Dot-com to .pizza: Welcome to the Web domain rush

The Internet's long-restricted virtual real estate market is open for business.

Hundreds of new so-called top-level domains (TLDs) like .photography, .expert and .pizza are available now that the Internet Corporation for Assigned Names and Numbers (ICANN), which oversees the domain name system, has expanded access to suffixes.

A handful of companies that prepared years ago to take advantage of this land grab are in a position to profit handsomely for years to come.

The new opening will also be a boost for brands looking to strengthen their online presence, but have been thwarted by domain-name squatters charging top dollar for the last remains of the dot-com universe.

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One business, the sports training group Fast Twitch, jumped on the trend early. The company's three elite training facilities in South Florida attract major league pitchers, pro boxers and all-star football players. But try finding the company online at fasttwitch.com and you'll land on a generic website telling you the domain is for sale.

The dot-com game is too pricy for Fast Twitch Chief Development Officer James Meder. As a small business operator on a tight budget, he refuses to plop down $20,000 for a domain.

Fortunately for Meder, the new level of TDL suffixes means he no longer has to. Early this year, for an annual fee of about $40, Meder launched his website using the brand new address fasttwitch.training.

"Being a training company, this is a catchy, quick way to brand ourselves," said Meder, whose Miami-based company operates in partnership with sports apparel and accessories provider Under Armour. "It's another piece of trying to do something unique."

Other currently live pages include beingamom.life, a website for mothers, and any.business, a small business content site. Donuts, a major buyer of new TLDs, calls it the "Not Com Revolution," because the past 30 years on the Web have been a dot-com circus.

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The original .com suffix, short for commercial, is the default method for establishing a corporate address, while .org has been the go-to extension for nonprofits and .edu for colleges and universities. According to Verisign, which manages .com websites, 115.6 million of the 288 million domains registered across the globe end in .com. (Tweet This)

"It's a very saturated name space," said Bhavin Turakhia, founder and CEO of Radix, the owner of rights to new suffixes including .website, .space and .site. "You really can't find any good, short, easy-to-remember names."

To get around the shortage, U.S. start-ups have turned to using country codes like .ly (Libya), .me (Montenegro) and .tv (Tuvalu) in building their online presence.

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In June 2011, ICANN announced the plan to increase the number of TLDs to let organizations "market their brand, products, community or cause in new and innovative ways." A bidding process took place in early 2012, and by January 2014, new addresses started coming online.

More than 600 new TLDs have been purchased, and about 350 of those are available today, according to nTLDStats. Some 5.6 million new addresses are live, with .xyz, .science and .club ranking as the most popular English suffixes.

Top English TLDs

Suffix
# of domains
Market share
.xyz 931,353 16.6%
.science 294,933 5.3%
.club 229,797 4.1%
.berlin 155,401 2.8%
.wang 145,726 2.6%
.link 113,910 2.0%
.party 108,949 1.9%
nTLDStats.com as of 5/15/15

The domain boom is breathing life into a historically quiet corner of the Internet.

It's certainly not a corner that Meder knew or cared much about until 2013, when he stumbled upon a Twitter conversation about a company called 1and1.

The tweets caught his eye because Fast Twitch had been struggling for years with various dot-com iterations, like FT-PT.com and AreYouFastTwitch.com. Meder did some research on 1and1 and found that a wealth of new addresses would soon be available for purchase.

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He settled on fasttwitch.training as the official site, purchased the address from 1and1, and migrated over from the dot-com world at the beginning of this year.

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While Meder is excited about the URL's potential, he's encountered some frustrations in being an early adopter. One is the difficulty in using his email address when registering with online businesses, because many websites aren't yet recognizing the new domain extensions.

Consumers, like machines, have to adapt to an all new Internet. Millions of new sites are certain to create some level of chaos and abuse. And with the mass transition to mobile apps, it's not even clear how important URLs will be in the future.

But the publicity opportunities for Fast Twitch more than outweigh the risks, according to Meder.

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"It's a conversation piece," he said. "It gives us the chance to talk about it."

Stories like Meder's give 1and1 punchy anecdotes for its own marketing efforts. The German company is among thousands of domain name registrars, or entities that act as Web address retailers. They sit between the registries like Verisign, Donuts and Radix and domain buyers like Fast Twitch.

"It puts an end to the scarcity of dot-com names." -Thomas Keller, director of domain services at 1and1

GoDaddy is the biggest registrar in the market, with 59 million domains, compared with 19 million for 1and1. GoDaddy sold shares to the public in April and is valued at $4.1 billion.

Recenty released TLDs already account for about 15 percent of 1and1's new business, according to Thomas Keller, the company's head of domains. It's lucrative, too, with the new TLDs selling for about $40 a year on average, more than double the typical .com addresses.

More importantly, companies finally have options and aren't forced to pay ridiculous prices to domain hoarders. According to Keller, 90 percent of searches on the 1and1 site for .com names show that the address is not available.

"It puts an end to the scarcity of the dot-com names," he said. "It will have a huge influence over time."

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For .training alone, there are about 16,000 registered names. Every time 1and1, GoDaddy or another registrar sells an address with that extension, Donuts gets a substantial share of the revenue, because the Bellevue, Washington-based company owns its exclusive rights.

Donuts is an Internet registry, a designation that gives it the unique ability to buy TLDs after a thorough vetting by ICANN. In that market, Donuts owns the most unique suffixes and competes with companies including global Internet powerhouses Google and Amazon.com along with Radix, Afilias and Rightside.

Donuts was founded in 2010 by a four-person team betting that ICANN would soon open up the TLD universe. Over the past five years, the company has raised $150 million from venture investors and private equity funds, mostly to load up on suffixes.

A screen shows a rolling feed of new 'Generic Top-Level Domain Names (gTLDs) which have been applied for during a press conference hosted by ICANN in central London, on June 13, 2012.
Andrew Cowie | AFP | GettyImages
A screen shows a rolling feed of new 'Generic Top-Level Domain Names (gTLDs) which have been applied for during a press conference hosted by ICANN in central London, on June 13, 2012.

When ICANN initiated bidding in 2012, Donuts went on a spending spree, applying for more than 300 names. A nonrefundable application fee of $185,000 was required for every TLD the company wanted to pursue. For Donuts, that added up to $58 million.

"We went through an amazing amount of data in terms of how words are used commercially," said Richard Tindal, Donuts' co-founder and chief operating officer. "We picked the 300 we viewed as the most commercially marketable, through a combination of art and science."

If more than one registry applied for a given suffix, the process went to an auction and the winner was determined by the highest bidder. Google spent a hefty $25 million for control of .app, while .tech, owned by Radix, was purchased for $6.8 million, according to ICANN.

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Donuts has about 165 suffixes on the market now and is in the process of rolling out 15 more. The company expects to end up with about 200, in many cases spending several million dollars for a single TLD.

If its wagers pay off, millions of sites will be paying Donuts $20, $50, $100 a year and more.

For .training, Donuts paid only the $185,000 application fee, because no other bidders emerged. The name has already been profitable three times over, Tindal said.

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"It's a really great business," Tindal said. "The more your product gets seen the more people like it."

While most of the .training names will retail for about $30 a year, Tindal is quick to point out that fitness is just one way to use the suffix. There's a whole other group of sites focused on education. AWS.training, a site for taking classes on Amazon Web Services, is already up and running.

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Jeff Davidoff, former chief marketing officer of Orbitz and Bono's ONE Campaign, is tasked with turning the Not Com Revolution into a mainstream business. As CMO of Donuts, he's meeting with prospective customers at conferences like South by Southwest and helping users of new TLDs tell their stories.

He's convinced the market is about to tip.

"This isn't hypothetical anymore," Davidoff said. "So much of the history was four smart guys making bets on what the future could be. It's not a question of whether this will stick, it's just a question of how quickly it gets to be the new normal."