Update on the Status of Already-Launched gTLDs: Is Anyone Out There?

August 14, 2014

Because of the explosive growth of the top level domain and secondary level domain system managed by the Internet Corporation for Assigned Names and Numbers (ICANN) and the potential impacts it may have on trademark holders and advertising, we have asked our general counsel’s office at Reed Smith LLP to provide us periodic updates on the status of developments in this area. ANA continues to strongly believe that ICANN’s activities are extremely important and deserve the focus of the ad community. 

Below you will find the first of these periodic reports. If there are issues you wish for us to particularly focus on in the future, please let me know at djaffe@ana.net.

ICANN Report by Brad R. Newberg, Reed Smith LLP

As you are likely already aware (but only if you are part of the subset of society at which this post is aimed), ICANN’s program to greatly expand the top-level domain name system by many multiples more than the previous 22 "generic" gTLDs (.com, .org, .net, .info, .biz, etc.) is well underway. Under the new system, entities located anywhere in the world were able to apply to operate a gTLD corresponding to just about any word or phrase, including an organization's name or brand, although the vast majority of TLDs that have launched so far have been strings corresponding to a generic word (“gTLDs”), such as .BIKE or .CLOTHING.

As you also may be aware, this program has caused a great deal of (pragmatic and reasonable) consternation among brand owners who were worried that the new gTLD program would lead to rampant cybersquatting. Future posts will have more about that, but this post asks the question: Putting aside cybersquatters, domainers (those who speculate in domain names for profit), and in-house counsel at brand owners, when it comes to the public at large, if a TLD launches in a forest and no one is there to hear it, will it make a sound?

A Quiet Entry and Exit? ICANN’s purported reason for launching the new TLD program was to open up domain names in non-Latin characters (through new TLDs in Arabic, Chinese, etc.), foster competition, increase consumer choice, and offer alternatives to individuals and businesses who might have been shut out of their preferred .com name. However, the actual launch of these TLDs has seen practically no advertising, resulting in a collective yawn from the general public — most of whom are blissfully unaware that any new TLDs exist. In fact, given the registration numbers, it is hard to imagine that most of the already-launched TLDs will still be around in two years. None has failed so far, but it is possible that the first TLD to close its doors will start a domino effect.

A Look at the Numbers Almost 200 new gTLDs have launched, passed through sunrise (the period where only trademark owners could register second level domain names), and are in the general availability phase (where anyone can register a domain name). Some have been in general availability for more than six months, although for almost all of the gTLDs, a significant portion of their registrations came in the first few days of general availability.

According to the statistics, approximately 1.8 million domain names have been registered across those 200 domains, for an extremely low average of 9,000 domain names per gTLD. But those numbers are misleading as the actual number of registrations is far lower. Many gTLD registries have taken to reserve names in dummy registrations either to sell them later for premium prices or to pump up their numbers, or they have given domain names away for free just to make the gTLD seem popular. For example, the No. 1 gTLD registry right now is .XYZ with a staggering 25 percent of all registrations (almost 450,000). However, only a small fraction of those domains have been paid for by actual end-users or even domainers investing in the name — some have stated that .XYZ appears to have a goal of getting to a million registrations whether those registrations are paid for or not.

Even where the numbers have not been artificially inflated by the registries, many of the domain names were bought early by domainers hoping to flip the name for profit. When one looks at the actual number of end-user registrants — importantly, they are the registrants likely to actually renew registrations when they come due (typically in a year) — it is hard to imagine the total actual number being outside the mid six-figures (and probably far lower), for an average of closer to 3,000 registrations per gTLD. .BERLIN, .CLUB, and .GURU are the only gTLDs above 50,000 registrations, and only 35 gTLDs have more than 10,000 registrations (regardless of who owns them — domainers, end-users or otherwise). The gTLD that went into general availability first (by a day), the Arabic word for .WEB, has registered fewer than 2,000 domains in six months. By contrast, .COM has 114 million domain registrations and still nets (new registrations minus discarded registrations) almost a million each month.

Success May Depend on the Big Brands Given that the gTLDs have been launched for profit — as opposed to supporting brands — one would think that there is a profitability threshold well above 10,000 names. It is possible that many of the gTLDs will do their best to stick around for a year after launching general availability, see what their renewal figures are, and then close shop if the numbers do not meet whatever threshold they have set for themselves. Ironically, their survival might depend on the success of the .BRAND TLDs, almost none of which has launched yet. The large brands that have applied for TLDs have the money to market their new TLDs if they so choose and make their new TLDs a key part of their marketing strategy. If they do, and if the public latches on, perhaps that will fuel interest in the non-brand gTLDs. If not, the whole system could fail and few will have the stomach to apply for more gTLDs when the second round comes around.

Brand Protection In terms of brand protection, brand owners have different options. Some companies have taken a wait-and-see approach given that this territory is uncharted — especially as opposed to the costly approach of blanketing the gTLD landscape with defensive registrations. Some companies have taken a mix and match approach to the following options: 1) paying approximately $3,000 for a block across the gTLDs run by the registry “Donuts,” since Donuts operates a significant number of TLDs and $3,000 is less than what it typically costs to go through a Uniform Domain-Name Dispute-Resolution Policy (UDRP) proceeding; 2) putting important marks on the Trademark Clearinghouse List (TMCH), and responding to the TMCH notices when a threat arises and monitoring for cybersquatting and typosquatting as usual; and, 3) registering domain names for important marks during the Sunrise period for gTLDs associated with a company’s particular industries. You should consult your internal experts and, if necessary, outside counsel, to come up with the right approach for your brand.

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