For some time, the measure of success of a TLD was volume of registrations, or strictly speaking, Domains Under Management (DUMs). Who better than .com to validate the truth of that metric? More recently, this same metric has been applied to new gTLDs, especially those who achieve volume quickly, by whatever means necessary. These gTLDs are fawned over, written about, and effectively set up as the standard for other gTLDs to aspire to.

But I’d like to challenge that notion. The quick accumulation of Domains Under Management, is an outdated, if not outright incorrect, success metric. Here is why:

1. The registration volume metric worked where there were few suppliers (artificial restriction), steady and growing demand, and domains which were uniformly priced, with a decreasing and predictable cost due to economies of scale (hence predictable gross margin). In this case, registration volumes are a quick and dirty, yet reasonable way, to measure success.
2. In the world of new gTLDs, many of those assumptions no longer hold. There is and will be more and more supply. Demand is as of yet uncertain, and the price and cost varies widely across new gTLDs.

More importantly, it’s not volume that is important, it is your back-to-basic business fundamentals. For example, are you:

1. Generating a respectable and sustainable gross margin? After all, what good it is if you are generating volume at loss?
2. Building a repeatable base of business? Yes giving away domains helps bolster volume, but how many of those registrations will renew? How many of those will have good content (by good content I mean, content that is not a parked page or a redirect?) How many will have email addresses that are used. Think of email addresses that are consistently used by registrants of the new gTLD, as a free viral awareness campaign. The more that email address with the new TLD to the right if the dot is out there, the more free awareness the new gTLD gets.
3. Enabling a healthy ROI? After all, for many new entrants a new gTLD is a new business that represents a significant investment of resources, both upfront and on-going. Is the business set up to return a healthy return on investment (at least higher than ROIs for other alternatives?)
4. Attracting and maintaining the target registrants? Free domain registrations tend to result not only in a spike of registration volumes, but also in a jumble of registrations representing a mishmash of segments. Many of these registrants will not even recall they have a registration a year from now. When the time to renew approaches, the registrant will see no reason to now pay for something they have had for free and never used. Some of the registrants will be domainers whose interest in the new gTLD is monetization and not use. And sadly many registrations are likely to be by bad actors who see virgin territory and a low barrier to entry for abuses such as spam.

It is at best disorienting and at worst highly misleading, to focus on volume and the velocity of reaching over 50k shortly after launch, to separate successful from not so successful new gTLDs. This is akin to declaring the fastest sprinter as the winner of the marathon only 10 minutes into the race. It’s too early to declare any winners; it’s a marathon, not a sprint. And just because we are talking about new gTLDs, doesn’t mean we need to suspend longstanding business fundamentals.

If you can’t ask new gTLDs about their cost of sale, gross margin or ROI to evaluate their chance of success, at least ask them the following questions:

1. What are you doing to make people passionate about your new gTLDs? And I mean end-users and potential registrants.
2. What are you doing to ensure your gTLD is continually used? And by “used” I mean websites with relevant and compelling content, consistent and relevant traffic to said websites, and last but not least, email addresses which are set up and frequently used.
3. What are you doing to get the right users to register your gTLD?

If they do not have ready answers for the above, chances are they will not have the right success metrics in place anyway.

By Alexa Raad, CEO of Architelos. Architelos provides consulting and managed services for clients applying for new top-level domains, ranging from new TLD application support to launch and turnkey front-end management of a new TLD. She can be reached directly at [email protected].