The NameSentry Report: Benchmarking Abuse Levels in the Domain Name IndustryPublished in CircleID, July 30, 2013 by CEO of Architelos Alexa Raad

On July 10th Architelos released the first NameSentry Report, benchmarking abuse levels in the domain name industry. For some time now, a debate has raged about the potential impact of new gTLDs on Internet safety and security, namely abusive registrations such as phishing, spam, malware, and so on. However, without benchmarking the current state, how can we realistically evaluate if new gTLDs have made any measureable difference in the level of abuse?

The goal of the report was to establish a way to measure the level of abuse in the domain name space as a whole and across the top TLDs, in order to bring some transparency and encourage discussion and debate on what factors if any result in a safer namespace. The report is self-explanatory and can be downloaded from our site. The goal of this blog is not to reiterate the report findings, but to provide additional detail to the methodology we employed.

Before we get to the methodology, its important to note:

1. The NameSentry Report is the result of analysis of existing data from respected sources. The data comes from sources such as SURBL, Spamhaus, Internet Identity, ZeusTracker, Spyeye Tracker, Malware URL, and Malware Domain List. All of these data feeds/sources are widely available, and are trusted to measure and block abuse in thousands of enterprises worldwide.
2. Our analysis measures how many of a TLD’s domains are being blocklisted as dangerous. This is an important and objective measure of trust and verifiable problems. It’s also reflective of an important but unfortunate truth, which is that by the time a domain gets blocklisted, usually some harm has already taken place. How well or how fast those problems are mitigated is a separate (and interesting) matter, but one that requires hard-to-come-by additional data and we did not attempt to tackle it in this first report.
3. “Abuse” in the context of the report is defined as phishing, malware, and domains advertised in spam.
4. The data overwhelmingly contains domains registered with bad intent. A small percentage were registered to innocent registrants who had their servers hacked into. Often the same domain is listed by multiple sources, and/or is associated with multiple types of abuse. To avoid duplication, we simply counted the number of unique domains listed as abusive, be they 2nd level or delegated 3rd level registrations, that were flagged for at least one type of abuse by at least one source.

Principles and Goals

The first step was to establish some principles and goals from which we could then derive a methodology for analysis. Some of our key principles and goals were:

1. Fairness: Since the data was already available and created by leading authorities (see point #1 above), the key here is not the newness or availability of the data, but rather the fairness of the analysis. Therefore, all TLDs should be subject to the same measurement in evaluating the quality of their namespace vis-à-vis abuse.
2. Clarity: see points 3 and 4 above
3. Transparency: The report was published and available to all TLD registries on the same date. There were no previews of the analysis or report content with any TLD registries. This ensured that no one had any advantage or disadvantage, regardless of their rating. Everyone received the same information once the report was published.
4. Precedent: This kind of rating has long been used to measure abuse levels in ASNs, ISPs, and networks. It’s been used to measure the prevalence of phishing in TLDs too. Our report is a basic benchmarking along those established lines.
5. Timeliness and Specificity: The report’s analysis is based on data from January 1 to May 31 2013. This span of time is recent enough to be relevant and long enough to support analysis of trends.
6. Comprehensiveness: In order to apply a measure to the quality of the Internet namespace as a whole, we needed to account for over 99% of Internet domains. There are 257 million domains registered in over 300 TLDs, and we wanted to include all TLDs with over 100,000 Domains Under Management (DUM). This means our report had to focus on the largest 72 TLDs, which together account for 99% of the world’s domains.

Methodology

The TLDs that comprise the Internet namespace vary widely in size. One challenge was to find the means to measure and compare TLDs with multi million domains under management with much smaller TLDs. Using actual TLD size and measuring abuse in absolute numbers would only provide part of the information, but would miss the larger picture. We settled on the choice of a logarithmic sale. A logarithmic scale can be helpful when the data covers a large range of values. Plus, the use of the logarithms of the values rather than the actual values reduces a wide range to a more manageable size. As a result, abuse was measured as “abuse-per-million” or specifically the number of unique 2nd level or 3rd level domains that were flagged for at least one type of abuse per million domains under management. This is similar to “part-per-million” which is one the most commonly used terms to describe very small amounts of contaminants in our environment. “Abuse-per-million” and “part-per-million” are measures of concentration, the amount of one material in a larger amount of another material. Using the logarithmic scale also allowed us to apply the same scale of measurement to each and every TLD, and indeed across the Internet namespace.

If the Internet has indeed become a utility that we rely on, then what measurements were already in use for other utilities such as air and water? Air Quality Index and Water Quality Index were easily communicable measurements that have been successfully used to evaluate relative safety and quality based on contaminants or pollutants on a parts per million basis. Assuming abusive domains are similar to pollutants in any given namespace, then a similar quality index could be used. We established the term “Namespace Quality Index” (NQI) since the same method of analysis and measurement could be applied to any given namespace: the Internet as a whole, any gTLD or ccTLD, any portfolio of domain names registered by a registrar, etc.

What’s Next

We are pleased that the NameSentry Report has not only provided a means of measuring and evaluating any changes to the Internet namespace going forward (i.e. new gTLDs) but that it has also generated debate and discussion about what factors or combination of factors would lead to a high quality or “Green” NQI. We believe that there is no one lever (such as price, restrictive registration policies, or aggressive takedown policies) that achieves this result, but rather a careful calibration of multiple levers. The next NameSentry report will focus on drawing correlations between the various levers and outcomes to identify potential best practices that can be successfully employed by existing and new gTLDs. In the meantime we are focused on enhancing our analysis to better serve the community and therefore very interested in constructive feedback and critique. Please contact us at [email protected] or send us your questions via our “contact us” page

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Standing Up for a Safe InternetPublished in CircleID, July 7, 2013 by CTO of Architelos Michael Young

Back when I started working in this industry in 2001, ICANN was small, the industry was tight, and things moved slowly as interest groups negotiated a balance amongst the impacts of change. Change often meant added overhead and, at the very least, a one-time cost effort to implement on the commercial side. Registries and registrars preferred to be hands-off when it came to how their domains were being used. But e-crime became big business during the 2000s. We all became aware of the dangers posed by malware, phishing, scams, and of the billions of spam e-mails spewed by criminal-controlled botnets. The costs of the criminal use of the DNS began hitting everyone — Internet users, big and small businesses, and governments too.

Answering GAC requests, the ICANN Board has now inserted two significant new contractual requirements about domains abuse into the nTLD Registry Agreement. The first is pretty non-controversial, and most TLD applicants had already pledged to do it:

“Registry Operator will include a provision in its Registry-Registrar Agreement that requires Registrars to include in their Registration Agreements a provision prohibiting Registered Name Holders from distributing malware, abusively operating botnets, phishing, piracy, trademark or copyright infringement, fraudulent or deceptive practices, counterfeiting or otherwise engaging in activity contrary to applicable law, and providing (consistent with applicable law and any related procedures) consequences for such activities including suspension of the domain name.”

But the second new requirement is more substantial and difficult:

“Registry Operator will periodically conduct a technical analysis to assess whether domains in the TLD are being used to perpetrate security threats, such as pharming, phishing, malware, and botnets. Registry Operator will maintain statistical reports on the number of security threats identified and the actions taken as a result of the periodic security checks. Registry Operator will maintain these reports for the term of the Agreement unless a shorter period is required by law or approved by ICANN, and will provide them to ICANN upon request.”

ICANN calls this a “public interest commitment,” and the Board committee must have seen it as an affirmation that all parties have a role in keeping the Internet a safe place, and should manage the resources they control in a responsible way. (And who can disagree with that sentiment?) But it’s not an easy thing to implement. It takes specialized knowledge and data to understand when your domains are being used for no good, much less what to do about it.

If you are a current registry operator, it’s about understanding the extent of the problem you have, and if you are a new operator, it’s about understanding the extent of the problem you face. Then, most importantly, it’s about having tools in place to manage the abuse. Unchecked abuse can (and has) operationally impaired domain registries by steady reputational poisoning, and has hurt registrars through payment fraud and complaint-handling costs.

Finally, ICANN’s new analysis and reporting requirement will receive some refinement. There will be additional public discussion and policy-making to flesh it out. We at Architelos will be watching these developments closely. But it’s clear that registries will be required to know what’s going on in their zones, must be able to quantify and categorize it, and must be able to report what they did about it.

I’ve watched the domain space grow to almost ten times the size it was when I started in 2001. Growth of a successful medium is inevitable, but continued success depends on maintaining the value proposition — in this case, keeping the domain space safe for everyone’s use. It’s time to fight for what’s valuable to us.

I think Bob Dylan put it well when he said:

Come gather ’round people Wherever you roam And admit that the waters Around you have grown And accept it that soon You’ll be drenched to the bone If your time to you Is worth savin’ Then you better start swimmin’ Or you’ll sink like a stone For the times they are a-changin’.

By Michael Young, Chief Technology Officer at Architelos. He built the first modern EPP Top Level Domain registry in 2001 (.info) and subsequently built and operated the backend systems for numerous gTLDs, ccTLDs, IDN enabled registries and sponsored TLDs such as .org, .mobi, .in, .me and others. Architelos provides new gTLD application guidance and registry management services for clients in the DNS and IP industry. Mr. Young can be reached directly at [email protected].

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Architelos and Kurt Pritz join forces to serve TLD Market

Architelos Inc. and Kurt Pritz are pleased to announce a collaboration to provide advisory services to the new gTLDs applicants and registries.   Together, we share the same goal and approach, namely to understand our clients’ strategic objectives and translate them into the successful pursuit and operation of a top-level domain name registry.

While Architelos and Kurt will remain separate and independent, the collaboration will bring an unmatched depth of experience and breadth of services to new gTLD applicants, TLD registries and other DNS industry participants.  The impending expansion in the number of gTLDs will provide an opportunity for innovation and competition in the domain name and Internet identity space.   For many applicants and existing players, a key requirement for long-term success is securing trusted, independent guidance and services in the critical early stages of a rapidly changing and increasingly competitive industry.

Within the ICANN community, Kurt is best known for his long tenure at ICANN, most recently as Chief Strategy Officer, and also as the key executive responsible for the planning, development and launch of the new gTLD program.  Prior to ICANN, he led innovation efforts at Walt Disney Imagineering, implemented new aerospace technologies, and launched start-up operations.  Kurt holds as BS and MS in Physics, an MBA and a JD and is admitted to the California State Bar.  Please see his full bio.

Architelos was founded by DNS industry executives with over 30 years of experience, and a track record in building, launching and managing multi-million name gTLDs.  Architelos helps companies develop new TLD strategies, launch their top-level domain, and then manage the major functional areas of the registry such as abuse mitigation, finance and compliance systems.   Architelos has already launched NameSentry™, an abuse detection and mitigation service, and is preparing to launch other new products, including registry-tailored finance systems, as well as services for other key functional areas needed for launch.

Together, Kurt and the team at Architelos have a breadth and depth of domain name industry experience unmatched by any other service provider.   The team will initially focus on providing new gTLD applicants support to successfully pass ICANN’s evaluation processes, including: answers to Clarifying Questions, managing GAC advice, responding to objections, and navigating contentions.  The collaboration will leverage the Architelos executives’ registry and operations experience, to assist applicants with contract negotiations, launch planning, and front-office systems selection and integration.

To learn more about our services or schedule a consultation, please contact us at [email protected] or please submit your inquiry online.

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Survey of new gTLD applicants’ launch preparation

Fifty percent of new gTLD applicants surveyed are currently not doing anything to plan for launch, despite indicating that launch planning and a “go-to-market” strategy are very important.   On Feb 13th, we launched a market readiness survey to new gTLD applicants through direct email and via domainincite . The survey remained open for a week and received a total of 65 responses with 46 completed surveys or a 70% completion rate.

Key Findings

Concerns about being in contention and winning the strings are paramount in the minds of new gTLD applicants for 2013.  Of the new gtLD applicants who responded:

• 40% or about 17 applicants are not in a contention set.
• 50% said they are not planning for the launch of their new gTLD strings now
• 60% expected to focus resources equally on launch and winning their string in contention in 2013.

With regards to the launch:

• “Very Important” Tasks
  • Developing a realistic launch plan -35% resource allocation
  • Developing a “go-to-market” launch strategy – 40% resource allocation
  • “Important” Tasks
    • Hiring staff
    • Setting up operations

Hiring staff and Setting up Operations are deemed as important, but less than Launch Planning & Go-To-Market Strategy.  This is likely due to the uncertainty surrounding the ICANN timeline and the possibility that events and dates may slip.

From the survey results it is clear that the immediate next steps are first and foremost in the new gTLD applicants minds, and much of that is the uncertainty around the ICANN timeline.  The flip side of this is that if timeline progresses as planned or even faster, then many will be caught facing a very steep timeline to operationalize their registry.

About the survey

The survey was distributed via two methods: email and web. The survey was emailed to 260 unique new gTLD applicants. The email list was edited to ensure the survey was emailed to applicants and not 3rd parties who were listed on the application, but otherwise not affiliated with the applicant. For example, many legal firms and consultants were listed on the application, but are not otherwise associated with the legal entity who has applied for the new gTLD. This method yielded 27 responses or slightly over 10% of the list. The second method was via a web-link, which was distributed via domainincite and also tweeted by Architelos and domainincite. 38 additional responses were received from this method. In both cases the individual responses were kept confidential, and so was the identity of the respondent.

Almost all the survey questions were mandatory. The survey also included built-in skip logic functions to drive respondents to the next logical set of questions based on the previous response. For example, if a respondent indicated that “brand gTLDs” best described their new gTLD, then the next question presented was the “Which of the following best describes the primary model for your gTLD (s): “Open”, “Restricted” or “Closed”?. Therefore the “skipped question” number ddoes not mean the respondent did not answer the question, rather it means that the logical sequence of the question forced them to skip this question based on their response to previous one.

The survey was designed to ensure only new gTLD applicants were targeted, therefore if the respondent did not identify him/herself as a new gTLD applicant, they were asked what best described their role (consultant, back-end registry operator, legal counsel or other) after which the survey was concluded. The survey also guarded against any potential manipulation of the responses by allowing only one response per respondent. A limit of one response per computer was set on the web-link URL as a result.

Survey Results

The summary findings are listed below.

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Are .Brand Applications Being Scared off by Financial CQ’s?Published in CircleID, February 28, 2013 by CFO of Architelos Norbert Grey

There has been an upsurge in brands withdrawing their applications. The timing undoubtedly is due to the deadline of 70% refund of the $185k application fee. But why are so many of the withdrawals .brand/closed generics?

Having been involved in drafting of financial projections for over 50 applications and having answered a number of financial Clarification Questions, I believe that the major reason why there is an acceleration in .brands, especially closed ones, is that they are receiving a large number of financial Clarifying Questions (CQs) and are deciding to cut their losses. In my opinion there are two main reasons for these types of gTLDs receiving an inordinate proportion of financial CQs.

In general, .brand applications were defensive in nature, hastily prepared and involved a lot more “cut and paste” in answering the questions of the application.

Many of the financial Clarification Questions received by brands seem to be geared towards open rather than closed systems. The applicants did not effectively consider how to write their answers to comply with the ICANN evaluation criteria.

It is very likely that .brand/closed generics are receiving a relative large amount of financial CQs and are deciding to opt out because:

• They may be defensive registrations from the legal department with little or no business/financial or marketing participation
• They have failed to identify a real and tangible business value
• Risk they were mitigating against, just was not worth the trouble
• They cannot figure out sufficient answers to CQs or do not have the confidence that they can put forward a reasonable business use case to answer the financial CQ.

The number of applicant withdraws reached 22 during the week and I think it’s a shame to see such global brands depart the gTLD round, especially if the reason is due to the difficulty of answering CQs. ICANN was always clear, either answer the questions per the AGB criteria in your initial application, or you will get clarifying questions. Pay me now, or pay me later.

One concern is that for several brand applicants, the awareness of the new gTLD application never got out of the legal/trademark protection department. If the legal departments are making the call to abandon without fully exploring the future opportunities with the marketing department, they have done their brands a disservice. The .brand applications can provide clear financial answers that meet guidebook criteria. It will require additional speculative investment to secure undeveloped internet real estate, as well as urgent engagement with the marketing and branding functions to fully realize the risks and or potential benefits of your own TLD.

I hope that other brand applicants fully consider the long-game before pushing the trigger on a hasty “withdraw” button.

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Architelos Marks Successful Second Year, Adds Software ServicesPublished in Business Wire

Company Hits $2 Million in Sales, Launches NameSentry™ and Expands Internationally

LEESBURG, Va., January 14, 2013—Architelos, Inc. celebrates its second year of business, with a number of notable accomplishments under its belt.  The company had a profitable year in 2012, earning over $1.7 million in revenue and booking sales of over $2 million dollars in consulting and software service fees. Architelos also expanded its footprint internationally by opening up a Canadian office in Toronto, which houses its software development efforts.

In August of 2012, Architelos launched the patent-pending NameSentry domain abuse detection and mitigation service.  Within two months, deals were inked with major portfolio companies Donuts and TLDH whose TLDs represent 22% of the new gTLD applications.

In its first year of operations Architelos’ revenue exceeded $1 million.  Results for year two represent a 70% increase in revenues and a 100% increase in sales.  “Our financial performance and revenue growth is significant, given the fact that the company is self-funded, carries no debt, and was still able to make substantial investments in software development,” said CEO, Alexa Raad.  The company ended the year on a high note with Success Magazine recognizing the company in its December 2012 issue.

 Expanded International Presence

Architelos has clients in 10 countries ranging from Europe to Australia and China to the US and Canada.  The company added 15 new clients in 2012, including current gTLDs and ccTLDs, as well as new gTLD applicants.  2012 milestones for the company included the establishment of the Canadian branch office in Toronto, to house all software development efforts, and the set-up of two data centers in Los Angeles and Toronto to support its SaaS-based product suite called TLD Managed Services (TMS).

Successful launch of Registry-Specific SaaS-based Services.

Anticipating industry need for greater domain name abuse protection and reputation management, Architelos introduced NameSentry in August of 2012.  NameSentry is designed to allow registries to comply with the Internet Corporation for Assigned Names and Numbers (ICANN) requirement for new gTLDs to mitigate domain abuse, and will work with any back-end registry system.   It is the first product in TLD Managed Services (TMS) suite of services to be released.   Architelos is currently developing its second TMS product, which is a solution for

the complex requirements of new gTLD finance systems.  TMS distills the 30 years experience of the Architelos leadership in building, launching and managing TLDs. With TMS, registries can outsource the management of the critical business and front-office functions thus reduce the costs of procuring, customizing and integrating software.

About Architelos, Inc.

Architelos, Inc. provides strategic consulting and managed services for clients in the Domain Name System (DNS).  The Architelos team of executives is unique in having over 30 years of experience, and a track record in building, launching and managing multi-million name gTLDs.  Clients include new as well as existing generic Top Level Domain (gTLD) and Country Code (ccTLD) registries.   Architelos has locations in Leesburg (VA), Los Angeles, (CA), Toronto (Canada) and Dublin (Ireland), and data centers in Toronto and LA.  For more info follow Architelos on Twitter and Facebook.

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How To: Launch a Startup with No DebtPublished in Business Wire

Savvy strategies can keep a young business lean and profitable

Alexa Raad, co-founder

Company: Architelos, marketing and software consultancy, with headquarters in Leesburg, Va.
Startup philosophy: Keep overhead low, hire the best people and don’t spend more than you earn.
Launched: 2011
Proof it worked: Grossed more than $1 million its first year and an additional $1 million in the first six months of 2012 with zero debt

Before this, I was the CEO of .ORG [Internet registry for public-interest groups], where I’d nurtured a lot of great contacts. I knew I wanted to build a company with people whom I liked working with and our clients would like working with. Not just people who were excellent at what they did, but people I’d want to have over for dinner on a Sunday night and to build a future with. To get the best people, you have to look beyond a 20-mile radius of your office. You have to look globally. Today we have partners all over the world: Ireland, California, Toronto and Washington, D.C.

Thankfully, the global economy makes this arrangement possible—and affordable. Each partner has an equity stake in the business, which eliminates the need for salaries and benefits. We all eat what we kill. This model is also very profitable. Since each partner has an excellent track record and reputation, we spend little on marketing.

Our overhead is low: No office space or salaries are required at this point, and we rely on free web-based services such as Skype, Google Docs and Dropbox. Just five years ago this wouldn’t have been possible because the infrastructure wasn’t there. Our only startup expenses were legal fees to incorporate, a website and logo—all very affordable. Our biggest expense is travel to all of our clients.

Our strategy has been to focus first on consulting contracts, and then we will build on software projects. The latter requires some overhead for engineers and product development, while consulting does not have that overhead. In our first six months, we landed $1 million in contracts. That gave us funds to really get started, and now we’re on our way.

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A Navigation Aid or a Brand TLD? (Part 2 of 2)Published in CircleID, November 21, 2012 by CEO of Architelos Alexa Raad

So what are the characteristics of a “Brand TLD”?

Please note that by “Brand TLD”, I do not mean gTLDs applied for by brands. I mean TLDs whose registrants tend to use them as their primary site and identity. They have either created themselves as, or have become a brand in the eyes of their registrants. These TLDs tend to be in the minority.

Not only do these TLDs have second level domains that are used as the registrant’s main site, but they also have domains that have been renewed by the same registrant at least three or more times consecutively. More of their domains have associated MX records than Navigational Aid TLDs.

This of course means that many of their registrants are using an email address associated with their domain names; these email addresses are printed on the business cards, and published on ads and websites. As a result, the renewal rates tend to be high, stable and less prone to fluctuations.

Brand TLDs also tend to be the first choice of new registrants; they place a higher value on domain names in a Brand TLD than the same name in a Navigational Aid TLD. As a result, the demand for domain names in Brand TLDs is highly price inelastic. Increases in price will not see a corresponding drop in sales.

When and if the registrant is forced to prioritize, he will drop other domain names in his portfolio, before he even considers dropping his primary one. The pain to change the email address and primary website, is too high of a price to pay.

On the registrar side, the situation is very different. The registrars treat the Brand TLDs as the “must have” set of TLDs on offer, because if they do not, their customers will go elsewhere.

The registries operating Brand TLDs either employ “pull” marketing, and market directly to the target registrants. The channel then simply reacts to the market demand by offering the TLD. These registries treat the registrant as the ultimate customer, and the focus of the marketing efforts; they treat the registrar channel, as a channel, but not the ultimate customer. The registrars in turn, do not face the added cost and burden of actively marketing to the target registrants; the demand is present.

If the Brand TLD provides price discounts, they may find upon closer examination that many of registrars pass none or part of the discount to the registrant as a means to bolster their margin. The retail price is then relatively stable.

These registries may also find that dedicated sales resources for the registrar channel are in fact low ROI investments. Their dollars are better spent on marketing directly to the target registrants or on better customer/tech support. Why? The channel is already incented to sell the domains in the Brand TLD.

Brand TLDs may or may not have a few registrars who sell the bulk of their domains, but they can be assured that these registrars can ill afford to drop their TLD as one of their main offerings. As a result, the Brand TLD’s revenue stream is less volatile and far more predictable.

So which TLDs exhibit more of characteristics of a brand TLD? A good barometer is to look at the secondary market: given the same name in two separate TLDs, which one will fetch a higher price? Which TLD has consistently fetched a higher price than others?

.Com is arguably a Brand TLD. Netsol and then Verisign did not create the “dotcom” brand, certainly not in the early days. But the first mover advantage and lack of choice, created the brand for them, so much so in fact that it became part of our jargon. Remember “dotcom” boom and then the “dotcom” bust?

Many TLDs have been launched on the hopes of displacing .com, but have not succeeded in switching their registrants. The barrier to switch is simply too high for those registrants whose primary site is .com and who use a .com address for their email. Many ccTLDs have successfully established themselves as a Brand TLD within their market. A simple test is to look at the top trafficked websites within that country and estimate what percentage use the ccTLD as their primary address.

However, the majority of the existing gTLDs today are replete with domain names that are simply pointers to other sites. They face the most risk in the next few years.

We expect as many as 1000 gTLDs to enter the market. The balance of power between the registries and registrars will shift. You will see new registrars emerge who will focus on a niche vertical or community, and offer specific services to meet the needs of that market. We call them Vertical Registrars. They are most likely to adopt the Brand gTLDs that best appeals to their core market.

Today, the biggest registrars like GoDadddy have a “Wal-Mart” approach, serving a wide variety of registrants from individuals to businesses, but no specialized services for a given industry vertical. With new gTLDs you will see that change.

There will be highly profitable Vertical Registrars, who intimately know the niche market they are serving. Of the 1000 expected new gTLDs, many will also have a new and inventive value proposition coupled with a very defined addressable market, and the means to reach them. Many of the previously gTLD launched did not have any of these and hence became Navigational Aid TLDs.

The influx of so much supply and choice in a previously restricted market will create competition, and render domain names a commodity, if they are not already one.

So, why wouldn’t all TLDs eventually have the characteristics of a Navigational Aid TLD, if domain names are or become a commodity? If you stood in line or pre-ordered the latest iPhone, you will understand. There is no lack of new smartphones with similar features, some with far lower price tags. Yet Apple is a brand, and its customers demand the iPhone and are willing to pay the premium price.

The new gTLDs most primed for success are the ones who will build a brand with their target market, and treat them as the ultimate customer. The existing gTLDs are best advised to determine if they exhibit the characteristics of a Navigational Aid TLD, and if so either make major changes in their approach while there is still time, or face an uncertain revenue stream in the future.

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A Navigation Aid or a Brand TLD? (Part 1 of 2)Published in CircleID, November 16, 2012 by CEO of Architelos Alexa Raad

Every TLD has domain name registrants who use their domain name either as their primary site, the basis of their online identity, or as a navigational aid to direct traffic to other sites. The dominant purpose determines the long-term financial wellbeing of the registry.

The choice to use a domain as a simple pointer to another site versus creating a branded identity online does not just happen. It is almost always the direct result of the registry’s own efforts and focus. How does the registry define their customer? What is their value proposition and who is expected to deliver it? How do they treat their channels? How do they allocate resources? All of these determine whether the TLD exhibits more of the characteristics of what I’ll call a Navigational Aid TLD versus a Brand TLD.

For existing TLDs facing a changing market, understanding which way they lean will enable them to more accurately forecast revenues and assess risk. For new gTLDs, self-awareness of this distinction is even more important to making the right business decisions from the beginning.

First lets review the primary characteristics of a Navigational Aid TLD — those TLDs whose second-level domains are primarily used as pointers to other sites. These domains are often registered defensively, and/or used as a means to capture and redirect traffic to the main site. Typically these domains do not have MX records associated with them because they are not used for email.

An analysis of the namespace reveals that there are many domain names with parked pages, or very thin content. As a result, registrant demand is highly price elastic. In other words, registrants are more likely to purchase domains in this type of TLD if the price is deemed low enough; however, increase the price and you will see a corresponding drop-off of in demand and registrations.

A Navigational Aid TLD is rarely a registrant’s first choice simply because there is much utility beyond the defensive or the navigational aid aspect. To be expected, when the registrant is forced to prioritize in less forgiving economic times, these Navigational TLD registrations are dropped rather than renewed.

Registrars and “Push versus Pull Marketing”

On the registrar side, the situation is not much different. Registrars treat Navigational TLDs interchangeably and often position them as the alternative to the unavailable name in the desired TLD, or as a cheap and impulsive add-on at the tail end of the purchase process. The registrars’ loyalty to the TLD is low, since dropping it from their shelf space has little impact on their business.

As a result, the registries operating these types of TLDs are highly reliant on the registrar channel to “push” their product to the market. They treat the registrar channel as the customer, creating promotions, and assigning dedicated sales and account resources as enticements to sell. Their primary means of motivating registrars are price promotions, or discounts to be exact. As a result, the fees paid by registrants vary widely based on time or choice of registrar. The registrant is then trained to demand lower prices.

TLDs with more of a navigational bent often find that they are increasingly dependent on a few registrars for the bulk of their new creates and renewals. Should these main registrars focus their attention elsewhere, the Navigational TLD’s numbers tank.

In the meantime, neither these primary registrars nor the others feel any reason to carry the marketing or value proposition the registry may now produce. But really, why should they? They see it as an additional burden not warranted by the ROI.

You will often see wide swings in “new net adds”, and less dramatic, but nonetheless important, swings on renewal rates. Those TLDs facing their first ever renewals, will experience a sudden drop, and their rates in turn lower than industry average.

It is no wonder that these characteristics will sound familiar to more than a few TLD registries. To understand what this means to long-term revenues in this competitive and deregulating market, it is vital to make distinctions between the different types of TLDs.

In the next blog in the series, I will discuss the characteristics of the TLDs that have established themselves as the first choice of their target registrants.

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ICANN Clarifying Questions - Question 50 Focus (Part 3 of 3)Published in CircleID, November 14, 2012 by COO of Architelos John Matson

If the timeline for turn-around of clarifying questions (CQs) remains two-weeks, the long pole in your CQ tent is likely to be revising your Q50 letter of credit or escrow agreement to meet the ICANN requirements. Based upon ICANN comments, it appears that many applicants are having trouble meeting the specific letter of credit (LOC) or escrow agreement language. To remedy this ICANN should consider publishing what it considers acceptable language for an LOC or escrow agreement.

This would clarify what appears to be conflicting guidance that ICANN presented in the Guidebook and Supplemental Notes for Question 50. The Guidebook states that unconditional release of funds is required. However, in the Supplemental Notes for Q50 under paragraph 1.6, ICANN provided recommended wording for the beneficiary statement including: “in the event of a failure of a critical registry function as described in the foregoing sections of the Applicant Guidebook”.

We’ve seen clarifying questions during the pilot where applicants who used the exact wording recommended by ICANN in the Supplemental Notes were provided a Q50 clarifying question stating that their COI instrument did not meet the “unconditionally entitled to a release of funds” requirement.

We assume that all of the applicants have submitted their applications with the intent of trying to meet ICANN’s detailed Applicant Guidebook requirements. ICANN published Continuing Operations Instrument guidance that was specific.

The value of the COI is half the battle for the question 50 three points. Getting the LOC or escrow agreement correct is the other half.

Also read:
ICANN Clarifying Questions - How Are They Structured? (Part 1 of 3)
ICANN Clarifying Questions - How to Respond (Part 2 of 3)

ICANN, please consider publishing example acceptable LOC/escrow language so that applicants can confidently work with their banks or financial partners to meet the question 50 exacting language for scoring 3 pts. This would reduce the volume of unnecessary clarifying questions for 47, 48 and 49 during the heavy workload of initial evaluation.

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