winter-is-coming

Cold winds in the global domain industry

Vacation is basically over and I thought I would follow up on my last blog post about the domain industry. I traditionally compose a post every six months (when it’s quiet at work) 😊 .

Läs den här bloggposten på svenska.

The last time, in December 2016, I wrote about the Chinese speculation wave in some new generic top-level domains such as .xyz and .top. At that time, I expected the interest to decline and already after 6 months, we are seeing an enormous amount of cancellations. Here are the statistics for .xyz and .top. I also wrote about the expected portfolio sales and that some new top-level domains would want to give up and throw in the proverbial towel.

Decline in the domain industry

Now, one doesn’t need to be especially gifted to guess what is about to happen in the domain industry. The market is mature and largely over-established. We see too much speculation, too many top-level domains, too many registries (that administer top-level domains), too many back-end providers (delivering systems for the administration of top-level domains) and apparently also too-many ICANN registrars.

This also means that much will decline in the future. We will see a decline in growth of domains in new top-level domains, in growth for .com after a large speculation wave in 2016, and in the number of registries. Growth in .se may also decline. We have received a lot of new registrations during the spring that probably will not be renewed.

Carrot and stick

With the risk of this blog post only being of interest to well-informed nerds, I thought I might make some predictions again. This time about ICANN.

In brief, ICANN is a non-profit organization that coordinates the internet’s domain name system, allocating the internet’s unique identifiers as well as their protocol addresses. ICANN accredits generic top-level domains and their administrators. ICANN also helps to develop the internet’s policy through engaging volunteers from all over the world. You can read the 28-page introduction here.

During the past year, ICANN has been in focus for many in our industry, and the ICANN conferences have been lavish and popular to attend. One can say that the attraction was both a threat and an opportunity. Or if you like, both the carrot and the stick.

The threat, or stick, was the discussion around releasing ICANN from the agreement under the auspices of the U.S. Department of Commerce. The agreement made us discuss DNS and in the long run that the internet was still owned by the U.S. Politics simply attracted many to engage in the issue.

The carrot and opportunity attracting people to ICANN conferences was the decision to open up for new top-level domains in 2012. This led to a whole new industry with suppliers, subcontractors, new services and other fortune hunters. A “gold rush of new domains.”

At the time of this writing, the rush has come and gone and the party seems to be over, everyone coming to their senses. As the so-called IANA transition was conducted in September 2016, the idea of threat has disappeared.

The cold wind begins to blow instead.

Reduced interest

If one continues to speculate, I think the interest for ICANN as an organization and for ICANN conferences will decrease. Why should one participate in ICANN’s multi-stakeholder’s process now?

In the past ten years, we have had a large group of enthusiasts who have given much time to the ICANN process. The risk is large that this group is now tired or is starting to phase out (new jobs, retirement, etc.). Asking large numbers of participants to visit upcoming (three per year) conferences that take between 6 to 10 days including travel time to Johannesburg, Abu Dhabi or San Juan, just to name the latest and upcoming destinations – feels more and more outdated.

I am aware that a new “meeting strategy” has been launched, but I believe one should think again. Maybe the wrong people were asked in the previous strategy process. I still think the number of conferences needs to decrease to two and have a clear theme or issue, much like the new GDD conference is evolving.

ICANN then needs to evaluate how many people really participate in a multi-stakeholder process. The number of visitors to ICANN conferences is a bad measure. The number of visitors says nothing when the local host adds on hundreds of visitors. How many are actually engaged? Is it enough for a handful of participants to set IDN standards? Or that those who have fortitude or energy (and probably their own interests) can steer major policy processes? How do we measure this in the ICANN health index?

ICANN’s revenues may eventually stop growing, and the strong increase of ICANN staff will turn to a gradual decline. A completely new situation after more than ten years of growth.

To think about

What does it mean? In my opinion, ICANN has to start re-thinking. Focus on costs, efficiency, lower travel costs for ICANN conferences, and a more focused activity on policy development. In a situation when things “go down” for many in the industry, it could become even more difficult to get involved in ICANN’s multi-stakeholder process – and then it’s only the “rich” that are heard in the long run.

Now, ICANN can certainly start a new round with applications of new top-level domains, but it will take at least three years and one may wonder if there’s really a need for new top-level domains. Of course the industry would like to have a new round. New top-level domains mean new blood for everyone that wants to deliver services (advice, systems, administration, strategies, etc.), and one can above all, convince large global companies to invest in important “brands”.

ICANN’s new CEO is a Swede and therefore used to cold winds. But it is difficult to convince participating organizations and visitors in Abu Dhabi that a jacket is needed.

Tags: Photo: Winter At Hopewell Rocks by James Mann (CC BY)

About the blogger

Danny Aerts Danny Aerts CEO, IIS Danny Aerts is CEO of IIS since 2006. He is originally from the Netherlands and came to Sweden in the mid-1990s. Danny has worked at several telecommunications companies, such as Unisource Mobile, Telia, and PTT Telecom and as CEO of the internet portal Spray.

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Comments

  • Jens 8 augusti 2017, kl 18.01

    Hi IIS,

    even though the Autumn is behind the corner, I know the summer will still last for a long time for beautiful trustworthy and secure ccTLD’s like .is and .se :).

    Good that someone can talk honestly about what many refer to as the ”ICANN Travelling Circus”, and it’s total overproduction og new gTLD’s, which will not only produce more and more chaos for all internet users, but harm a lot of innocent people and companies to.

    Hejdå,
    Jens.,

    P.s. Hope DA will be able to make it to NIC Norden on August 8-9 in Reykjavik.

    Reply
  • Vanda Scartezini 10 augusti 2017, kl 19.41

    dear blogger
    I posted you text into my Facebbok and tweeter since I consider it relevant. However, I also added this comments: ”some consideration to think about for all in the ICANN community The blogger may be analyzing just the North Hemisphere, forgetting to look down to the map and take a look at how few Registrar and especially few Resellers there are in the Southern Hemisphere and may rethink and the cold winter has rarely seen around here, may become a mild summer for DNS industry.
    best regards

    Reply
  • John McCormac 14 augusti 2017, kl 17.00

    It may be more of a consolidation of the market than a decline. Almost everyone seems to be looking at the .COM as a single TLD when in reality it is a small global market with a lot of country level markets. In some of those country level markets, the local ccTLD is the dominant TLD and growth in .COM in those markets has plateaued or or is slightly above replacement level. This shift towards ccTLDs has been happening for years. It was the combination of Domain Tasting from 2005 to 2010 that started a lot of the major shift. In Europe, the .EU fiasco where the messed up Landrush and Sunrise phases meant that many EU businesses and registrants lost out to non-EU speculation almost destroyed the .EU as a ccTLD for the European Union and shifted the focus of registrants towards their local ccTLDs. Consumers in various countries generally only recognise their local ccTLD, a few from adjacent countries and some legacy gTLDs. These are mature markets and it can be hard for new TLDs to gain traction in these markets without a lot of marketing.

    There is also a kind of nationalisation of new gTLDs happening where particular countries are effectively dominating various new gTLDs. While some of these gTLDs were targeting particular markets (the Chinese gTLDs and the IDN gTLDs), some have become dominated by particular countries due to registrar promotions. It is these promotions and discounts that have locked some of these new gTLDs into a Boom and Bust cycle as discounted registrations tend to have low renewal rates. For registries, discounting is tool that can be used to grow the registration volume but if it is overused, it can damage the TLD.

    The Swedish market is a difficult one for new gTLDs in that it has a strong ccTLD. This means that new gTLDs are trying to gain market share against a strong ccTLD, .COM and the legacy gTLDs (NET/ORG/BIZ/INFO) and even .EU. In most mature markets, the ccTLD and .COM represent approximately 80% or more of the domains registered.

    The problem with ICANN is that in 2010, the market changed when they were not paying attention. Domain Tasting had created an artificial scarcity of domain names in the .COM and a lot of this drove the idea that all the good domain names were gone. Once Domain Tasting was limited by the introduction of a kind of restocking fee for domain names deleted in the five day Add Grace Period, much of that artificial scarcity disappeared. But ICANN proceeded with the roll out of the new gTLDs oblivious to how things had changed.

    It is not all doom and gloom for some new gTLDs. A few of them have renewal rates for one year registrations that are higher than that of .COM and they are closer to early-stage ccTLDs in registration patterns and web usage. On the other hand, some new gTLDs have had problems gaining market share and usage. But as with all newly launched TLDs, the first few years tend to see a lot of speculative registrations and the subsequent deletion of these registrations. The key aspect for all registries in the immediate future will be usage. Usage builds consumer awareness and drives renewals and registrations. Parked domain names delete at a higher rate than developed and used domain names.

    Reply