How Does a Domain Extension’s Registration Fees Affect It?

Our previous article indicated that registration fees don’t mean much unless you have a lot of domains. With respect to a domain extension itself however, registration fees can affect quite a bit.

As of Monday, ICANN indicated that 100 registrants have joined the new TLD program (some of which will be applying for multiple TLDs). One decision they will face regarding their TLD is how much to charge for domains.

It may not seem like a big deal – after all, there are already extensions charging as little as nothing (.tk) or as much as a thousand dollars (.pr). A good price however can find the sweet spot for the registry to make a lot and for the extension to sustain a long healthy life while a poorly-chosen price can not only hurt the registry’s bottom line but hurt the extension’s ability to succeed.

How could a higher registration price affect the TLD?

1. Some people may feel priced out

This seems kind of obvious – with .com’s costing about $10 at most registrars, a $100 or higher extension isn’t likely to get too many registrations. Furthermore, the renewal cost will really sting and possibly force some otherwise longterm customers to let the domain go.

For someone to profit from a $10/yr domain assuming no other costs, they would need to only make less than $1 a month. Change that to $100/yr and all of a sudden the registrant needs nearly $10 a month to profit. It may not sound major, but it can cut out registrants such as affiliates that set up small sites looking to simply make a small amount of money per site and replicate the success.

2. It may not get widely adopted enough to stick longterm

We’ve seen many extensions come out in the past 10+ years, with some doing fairly well and others not so well even after a hype-filled launch. An extension really needs widespread adoption via development of sites that see some popularity in order to sustain success over the long term. A high price isn’t always the primary cause of the decline of an extension, but the higher the price, the more important it is for other factors to go the right way.

Just last month, Afilias acquired the .pro registry and looks to counteract the issues that have caused it’s since it launched in 2004. It originally had a price close to $100/yr and was limited to certified professionals in certain areas. Given it’s always tough for a new extension to grab hold, both of those other factors combined to cause the extension to struggle.

Likewise, while .tv has seen some success over the years, pricing of both regular registrations as well as their reserved “premium” domains combined to somewhat limit the extension’s growth. It could have been a great example of a genericized TLD that saw widespread adoption if not for those two factors. As-is, only a small percentage of video sites reside on .tv domains, and only a handful of them have seen major success.

3. Less likely for a domain to have significant value

Domains are assets, and how much value they have as an asset is affected by its registration costs. Consider the cost over 10 years to own the domain. For a $10/yr domain, it’s $100 while for a $100/yr domain, it’s $1,000. A buyer will usually take that into account when buying a domain, and as such, the higher registration costs will be factored into the price they’re willing to pay.

Given newer extensions often won’t have many domains with immediate value anyways, the amount of them will be far lower with a high registration fee.

How could a lower registration price affect the TLD?

1. Cheapens the extension, affects how people view it

For lower registration price examples, look no further than .info and .tk. Both of them have millions of registrations and you might think they should easily be widely adopted. The problem is that the appeal appeal of extremely low registration fees isn’t huge with a single registration but it largely attracts low-budgeted webmasters seeking hundreds or thousands of domains. Those registrants often put up low-grade websites.

A combination of that and the low registration fees have caused most serious companies and organizations to not take the extensions seriously. With very few major presences on those extensions, the vast majority of sites on them then wind up being those aforementioned low-grade websites.

Because of that, even visitors of those domains have become biased against them. They see enough poor websites and wind up assuming that there would be little if anything of interest on the extension and avoid it.

2. Invites scammers

Anyone looking to scam people likes very cheap domains. Any time their site becomes largely known for its scamming, they can switch it to a different domain for little cost. That’s not to say if .com was the cheapest registration cost at $10/yr that it wouldn’t be used a lot in that manner, but with .info being significantly cheaper, it’s become a magnet for that behavior.

3. Search engines see the massive scamming and poor quality sites and doesn’t like the extension

While Matt Cutts may not admit this and may say that all gTLDs are treated equally, most authoritative SEO sites will confirm that .info simply is treated far inferior to .com, .net and .org. While the amount of time .info has been around being less may be one reason, the more likely reason is the general quality of sites on .info. The low registration fees ultimately led to that.

New TLDs coming out will need to figure out the sweet spot. Ones that would only appeal to a smaller crowd may be able to get away with higher fees since they don’t need to be as widespread. The “.com alternative” kinds of extensions on the other hand should at the least be competitive with .com in registration fees. I would not be surprised however if some of the new TLDs falter primarily due to poor choices on pricing.


One Comment on “How Does a Domain Extension’s Registration Fees Affect It?”

  1. Sharon Hayes says:

    Reblogged this on Sharon Hayes Dot Com.

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