The Domain Rush is Over, or Has it Just Begun?

The sudden rush to register domain names for new businesses or to protect existing trademarks has come to a screeching halt, according to a report by domain name protection concern SnapNames.

SnapNames‘ report “State of the Domain, 1st Quarter, 2001,” found the size of the market for new registrations in the .com, .net and .org top-level-domains (TLDs) is losing ground to the market for secondary names — those that were previously registered but are about to expire.

The report, which is a compilation of data from the public domain registry databases, found the number of domain name deletions now exceeds 70 percent of new domain names sold in the .com, .net and .org TLDs, and that ratio is increasing by more than 15 percent per month. An average of 25,000 names per day expire and are returned to the pool of available names, while about 35,000 new names are purchased each day. Just six months ago, only a few thousand were deleting while over 60,000 new names were being sold.

Sales of new domain registrations peaked in the third quarter of 2000 at roughly 60,000 per day, and have been gradually declining to about 35,000 per day at present. Speculators acquired many names a year ago, when pricing for domain names dropped to $35 for a one-year registration term. Many of these names are expiring now, causing the ratio of deletions-to-additions to zoom upward.

SnapNames also found that only 2.8 percent of attempts to purchase a domain name are now successful. For that reason, the average successful buyer makes more than 30 attempts before finding an acceptable name. The lack of an available inventory of good names has dampened domain name sales, and driven many buyers to alternative TLDs such as .TV, .WS, .CC, and .LA.

With the demand and availability of domain names drying up, it should come as little surprise that market shares among domain registrars have been volatile. ICANN has approved 159 registrar applicants to date, about half of which are operational. But retail prices for domain names have fallen, ranging between $8 and $35 per name for a one-year registration, and this is forcing vendors to survive on lower margins. According to SnapNames’ report, competitive forces may crush those who cannot find a way to tap into the resale market for domain names or generate additional revenues from add-on services.

“We expect to see continued dramatic swings in the top 10 positions as various registrars are acquired, merge, or go bust, while others bound upwards on the charts through stronger marketing efforts,” said Len Bayles, SnapNames’ vice president of domain industry relations. “There are over 60,000 Web sites selling domain names worldwide today and yet only 35,000 new names are sold daily, so competition is fierce. It doesn’t take a rocket scientist to figure out that consolidation is going to be on the increase, resulting in an eventual shakeout.”