Friday, December 30, 2011

Verisign's .COM Price Increase, how will you deal with new high domain prices?

.COM is arguably the most popular and preferred Top Level Domain by internet users. In fact, there is a category of users who believe .COM is the only top level domain and that all "websites must end in a .COM". Such is the power and recognition of .COM and it will take decades for its grip on our psyche to loosen.

But the prices are set to increase in 2012 even as new gTLDs are expected to begin coming into the market later that year. Early this year, we saw some movement and pricing offers from Verisign and many domain registries kept offering goodies to users to consolidate their market position ahead of the launch of new gTLDs. But come 2012, your .COM will not be so cheap.

Verisign, the registry for .COM and NET plus others, signed a revised contract with ICANN in 2006 for the managemnet of the .COM and .NET namespaces that gave Verisign absolute power to increase the prices of .COM and .NET domains by 7% every year for 4 years out of the 6 year duration of the contract. The original contract was merciless and proposed increasing prices for the entire 6 years. To put this into perspective, let's look at the prices of .COM domains under the original contract in comparison to the prices under the revised contract from 2006 to date:

Original Contract
Year         .COM Prices
2006        $6.00  7% Increase
2007        $6.42  7% Increase
2008        $6.86  7% Increase
2009        $7.34  7% Increase
2010        $7.86  7% Increase
2011        $8.41  7% Increase
2012        $9.00

Revised Contract of 2006
Year        .COM
2006        $6.00  7% Increase
2007        $6.42. 7% Increase
2008        $6.86 
2009        $6.86         
2010        $6.86  7% Increase. took effect from  July 2010
2011        $7.34  7% Increase, to take effect from January 2012
2012        $7.85

The difference between the two contracts cost Verisign roughly $140 million but for the millions of internet users who buy domains on a daily basis, it could have been more painful.

The prices for .COM domains have increased by $1.85 since the signing of the original contract. Under the original contract, there would be a yearly increase of .COM domain prices which means .COM base price would probably be $9.00 at this time and the average user would be paying anything from $11 to $20 from "Cheap" domain registrars and resellers..

The price increase will particularly pinch the domainer community who buy hundreds or even tens of thousands of domains. If domains are the fuel that will fire your enterprises in 2012, then you better do some fuel hedging and buy or renew your domains quickly before the January 15th date. You can bypass Verisgn's price increases by for example registering your domains for up to 10 years, this will lock your registration costs at the current price and even shield you from this and future price increases. It's very much like aviation business. Going by Verisign's contract with ICANN, the base price for .COM domains will be $10.29  by 2018. I wonder by how much Network Solutions will increase its domain prices since it's already charging users $34.99 for a .COM domain

So will the colorful newgTLDs come to the rescue of helpless internet users with some good prices for domain names? DotAfrica Comes to mind. Also, with expensive .COM prices in the near future and with the prices of the ccTLDs expected to drop due to pressure from users, I think this might lead to a preference for ccTLDs. South Africa for example will in 2012 lower the price of the ccTLD to about $4 so for South Africans, the  choice will be quite clear; either go for a second rate and expensive .COM or a brandable generic keyword that costs you half the price of .COM. For upcoming new gTLDs, this will be a good selling point and will increase adoption of new Top Level domains if they are offered at the RIGHT price.

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