Is the domain industry on the way towards supersizing?

The new year has started in an unfamiliar way. Why? Well, during the first two months we have not seen any growth in the number of .se domain names. Certainly there are simple explanations, like past campaigns that are leading to a greater amount of cancellations now, but the fact is that the natural growth that we have had for over ten years (!) has stalled.

(Read this blog post in Swedish)

Last year, the TLD .se grew 6 percent. Without having done a calculation, I would think that this is near the average growth for all European TLDs. Many have already begun to see their growth landing between 0 and 5 percent. We will probably soon see the first TLDs in a structural manner begin to shrink.

Why is this happening? There are many explanations

Soon, every business will have its own domain name and the market is possibly saturated there. The lack of simple tools and packages to private customers (or marketing of the packages) leads to less growth in that market.

Competition from the new top level domains, changes in the algorithm of search engines and popular social media services might be causes. It is surely a mix of several factors.

What are the consequences for us at .SE?

To start with, for the first time in ten years we must start seriously thinking about marketing and product development.

The thing that every ordinary organization has as a daily challenge has not been an issue for us. As an administrator (or registry) we have been able to sit back and let our dealers sell domain names. We have been behind the scenes producing our “standard product” that is the same for everyone and everything.

The industry needs to keep the customer in focus

I often ask my peers in other countries about the progress of registry operations. Most of them can give an exact number of registered domains, but they do not know how many customers they have. For TLD administrators, focusing on the customer and understanding the customer’s needs have always been of less importance over the years.

Supersize

What is currently happening is that we might want to think in terms of new products, additional services and packages. A common approach would be to start with “supersizing” in our branch as well. To supersize means to group products together and offer larger volumes for a favorable price to the customers. The underlying benefit for the vendor is that the cost of producing larger volumes is so low that it focuses on increasing the average revenue per customer.

I am convinced that the future growth of domain names can come through these packages or additional services. The question is whether our resellers can – and want – to sell these new product packages. Domain sales are important to most of our resellers in order to get a hosting customer. By itself, the domain name sale is often less important. This is where we must find a win-win situation.

.SE will have more legs to stand on

A second consequence of the reduced growth of the TLD .se is the need to have more legs to stand on in order to continue with our important internet ventures.

We began to administer the TLD .nu in September. .Nu might have a higher growth potential (larger market) and provide clear scaling benefits. With reference to the above, .nu and .se will also be attractive for packaging, but in the end it’s the same deal.

More strategically important is the work we do for ICANN. To be a global test organization is typical for what is called the “blue ocean strategy” – an approach that advocates that instead of competing in existing markets, one should focus on finding undiscovered market space.

Our early focus on the development of alternative revenue-generating services makes it so that we now are increasing our revenue every year. We expect that revenue coming from parts of our organization other than the .se domain will be able to stand for 20 percent of the total intake this year.

The wholesale price for .se domains has not been raised in five years

A third consequence of the reduced growth may be that we need to discuss whether we should revise our prices. It has now been five years since we set the current wholesale price. The constant growth has been able to balance other price and cost increases and has given us space for our internet ventures.

To raise the price is like swearing in church. But at the same time one can look at it in the sense of raising the yearly fee being equal to a small caffe latte every fifth year, and maybe that’s not so bad.

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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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