Seasoned domain industry veteran shares his thoughts on the challenges new TLDs face in China

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Pinky Brand is someone that I’ve always looked up to in the domain industry. He’s been involved at many levels for a long time, long before I got started, and he’s sold two domain portfolio management startups to public companies so he definitely knows how to build a solid business. Most recently Pinky has been putting a lot of focus on the Chinese domain name market and the various intricacies involved in launching and growing a domain business there.

As we’ve all witnessed, new TLDs have struggled quite a bit this year and particularly in China where the regulatory process around domain names is different from the US and Europe. Last week Pinky shared his thoughts on some of the challenges that new TLDs face in China and I thought he shared a very interesting perspective, in his post he said:

“Now it seems that some TLDs are at a growth pause or experiencing negative growth, particularly in the cases of some new gTLDs that were heavily promoted in China, or where promo deals were done with greater China area registrars. I don’t need to call them out. You know who they are.  

Today’s market and regulatory conditions surrounding the creation and trading of domain names is quite different from market conditions that existed in the past. The China bubble has burst and the free-to-nearly-free domain create promos don’t seem to have worked. 

Some registry and registrar operators seem to have never adjusted to the new realities, or figured out how to leverage all the incredible data, tools, and experienced human intelligence available to them today vs. relatively little that was available to us 15-20 years ago, not to mention common business sense.

Some registry operators have latched on to a PR huckster type of introduction to the Chinese market that might please inexperienced applicants and domain name investors at first, but does little to demonstrate value compared to .com or the local ccTLD (such as .cn) and how to achieve scaled up real business and end-user utilization of a particular TLD via the registrar channel.” (Source – PinkyBrand.com)

I think Pinky makes a great point here and one that shouldn’t be overlooked – today’s market and regulatory conditions around domain names is different than it was in the past. When big changes happen in an industry there’s usually two approaches companies take:

  1. Invest in innovation
  2. Cut costs and keep doing the same thing

Nowhere has this been more public that in retail where stores are closing left and right and some of the most iconic brands are filing for bankruptcy because they failed to adapt to changing market conditions. You have companies like JC Penney and Sears who are slowly dying, cutting costs where they can and clearly not innovating in any meaningful way. Cutting costs can seem like a quick way to stop the bleeding…but without adapting to change, it’s really more of a slow death.

The same is true for domain names and new TLDs. It’s easy to think that launching a new TLD is innovative itself, but it’s only innovative if you’re adapting your business to changes in market conditions. This isn’t a one time correction, it is a constant process. Like Pinky says in his post:

“Especially for China. China is HARD.

You will not be successful there, as a foreign registry operator, at a minimum, unless you understand that you will likely lose money or barely break even for several years and are prepared to deal with that reality. You must be in it for the long term. Long term, at a minimum, is 5 years of sweating it out (flying back and forth on a near monthly basis) before things *might* work out.” (Source – PinkyBrand.com)

I think the new TLDs that will have the most staying power are those that adapt and grow in these changing climates and embrace the challenges ahead, don’t ignore them, don’t pretend like they don’t apply to you, but really commit to the long game. If you want to understand more about the complexities that new TLDs are facing, particularly in China, and how this impacts the domain industry as a whole I highly recommend reading Pinky’s whole blog post here.

Thanks for sharing Pinky! As I’ve said many times before, we’re lucky to be in an industry where are leaders are so transparent and take the time to share the good, the bad, and the ugly, with the rest of us.

 

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