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Major Bear Market Expected for Geo Domains

Located in General Domain Discussion, started by namemarket, Jun 26, 2011

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  1. namemarket

    namemarket Top Contributor VIP ★★★★★★★★★★

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    Starting next year unlimited numbers of new domain extensions are scheduled to be sold and some will be up and running by then. We always assumed major brands such as .sears .apple .microsoft .hp .godaddy .ibm and many others would want to own their own extension, not necessarily to sell domains but for their own product, use and branding.

    Now we am hearing many reports about large U.S. and international cities including the cities of .tokyo .sydney .newyork .sandiego .vegas and others planning to also buy their very domain extension. At an initial cost of $185k it may seem high to you or me but to a large corporation or big city it is not too significant a cost.

    Having heard about many major cities with plans to buy their own extensions it would seem logical the end-effect will be to greatly devalue the domainer or investor owned geo dot com’s, including mid-size city dot-coms.

    The smaller or mid-size cities may not want to invest now or be able to budget $185k but they will likely do so as the ICANN price drops (and I am sure the fee will decline rather quickly and dramatically within a few years).

    At that time I believe you will also see many mid-size cities such as Palm Springs, Burbank and Scottsdale for example, getting their own extensions. It’s also possible they may not wait for lower costs and instead apply soon, agreeing to pay the 185k ICANN fee.

    Think about this scenario; A visitor (or resident) in Scottsdale Arizona knows many cities now own their own domain so would he be more inclined to typein to a search box or the browser window “Scottsdale.com” or the word “Scottsdale” without an extension? In our opinion there is little doubt as time goes by the word Scottsdale will prevail as the most popular choice, relegating Scottsdale.com to 2nd tier status, which dot-com decline would be ongoing and the scottsdale.com down-trend be more pronounced as time goes by.

    In our opinion, this news marks the beginning of a very significant and long term bear market (a likely permanent major drop in geo domain values), impacting mid to large city Geo domains in particular. We would expect a number of them to go on the auction block soon before the Geo's decline more in value.
     
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  2. maxeaus

    maxeaus VIP Member VIP ★★★★★★★★★★

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    Thumbs up for your analysis IMO.
     
  3. glaxxon

    glaxxon VIP Member VIP ★★★★★★★★★★

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    Really great analysis. Was thinking of the same thing.
    But we must also consider that despite the fall of .com value, the demand will still be there to an extent. For example florists.nyc would be the premium name for a florist in NYC, but then only one business can have it. Thus there still will be a demand for geo domains, but only the prices will fall.
     
  4. DomainNamePort

    DomainNamePort New Member

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    I feel that everything will remain the same, if not increase the values of geo domains. I guess we will have to wait and see.
     
  5. FPForum

    FPForum Top Contributor VIP ★★★★★★★★★★

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    That's a pretty good analysis David, but I have to disagree a bit. I personally do not own any GEO domains but I still haven't come to grasp that all these cities are going to jump on this new thing ICANN introduced.

    I guess only time will tell. Personally, I think local business would still rather own .COM's considering it's the oldest extension, the most well known, and the easiest to remember. Just my opinoin though :)
     
  6. Kate

    Kate Domainosaurus Rex VIP ★★★★★★★★★★

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    And what do you put to the left of the dot ?

    Which one is better ?
    palmsprings.com
    city.palmsprings
    palmsprings.palmsprings
    ...

    of course the cities will finally own their own extension.
    So what ?
    And what about registration rules ? Geo TLDs might very well be closed TLDs that are not open to the average Joe, even if you happen to live there.

    Frankly, I am very skeptical in particular for large US cities because .us is underused.
    Why expect that vanity extensions will be heavily populated and developed. Looks like another waste of taxpayer money or a publicity stunt IMO.
     
  7. jmcc

    jmcc Top Contributor VIP ★★★★★★★★★★

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    While the analysis is certainly novel, this talk of "bear markets" is open to question because of the existence of city/state subdomains in .us. How will .nyc cope with newyork.us? What a lot of non-ccTLD domainers do not understand is that generics tend to work differently in ccTLDs.

    Regards...jmcc
     
  8. JMJ

    JMJ VIP Member VIP ★★★★★★★★★★

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    All these new extensions will do is make ICANN lots of dough and nothing more.. That is outside of all of the losses for whoever invests in one. .jobs a flop, .mobi a flop, .pro a flop, .travel a flop and .flop will be a flop..
     
  9. louddrums

    louddrums Established Member ★★★★★★★★★★

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    I was thinking the same thing SDsinc was thinking in terms which is better when he said-

    "Which one is better ?
    palmsprings.com
    city.palmsprings
    palmsprings.palmsprings"

    I never ever thought I would say this but if I pretended .com, .net and .org didnt exist and I had to pick a TLD extension that made the most sense if you wanted to type out the whole thing. It would be:

    PalmSprings.info (gasp)

    I only own maybe one domain of this particular extension so I'm definitely not biased toward it. I have almost all .com's and .org's.

    Crazy huh?

    What's crazier is it's $.49 (not $185,000) at Godaddy.com if you did an Add-on.
     
  10. johnny6

    johnny6 Senior Member VIP ★★★★★★★★★★

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    This is a whole lot of optimism with no empirical evidence behind it. Domains are already sinking (if not sunk)... why introduce more nonsense extensions into the mix?
    Except for... to... make... ICANN... money....
     
  11. bmugford

    bmugford www.DataCube.com PRO VIP ICA Member ★★★★★★★★★★

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    To start with the actual cost of running a registry is not $185K. That is only the application fee.

    Minds + Machines estimates the actual cost to start a registry at about $500K. Then you will have at minimum $200K - $300K/year operating cost.

    This is at minimum a $2.5M - $3M financial commitment over 10 years, and could go much higher.

    You have to pay ICANN $25K/year.
    Someone has to be paid to run the registry itself ($100K+/year)
    Even a small registry will need to have a least a couple employees.
    Then there are going to be added legal fees for everything from policy drafting, disputes, etc.

    The actual cost is far higher than people realize.

    I just don't see mid tier US cities like .Plano having their own extension.
    It is not financially feasible.

    I think if anything GEO domains in established extensions will go up, not down in value. When there is confusion in a market, people will stick with what is credible and known.

    Domains like DenverHomes.com, ChicagoDentist.com, NewYorkAttorney.com are not going down in value.

    Let's say an extension like .NYC exists. There will only be one Dentist.NYC, and it would be very costly.

    Outside that, why would an end user choose a brandable like JonesDentistry.NYC over .COM?
    I don't see it.

    Brad
     
    Last edited: Jun 27, 2011
  12. GeoOwners

    GeoOwners Established Member ★★★★★★★★★★

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    My city can't even keep the potholes filled so I wouldn't worry too much that very many cities will kick butt with their great network of sites.
     
  13. jmcc

    jmcc Top Contributor VIP ★★★★★★★★★★

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    But that won't stop salesmen trying to sell the idea to people in those areas.

    This is exactly what I've seen over the last five or so years as newer TLDs launched. The classic example is the .eu fiasco. It boosted most of the ccTLDs in the EU as people were so disgusted with the incompetence and bungling of Eurid and the clowns in the European Commission and the abject plunder of the ccTLD by non-EU operations that it became a joke. People in the EU started registering more ccTLD and .com domains. What a lot of people outside strong ccTLD countries fail to appreciate is that the ccTLD/com axis in many countries occupies upwards of 85% of that country's domain market. This is the hidden power of ccTLDs and many of the .com registrations in those countries will be brand protection registrations.

    Try looking at it from a business owner's point of view, Brad. They often trade locally and with their own business name. They would be more likely to register their business name as their domain and .nyc would signal to people that they are "local". This is the attraction of ccTLDs over global TLDs like .COM. The US is a curious case though because .COM has become the defacto US ccTLD. From the work I've done with ccTLDs, some of them are 15% or more unique - that means that the ccTLD domain has no equivalent in com/net/org/biz/info/mobi/asia TLDs. These registrations are often the small businesses rather than domainers or large brand protection operators. While the issue of geo domains is quite new to those outside the ccTLD markets, the dynamics are, to a large extent, identical to those that affect the ccTLDs.

    Regards...jmcc
     
    Last edited: Jun 27, 2011
  14. moerdo

    moerdo New Member

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    nice analysis :)
    however .com still has value compared to other TLD. it is because branding of .com have stuck on every body mindset. so, the value of .com domain will remain increasing compared to other TLD

    as for .net and .org, i predict the value will decrease along with the increasing of new TLD coming out.

    so, go for .com instead of other TLD :)

    just my $0,02

    thanks
     
  15. NLP

    NLP Top Contributor VIP ★★★★★★★★★★

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    Although small to midsize businesses would benefit the most from "local" extensions like .nyc or .palmsprings, I don't think they'd be able to afford it. Most end users won't take a risk on something that's not .com, so do you think they're really going to jump at this opportunity?

    Plus, although there are a lot of businesses that operate locally (realtors, restaurants, etc.), the really large companies are going to have branches throughout the country, and are going to want a national/global presence. Why would you want to LIMIT or diminish your reach?

    Personally, I think it's a bad sign overall. It could be the mushroom cloud signaling the end of a lot of things.
     
  16. louddrums

    louddrums Established Member ★★★★★★★★★★

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    You'll have to consider the dynamics of business owners becoming galvanized against using the new TLD's when they've discovered a competitor of theirs had already gotten the name they want in the new TLD. Let's say one business gets florist.nyc - Do you think the other several hundred florist is going to let that business have all the marbles?
     
  17. alien51

    alien51 Take Me To Your Leader VIP ★★★★★★★★★★

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    I don't know if i'm trapped in some kind of Groundhog Day. Today is still Sunday, isn't it? These new TLDs are driving my levels of paranoia. I'm about to lose it...
     
  18. DU

    DU Secret Santa VIP ★★★★★★★★★★

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    Its not about limiting reach, it's about maximizing your local reach.

    Very few companies operate in a truly global marketplace - even less if you remove those which are global but operate on a local franchise level.

    ---------- Post added at 01:20 AM ---------- Previous post was at 01:17 AM ----------

    The movie was 1.5 hrs. This could be 2 more years.

    Do a search on DotMusic here - that thread was last year and contains A LOT of valuable information from Constantine who is DotMusic.

    It's quite interesting reading. Don't recall if you were involved in that thread or not.

    Recommended reading for all though. I know SDSINC was in there.. and Jaco for those who remember him :)

    http://www.namepros.com/domain-name-discussion/648244-guy-behind-music-tld-says-why.html
     
  19. ecalc

    ecalc Top Contributor VIP ★★★★★★★★★★

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    Re: city owned registries ...

    DNJ public sales reports 2007-2011 show exactly zero American city domain names trading at or above $185k. Four international cities topped $185k: Melbourne, Perth, Rio and Jerusalem. Two are developed, two are parked, all appear to be in private hands. $185k+ city names are a thin private market. Governments spend little or no money buying domain names. They don't regard ugly URLs as a problem. Scottsdaleaz.gov works fine and is google numero uno. Dot city tlds are a $185k+++ solution looking for a problem. We're in year 5 of a grinding global recession. Imagine the city council fireworks when "hey let's start a domain registry" hits the table.
     
  20. Gregmde7

    Gregmde7 Established Member

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    I agree that this is a great analysis. But at the same time I hate it. There's goin to be so many domain extensions - I really don't like it. I'm wondering how it's going to effect the Seo game - there's going to e so many exact match domains. Hopefully com and org and net hold there authority...
     
  21. TheBaldOne

    TheBaldOne Top Contributor VIP Gold Account ★★★★★★★★★★

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    ecalc you make very good points in your post above.

    Has anyone actually mentioned or analysed .la and the impact that has had on the circa 3% of the US that the extension is marketed at?

    The biggest certainty of all is that 'local' search will increase (:tu:), this applies to national companies operating in local markets as much as it does to the local one-man business (:tu:), and the new extensions will not alter this fact. It is how these extensions, and more importantly how the sites on these new extensions, are developed.

    Bear market - No Way

    Bull Market - Already being formed

    One final thought at the moment is this. What about companies looking to expand outside their 'city' market? How would they attract new markets if they are confined to say San Francisco or Dallas or Chicago?
     
    Last edited: Jun 27, 2011
  22. dottelads.com

    dottelads.com Established Member ★★★★★★★★★★

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    couldn't have said it better - my thoughts exactly!
     
  23. DnEbook

    DnEbook DataGlasses.Com VIP ★★★★★★★★★★

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    i think the money spent promoting geo .coms will continue
     
  24. Debt.tv

    Debt.tv Top Contributor VIP ★★★★★★★★★★

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    We are getting too worried about these new tld's.....the only ones who will buy their extensions are big businesses and registrars (.me and godaddy). And trust me, the average internet users barely know what the words after the dot mean and they are not going to go to shop.amazon unless the .com forwards them there.
     
  25. enlytend

    enlytend Moderator, NamePros Moderator VIP Gold Account Trusted Blogger ★★★★★★★★★★

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    Interesting analysis, but I have to agree with a couple of points made by others:

    - Are going to be "open" extensions or reserved for city use?

    - Most towns/cities are looking everywhere to cut back on expenses - how would they possibly justify becoming a registrar?

    - Too limiting for business, too confusing for people. In the US, we already have .us and .gov being used for official sites.

    ecalc said it best:
    IMO, Geo domains have a lot more to "fear" from the rise of Local Search. For many queries with local "intent", Google Places/ Bing Local/Yahoo Local (the map, top listings from the map) pushes the organic listings down below the fold so that ranking in the top 5 organic because of a geo domain still doesn't do you a whole lot of good. Optimizing for local is the way to go, and you can do that VERY effectively without a geo domain. (Great for branding and relevance/click-through if you have one, but location kwd in domain is not a major ranking factor for Local).
     

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