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Summary:

Every so often, you run into some entrepreneur and that one thing he (its mostly he) who laments about: lack of available domain names. Which means people use dyslexic spellings of popular words, or even translate words from other languages and then Valleywag gets a chance […]

Every so often, you run into some entrepreneur and that one thing he (its mostly he) who laments about: lack of available domain names. Which means people use dyslexic spellings of popular words, or even translate words from other languages and then Valleywag gets a chance to make fun of them. Nevertheless, it is becoming increasingly obvious: its easier to find one great true love in New York City than it is to find one great true love. (Oh, if you go by the money spent by the likes of Sphere, Dabble, and Flock on their domains, the “love ain’t cheap” theory ports well to domains as well.)

The domains are so hot that domain squatters are making more profits than some of them real estate speculators. About 2.2 million new domains are being snapped up every month in the US alone, according to some estimates. Marchex, a Seattle-based public startup which has built up a massive portfolio of domain names claimed in a Business 2.0 article that it was nearly 10 percent of the global paid search market, about $9 billion or so. Another proof, Donald Trump is no money-genius.

The madness is going global it seems. IPWalk says that new .eu domain, when opened to all European Union residents last week (aka Landrush) has zoomed past the .biz domain and will lap .info in about four months. EURid, the registry of .eu, received 346.218 applications, in comparison with approximately 800.000 applications within the first 24 hours. Today there are 1.454.128 active .eu domain names, a number that surpasses 1.352.984 active .biz domain names.

Given the frenzy, looks like GoDaddy, the domain registrar with enough power to unleash major swings in web-server market share might begoing public. Wow… the company most known for its steamy commercials, hasn’t filed any documents with SEC, but boy, it could be an interesting read. Folks over at Techdirt think that a known name like GoDaddy could be the trigger to get IPO-lemmings out of the door as well.

Just a few things I gathered about GoDaddy.com from IPWalk. The company uses three name servers for its domains, WildWestDomains, Jomax.net and of course Godaddy.com. The only name server, WWD is going up, while the other two are trending down. WWD is the #1 host in the US. GoDaddy has a total of 6.66 million domains registered to it. At a very rough average of about $10 a year for registration, that would work out to about $66 million in annual sales just form domain sales/renewals. Warning: This is a very very very rough estimate.

  1. What happens when domains become truly exhausted? Do we just keep rolling out additional tld’s that become pounced on by the same domain name holders? Eventually, we’ll need to introduce a new system where you’re somehow just able to find the company or site you’re looking for without using an exact literal domain name. Of course, this will be resisted by anyone who has marketed their business as a dot com.

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  2. Eventually, we’ll need to introduce a new system where you’re somehow just able to find the company or site you’re looking for without using an exact literal domain name.

    Its already here, its called google.

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  3. As the guy to blame for starting and running EveryDNS [ ;-) ] I can tell you that IPWalk is not very accurate; not quite as bad as Alexa though… that’s a whole different story…

    http://www.ipwalk.com/index.php?module=default&action=static&page=graph.php&name=webhosttotaldomainseverydns.net3comnetorginfobizedu_2006-03-01.png

    Best,
    David

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  4. There should be a HUUUUGE tax on sale of domain from a third party so it gets harder and harder to buy from third parties (other than registrars). This will ensure that third party who typically just buy all domain to resell them later, stop doing that and free up a lot of domain. Lately while looking for a domain I was frustrated not cos nothing was available but that everything was back up for sale for $7000 …when it should not cost more than $10

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  5. Essentially make the domail resale business unviable!!!

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  6. This is definitely a big business. GoDaddy is kicking ass and they really are good – we have used them for a while and their service rules. WWD is well-executed and the whole domains business really is one of the best examples of reseller/affiliate success, which makes is scale constantly as GoDaddy and others don’t have to depend on their own marketing for that next 3% growth. I am surprised there haven’t been any really new ideas in this space.

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  7. make the domain resale business unviable

    The last time i checked this is still a free country…Seriously for any free trade system you need speculators for smooth functioning.

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  8. Ipwalk’s methodology is limited in that it only counts the number of com/net/org/biz/info/edu domains on a particular nameserver. A registrar will have domains that are registered through it but not actually hosted on the registrar’s nameservers. Neither does Ipwalk include ccTLD domains. But critically the methodology does not distinguish between active domains and domains that merely point to those nameservers.

    This limited nameserver-only view of a registrar or hoster gives, what is essentially, the retail market view. The higher profit margin shared hosting, dedicated/colo services and other services are not included in the nameserver view. Getting an accurate estimate of a hoster’s financial health is really only possible with a copy of their financial accounts in front of you.

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  9. I collect domain names as a hobby of sorts. I don’t have very many and I’m not a profiteer — I do plan on using them eventually.

    It’s a fun sport because it’s quite hard and requires creativity. One of my recent bags: SoSaySo.com — sounds like a good opinion site, eh?

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  10. If you want more accurate numbers regarding the registrar market use webhosting.info they will give you a much more accurate picture of registrar rankings and trends. (the parent company that runs the site DirectI (based in India… cool guys) is also a registrar and knows how to count the market properly.

    GoDaddy, Wildwest Domains and Blue Razor are more than just nameservers controled by GoDaddy, but rather ICANN accredited “tags” (aka accreditations) which have become a commodity as well as the domains that they can register. I wish Bob luck if he IPO’s, I’d love to see some of his data as a shareholder ;-) Being a former competitor who ran the domains business for Tucows.

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  11. Webhosting.info uses the same methodology as Ipwalk but also allows hosters to cluster nameservers. It too does not cover ccTLDs and as such, where there is a strong ccTLD in a country, gives a limited view.

    I find http://www.registrarstats.com to be a far better site when it comes to registrar statistics. However it too has the ccTLD coverage problem.

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  12. John (McCormac, above) is commenting in detail about the .EU landrush on his blog (click on his name to get there). And darn fine comments they are too — I agree.

    But this is partly about markets and how creative they can be. Om’s point is well taken — the good names are pretty much all gone in .com. Along comes a new TLD, priced at a flat rate. The market responds — speculators snap up just about all the names in the space within a week, with the intention of reselling them at auction. Some of those folks will make a bunch of money, others will not. Markets at work, no problem there. Even the abuses that may be taking place can be viewed the result of an efficient market — creative people recognizing a loophole in a flawed process. Efficient allocation of scarce resource. Supply and demand, etc.

    One way to reduce the value/cost of domain names would be to increase supply. Let thousands of TLDs bloom. An interesting question to ponder is “who’s motivated to restrict supply?”

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  13. I am one of the entrpreneurs who is really mad on the lack of domains, however with some effort i think good domains are still around it is just takes some effort.

    I consider anything that has some not more then 6 letters, easy to remember and ends with .com as a good domain.

    For instance not so long ago I got
    fijjy.com,kimpi.com

    so I think there are still some domains that are left out

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  14. I am one of the entrpreneurs who is really mad on the lack of domains, however with some effort i think good domains are still around it is just takes some effort.

    I consider anything that has some not more then 6 letters, easy to remember and ends with .com as a good domain.

    For instance not so long ago I got
    fijjy.com,kimpi.com

    so I think there are still some domains that are left out

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  15. sorry for double comment, my cocomment did not record the first one

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  16. Great post, Om. See the SeekingAlpha post, http://internetstockblog.com/article/9023, about what the GoDaddy IPO may mean for Verisign(VRSN), Web.com(WWWW), and 24/7 Media (TFSM).

    “What is perhaps most interesting about this IPO (if it comes) is that it will shed light on an industry segment that has become very difficult and opaque in determining a fair value for each company. The industry leader is clearly VeriSign (Nasdaq: VRSN), which has been hounded publicly by GoDaddy’s CEO because of some unfair monopolistic advantages that Internic has given to VRSN.”

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  17. did not someone appropriate the bigdaddy.eu domain ??

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  18. Good analysis Om. Keep in mind that GoDaddy’s margins on domains are minimal (the wholesale cost of a .com domain is $6.25, plus infrastructure). They make most of their margin on non-domain products. That’s why they offer domains for $1.99 if you buy something else with it (e.g. web hosting).

    One of the big challenges for GoDaddy going public is its outspoken leader, Bob Parsons. He’s blogged about things like how he is a proponent of torture. That’s not good for a public company. I can see him being like Overstock’s CEO when he has an analyst asking tough questions.

    For more about GoDaddy and some recent articles about the company, visit http://domainnamewire.com/2006/04/12/godaddy-plans-ipo/

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  19. The domain monetization business is here to stay, but will likely see a decline as user get savvier about using Google, bookmarking. In addition, IE and Firefox will get smarter about suggesting the “real” site you might be looking for. What is interesting is what the domain owners will do to drive traffic to their paid links. See my post on Marchex’s traffic arbitrage practices. They’ve said it is a core part of their strategy to drive more search traffic (paid and unpaid) to their domains full of paid listings. Seems like a short term win for marchex, but not great for users!

    http://berk.typepad.com/bshaw/2005/11/irrelevant_traf.html

    Disclosure: I own puts on Marchex shares

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  20. The real potential value for domain speculators with huge portfolios is a new trend in building out the domains and not just depending in type-in traffic. The forward-thinking firms will see that this is their best current method of generating long-term value for their holdings.

    Looks like an opportunity for Web 2.0 developers – partner with the domainers and have access to cool names, instead of Star Wars characters.

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  21. It took our company nearly two year to find a good domain.

    We were looking for something:
    - short (6 letter max).
    - available .com
    - available in local European countries (.co.uk, .de, .fr, .it, etc..)
    - easily brandable in any language.

    I finally found Adoos.com after spending many long nights trying millions of words at godaddy.

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  22. “GoDaddy has a total of 6.66 million domains registered to it. At a very rough average of about $10 a year for registration, that would work out to about $66 million in annual sales just form domain sales/renewals. Warning: This is a very very very rough estimate.”

    I think that about $6.25 of every registration for a dot com goes back to Verisign and/or ICANN. A few companies will sell you a dot com domain name for less than $6.25, but this is only if they think that you are going to use their webhosting.

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  23. I am glad to say that we do live in a free market, otherwise airline pilots, doctors, scientists, etc., would all be paid a paltry wage as in some non-free market countries.

    As for those entrepreneurs who complain that they have to spend money on buying a domain name why should that be any different to any other product? As for the lack of good dotcoms why not go after something truely original and worth its weight in advertising gold like:

    ‘TheBe.st’
    ‘GolfClub.st’
    ‘Texas.St’

    And the difference in cost between the dotcom and .St they can bank with a smile on their face.

    Here is for the ccTLD’s, and the small entrepreneur who is giving small and medium sized companies the chance to utilize the power of the internet at a fraction of the cost of a dotcom!

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  24. GODADDY WITHDRAWS IPO TODAY!

    Will Godaddy now sell to someone like AOL as they re-tool there internet company.

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  25. Those who think that domain squatting is “just the free market at work” definitely have had a moral bypass. While I rarely applaud Microsoft, I give them two thumbs-up for taking on the domain, name, and typo-squatters. A squatter is a scumbag, a cockroach, with no creativity, no life of their own, looking to buy for 1 and sell for 2 with no value added. These are the types of people that make terrorists view the capitalist system as full of blood-sucking vultures and thus provide the rationalization so that they feel no remorse for cutting off the heads of Westerners.

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  26. Interesting…

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