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New Internet domains are coming, and small biz needs to be wary

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A vast expansion of the real estate on the Internet now underway designed to enhance choice and competition could in fact threaten the health of thousands of small businesses.

The Internet Corp. for Assigned Names and Numbers (ICANN) is in the process of authorizing thousands of new domain names, which means instead of naming a website with ".com" or ".net" at the end there are new tags like .guru, .dating, .sports and .wow.

(Read more: Hundreds of new domain names starting to hit Web)

As many as 1,400 of these new domains—called generic Top-Level Domains (gTLDs)— will become available over the next year or so. (Until recently there were only 22.)

Proponents of the domain expansion say it will help increase choice and competition, and will help new enterprises acquire website names more specifically tailored to their business.

But some industry experts say this dramatic increase in gTLDs may spur problems—like trademark infringement issues, cybercrime and cybersquatting—that smaller businesses may be ill-equipped to deal with.

"Until recently, there were only 22 of these top-level domains and there are more than 100 million secondary domain names just for .com. In this limited universe, there is already a lot of cybercrime, phishing and cybersquatting," said Dan Jaffe, the head of the Association of National Advertisers' government relations office in Washington.

"And when you dramatically expand the number of domains—if you increase it to as much as 1,000 or more—we have reason to be concerned that this is only going to continue to grow these problems."

Since there will be so many new top-level domains (which is the part of the Web address to the right of the dot, like .net) that become available, the number of second-level domains (the part of the Web address before the dot) will increase to an even greater degree.

This makes it easier for cybersquatters to buy a domain name that a legitimate business may want. It also opens the door for more cybercriminals to pose as an established website in order to steal user information. And while big corporations have the resources to deal with these kinds of problems, small businesses don't, experts say.

One of the biggest issues that smaller businesses may face, though, is trademark infringement, said Kathy Nielsen, vice president of business development for new gTLDs at Sedo, a domain marketplace.

(Read more: Why the Internet will never be the same)

Big corporations have lawyers and consultants to protect their trademarks, but many small businesses aren't even aware the new domains are becoming available or what they can do to protect their trademarks, Nielsen said.

In fact, 63 percent of small to midsize business owners were unaware that new gTLDs were becoming available and did not understand why they would be valuable, according to a report published by Sedo in March. And 94 percent of respondents said they weren't planning on purchasing a new domain when they became available.

"For small and midsize businesses that have trademarks, this is probably the most important thing that is being missed," Nielsen said.

"Trademark owners that aren't the big strategic clients for lawyers or consultants are being left out. They don't know about the protections."

The Web domain expansion includes a trademark clearinghouse system, which is designed to alert a trademark holder anytime someone registers a website with their trademarked name. (A business has to register with the clearinghouse to get the update.) Problem: many small trademark holders are as unaware of this program as they are of the new domain rollout, Nielsen said.

Businesses have the option of registering a website that is important to their brand before the top-level domain opens to the public. For example, Pizza Hut could buy the second-level domain "PizzaHut.pizza," before the generic domain ".pizza," opened up to the public.

But with more than 1,000 top-level domains expected to come to market, purchasing every iteration of a Web address is almost impossible and can be incredibly expensive, said Troy Larson, an attorney at Ballard Spahr who focuses on trademark and Internet law.

"For brand owners, this isn't something they want to buy. They have no interest commercially in having these assets. And because of the volume, just the sheer size of the expansion, it's impossible to register domain names for all of your brands," Larson said.

(Read more: China Internet outage could have been hacking attack)

Larson said that he is advising his clients, which are mostly big corporations, to find out what gTLDs matter most to their brand and consider purchasing second-level domain names with those top-level domains.

Small businesses should be doing the same, Nielsen said.

"It will be a gold rush all over again. If you are a small business you should start looking at what new ones are coming out and when and start making a wish list and know the launch date and register for them when they become available," she said.

However, the issue for small businesses is cost. While trademarked holders can register Web addresses early with gTLDs relevant to their brand, the cost to do so can add up quickly. The cost for just one Web address during the sunrise period can be $250 or more.

"This will affect all businesses of all sizes and require an enormous amount of diligence and awareness," Jaffe said. "It's obviously going be expensive for everyone, thousands of trademarks will be affected and if you are smaller business you don't have the resources to do this quite as well."

By CNBC's Cadie Thompson. Follow her on Twitter @CadieThompson.

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