Alexa Raad Talks: How New TLDs Can Better Engage Customers Published in DomainNews, on April 23, 2012

Domain News: It is getting close to the time when all proposals for new TLDs will have to be submitted, so what is your prediction for the number of TLD applications? What proportion do you think will come from business? And has the number of registrations in the TAS surprised you?

Alexa Raad: Given the number of applicants ICANN has announced, I suspect there will be in the neighborhood of 1,000 TLDs applied for, with a large number coming from brands.

DN: For the clients you are dealing with, what trends are you seeing - what types of applicants, and what are their intentions for the use of their TLDs?

AR: I’m unable to discuss specific clients until after all the names are revealed. However, we’re seeing localities, generic names, brands and non-profit organizations seeking TLDs. I believe you’re going to see applications that describe using the TLD as a platform to build stronger relationships (ex: among the members/customers/subscribers) and industry verticals. The domain name industry is changing with the entrance of new players with new ideas and uses. The number of domains one sells is not going to be the sole driver of success of new TLDs.

DN: Do you think awareness of new TLDs among business has been adequate? And does it vary in different regions?

AR: The industry has not done an adequate job of raising awareness or describing uses for new TLDs. Part of that is because the controversy sparked by advertisers took up the majority of media attention. Controversies make for interesting stories. But in fairness to journalists, TLD benefits and uses are hard to explain unless you have a good grasp of the technical and policy aspects of the DNS and the industry. When so many mistake domain names with TLDs, the learning curve is steep.

DN: Have you seen any interesting ideas you are able to speak about for new gTLDs rather than just using the TLD as an alternative or instead of current domain names?

AR: There are plenty. Many new brands and businesses that are applying can and will add their own unique services to offer the potential registrants.

A registry sets the rules of engagement as well as the level of security. Those TLDs might also restrict who gets a domain name and improve the verification process for registrants. A .ebay or a .paypal can offer greater security for their subscribers as well as their customers. They can also provide retention and loyalty benefits. A .mac TLD could knot together the existing but dispersed online community of users, developers, enthusiasts, and not only derive better product intelligence but also offer benefits such as VIP access for new introductions.

DN: When looking at new TLDs, how do you think business models will need to vary from existing TLDs for them to be successful, as it is likely that, not including brands, many of them will have quite small registration numbers? Also, obviously different registry models will have differing costs, but what numbers do you expect will be needed for TLDs to break even as a general rule?

AR: (See answers above for new business models.) New TLDs will not be judged on the volume of domain names sold in many instances. They will be part of a marketing effort to build a stronger relationship with customers, community members, distributors, affiliates, suppliers and organizational members. It is the value of that relationship that would determine the success of a new TLD.

DN: Again, not including brand TLDs, apart from registration numbers and profitability, do you think there are other ways the TLD can be considered a success?

AR: There are at least three other metrics: greater control of the customer relationship, reduction of online fraud, and better intelligence.

Right now, companies are ceding control of the customer to a variety social media outlets and sites such as Facebook. And the evidence is scant that “like” translates into sales. There is a much greater opportunity to bond a brand and a customer, a member and an association, an interest group and a cause or vertical, if you can engage them on your own terms.

For businesses and brands concerned with online security and fraud, a TLD can offer them better intelligence but also much tighter security controls and mitigation than they have now.

Lastly, as a website or group of websites, you only have a limited amount of information. To use the apartment analogy, a secondary domain name is an apartment in someone else’s building. You can only know who comes to your door. If you owned the building, you would know all the traffic between the tenants as well as the traffic on the perimeter. So if having better intelligence about the flow of traffic and resolution is key, then a TLD can be much more valuable than a domain name.

DN: Do you think business and other potential applicant areas have an understanding of TLDs and how they can be used?

AR: Many do not, but I suspect that once new TLDs are launched and some succeed and some fail, there will be valuable lessons for all. There already has been and will likely be a greater call to open up the application process again sooner rather than later. But that said, we have advised several clients not to apply because there was not a strategic imperative. A vanity name, or a “good” name, is not a compelling reason to run a TLD. There needs to be a solid business case.

DN: How has Architelos been positioned? What makes it different?

AR: We are a team that has actually done what our clients plan to do, namely launch a TLD and build or manage a registry. So more so that anyone else, we have lived the marketing, technical, operational and policy implications. We harnessed that knowledge into advising our clients and now into building software applications that we call TLD Managed Services.

We were the first to announce and develop TLD managed services that enable companies to focus on their core business and not on the technical aspects of running a registry. Our SaaS-based software allows clients to set up their registries from day one, at a lower cost, minimal learning curve and no delay. We will help them run the registry as well if they should so choose.

Last, but no less important, we have no conflict of interest and believe in an open source ethos. Therefore, from the start we have been entirely independent and self-funded. We have no exclusive arrangements with anyone, nor do we have any investors from inside or outside the industry. We did not apply for TLDs, nor are we vested in any companies that have applied. We do not partner with companies in any way that restricts our ability to provide solid, unbiased counsel or to choose the best of breed technology.

DN: Do you have any views on allowing registries becoming registrars? And the policy development process for the Applicant Guidebook in general? Do you think ICANN’s consultation process was adequately consultative?

AR: Many restricted or closed brands will also act as their own registrars, by choice or necessity. Right now, registries are reliant on registrars and the marketing is basically promotional. And with so many new TLDs being launched it is unlikely they will get any more — and probably a lot less — attention from registrars.

The new gTLD program took six years to complete. Participation was open and the comments, position and research papers and blogs all transparent. Those who chose not to participate in this multi-stakeholder model did not have the right to change the outcome at the last minute to suit their point of view. I hope they will choose to participate from the start at the next go round.

DN: It has been said by some registrars that it will be difficult to get them to give new TLDs shelf space given their limited resources. Do you see this as a problem? If so, how do you see new TLD operators can breach this problem?

AR: That is true of the current model. However registries can become their own registrars. Also do not forget that the introduction of new types of gTLDs with new business models will also encourage new registrars to form. For example, .law might become available through new registrars who offer .law bundled with a variety of other services targeted to the legal community.

DN: Architelos has been around for over a year now. Has the company met or exceeded its goals for its first year? And if so, what do you attribute the success too?

AR: Our revenues for the first year were in excess of $1 million. And our 2012 first quarter revenues put us on track to double that this year. I think our success has been due to three factors: a terrific team, a nimble and low cost model, and our open source ethos. Our team consists of experts with hand-on experience and a proven track record in building, launching and managing registries. Norbert Grey has solid high-level financial and operational experience and was the architect of the Business Case Builder application. Michael Young, our CTO, has built registry back-end systems and has several patents under his belt. He has a keen sense of the market needs for technical products and services that solve the problems new TLDs will face. John Matson has more than 20 years of management consulting experience developing new business models. And I am the one in the industry so far who has successfully launched a TLD in the last round and managed a large registry.

You won’t often find the best people within 20 miles of one another, so not surprisingly our team is dispersed. We have built an efficient virtual architecture that also reduces our cost structure.

Lastly, our independence has meant we’ve earned each and every client not by referral but by reputation and client satisfaction. That is a harder but more financially and personally rewarding.

DN: And what about the future?

AR: There will be a shift in the balance of power with the entrance of brand new registries (incl. vertically integrated ones) and those who use their marketing dollars to entice the potential registrant, instead of the registrar. This is pull marketing versus the traditional way it has been done in our industry, which has been a “push” marketing effort through the registrars.

You will also see new registrars emerge who are set up to serve specific vertical markets, as opposed to the current set of registrars that are either retail or reseller-oriented or focus broad swaths of consumers, SMEs or brands.

For those registries that can cleverly use “pull” marketing, you will also see the balance of power shift from total reliance on registrars for marketing and branding toward the registries. This way they can regain control of the marketing messages, use the registrar channel to satisfy customer demand, and not be reliant on them to create the customer demand. This is one of the key features of our Velocity service.