January 9, 2012
By SARAH E. NEEDLEMAN
Entrepreneurs See Opportunity in Domain-Name Opening
This week will bring the long-awaited opening up of a new realm of Web addresses in which just about any word—such as dot-furniture or dot-arcticvacations—can serve as a domain name. And to some, that spells opportunity.
Beginning Thursday, the organization that oversees the Internet will start accepting applications to manage new top-level domains—the names that appear at the end of website addresses, like dot-com and dot-net.
It will be the first time in more than a decade that anyone can apply for the rights to control a slice of the broader Web marketplace, as opposed to just domains for specific types of Internet users. Only a few options, such as dot-jobs for sites catering to job seekers, have been available more recently.
Allowing a wider variety of domains to exist will create more choice on the Internet and potentially spur innovation, according to the Internet Corporation for Assigned Names and Numbers, or Icann, the nonprofit that regulates the world's Internet domain names.
Jeffrey Smith, an entrepreneur in Louisville, Ky., sees gold in the opportunity. He and domain-name speculators like him have been building entire businesses around ideas for new right-of-the-dot names, and in many cases they have lined up backers to help them cover application and other costs.
Just applying to be the overseer of a new top-level domain—and become what's known as a "registry holder"—involves an application fee of $185,000, more than double the cost Icann charged in 2000, when it last accepted applications for top-level domains of just about any kind.
The goal of the overseers is to sell their names to registrars like GoDaddy.com LLC. The registrars specialize in reselling so-called secondary names—the words to the left of the dot—to entities known as registrants that want to own Web addresses. But before an overseer can sell its name to a registrar, it has to determine who will be eligible to use the name and provide the technology that will enable the domain to function.
Mr. Smith and his eight partners started their business in 2000 for the sole purpose of having it become a dot-shop registry holder that could sell dot-shop Web addresses, such as jeans.shop and coats.shop. "I've dedicated the last 10 years to this," says the 46-year-old Mr. Smith.
The way he sees it, dot-shop at some future point could catch on among retailers and others involved in Web sales—and one day may even rival dot-com, the dominant domain operated by Internet-services giant Verisign Inc.
Mr. Smith says he has already put more than $2 million of his own money into his speculative dot-shop registry business. He and his partners have also lined up four angel investors to raise capital.
Their business, called Commercial Connect LLC, initially applied for the rights to dot-shop in 2000. But Mr. Smith says that application was denied for reasons he's not clear on. A failure to nab it in the coming application season would be crushing, he acknowledges.
Jacob Malthouse is also developing a domain-registry start-up. He and two business partners say they plan to apply for dot-eco, a domain they hope will be attractive to companies and nonprofits with eco-friendly products or missions. "We get emails almost every day from people wanting to buy" a dot-eco domain name, says Mr. Malthouse. He and his partners began building the Vancouver, angel-backed start-up in 2007.
Mary Iqbal of Fitchburg, Wis., has a start-up dedicated to dot-bank and dot-secure. She thinks the domains will be attractive to financial institutions and large and midsize businesses seeking greater security on the Web, a service she says her domains would provide. "I'm obsessed with this opportunity," she says, adding that several thousand potential buyers have expressed interest in her addresses.
Getting the rights to be a domain registry doesn't guarantee success. A small number of these new dot-anything names may catch on, but it could take years. Many dot-something businesses will likely go bust.
Even if they succeed in their quest to become registry holders, these entrepreneurs will likely need to spend hundreds of thousand of dollars annually on technical support and promotional efforts to generate revenue consistently.
"You're going to have to have a widespread marketing campaign to build up consumer recognition," says Christopher Glancy, an intellectual-property attorney in New York.
"It requires care and feeding," adds Jothan Frakes, a domain-name consultant in Seattle.
Tom Embrescia, the owner of the Cleveland business that oversees dot-jobs, a domain that Icann approved in late 2005 only for websites listing job openings, says he spends more than $1.5 million annually on marketing. It took about three years for his venture, Employ Media LLC, to become profitable, he adds.
But for the current crop of people hoping to become dot-anything entrepreneurs, there's an immediate concern. If more than one equally qualified applicant seeks the same domain name, an auction would likely ensue. And that could drive up the costs of getting started.
"It's possible to have no competitors, but we could have five," says Jean Guillon of Paris, who along with several partners is seeking the rights to dot-wine, a registry aimed at wine bloggers, retailers and others.
Enrico Schaefer, a Traverse City, Mich., attorney specializing in Internet law, is excited about his right-of-the-dot idea. But he's so worried about the possibility of a bidding war that, in an interview, he refused to divulge the name that he and his business partner intend to seek.
Mr. Schaefer thinks his undisclosed dot-something could become a leading rival to the ubiquitous dot-com registry. "Dot-com is not immune to real competition," he says. "This will be the very first opportunity for competition to come to dot-com in a real, meaningful way."
Large companies are likely to make up the bulk of applicants. But most of the big firms will probably go after brand names for which they already own trademarks and hold onto any registries they acquire.
Compared with the last broad, dot-anything application period in 2000, the application itself is now several hundred pages long and far more complex, according to Icann spokesman Andrew Robertson. It requires numerous additional details about applicants' finances and technical capability, as well as their plans to use the domains they're seeking the rights to, he says.
"You can't have a fly-by-night organization run out of a kitchen," says Kevin Wilson, who served as Icann's chief financial officer from 2007 to 2011 and is now co-founder of a South Pasadena, Calif., consulting practice.
Write to Sarah E. Needleman at sarah.needleman@wsj.com
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