On the occasion of leaving .cloud to take a short break, Francesco posted his thoughts on LinkedIn about the state of new top level domain names. It’s a fantastic post. With his permission, I am publishing it here in its entirety.]
After 2 intense, fun and rewarding years spent building .cloud from the ground up and seeing it take its first steps in the world (luckily, quite well as it turned out), I have decided it is now time for me to take some time off before figuring out what I want to do next. Early signs show that finding another project in the domain and hosting industry should not prove too difficult, but for the moment I am enjoying the liberating sensation of not having something lined up already and instead leaving the door open to the unexpected.
Many years in the domain industry, and the last 2 at the helm of a new TLD Registry, have however given me the opportunity to reflect on the challenges that our industry faces.
As the voices calling for a new round of TLD applications get louder, I wanted to take the opportunity to share some of the questions and issues that I have been contemplating, and that in part have brought me to the decision to take some time off.
When we set to expand the original namespace, we did it with the objective of enhancing competition, consumer choice and innovation… So I naturally ask myself: “how well have we fared so far?” and “What can we learn from our experience?”
1. Consumer choice – Emancipate yourself from mental slavery (of volume at all costs)
A couple of years ago I stopped going to panels on new TLDs, as I found them repetitive, self-centered and quite frankly a bit depressing.
A recurring theme is the problem of declining growth and the need to promote new TLDs (and domains in general) more aggressively to keep “hitting the numbers”.
When I look at the volumes achieved so far though, and particularly at their composition, I can’t help but think that the domain industry lives very much in denial. The obsession with volume for the sake of volume reminds me of a similar debate a few years ago in the mobile app industry: having millions of downloads might make your slide deck look fancy, but it is user engagement that ultimately decides if your business is sustainable or not.
In my mind, the objective of our business is to help regular “consumers” get online. These are the “high quality customers” that we all strive to attract. These are the people that build websites and put their domains to use, they renew every year and provide great material for case studies and inspiration for others. Regular people however typically only run a site or two, so their demand for domains is obviously limited.
From this perspective, the sensible approach to evaluating the interest of domain investors and the uplift in volumes that they have brought so far, particularly in China, should have been to consider it a nice “extra boost”, which hopefully also brought some revenue to those Registries that didn’t simply give away their names for free. It is, however, a very short-sighted move to build your entire business on fantasy numbers and on the possible interest of speculators. That is, of course, unless your objective is to impress a potential investor/buyer and make a quick exit.
I think it is time we finally move past the obsession with “pure” volume and start making actual usage levels and the percentage of quality business a TLD attracts the key metric on which we build our business plans and revenue models, and ultimately judge our success. The numbers and the growth curve will clearly not look as impressive and it will require not only a long-term vision but also plenty of hard work and commitment in order to reach stable footing, but this is definitely a healthier and more realistic approach to the business of selling domains to help real people get online.
2. Competition – you just haven’t earned it yet…
If one had to do a brief summary of the requirements of the 2012 Applicant Guidebook, it would all pretty much boil down to the question:
“Do you have the cash to pay for your application fee?”
After years of discussions, we ultimately decided that “the market” would be the sole arbiter of the nTLD program, so we never questioned whether the numbers provided were realistic or the business plans viable. As long as applicants were able to provide enough money to cover all the costs, the answer (with a few exceptions) was pretty much “just go ahead and do as you please”.
Given the scenario was very much “pay to play”, should we be surprised when certain actors try to make their business profitable by adopting questionable business tactics, or when a Registry suddenly decides that customers should pay more for domains in TLDs that are struggling for profitability and were probably not a great idea in the first place?
Just to be clear, I am not blaming anyone for putting all their efforts in trying to recover their investment and making money with their extensions. I know that there are many Registries out there that are doing a terrific job and that genuinely and passionately strive every day to build real value for their users. Nonetheless, I think that we can all agree that in the process we also ended up with a handful of nTLDs (and their operators) that we would have happily done without. Moreover, and if we add to the bunch the few others that simply did not have the resources to live through the long winter nobody planned for, the overall picture certainly raises a lot of questions.
And here is the other problem: we have already seen a few examples of struggling, smaller players being bought by bigger competitors that enjoy better economy of scale, highlighting how the system we crafted ultimately favours consolidation, reducing competition instead of promoting it.
Whilst we might love to blame ICANN “the organization” for all the problems of our industry and in this instance the ‘less than stellar’ performance of the nTLD program so far, we should keep in mind that it was ICANN “the community” that wrote that handbook and decided the rules of the game in the first place. Maybe we were naive, maybe we fell for the sweet talk of those that had the most to gain, but we simply did set the bar too low. So while there is definitely a lot of room for improvement in the way “the organization” manages its tasks, it is really upon us “the community” to make sure that next time we demand more from the applicants and make sure that we all to reap the benefits of true competition and consumer choice.
3. Innovation – Is there life beyond the A record?
A good, short, clear domain name can be a great marketing tool, and nTLDs have definitely brought new opportunities to add context to a web-presence.
That said, I have to admit that every time someone (usually with a not-so-covert agenda) talks about “the innovative power of new TLDs” I throw up a little in my mouth. Let’s be honest: having more options to call your website is not innovative, it’s novelty at best.
What is interesting (and occasionally maybe innovative) is what some people are doing with their domains, but that is something that as an industry we can hardly take credit for. This is also why, no matter how much money we decide to throw at “awareness campaigns”, we are still very much failing to find effective ways to engage users and get them excited about domain names.
The problem is, however, systemic. The ICANN model is traditionally based on the assumption that a Registry will sell its product exclusively through a channel of accredited Registrars, who in turn (one way or another) are all selling fundamentally the same set of hosting products and web-focused services.
Whilst originally this system did contribute to the development of the Internet by providing consumer choice and driving down the prices, it has also become the “golden standard” to which everything has to conform if it wants a chance at “making it” commercially. When even those few that tried to do something different eventually end up quietly coming back to the herd with their head down, it isn’t really that hard to understand why everybody decided to “play it safe”. The result was 1000+ new extensions that all do pretty much the same thing: point to a website.
If anything, this perfectly defines the antithesis of innovation. It’s a mature, slow and self-centered status-quo that exists within a bubble and is blissfully unaware of what is really going on in the outside world. I am guessing this is what the Salon must have looked like at the end of the 19th century, enjoying its unopposed dominance only to be swept away by the disruptive force of the Impressionists shortly after. How long can we really keep our game up before reality catches up?
With the prospect of a new round of nTLDs on the horizon, we as a community have however the great opportunity to be part of that disruption movement and be true to our mission of innovation.
ICANN currently sits on a lot of money and it’s money that many would like to see used to “promote nTLDs”. But ICANN’s job is not to “sell domains”, but more so to serve the community of internet users that trust it to manage this common resource for the greater good. Needless to say, and instead of subsidizing “a solution in search of a problem”, perhaps that money would be better spent supporting true innovation in this space.
In a world that increasingly puts its faith in startups to show us the way forward, why not spend some of this money running hackathons and supporting projects to find and develop new ways to use the DNS? Why not offer grants to expand the pool of potential Registry operators and allow organizations that cannot afford the application fees to run a “commercial” extension to bring their contribution to the table?
In conclusion…
The domain industry has given me some of the best years of my life, full of incredible opportunities and amazing people that have become my best friends. I hope it is clear that the goal of this post has not been to bash this industry, but rather to try and shake it and point out that there is so much potential and great things we can achieve if we only dare to think bigger and set higher goals for ourselves.
From my perspective, I have to admit that over the years a sensation of “more of the same” has been slowly eroding my motivation. Quite frankly, I am bored of “selling domains for websites”, and I long for getting my hands dirty building cool stuff that people find useful and that make a difference.
One of the best parts of the .cloud experience has been building the product up from scratch, working with the value proposition and the communication, writing and speaking at events: in an ideal world, I’d love to find a place where I can continue doing all these things… so if your organization has a use for a crazy guy that talks a lot and is not afraid to ask uncomfortable questions, then maybe we should talk (in June… now I am officially on holiday 
).
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Author: Francesco Cetraro