ICANN’s New gTLDs:
Brandholders Navigating Uncharted Waters

Fred Felman, Chief Marketing Officer, MarkMonitor

ICANN’s decision to add new generic top-level domains (gTLDs) to the Internet is among one of the most controversial moves by the organization to date. We’ve heard a whole range of sentiment from those who have considered ICANN’s plans. These perspectives range from concern over costs and complications to excitement at the potential for solving some key Internet problems.

Saving the best for first…amazing potential
Business opportunities are leading the world’s biggest brands to consider taking on the extreme start-up costs and ongoing expenses of operating a gTLD in order to fundamentally change their businesses online. The applications of gTLDs are as diverse as the Internet itself; here are a few examples of these opportunities:

• Building community: It is easy to see that social networks have made a great meeting place for birds-of-a-feather to congregate and many of these business models have yielded vast economic success. With new brand-based TLDs, companies of all sorts will be able to build communities of users, customers, partners and others by granting them an address on their domain.
• Creating and promoting innovative products: The Web has become a place to find information, shop, share data and interact – many of these practices supported by sophisticated web-based applications. Some brand owners are considering using the new domain offerings to make new products more memorable by creating new naming and promotion systems for those products. 
• Securing their business: While the Web has fast become an excellent platform for transacting business, it has also become a fruitful source of income for brandjackers seeking to exploit consumers and businesses on the Web. Fraudsters have sought to use the openness of the domain naming system to confuse and confound innocent web surfers. As a result, many brands are considering the advent of new gTLDs as a means to make themselves more identifiable on the Web and their customers less prone to fraud.

Ultimately, brand owners are evaluating the business models behind new TLDs and the economic and brand benefits they present against the negative perspectives outlined below before applying for one or more of the new TLDs.

Teaching an old dog
Despite the fact that the Internet is relatively new (compared to the printing press), we’ve all become accustomed to navigating it the way that makes sense to us. Many just type in the name of the site. It is for that reason that “www” and “.com” or “dot com” have come to frame everything from our keystrokes to our vernacular. Getting users to type “myapp.brand” and search engines to accommodate this change might be a bit disruptive. Factor in the number of custom-built systems all over the Web that rely on the “.com” address to operate and you get a very complex picture! Changing user behavior as well as IT and business systems to function with these new naming systems will be a high hurdle to clear.

It’ll break the bank
Many of us start to plan our budgets for the coming year very early. Here at MarkMonitor we’ve already begun the process of readying our 2009 plans. As part of that process we’re thinking about the programs that will make us successful. Will we have room for a new TLD? I’m not entirely sure yet. 

The direct and indirect costs of a TLD could prove prohibitive. Here’s a list of some of the direct costs to consider: 1) a hefty $100-200K just to pony-up an application; 2) ongoing ICANN fees estimated at $110K per year; 3) registry and registrar startup and operating expenses; 4) other startup and operating expenses. We’ve heard expert estimates of up to $1 million dollars for some projects. 

We’ve also heard a few impolite reactions to the idea of paying ICANN six figures annually to use a company’s own brand in the way it sees fit on the Web!  

Over a barrel
Many of my concerns for brand owners are centered on the potential consequences of a wait-and-see strategy. Unfortunately, as the rules are speculated to have been written, the granting of an application is not based on merits. It is first-come, first-served. A TLD grant will be given to the first comer. In the case that there is contention through more than one application for a similar or the same TLD, the matter will be settled by auction.  If you haven’t applied for a TLD, and some other entity has done so, that entity will be granted it. The exception is that the TLD should not be illegal in any jurisdiction. A big and unique brand might have standing to protest or stop the process, and it might not. Similar applications (whether sound-alike or typed-alike) won’t be accepted, so if your brand looks or sounds like any other brand anywhere in the world and in any language, you might lose it as a TLD. If your brand is at all generic-sounding or has commonalities with any other market segment, it might be claimed by someone else.

While the stakes are high in this auction and application process, they aren’t as bad as they seem — applicants can withdraw their application and may be able to receive a refund of a significant portion of the fees paid. However, this process also paves the way for well-financed domainers to more easily set-up an association with your brand in the world of new TLDs. 

It is for these last reasons that many brands have expressed their plans to participate in the first round of applications. They don’t want to explain to their shareholders why they don’t own their own brand in this new world.

Is fear the most important driver?
No. Business drivers trump all other factors. We are advising brand owners to think about the specific business drivers for their actions and then make a decision on how to respond to this new opportunity and set of risks. As always, we are here to advise and help brand owners execute strategies that help them meet their goals. So please call upon us to help.

And, remember – because MarkMonitor is a registrar that only seeks to serve corporations and brandholders, we will advocate changes to the proposal as its details become publically available. So help us understand your concerns and share your suggestions. We stand ready to create a coalition of brand owners to make this process as beneficial and fair for our constituency as possible.

Regards,

Fred Felman
Chief Marketing Officer, MarkMonitor

ICANN UPDATES

ICANN Update to New gTLD Program Implementation:
Implications for Brand Owners

On August 8, 2008, ICANN issued an update on 3 topics related to the New gTLD Program:

	A. Economic Case for Auction in New gTLDs Paper Release
	B. String Similarity Algorithm Update
	C. Backend Registry Certification Not Available in First Round
		          

Summary
The update does not have any material significance for brand owners.
The auction element for resolving contention between competing applicants does not change the first-come-first-served nature of the new gTLD process, though it invites public comment. ICANN announced its progress in developing an algorithm to mitigate the possibility of confusing strings, and they’ve ruled not to certify backend registry operators in the first round of applications.

Below is an explanation of these updates, as well as the implications for brand owners, or community of brand owners, considering launching their own gTLD.

Economic Case for Auction in New gTLDs
Summary: ICANN released a paper analyzing the economic case for auctions as the tie-breaking mechanism for resolving contention among competing applicants for new gTLD strings. The community can provide feedback on this element of the forthcoming gTLD implementation plan by submitting comments to auction-consultation@icann.org through 7 September 2008 23:59 UTC. The community can review comments already submitted via ICANN’s online public forum. 

MarkMonitor View: The newly-released paper does not change in any way the draft gTLD evaluation process presented by ICANN at the June Paris meeting.  ICANN is simply seeking public feedback on the proposed auction element of the process.

In the proposed new gTLD evaluation process, auctions are being considered as a way to resolve contention between identical or similar strings. In the case where a community-based applicant is competing for a particular string, then either comparative evaluation or auction will likely be used to award the string. In the case where no community-based applicant is competing for a particular string, then auction will likely be used to award the string.

So, what are the implications for brand owners? If a community-based applicant is competing for a particular string, and if it elects to have the contention resolved through comparative evaluation, then individual brand owners may have a tougher challenge in winning the string, as GNSO Policy Recommendations have established a preference for community-based applicants, (see page 24 of the link), that can convincingly demonstrate adding more value to the Internet namespace over other applicants.

If no community-based applicant is competing for a particular string, but there is still contention among other applicants, then the contention will be resolved via auction. In this situation, applicants with the deepest pockets — who are often brand owners — will obviously fare better.

String Similarity Algorithm Update
Summary: SWORD, the partner assisting ICANN in the creation of an algorithm for assessing potential string confusion between proposed and existing TLDs, recently completed a beta algorithm and reviewed several test cases with ICANN. The refined version of this algorithm may be used as a tool to avoid user confusion with existing TLDs.

MarkMonitor View: This is simply a status update of ICANN’s existing plans to potentially use an algorithm to automate the process for assessing similarity among proposed and existing TLDs. Assessing similarity to existing TLDs is part of the “Initial Evaluation” in the draft New gTLD Evaluation Process. No details on the actual algorithm are publicly available.

Backend Registry Certification Not Available in First Round
Summary: ICANN has decided not to launch an initiative to certify backend registry operators in the first round of the new gTLD process. On January 31, 2008, ICANN had announced that it was exploring this possibility as a way to streamline the application process for new gTLDs and to create a pool of pre-qualified backup registry operators in the case of registry failure. Certification for backend registry operators may be introduced at a later day after further analysis and if deemed appropriate.

MarkMonitor View: No certification of back-end registry operators will put the onus on brand owners, or community of brand owners, to demonstrate that they meet the minimum technical requirements for the application process and meet requirements for contingency planning. The minimum technical criteria and pre-delegation check requirements will be made available in the draft Request for Proposal (RFP) for new gTLDs, expected in Q4 2008. To satisfy these requirements, brand owners can either build their own registry systems in-house or outsource the registry functions to existing registry service providers.

For comprehensive FAQs on the new gTLDs, please click here.

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