How much will it cost?
This is the question on everyone’s mind as they consider applying for a new top-level domain, and it’s an important one. But don’t forget that the other side of the equation is what you can expect in revenues.
This is a short guide to what you can expect to spend, and how much you can expect to make.
For a full exploration of your costs and revenues, contact us and we can give you specific answers that match your plan for a TLD, instead of the general advice offered here.
Estimating Costs
Add it all up and you probably need about $400,000 to start a new top-level domain, plus whatever you have to spend in an auction.
First of all, the ICANN application will cost you $185,000. Some of this is refundable, and even if you pull out at the last minute, you’ll get 20% of it back. But still expensive.
Then, you may have to go through some contingent steps. If the panel examining your application isn’t satisfied, either with your business plan or with your technical setup, there is an additional evaluation, which could set you back another $50,000 or more.
If there are objections to your application (for instance, from a trademark holder who asserts that your TLD infringes on their rights), there are adjudicating panels to decide whether the objection is warranted. If you win, you get your money back, but you still have to pay up front, anywhere from $5,000 to $15,000 or more depending on the number of objections.
If there is another application contending for the same or similar string, you may end up at an auction, where you can spend an unlimited amount.
Of course there are the non-ICANN costs, for staffing, rent, travel to ICANN meetings, and all the rest.
Estimating Revenues
There are some distinct “revenue events” to consider, happening at different times during the beginning of the life of your TLD. (After a few years, everything will be in “steady-state” mode.)
First, you have a Sunrise period. This is something that most registries would like to skip, despite some trademark holders’ belief that people will start TLDs just to make money from the Sunrise. In your Sunrise period, you can charge a little more given that there are greater costs, but beware of blowback from intellectual property interests if you go much higher (see our article on the Sunrise period for more color on this). You can, however, sell a 2-year registration during the Sunrise and that will help bring some revenue in after years of costs. How many registrations will you get? That depends on a lot, but as a point of reference .ASIA registered 30,000 names during its Sunrise.
After the Sunrise, you will most likely have a Landrush period, which is the opening launch. During this window, registrars submit names from their clients, and at the end of the window you sort out who gets what. There are various ways of doing this, from a round-robin allocation method to a collision-auction method (see the auctions section below). VeriSign is charging registrars $6.83 for a .com name, which pretty much sets the market price. You can charge more than that, but if you do you’ll get some resistance from registrars unless you have an especially compelling offering. The Landrush will be the first good test of your TLD’s popularity. You will have (if you’re smart) spent some time and money marketing your TLD, and here’s where you’ll see if it paid off.
To estimate your ongoing revenues from registrations, you should estimate your renewal rate (retention rate) at about 75%, which is about industry average, and closer to 90% for Sunrise registrations.
A word about auctions. The two TLDs to have made extensive use of auctions are .asia and .mobi.
In both their Sunrise and Landrush periods, .asia used collision auctions. In a collision auction, when two applicants (or more) want the same name, it goes straight to auction, and the parties battle it out. Sound good? Your average selling price for a domain name certainly goes up, but so do the attendant hassles. If you look at the link above, you’ll notice that .asia’s page has bulletins about auction tampering, disqualification, non-payment, and a host of other unpleasantnesses.
A different strategy was taken by .mobi. They are continuing to conduct what are called “premium auctions.” They reserved about 5000 high-value names and are auctioning them off in small groups of about 100 each. They have done this both at live auctions and web-based auctions, and they’ve achieved mixed results, which have tended to rise and fall with the economy. These auctions too have had their problems, with the attendant administrative and legal costs – one of .mobi’s auctions had a technical glitch and some people who thought they had won were disappointed and howled to the blogosphere.
All in all, auctions are a good way to allocate names when there are, or are likely to be, multiple applicants for the same name, but be careful that you don’t underestimate the costs associated with them.
These are the main costs and revenues. There are others, though, and depending on your TLD they could be significant. If you’d like to hear our thoughts on how to keep your costs down and maximize revenues, you can pick our brains during a free and confidential feasibility analysis.
