable.)  It has also become a kind of truck-stop TLD where people go 
before being redirected to the registrant's primary website in another TLD.

What happened to the .EU did not happen to most of the 2012 round new 
gTLDs. The .EU situation was one where the registrants decided the 
outcome. With some of the new gTLDs, it was the registries deciding to 
withhold the "valuable" domain names from the market that affected the 
outcome of their launches.

> In new gTLDs mass domain-grabbing is the death dagger for that entire 
> namespace.

It is not. Many new gTLDs were created with a "Field Of Dreams" attitude 
to marketing in that some registries thought if they launched it, the 
registrants would appear. They didn't. These registries competely 
underestimated the amount of marketing and time that is required to get 
a new gTLD established in the market.

> of for example .info: Many domains registered – zero brand awareness – 
> zero real life impact – nothing there for the Internet user. .info had 
> the chance to be what .net or .org are now. It could have been a real 
> .com-hunter. Instead, it is a Dubai without any development: just sand 
> and a few roads. And lot’s of sold property – undeveloped. And many, 
> many “for sale” signs and billboards. Hurra!

No. The .INFO had stalled before it added the free domain names. What 
stopped it being a .COM competitor was the bursting of the DotCOM bubble 
in 2000. At the time, most of the registrations in the legacy gTLDs were 
two year registrations and over the years 2000 to 2004, many of the 
domain names that had been registered in .COM were deleted as DotCOM 
bubble companies went bust and did not renew their domain names. This, 
combined with the launch of Google Adsense for domains, kicked off 
large-scale Domain Tasting.

It is similar to the artificial scarcity problem created by large-scale 
Domain Tasting where "all of the good names are gone" panic took hold. 
Once these domain names (often previously registered by failed DotCOM 
bubble companies) became available for registration again, the prospects 
for .INFO were in trouble. It also killed the .PRO's plans. The .PRO 
registry thought its market was in the millions and ended up with only a 
few thousand registrations. That also happened with some of the 2012 new 
gTLDs.

History, in the domain name business, does repeat. For every boom in the 
TLD markets there is a bust. The only things that change are the names 
and the bank balances of those who get it wrong.

Perhaps that is the liquidity that really matters?

Regards...jmcc
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John McCormac  *  e-mail: jmcc at hosterstats.com
MC2            *  web: http://www.hosterstats.com/
22 Viewmount   *  Domain Registrations Statistics
Waterford      *  Domnomics - the business of domain names
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