VeriSign: The New Domain Name Game

A vast majority of the websites we visit on a daily basis end with the most common domain extensions in the world – .com and .net. As of June 30 this year, these two domain names accounted for almost 134 million of the 296 million domain names registered, all of which are sold and maintained by VeriSign (NASDAQ:VRSN). ^[1] However, with the recent introduction of new gTLDs (Generic Top-Level Domains), this number could possibly see some shrinkage. Could this pose a threat to VeriSign’s top earning commodity (subscriptions of which account for a large part of revenues)? Probably not.

What Are New gTLDs?

In January 2012, the regulator for domain names registered on the internet, Internet Corporation for Assigned Names and Numbers (ICANN), began accepting applications for new gTLDs. These new domain extensions were meant to provide a more diverse range of options for potential website owners other than the 22 gTLDs like .com, .net, .org, and 295 country specific extensions like .de, .in, .us already in existence. It was believed that these new gTLDs like .guru, .photography, .(your brand name) will be more specific and can provide a more unique identity. For example, we can immediately understand that a .blog extension means that the website is a blog or that .bmw relates to the brand name BMW. Apart from this, the new extensions could also make the potential website more search relevant and self descriptive. ^[2]

Also introduced by ICANN were the Non-Latin Script and Foreign Language Domains. These domains help businesses that want to showcase their business on a global platform, by allowing users to use the domain names in their native script, thereby allowing greater flexibility. This is done by permitting domain names to have characters outside the latin script (a to z), digits (0-9), and hyphen (-), as encoded by the Unicode Standard (a character coding system that is designed to support the interchange and processing of diverse languages). ^[3]

Therefore, it seems that the benefits of this explosion in the standard internet naming system seem abundant and essential.

What Does This Mean For VeriSign?

VeriSign is the leader in domain names and internet security. It is also the sole authority on the sale of .com and .net domain names. Therefore, it seems logical that VeriSign should be worried about the new gTLDs which are ready to change the way domain names are perceived. In actuality though, this may only be partially true, and here’s why:

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1. In a recent survey that was conducted by ICANN, .com was still the most popular and most recognized gTLD. The TLD also dominated when it came to which TLD the participants were most likely to choose to set up a website in the next 6 months. Legacy TLDs like .com, .net, and .org were also chosen by about 90% of the participants as being the domain extensions they trust. The average trust in the new gTLDs was about 49%, which is much lower in comparison. ^[4]

2. Existing brands are not readily accepting these new TLDs. The .com extension has been around for almost 30 years and is firmly set in people’s mind. Most of the big companies have a .com website, large educational institutions have .edu websites, and .org clearly stands for not-for-profit organizations. Establishments have come to trust these domain extensions and are hesitant to move away from familiar territory. Not even one big brand has moved to a new extension so far.

3. In comparison to 3.3 million names being registered in 400 of the new domain extensions in 2014, .com had about 8 million registrations in only one quarter. These numbers clearly show how the .com extension isn’t losing market share anytime soon. ^[5]

4. Lastly, it would be worthwhile to mention that VeriSign is also participating in the new gTLD program, albeit only partially. The company has applied for IDN versions (Internationalized Domain Names) of .com and .net domains. In the latest quarter earnings, the company has announced a planned rollout of about 11 IDNs by the end of the year. Therefore, if new gTLDs do catch up in the future, VeriSign is ready to capitalize on the changing trend.

All in all, it appears that VeriSign doesn’t have much to worry about, at the moment, when it comes to the introduction of new domain name extensions. Even though the company’s market share has been reduced (52.5% in 2007 to 46.6% in 2014) and will probably continue to decline in the future due to higher competition and more alternatives, new gTLDs may not turn out to be the threat that was once feared.

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1. VeriSign Q2 FY15 Earnings Transcript, seekingalpha.com [↩]
2. 10 Good Reasons For New gTLDs, ebrandservices.com [↩]
3. Unicode Standard, unicode.org [↩]
4. ICANN Survey, domainnamewire.com [↩]
5. Why, Even After A Year, There’s Still No Land Grab For New Internet Domains, forbes.com [↩]