Auctions + Markets for Domains, Domain Names + TLDs

Several years ago, one of my friends (who is not a „domainer“ per se) made a very insightful remark… – a remark that I have carried around with me ever since and also pondered over all this time (and indeed, I continue to do so).

He noted that domain names are not interchangable the way uniform products are – you can’t replace one domain name with another one the way you can exchange one pair of jeans with another pair of jeans, one rubber duckie with another rubber duckie, one toaster with another toaster or one widget with another widget. Therefore, unlike the market prices we are all familiar with for one ounce of gold or one barrel of oil, domain names belong to an entirely different category of things. The are unique, much in the same way that a painting by Van Gogh or Rembrandt are unique. Just as it doesn’t make sense to switch out a painting made by Picasso with a crayon drawing made by the kid around the corner, you cannot simply exchange or replace health.com with movies.com (or even health.com with health.net, or movies.com with movies.net).

This became vividly clear to me earlier today as I was writing a response to a question raised by Michael Berkens (see „Quick Poll How Much Will .Web Sell For In The ICANN Auction On July 27th ?“). There, the discussion had become focused on whether the new TLD „web“ is comparable to the generic TLD „net“. Michael did a „back of the envelope“ calculation to arrive at $500 million as the value of the „net“ registry. I agree with the logic of his argument, but the point I wish to make here is more related to something he included in his remark apparently by chance / in passing.

He noted that the generic „net“ TLD does not offer so-called „premium“ domain names – in other words: that there is no price discrimination (i.e., that all domains are available at the same low price in a „one-size fits-all“ fashion). This is not a magnificent discovery, but I do feel it is something very noteworthy nonetheless. This is the way all generic TLD registries price domains, but it is a very rare (or even non-existent) pricing mechanism among the registry operators of the newer proprietary TLDs. Since the proprietors have such an strong inclination to engage in price discrimination, this might (or could) even be the defining characteristic of the difference between generic TLDs and proprietary TLDs: If there is no price discrimination, then the TLD can be called „generic“; If there is price discrimination, then the TLD should be called „proprietary“.

Although the motivation to identify a TLD as proprietary originally stems from the sole proprietor’s own engagement in the associated market (consider, e.g., Amazon, Inc.’s engagement in the „book“ market, or Google Inc.’s engagement in the „app“ market, or even Johnson & Johnson Inc.’s engagement in the „baby“ market), I feel this is an „easy to use“ metric that seems (to me) to be both valid and reliable in order to distinguish these two very significantly different types of TLD.

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