Business Insights: New ICANN Top Level Domains – a Real Business Asset or a Very Expensive Cyber Vanity Plate?

Our business insights series is designed to give you greater understanding of business topics as well as ideas and tips for managing your business. If there is a topic you would like to learn more about, please contact us. This article is based on an article from Graham and Dunn’s GreenTech blog.

Get ready for another cyber land rush! New generic and branded domain names will soon be available– but this time there will be new challenges and significant costs associated with the process.

All businesses now know that having a Web presence and often directly offering goods/services through the business Web site is a must in the 21st century. Instead of accessing a specific business owner’s Web site by typing in a formal and convoluted Internet protocol (IP) address, such as 207.68.166.247, consumers look for a specific business by typing in a domain name (microsoft.com) to allow a computer on the Internet to find another computer.

Back in the mid 1990s we saw a big cyber land grab for everything .com, .org, and .net (other early top level domains or TLDs included .edu for universities and .gov for the U.S. government). ICANN, (Internet Corporation for Assigned Names and Numbers), the organization that oversees the huge and complex interconnected network of unique identifiers that allow computers on the Internet to find one another, continued to pump out many new TLDs such as .mil (military), country codes (like .ca for Canada), and regional codes (like .eu for the European Union) and others like .aero, .pro, .coop and others. There are or will be soon about 306 TLDs available, including a new TLD .xxx for the porn industry approved last March.

Trademark owners were up in arms over more cyber opportunities for others to filch their trademarks, but became generally pacified by ICANN adopting a uniform domain name dispute resolution proceeding (UDRP) to help legitimate trademark owners get back their domains when used illegitimately and in bad faith by others. ICANN also adopted sunrise periods in which legitimate trademark owners could object or block (through registration) objectionable use of a trademark in a new TLD domain. In the case of the new .xxx TLD, trademark owners can essentially co-opt their trademark from being on the .xxx registry by reserving their trademarks in the sunrise period beginning in September 2011. As an extra precaution, trademark owners can pre-reserve on sites such as http://domains.icmregistry.com/ .

Now, ICANN has thrown open all generic domain extensions — and the granddaddy of them all: .brand (in other words, your own private brand or name)– but for a fee, and a whopper of a fee at that. Here are the highlights, which are subject to a fair amount of continued tinkering:

  • Established corporations, organizations, or institutions in good standing may apply (individuals or sole proprietorships are prohibited from filing)
  • Potential applicants must become registered users of the TLD Application System (TAS) and pay a $5000 deposit to receive access to a full application form (containing 50 sections or about 100 pages!)
  • At time of filing a full application, the applicant must pay $180,000 ($185,000 less the $5,000 deposit)
  • Application window period is January 12, 2012 through April 12, 2012
  • Applications require proof of legal establishing and copies of financial statements for the most recently completed fiscal year
  • Financial information will be kept confidential by ICANN agents
  • In some cases, refunds for a portion of the evaluation fee may be available for applications that withdraw an application before the evaluation process is complete
  • Additional fees may be required in the event that a formal objection is lodged, for priority evaluation, for referring an application to the Registry Services Technical Evaluation Panel

Bottom line: this is a big expensive process. Some in the legal community are bandying about a number in the $500,000 range for the entire process, not including the business resource allocation time to assist with the preparation of the application and assembling requested documents, such as financial reports.

This begs the question: should a business pay the outrageous sum of $185,000 for the initial application filing fee (not to mention the very large legal fee that could accompany the 100 or so page application) when they can get a .com domain name for $11.99 (bulk price) from Go Daddy? Is this the equivalent of an expensive “vanity vehicle license plate”?

Most businesses would likely say the cost isn’t worth it. Many consumers do not type in a domain name into a browser anymore to find a particular business and rely more heavily on a search engine, such as Google, to find a particular business or brand. Further, the technical requirements will be much more strenuous to operate a “private registry” than merely registering a single domain on a .com registry. ICANN will want to know that an applicant has the technical expertise to meet the requirements. To date, there is only one business that has publicly stated that they intend to go after the “.brand” domain extension and that is Canon (wanting .canon). Presumably Canon has the technical savvy to meet the requirements, in addition to having the necessary funding.

But what if the goal is to get a bigger share of the cyber market space? What if the business plan adopts the use of distributors that can more easily be tracked/managed or a way to better police counterfeits? What if customers can immediately feed into the .brand account for a myriad of goods/services? Then, the prospect of a $500,000 or so expense may well be worth it in comparison to extensive and expensive online marketing and advertising and as a means to more cost effectively deliver the business’s goods and services to online consumers.

Once Canon obtains its .canon registration and others trickle in, will there be a sufficient interest for legitimate businesses/organizations to jump in? In other words, will Coca Cola, the holder of the most valuable trademark (estimated in some reports to be worth over $70 Million in 2010 by Interbrand) really want to sit on the sideline and not register .coke or .cocacola?

And what about entire industries, developing or not? What would it be worth to have .bank or .software or .smartgrid top level domain? How could information and goods/services be distributed to consumers/potential consumers under vast new swaths of cyber real estate?

Many of these questions will likely be resolved over the next year. But for those with strong financial backing and good Web business plan/marketing plan, the opportunity to get an exclusive top level domain (generic or branded) may be very attractive.

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