It’s a new domain-name game

Touchstone Energy, an alliance of 600 user-owned electric utilities, is at the forefront of a trend toward businesses adopting specialized domain names to market their wares on the Web.

Touchstone Energy has switched its primary Web site from a domain name ending in the .com to a name ending in .coop, which is reserved for companies that are owned by their customers. The .coop extension was one of several new top-level domains that became available two years ago.

“We’re probably the most prevalent cooperative in the nation as it relates to broadcasting the difference of the cooperative business model,” says COO Jim Bausell. “Switching to .coop in our URL was one more way to reinforce the difference between us and investor-owned utilities.”

Touchstone Energy still owns its .com address. But for the last year, queries to that address have been redirected to its .coop address.

“We’ve had constantly escalating traffic,” Bausell says. “We use the .coop URL in every TV and print ad. . . . We view .coop as a key differentiator for us.”

Touchstone Energy is not alone. Utilities, credit unions and agricultural partnerships have purchased 8,200 .coop names from the registry run by the National Cooperative Business Association. (Registries provide the back-end operations for a domain, such as VeriSign provides for .com and .net.)

Meanwhile, British Airways and Los Angeles International Airport are among the airlines and airports that have purchased 4,000 domain names ending in .aero. The International Spy Museum is one of about 600 owners of domain names ending in .museum.

Sales of specialized domain names are expected to increase, and Internet regulators plan to select several new industry-specific extensions later this year. The Internet Corporation for Assigned Names and Numbers (ICANN) has asked industry groups to submit proposals for new, industry-sponsored top-level domains by March 15, and the topic is on the group’s agenda at a meeting this week in Rome. Among the extensions expected to be proposed are .travel, .health and .union.

U.S. businesses historically choose domain names ending in .com or .net as their primary Web address. Of the 60 million domain names sold worldwide, about half are in the .com and .net domains. Domain names are available in 260 extensions, including 242 country codes, 14 generic domains such as .com, three industry-specific domains such as .coop, and .arpa for infrastructure use only.

“Our customers have a continuing interest in .com, .net and .org,” says Champ Mitchell, CEO of Network Solutions, a leading registrar of domain names ending in .com, .net and many other extensions. “But if you look at the growth curves over the last two and a half years, the growth has been in names ending in [country codes].”

Multinational corporations are buying more names that end in country codes such as be .de for their German operations and .uk for their operations in the United Kingdom. That trend is likely to continue as various countries, including France, Spain and China, make it easier for U.S. businesses to purchase domain names with French, Spanish or Chinese country code extensions.

Meanwhile, domain names that use non-English-language characters are becoming available in extensions such as .com and .info. Coca-Cola uses two domain names to market its products in Korea: One is an English-language domain name that ends in the Korean country code .kr; the other is a Hungol language version of Coca-Cola that ends in .com.

“The reason Coca-Cola is doing this is to address the needs of the local market,” says Ben Turner, vice president of VeriSign’s naming and directory services group, which operates the .com and .net registries. “We’re seeing more multinationals use internationalized domain names in their billboards.”

The new specialized extensions are coming whether U.S. businesses want them or not.

“I see zero demand for new domain names among Fortune 500 U.S.-based companies,” says Bret Fausett, a domain name industry expert and partner with law firm Hancock, Rothert & Bunshoft. “They just don’t understand what they would do with yet another domain name.” 

ICANN watchers expect the group to select up to 10 new, industry-sponsored top-level domains this summer. Whether these extensions will gather broad support remains to be seen.

ICANN’s track record for introducing top-level domains is spotty. In 2000, the oversight body added seven extensions – .aero, .biz, .coop, .info, .museum, .name and .pro – with mixed results.

“None of them have been terribly successful,” acknowledges Mitchell, whose company offers names ending in .biz, .info and .name. “Renewal rates are weak on all of them.”

Of the three existing industry-sponsored top-level domains – .aero, .coop and .museum – the most successful has been .coop, with 8,200 names.

However, despite marketing efforts, the .coop registry has sold names to a fraction of the 750,000 cooperative businesses it targets worldwide. Some of the highest-profile cooperatives, such as Ocean Spray Cranberries, have not purchased .coop names.

“There are 750,000 .coops in the world, but lots of those are in developing countries,” explains Paul Hazen, president and CEO of the National Cooperative Business Association, which runs the .coop registry. “There are 100,000 .coops in India, but most of them don’t have a Web site and aren’t going to have one any time soon.”

One difficulty for the registries that run industry-sponsored top-level domains is attracting registrars to sell their names. The .coop registry has signed up five of the 190 ICANN-accredited domain name registrars worldwide. In contrast, .info names are available from 115 registrars.

“It’s taken a while for the registrar community to take sponsored top-level domains seriously because we don’t have big volumes,” Hazen says. “We hope that ICANN comes out with new sponsored top-level domains so registrars will see them as a growing market.”

Hazen says trade groups that propose new domain name extensions should be realistic about the potential market. Because these extensions are controlled, no speculating is allowed. Legitimate name buyers aren’t compelled to buy their names in every domain for protective purposes because no one else is allowed to do so.

“When we were setting up our projections three years ago, we were wildly optimistic about the potential market and how quickly it would grow,” Hazen says.

The first three industry-sponsored top-level domains are not very profitable, either. The .coop registry lost money in 2002, its first full year in business, and it returned a profit of $50,000 in 2003.

“Our challenge is to generate enough cash flow to put into our marketing,” Hazen says.

Similarly, SITA, the global aviation IT and telecom solutions provider, has had limited success with its .aero registry. SITA has sold 4,000 names, and about 1,500 of them resolve to active Web sites.

The .aero registry uses the same abbreviations – such as nw for Northwest Airlines or jfk for John F. Kennedy International Airport – that the aviation industry uses.

The .aero registry is testing new features that would let users type in a flight number with an .aero extension and reach a Web page that details the flight arrival and departure times for a given day, says Marie Zitkova, .aero business manager for SITA.

“How many .aero names we will sell depends on what concepts and business ideas we identify,” Zitkova says. “If we just sell them for airline or aviation company names, we’ll be limited. But if we find ways to use structured [aero] domain names to identify individual flights or planes we might be able to sell tens of thousands or hundreds of thousands of names.”

If these kinds of new applications gain ground, corporations could face hefty domain name registration bills each year. Specialized domain names sell for about $100 per year, compared with $35 per year or less for generic names ending in .com, .net and .info.

When ICANN approved its first industry-sponsored top-level domains, the oversight body also introduced new generic extensions, including .biz for small businesses, .info for informational Web sites, .name for individuals and .pro for professionals such as accountants and lawyers.

Of this group, only .biz and .info have had success, with each selling more than 1 million names. The .pro registry has not yet launched, and the .name registry has sold about 150,000 names.

“The large corporations already had .com names. Whatever .biz and .info names they purchased were mostly for defensive purposes,” ICANN watcher Fausett says.

NeuStar, which operates the .biz and .us registries, is teamed with The Travel Alliance as the back-end registry provider on its bid for the .travel extension. Richard Tindal, vice president of registry services with NeuStar, says U.S. companies will buy specialized names if the registry provides additional services beyond a Web address.

“What .travel is providing is a whole authentication process and a whole directory process,” Tindal says. “As a consumer, if you see a .travel name you will know you are dealing with a legitimate travel association or a legitimate travel agency.”

Most domain name registries and registrars want additional specialized domains, but they are pushing ICANN to be more innovative.

“We’re very supportive of the introduction of new top-level domains as long as ICANN lets the market drive the process,” VeriSign’s Turner says. “Sponsored [top-level domains] can work as long as ICANN gives the registries the freedom to set up their businesses differently.”

“There is potential for top-level domains where the ending itself has meaning, like .kids,” Network Solutions’ Mitchell says.

“If, for example, ICANN were to put in standards that the content had to be meant for kids . . . they might find a huge update. But ICANN’s not thinking about that. They don’t seem to be very attuned to the normal Internet user and what will be useful to them,” he says.