In a blog post written by
“It’s estimated that you would need about $50,000 a year to cover your costs of running a new gTLD. So as long as the applicants felt that they could cover those costs with a minimum number of registrations based on their business plan, they felt that the upside was well worth the risk.
“The thinking in many cases was based on a worst case scenario that if you sold 10,000 second level domains for $5.00 each you reach your $50,000 to cover your costs. Any registrations above that would be considered profit.
“Considering that one of the slower performing TLDs on the market place like dot.aero currently has nearly 10,000 registrations, getting to 10,000 would be considered realistic and the risk reasonable.
“Although SLAM Strategy is very much an advocate for the new TLDs program as a whole, we do have our doubts about the viability of some of these new strings. Not because they can’t be successful but because of three main and very real issues.
“Domain Supply vs demand concerns – There will be approximately 1,000 new domains available to the public in a very short time frame and although there will be considerable demand the supply is going to vastly outstrip demand with a flood of string options.
“Owners need to see this as a long term strategy that could take 5-10 years before they reach their breakeven points.
$1 for a dozen domains for sale – Further to that, owners need to consider the fact that ICANN has mentioned subsequent rounds and the price for entry to own a domain likely to drop. This could further put pressure on existing owners trying to reach their break even points and extend or even make it impossible for some TLDs to ever reach their minimal requirements. A glut of registration options could lead to some offering a dozen domains for a $1 just to move stock.
Risk of extinction – Anything with a small population is at risk of being wiped out if it is unable to adapt quickly enough to survive a changing environment. This is something that is a serious issue for the new gTLD owners as they are relying on a small pool of long established, existing Internet advertising and marketing companies to help them.
“In an environment where innovation, creativity and new thinking are paramount, the new top level domain name community is dangerously “short of options”, increasing the likelihood of catastrophic failures if they pick the wrong company to partner with.
“To some degree, a cookie cutter approach is inevitably going to be used by many of these companies who know no better, resulting in fewer registrations than anticipated and more importantly possible failure of the entire gTLD business model.
“All new gTLD applicants need to be wary of this and think outside the square.
“The industry is now set to suddenly and massively expand into a very different and almost hostile digital landscape of dog eat dog and over supply.
“However, the number of new and external Internet Advertising and Marketing experts available that understand the gTLD industry but are not from the industry hasn’t really grown at all, and could almost be counted on one hand.
“Many of the people working in these companies have either worked at a registry, a registrar or at ICANN itself at some time in the recent past.
“While these companies and their specialists really are very, very talented with many years of industry experience, their greatest strength is also possibly their greatest weakness.
“Many of the current internet advertising and marketing companies providing support to the gTLD industry are providing advice based on their prior experiences from within the industry itself, as that is all they know.
“As a result, a lot of the same, repetitive and conventional industry thinking is likely to be offered, limiting any real competitive advantage that the gTLD owner may think they have.
“There’s no doubt these existing companies are extremely talented with amazing insight of the old gTLDs industry. However, the industry is rapidly changing and morphing into something very different from its past, requiring a more diverse approach to create real wow factor and excitement in the mainstream world of the average consumer.”
You can read the entire post here
I wrote my own article on the risk vs reward and costs and profits of owning a new gTLD here: http://www.searchable.co.uk/how-successful-will-new-gtlds-be/
I’m positive that most of the theory from that SlamStrategy post is wrong.
For example, Dan Warner posted research found that there were fewer than 15,000 for cricket/rubgy keywords in existing top-level domains, which means getting 10,000 registrations would equate to 66% of the market for that industry.
Furthermore, I’m sure it costs more than $50,000 to run a TLD (I remember the figure being quoted was more like $250k for registry operations). Add to that employees, customer service, marketing channels, security, application fees, TLD auctions etc. The $50k “cost” of running a gTLD from SlamStrategy would barely cover the costs of a single employee, yet alone an entire registry.
This article validates our strong commitment and investment in GTLD services domains. New GTLD Registry owners will absolutely require knowledge, marketing, and advisory services in order to compete and survive. Companies that intend to offer these specific services need to start building their brand and awareness now IMO.
Adam
I think others would agree that $250k is still too conservative and I see upwards of $1M per annum not extraordinary. Given that and your keywords example I think so many of these companies are already dead in the water.