A Time For Domain Strategy & Discipline, Part 2

Should Brands Create and Manage .BRAND Registries?

Introduction

Domain names are defined as alphanumeric strings separated by dots that translate IP numbers into easier-to-remember labels. Domain names feature a hierarchy of levels, separated by dots, where the root of the domain name is the portion of the name that follows the “www.” and precedes the extension. For example, “google” is the root of the domain name, www.google.com. The extension is the final portion of a domain name beyond the root and sometimes following the right-most “.” (for instance, ".COM" or ".FR"). As ICANN prepares to open up the domain name space to an uncapped number of new TLD applications, the so-called “specialized TLD” is attracting the most attention. The specialized TLD is a dot-Brand, where a company can become the registry for an extension that is composed of their brand name.

Recent direct outreach to brand owners by ICANN and providers of outsourced registry services has implied that new TLDs can be deployed and user behavior easily changed to adapt to a new Internet hierarchy where a dot-BRAND search would become more common than a dot-COM search. This is concerning to FairWinds since it would force the next generation of brand owners to fund the expansion of the domain namespace through defensive investments. We compiled this paper to serve as a resource for any company considering their own top-level domain.

In order to understand the potential impact of the specialized TLD, it is important to consider the current Internet landscape. With much of today’s commerce being conducted via the Internet, Web sites enable companies to deliver positive experiences to customers searching for the brand online, draw in casual browsers and promote their brand in a beneficial and memorable way. So, at their most basic level, domain names are valuable because people frequently type them into browsers – this is especially true of .COM and the more popular country code TLDs (ccTLDs).

Given the omnipresence of sites such as Google and Yahoo!, one might assume that browsers primarily use search engines to reach their intended destinations online. However, according to a recent Forrester report, search via direct navigation accounts for 38 percent of Web site traffic. WebSide Story’s StatMarket division estimates that more than 67 percent of global Internet users arrive at Web sites by direct navigation. This type of navigation, also known as type-in-traffic, is defined as traffic derived from a visitor arriving at a Web site by keying a word or phrase into the browser address bar rather than following a link, a bookmark, or a search engine’s results. Direct navigation users typically type in keyword terms, brands plus keywords or generic category terms. The use of “dot-COM” is so prevalent, consumer searches usually vary by what domain root is entered into the browser rather than by what extension is used. For example, a direct navigation user may type in realestate.com when looking for information on purchasing a home or may type in remaxagent.com when looking for a RE/MAX real estate agent.

A large portion of direct navigation results in Web users finding the Web site or content that they were interested in. For instance, a user who types hotmail.com directly into the address bar will be brought to Microsoft’s www.hotmail.com Web site, where he or she can manage an email account. In other cases, users that search with generic keywords are directed to sites that have been strategically purchased by corporations. For example, the domain salad.com leads to the Clorox Company’s Hidden Valley Ranch salad dressing site.

The frequency with which a domain name is entered into the browser bar demonstrates the value of that name. Direct navigation user behavior shows that .COM domain names are the most valuable, followed by domain names paired with country code extensions. Other gTLDs including .NET and .INFO have very low value because users rarely enter them in their browser bars when practicing direct navigation. If the climate of the direct navigation market continues along this path, only .COM and popular ccTLDs domain names will continue to see a steady increase in value and provide businesses with an effective way to reach their audiences and a generous return on investment.

With millions of domain names occupying and continuously changing the Internet, not only is there opportunity for brand owners to garner traffic, there is also ample opportunity to lose it. There are times when direct navigation does not deliver the expected content. For example, if a user makes a typographical error, such as appple.com or wwwhotmail.com, the user is not delivered to the anticipated Web site. In the case of “microsoftexcel.com” the domain name resolves to a pay-per-click site consisting primarily of recycled paid search links to other Web sites. In cases such as these, consumers have found themselves on cybersquatted sites, which are sites where a company or individual has registered the domain in order to siphon traffic meant for another destination. Cybersquatting is the “bad-faith and abusive registration of distinctive marks as Internet domain names with the intent to profit from the goodwill associated with such marks.”

Navigating to a cybersquatted page often leaves users with a negative impression and leads to an uncomfortable “hijacked” feeling because users are taken to unexpected and sometimes inappropriate content. Because attracting Web traffic is vital to success in the online space, the loss of users due to negative impressions may bear significant consequences for a company.

Cybersquatters have built a business around registering names that are confusingly similar to brands in order to turn a profit. Cybersquatters utilize specific methods and tools in order to more accurately determine the most profitable domain name investments for their businesses. Domain names are a brand’s most important gateway to consumers online, thus the most profitable domain names for brand owners are also the most profitable domain names for cybersquatters. Due to current trends in consumer behavior, those names are, more often than not, in the dot-COM TLD. Traffic lost to cybersquatted Web pages has a profound impact on a brand’s immediate and long-term business prospects.

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