What's in a Domain Name? Marketers Weigh the Cost

Companies Wrestle With Decision to Buy Into Blitz of New Dot Designations

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YORK, Pa. (AdAge.com) -- Today there are 21 generic top-level domains, or those little words that come after the dot at the end of a web addresses, including .com, .net and .gov. But that's all about to change.

A proposed expansion of domains means that by the end of the year there could be hundreds. Coca-Cola and Pepsi could request .soda or .softdrinks; Procter & Gamble and Unilever could sign up for .laundry or .soap; and McDonald's and Wendy's could get .burger or .fries. The potential for names and online branding would be limited only by the imagination of the creative marketing industry.

But what if you had to pay for every one of the new domains that relates to your brand? The initial cost estimated by the Internet Corporation for Assigned Names and Numbers, the nonprofit agency that oversees the distribution and policy of domain names, is $185,000 for registration plus anywhere from $25,000 to $75,000 in annual fees.

But if both Pepsi and Coca-Cola wanted .soda, there would be an auction, and the domain rights would go to the highest bidder. And that could get pricey quickly for brand owners. One outside consultant estimated that the total cost to business could reach $1.5 billion.

"One of the biggest concerns to me is how on earth can ICANN legitimately adjudicate who gets what domains?" said Ken Hittel, VP of New York Life's corporate internet department. "Who has the right to own .lifeinsurance, for example? New York Life is the No. 1 seller of life insurance five out of the last seven years, so we could argue that we should get it. But what would Prudential and other competitors think about that?"

New York Life spent about $200 to $300 on domain names last year. But it calculated that to get just a minimal five top-level domains, it would have to spend well over $1 million.

Crowded domains
The nonprofit Coalition Against Domain Name Abuse is a leading critic of the new domain plan and estimated recently that marketers will spend a total of about $1.5 billion to register their brands in new top-level domains.

Why are those domains even needed? Paul Levins, VP-corporate affairs for ICANN, said, "Competition has always been very core to our central mission. ... Increasingly we're getting a pretty strong demand to open up the generic top-level domain space." He also said while there is not a fear of running out of .com names, the space is crowded, and "as a result it can be hard to find names that are intuitive."

That doesn't sit well with New York Life's Mr. Hittel, who paraphrased a friend: "Saying that we will run out of .com domain names is a little like saying we're running out of numbers that end with 5."

The money that ICANN earns from domain registrations -- 20ยข per name -- goes to running the nonprofit organization, and that will continue under the new system. The $185,000, in fact, is all cost recovery, Mr. Levins said. If it turns out that the process is more efficient than expected and there is excess money, it will be put into a fund or foundation for work relevant to ICANN's mission.

While marketers' main complaint is cost, there are other issues, including the difficulty of policing a greatly expanded world of domain names, the ineffectiveness of already-issued domains, and advertising and cybersquatting abuses. Sarah Deutsch, Verizon's VP-associate general counsel, said even if a company decides not to buy any of the new domains, it will still have to pay to watch out for uses of its brands on them.

Diverting consumers
"Today companies like Verizon pay Google to put our keyword out there, so people type Verizon, they find us. Cybersquatters register sites like Berizon.com, and when users mistype, they go to a parked page with ads. If they click on Verizon, we pay Google for that click, who then pays the cybersquatter," Ms. Deutsch said. "If you introduce hundreds of brand-new domains, people will figure out how to exploit those, too. Then there are just more and more ways consumers can be diverted from where they want to go."

ICANN solicited comments after its initial proposal and received more than 300 from 24 people around the world representing countries, domain-name players, businesses and brand owners. Some of the brand owners that responded included AT&T, Chevron, Visa, Time Warner, Lego, Microsoft, and Bank of America, as well as the Association of National Advertisers. ICANN published a second guideline and is again taking accepting comments through April 13 for a second draft.

Also at issue is the effectiveness of top-level names beyond .com, .net and a few others. Microsoft pointed out in its comment letter in December that .com, .net and .org account for 91% of all top-level-domain registrations; .com alone accounts for 74%.

New York Life, for instance, owns NewYorkLife.biz for small-business owners, but it gets "no traffic" on its own, Mr. Hittel said. "We'd have to put tons of money into advertising and marketing to get people to use new domains ... and they'd all end up pointing them to NewYorkLife.com [because] we're not going to create whole new websites."

CADNA President Josh Bourne, who is managing partner of consultancy FairWinds Partners, said, "Trademark owners and brand owners have registered millions ... of dollars in domain names that they don't use; .travel [introduced in 2005] is a great example of what they're trying to do and how it hasn't worked. There was already a community around it, but it still went belly up."

Advice to marketers about domain names

The coming surplus of new domains has been flying under the radars of many companies. So what should you do if you're just getting up to speed?

FIRST, FIND OUT HOW NEW DOMAINS COULD AFFECT YOUR COMPANY. Has your brand experienced a lot of cybersquatting or phishing problems? That's a red flag for more potential problems. The legal or internet department should be able to help. But realize that if your brand has any online presence, new naming will affect it.

SHOULD YOU BUY NEW NAMES OR NOT? That depends. Some marketers are taking a wait-and-see approach, but many think that's a mistake. Bone up on the issues, write comments to ICANN, or talk to industry colleagues about possibly banding together for common names. Just get involved. Sitting around and waiting to see how things shake out could cost you a desired domain to a competitor or give cybersquatters a time advantage.

WHO COULD WIN? New brands that don't yet have an online presence could use the domains to distinguish themselves. For instance, a coming-to-market energy-drink company could acquire .powerdrink and begin its first advertising and marketing campaign saying, "If it's not at .powerdrink, it's not a power drink."

WHO COULD LOSE? It's still too early to tell, but it's safe to say that companies such as pharmaceuticals and others with large portfolios of brands, such as Procter & Gamble and PepsiCo, will end up paying a lot of money if they buy lots of generic domains in self-defense. The good news is that direct trademarks, such as .cocacola or .pampers, will be for sale only to those brand owners. The bad news is .cola and .diapers could be up for grabs.

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