Domain Name Market Evaluation & Policy Development

Dr. Kenny Huang 黃勝雄博士

huangk@mindext.com

Executive Council, APNIC

Board Member, TWNIC

1

Internet Statistics by Region

World Regions Population ( 2011 Est.)

Internet Users Dec. 31, 2000

Internet Users Latest Data

Penetration (% Population)

Growth 2000-2011

Users % of Table

Africa 1,037,524,058 4,514,400 139,875,242 13.5 % 2,988.4 % 6.2 %

Asia 3,879,740,877 114,304,000 1,016,799,076 26.2 % 789.6 % 44.8 %

Europe 816,426,346 105,096,093 500,723,686 61.3 % 376.4 % 22.1 %

Middle East 216,258,843 3,284,800 77,020,995 35.6 % 2,244.8 % 3.4 %

North America 347,394,870 108,096,800 273,067,546 78.6 % 152.6 % 12.0 %

Latin America / Carib. 597,283,165 18,068,919 235,819,740 39.5 % 1,205.1 % 10.4 %

Oceania / Australia 35,426,995 7,620,480 23,927,457 67.5 % 214.0 % 1.1 %

WORLD TOTAL 6,930,055,154 360,985,492 2,267,233,742 32.7 % 528.1 % 100.0 %

2

(Internet World Statistics, 2012)

Internet Population & Penetration

3

Internet Population

Internet Penetration

(Internet World Stats, 2012)

Internet in Numbers

4

3.1 B email accounts (end of 2011)

555 M websites (end of 2011)

220 M total registered domain names (July 2012) 103.1 M .com 86.9 M ccTLD 14.7 M .net 9.97 M .org 800 M facebook users (end of 2011)

1.2 B mobile subscribers (end of 2011)

(Pingdom, 2012)

DNS & Its Working

5

Simple view of the DNS and its working, From “The Pharming Guide” by G. Ollmann, 2005

Domain Name Market Structure

6

ICANN Domain Name Authority

Registries Who are managers of TLDs

Registrars Companies that sell TLDs

Resellers

Companies that are not registrars themselves but use technology of another registrar

Registrants Who buys domain names

Current TLD List

7

.aero .asia .biz

.cat .com .coop

.edu .gov .info

.int .jobs .mil

.mobi .museum .name

.net .org .post

.pro .tel .travel

.xxx (ICANN Registries, 2012)

245 out of 260+ Country Codes of the World

8

Model for Naming, Addressing & Routing

9

Routing by Name (Bernard M Hauzeur,1986)

General Internet Routing Scheme (Bernard M Hauzeur,1986)

Analytical Framework for Identifier Resources

10

Layer 3 : Policy Decisions about Rights

Layer 2 : Economic Decisions about Rationing Scarcity

Layer 1 : Technical Coordination to ensure Uniqueness

Rationing Methods

First-Come/First-Served DN registration Administrative Fees discourage those who might consume too much

Market Pricing determined by demand and supply

Administrative Rules easy to implement but unable to reflect demand & supply

Merit Distribution “beauty contests” but would be intensely political

(Milton Mueller, 2004)

Competitiveness of Industry

11

CRm= Σmi=1 si Concentration Ratio

Four-Firm Concentration Ratio measures the total market share of the four largest firms in an industry

No concentration 0% means perfect competition or at the very least monopolistic competition. If for example CR4=0 %, the four largest firm in the industry would not have any significant market share. Total concentration 100% means an extremely concentrated oligopoly. If for example CR1= 100%, there is a monopoly. Low concentration 0% to 50%. This category ranges from perfect competition to oligopoly. Medium concentration 50% to 80%. An industry in this range is likely an oligopoly. High concentration 80% to 100%. This category ranges from oligopoly to monopoly.

Value Chain and Five Forces Model

12

Porter’s Five Forces Model

SWOT Analysis

13

Decision Making Methodology: Four-Quadrant Matrix

14

Stephen Convey. (1994). First Things First: To Live, to Love, to Learn, to Leave a Legacy. New York: Simon and Schuster, ISBN 0-684-80203-1.

Global Domain Name Market Overview

15

.com : 103,591,675

.net : 14,746,618

.org : 9,999,090 (2012.06.30)

Total : 225 Million names ccTLDs : 90.6 Million (40.2%) (Verisign, 2012)

COM/NET/ORG DN Counts

16

COM NET ORG

2004 32,390,225 5,190,241 3,226,527

2005 43,303,414 6,475,384 4,046,832

2006 57,543,658 8,450,170 5,424,925

2007 70,745,010 10,584,307 6,331,208

2008 78,361,107 11,956,290 7,246,015

2009 83,586,300 12,587,589 7,895,072

2010 91,164,993 13,515,715 8,703,984

2011 98,884,902 14,328,728 9,615,985

2012 103,591,675 14,746,618 9,999,090

(hosterstats, 2012)

COM/NET/ORG DN Histogram

17

32,390,225

43,303,414

57,543,658

70,745,010

78,361,107 83,586,300

91,164,993

98,884,902 103,591,675

5,190,241 6,475,384 8,450,170 10,584,307 11,956,290 12,587,589 13,515,715 14,328,728 14,746,618

y = 9E+06x + 3E+07

y = 1E+06x + 5E+06

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012

COM

NET

ORG

(hosterstat,2012)

gTLD DN Counts

18

103,120,068

14,724,169 9,967,847

7,844,252 3,571,727 2,237,838 1,043,405 274,496 205,266 197,657 118,324

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

.com .net .org .info .eu .biz .mobi .tel .name .asia .xxx

(hosterstat,2012)

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

ccTLD DN Counts

19 (hosterstat,2012) 23

0.29

0.21 0.21

0.18

0.16

0.13 0.13 0.12

0.11 0.11

0.09

0.06 0.05

0.04 0.04 0.03 0.03 0.03

0.02 0.02 0.02 0.01 0.01

0.00 0.00 0.00 0.00 0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

ccTLD DN Counts/ Inhabitant

20

20

gTLD DN Counts by Country

21

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

(webhosting,2012) 25

c/g Ratio by Country

22

15.74

9.67

8.12 7.66

6.90

6.04 5.73 5.22 5.19 5.02

4.65

3.45 3.33 2.53 2.44 2.32 2.12

1.75 1.55 1.18 1.01 0.92 0.68 0.65 0.49 0.47 0.25

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

4 c/g Ratio : ccTLD registrations/gTLD registrations

Sales Market (1/3)

• Sales Market Category – Retail market – Trade market

• Baseline Assumption – Market price USD10 /name

• Global DN sales market estimation – Total 2.25B names – Sales market : USD 22.5B per year

23

Sales Market (2/3) DN Trade Marketplace @Sedo

24

Sales Market (3/3) DN Trade Marketplace @Sedo

25

Top Category 2010

Equity Market (1/4) DN Policy vs. DN Stock Price

26

1. June 26, 2008 – GNSO Approves New gTLD Policy 2. June 20, 2011 – ICANN Boar Approves New gTLD Program 3. Jan 12, 2012 – New gTLD Application window opens 4. May 30, 2012 – New gTLD Application window closes Measure the financial performance of publicly traded stocks associated with DN market : Tucows (TCX: Toronto), Verisign (VRSN: Nasdaq), Neustar (NSR: NYSE), Top Level Domain Holdings (TLDH: London) and Demand Media (DMD: NYSE)

Growth from Date to 30 May 12

Company 26 JUN 2008 20 JUN 2011 12 JAN 2012 30 MAY 2012 26 JUN 2008 20 JUN 2011 12 JAN 2012

TCX 0.60 0.81 0.76 1.43 138% 77% 88%

VRSN 38.24 32.74 36.01 38.62 1% 18% 7%

NSR 21.69 25.75 35.96 32.95 52% 28% 8%

TLDH 3.50 10.05 8.30 8.07 131% 20% 3%

DMD 14.58 7.05 9.13 37% 30%

DJ 11347 11935 12422 12420 9% 4% 0%

IXIC 2316 3653 2711 2837 22% 22% 5%

(John Matson, 2012)

Equity Market (2/4) DN Market Valuation

27

Price @7/13/2012 Shares Outstanding Market Value

TCX $ 1.22 46,238,000 $ 56,410,360

VRSN $ 43.17 157,988,000 $ 6,820,341,960

NSR $ 32.78 66,906,000 $ 2,193,178,680

TLDH $10.1 4,751,049 $47,985,600

DMD $ 11.83 83,915,000 $ 992,714,450

Five Firms Aggregated Value : $10,110,631,050

Equity Market (3/4) VRSN Profile

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Number of Names = 103591675 (com) +14746618 (net)=118338293 Unit Gross Profit (com) = $7.85 - $0.2=$7.65 Unit Gross Profit (net)=$5.1-$0.2=$4.9 Gross Profit = $864,734,742

(Bloomberg, 2012)

P/E Ratio =42.5 Market Value =$ 6,820,341,960 Net Profit=$160,478,634

VRSN

Equity Market (4/4) The Journey to Profitability

29

• DN business is a recurring revenue business model: – The previous year’s efforts count – Sales growth speed outpaces the

sales efforts • Previous year’s efforts count:

– Do not need to start from scratch every year

– Less vulnerable and volatile • Sales growth outpaces sales efforts:

– Explosive growth at upward economic environment

– Stable growth at downward economic environment

Recurring

Sales

Time t 2t 3t

$

t

2t

Sales base from existing recurring customers

Sales growth outpaces sales efforts

TW Registry / Registrars

• Registry ccTLD: .TW Operator: TWNIC

• Policy & Regulation – Telecom Act 21 – Domain name registration &

administrative policy (92.02.11)

• Registrars TISNet Asia Pacific Telecom Chunghwa Telecom Net Chinese Co. PC Home online Sparq Telecom TFN Telecom Neustar Webcc IP Mirror

30

.tw DN Histogram

31 (TWNIC, 2012)

196451

238917 226181

241585 264680

310579 332022

356182

406669

444467

503109 512399

y = 29729x + 142864

0

100000

200000

300000

400000

500000

600000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

com.tw DN Histogram

32 (TWNIC, 2012)

79496

92624 86367

96129

110074

125535 135478

145644 155980

172255 180471

187098

y = 10459x + 62610

0

50000

100000

150000

200000

250000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

ascii.tw DN Histogram

33 (TWNIC, 2012)

24863

32159

45487

58090

68494 71920 73267

y = 8847.9x + 18077

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

2006 2007 2008 2009 2010 2011 2012

Registrar Market Shares

34

26.41

24.08

11.2

9.68

8.67

7.57

6.48

2.02 1.95

1.94

中華電信

NeuStar

亞太電信

網路家庭

網路中文

WebCC

新世紀資通

IP Mirror

協志科技

台灣固網

(TWNIC, 2012)

Total gTLD Names in Taiwan

35

Rank TLD Total Domains Market Share Net Gain/Loss

1 COM 54,027 79.8106 % 121

2 NET 5,020 7.4157 % 6

3 INFO 4,602 6.7982 % 12

4 ORG 2,721 4.0196 % 14

5 BIZ 954 1.4093 % 3

Total gTLD Names in Taiwan : 67,694

(webhosting, 2012)

Innovation vs. DNS Correlation between Incorporation and DN

36

(Nominet, 2010)

Competitiveness of DN Industry

37

CRm= Σmi=1 si Concentration Ratio

Four-Firm Concentration Ratio measures the total market share of the four largest firms in an industry

CR4= 94.66% gTLD (com/net/org/info)

Infringe NTIA agreement & ICANN Core Value “promote and sustain a competitive environment”

Monopoly Market Registry Actual Volumes vs Projected Volumes (ICANN, 2010)

By year 4, seven of the gTLDs had missed their projections by an average of negative 83%.

Registry/Registrar Reversed Structure Post new gTLD Stage

38

Registries

Registrars

Registries

Registrars

New gTLD

22 gTLDs 248 ccTLDs

1016 Accredited Registrars 1016 Accredited Registrars

22 gTLDs 248 ccTLDs

1930 new gTLDs

New CDN gTLD

• 1930 gTLD applications • 116 IDN gTLD :

– Chinese : 73 – Arabic : 17 – Japanese : 9 – Korean :3

一号店 公司 天主教 慈善 書籍 盛贸饭店 诺基亚 香格里拉

世界 公益 娱乐 我爱你 机构 移动 谷歌 電訊

中文网 商城 娱乐 手机 机构体制 网址 购物 點看

亚马逊 商店 家電 手表 欧莱雅 网址 通用电气公司

企业 商标 工行 招聘 淡马锡 网店 通販

佛山 嘉里 广东 政务 深圳 网店 集团

信息 嘉里大酒店 广东 政府 游戏 网站 電訊盈科

信息 在线 广州 新闻 点看 网站 飞利浦

健康 大众汽车 微博 时尚 珠宝 网络 食品

八卦 大拿 微博 普利司通 盛貿飯店 联通 餐厅

39

CDN New gTLD Applications

40

DN Market Value Chain

41

DN Market

Registries

Registrars Resellers Trade Marketplace Brokers

DN Holders

Registries/ Registrars

Backend Registry

Operators Software Vendors

DNS/Web Hosting

Server Hosting

Cloud Services

VCa

a1

a2 a3 c1 c2

b1 b2

d1

d2 d3

VCb

VCc VCd

42

Value Chain Analysis

• Primary VC (value chain) – VCa

• Assess missing links in VC

• Core competitiveness – Irreplaceable link in a VC

• Primary VC isn’t meant to come with missing links – Market saturation

• VC with missing links isn’t meant to be the primary VC

• Primary VC doesn’t last forever – Things vary over time – Registry/Registrar reversed

structure

VC Matrix Assessment

43

VC node

Value Uncertainty

P1 P2 P3 Mean P1 P2 P3 Mean

a1 5 4 5 4.67 4 5 4 4.33

a2 4 4 3 3.67 2 3 2 2.33

a3 1 2 1 1.33 1 2 2 1.67

b1 3 3 2 2.67 2 2 1 1.67

b2 3 3 4 3.33 4 3 2 3.00

c1 3 2 2 2.33 2 3 3 2.67

c2 2 1 2 1.67 3 4 4 3.67

d1 3 2 3 2.67 2 1 1 1.33

d2 3 3 3 3.00 2 3 2 2.33

d3 4 5 4 4.33 3 5 4 4.00

VC Value Distribution

44

a1

a2

a3 b1

b2 c1

c2

d1

d2

d3

0.00

1.00

2.00

3.00

4.00

5.00

0.00 1.00 2.00 3.00 4.00 5.00

Unc

erta

inty

Value

a1

a2

a3

b1

b2

c1

c2

d1

d2

d3

Taiwan DN Policy Strategy

45

a1

a2

a3 b1

b2 c1

c2

d1

d2

d3

0.00

1.00

2.00

3.00

4.00

5.00

0.00 1.00 2.00 3.00 4.00 5.00

Unc

erta

inty

Value

a1

a2

a3

b1

b2

c1

c2

d1

d2

d3

Deprioritize and source alternative technologies

Risk mitigation

Develop fair competition environment

Strengthen industrial competitive advantage

46

1. Bernard M Hauzeur. (1986). A Model for Naming, Addressing and Routing. ACM Transactions on Office Information Systems. Vol. 4, No.4 Oct 1986 P293-311

2. Deborah A. Garza. (2008). Letter to ICANN: ICANN's Draft RFP for New gTLD. Dec 3 2008. From http://www.ntia.doc.gov/files/ntia/publications/icann_081218.pdf

3. Elizabeth Feinler (July–September 2010). "The Network Information Center and its Archives". Annals of the History of Computing (IEEE) 32 (3). DOI:10.1109/MAHC.2010.54

4. GNSO.(2007). Introduction of New Generic Top-Level Domains, gNSO Board Report. September 11, 2007 5. Hosterstats. (2012). ccTLD Domain Name Counts 2012. From

http://www.hosterstats.com/DomainNameCounts2012.php 6. ICANN Registries. (2012). Registries Listing. From http://www.icann.org/en/resources/registries/listing 7. Internet World Stats. (2012). Internet World Population Statistics. From

http://www.internetworldstats.com/stats.htm 8. Michael Porter. (1996). The Five Competitive Forces That Shape Strategy. HBR Must Read on Strategy. Harvard

Business Review 1996. 9. New gTLD. (2012). Reveal Day 13 June 2012 - New gTLD Applied-For Strings. From

http://newgtlds.icann.org/en/program-status/application-results/strings-1200utc-13jun12-en 10. Pingdom. (2012). Internet 2011 in Numbers. From http://royal.pingdom.com/2012/01/17/internet-2011-in-

numbers/ 11. Sedo. (2010). Sedo's Domain Market Study 2010. From

http://sedo.com/fileadmin/documents/pressdownload/2010Market_Study.pdf 12. U.S. Department of Commerce. (1998). Memorandum of Understanding between the U.S. Department of

Commerce and Internet Corporation for Assigned Names and Numbers. From http://www.icann.org/en/general/icannmou-25nov98.htm

13. U.S. Department of Commerce, National Telecommunications and Information Administration. (1998). Statement of Policy : Management of Internet Names and Addresses, 63 Feg. Reg. 31741.

14. Verisign. (2012). The Verisign Domain Report. Volume9 Issue1, Mar 2012 15. Webhosting . (2012). Total Domains in Taiwan. From http://www.webhosting.info/registries/country_stats/TW 16. Wikipedia. (2012). List of Countries by Population. From

http://en.wikipedia.org/wiki/List_of_countries_by_population 17. Xahlee. (2010). Domain Names， Cybersquatting， Resell Market. From http://xahlee.info/js/domain_names.html

References

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