Domain name registrars are often seen as a promising sector with the expectation of new registrations adding to the existing annual renewals. It's not as rosy as it sounds -- the juicy names were snagged millions of registrations ago -- but it's still a pretty good business.
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What's your name worth? A lot depends on where you register it. VeriSign's (Nasdaq: VRSN) Network Solutions, the original and by far the largest player, will charge you $35 a year for your dot-com presence. Head on over to Register.com (Nasdaq: RCOM), the Internet's second-most popular option, and you can lock up your name for $30 a year. Keep going down the list and you can shave the annual fee by more than half. The domain name fee schedule might look awfully similar to the discount broker space where powerhouses like Schwab (NYSE: SCH) can charge two to three times as much as aggressive upstarts while still maintaining a large slice of market share. It is: Aggressive, company-specific marketing dominates the perceived alternatives to the end user. Locking up a customer along with the annuity of renewals makes it ad money well spent. A registrar is born Well, we all know what happened next. The fertile .com, .net, and .org vacancies ignited a land-grab gold rush that left few dictionary words, brand names, and phrases unturned. Seeing the monster it had created, the government decided to break up the registrar sector in 1999. By allowing five new companies to compete in the registrar business, including Register.com and America Online (NYSE: AOL), the move was supposed to level the playing field. Somewhat, that is. The companies still have to pay Network Solutions $6 a year to maintain the master database. While that's a fraction of the $70 for two years that Network Solutions charges -- and it opened up the realm of discounted domain registration sites to as low as $9.99 a year -- it had little impact on the volume of Network Solutions' business. By the end of the year, it still commanded just over 70% of all new registrations. The land-grabbing hands Over 21 million dot-com names have been registered. All of the good ones -- and many bad ones -- are spoken for by now. While 4.2 million dot-net and 2.5 million dot-org domains are presently occupied, the prestige clearly belongs to the dot-com turf. However, while growth is almost assured with new top-level domain extensions like .biz and .info rolling out later this year, the same can't be said for the more than 28 million existing registrations in the .com, .net, and .org fields. Why? Many domains that were registered remain undeveloped. Virtual landlord wannabes and failed cybersquatters scooped up names with the hope of riches that never materialized. Once bustling hotbeds of the domain trade like GreatDomains.com and eBay (Nasdaq: EBAY) have grown quiet. Everyone's selling. Few are buying. Every week, thousands of domains are willfully expiring, worthless. For now, there are still more people signing up than signing off. If the new wave of registrants are more set on developing their domains rather than aiming for the elusive mother lode, then the true value of the domain sites -- the perpetual revenue stream of renewals -- will truly flow. More than just a name That's why hosting heavyweight Verio was caught red-handed trying to mine through Register.com's client list for leads last year. It is also why VeriSign, under orders to sell part of its registration business, struck a deal with Web-governing body ICANN so that it could continue to keep the dot-com database. By giving up its .org reign by next year and putting its .net registry up for bid by 2006, VeriSign was able to hold on to the lucrative dot-com franchise. So, to answer the question we kicked things off with, what's your name worth? To the domain names service providers, it's priceless. Rick Aristotle Munarriz keeps a curio case where he displays his domain collection. Okay, he doesn't. It's mostly a hobby, though he has sold a few on eBay and has had offers from the likes of Reader's Digest and the Alan Keyes campaign. He also owns shares of Register.com. The rest of his stock holdings can be viewed online, as can the Fool's disclosure policy. Related Links:
When the Internet was created, no one imagined that the demand for domains would number into the tens of millions and possibly hundreds of millions. However, the government did realize that it needed someone to maintain the master database. At the time, there were just a few computer geeks who wanted to go dot-com, and Network Solutions was handed the keys to what seemed like an insignificant registration monopoly.
When news broke that domains like Business.com and Loans.com were selling for millions, chair jockeys everywhere figured they, too, would stake their claim on the Internet gold mine. Of course, by that time, all the truly valuable names were gone. They were down to BusinessBungalow.com, BusinessZing.com, and LoansWeekly.com (yes, all three of those were free for the taking as of this writing).
Domain brokering is good business. Register.com and VeriSign's Network Solutions are both profitable from registrations alone. Yet there are also bigger fish to fry as the companies continue to build out their services. Many new customers need help with everything from domain hosting to Web design. There is clearly more value to a patron than the money they spend claiming a dot-com stake.
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