Predicting domain price rises: What can a TLD tell us?

When you’re shopping for a new domain, one of the first things you’ll notice is that the price is set according to the top-level domain (or TLD) that you choose.

The TLD is the bit that comes after the dot. So if you shop for a domain with us you’ll see that .com domains cost $27.95/yr, while .biz is $40/yr and .info is even higher at $55/yr.

This is because different TLDs are controlled and administered by different registries. You can think of registries as wholesalers that set a price for companies like us to pay each time someone registers a new domain.

Some registries are not-for-profits with social goals. Others are profit-driven businesses. Some are directly regulated by price caps. There are economies of scale to consider, too. All of these things influence pricing levels now and in the future.

Like rent, domains are an ongoing cost

In a sense, you never really own a domain. It’s more like something you rent for as many years as you want. In most cases you can prepay for up to 10 years at a time.

It’s difficult and costly for businesses to change domains. That makes the future cost of your domain an important factor. You can never be certain about such things but it’s not impossible to take an educated guess about how different TLDs’ wholesale prices are likely to move.

There are clues in how registries operate. Let’s look at three examples.

Example #1: The private company with a profit motive (.kiwi)

This is the simplest set-up to understand, with the fewest barriers to price rises.

Related articles:

• Why do .kiwi domains cost more than .nz?
• Why some domains are “Premium”, and what that actually means

Hundreds of TLDs have been created specifically as products for private companies to sell. Most were established after 2012, so if you’re old enough to remember dial-up internet you probably think of them as “new”. Things like .ninja and .shoes are examples along with .kiwi, which is controlled by a company called Dot Kiwi Limited.

In the decade or so that they’ve existed, we’ve seen a lot of steep wholesale price increases within this category of TLDs. This is nothing more than market forces at work. We don’t know exactly what the bean counters at Dot Kiwi are thinking, but we know the picture that they’re looking at.

Dot Kiwi Limited saw an initial boom in registrations, and might have expected broad popularity to follow. Lots of new customers would have boosted their revenue and lowered the burden of fixed costs. But new registrations flattened out instead. Research from InternetNZ shows that only around 4% of New Zealand websites have a .kiwi address today. When a company isn’t bringing in new customers, an obvious source of growth is to increase what you charge.

Another option is to sell up. After an explosion of small companies each with the rights to a handful of TLDs at most, there has been a spate of industry consolidation. Identity Digital - originally known by the much more fun name of Donuts Inc - has gathered together a portfolio of around 270 TLDs. Think about those market forces again: Consolidation isn’t usually a recipe for more competitive prices.

Example #2: National not-for-profits (like .nz and .au)

At the other end of the spectrum from Identity Digital and Dot Kiwi Limited, you find organisations like .au’s auDA and InternetNZ, which runs .nz. They describe themselves in quite similar ways:

“.au Domain Administration Limited (auDA) is a not-for-profit organisation established by the Australian Internet community. We work with a range of stakeholders including industry, government and the Australian and international community to administer a trusted .au for the benefit of all Australians, and champion an open, free, secure and global Internet.”

“InternetNZ (Ipurangi Aotearoa) is the home and guardian for the .nz domain. And it’s our mission to create an Internet for all New Zealanders that is safe, accessible and a place for good. A non-profit organisation, we provide the infrastructure, security and support to keep the Internet of New Zealand humming.“

These groups aren’t out to turn a profit, and they are part-funded by domain registrations. When they set the wholesale price for .au and .nz domains, they balance their own costs against the mission to operate an open and accessible domain space.

Because they operate in the public interest, and with Government oversight, registries like these are the most likely to avoid surprising anyone with big price rises.

Example #3: The private registry and non-profit regulator (.com)

Things are more complicated when it comes to .com domains. We’re somewhere in the middle of the public-private spectrum here.

There is a non-profit at the top of the supply chain - a large and complex organisation called ICANN (the Internet Corporation for Assigned Names and Numbers) - but the right to operate .com actually sits with a private registry, Verisign.

The most important part of this arrangement, as far as .com prices go, is that ICANN caps the wholesale price that Verisign charges. This constrains the massive pricing power that Verisign would have otherwise. ICANN has a lot of stakeholders, including public and private organisations, to keep in mind when it sets that price cap.

In recent years ICANN has been less concerned with keeping prices down than it used to be. Reading the tea leaves last year, we wrote that “there’s every indication that .com registrars will be allowed to add 7-10% to their prices every year.”

Beyond wholesalers: Retail prices can vary a lot

So far we’ve been talking mostly about wholesale prices for domains. When you register a domain the price that you’ll be charged is ultimately set by the registrar (i.e. a company like us).

Different registrars, or retailers, can charge very different prices for the same domain. We have at least one competitor that charges $74.95 for the same .nz domains that are only $25.95 from us. So compare what’s out there before you get started!

When you do, there are some common traps to look out for. Sometimes a one-off special can hide a steep renewal price that you’ll have to pay next year. There are add-ons, like privacy, that can carry a separate price. In some cases you might even be charged to make DNS changes or update your nameservers. (For the record, we don’t charge any extra for renewals, we provide domain privacy for only $10, and we let you manage your DNS and nameservers without charge.)

Other things to consider, and which can justify a few extra dollars a year, include:

• Service and support. If something goes wrong, will help be at hand?
• Your provider’s reliability and uptime. A cheap domain can cost a lot if it doesn’t reliably lead to your website.
• The toolset that you’ll use to manage your domains. The more domains you have, the more important this gets.
• Time-saving options like auto-renewal.

We’re always happy to be compared. And if there’s anything in particular that you want to know, just ask and we’ll give you a quick answer. Or if you’re ready to go, start searching for your new domain today.