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The Evolution of Domain Name Industry: Past, Present, and Future

The Evolution of Domain Name Industry: Past, Present, and Future

The domain name system was first developed in the early 1980s along with the creation of the internet. In the beginning, domain names served mainly as easy to remember addresses for computers on the ARPANET network. Some of the earliest domain names included mit.edu, stanford.edu, and ucla.edu.

The responsibility for managing domain names and IP addresses fell to the Internet Assigned Numbers Authority (IANA) and the Stanford Research Institute. They maintained a simple text file that mapped domain names to IP addresses which was distributed to anyone running a computer on the early internet.

In 1985, only six top level domain names existed – .gov, .edu, .com, .mil, .org, and .net. The .com top level domain was meant for commercial entities, .edu for educational institutions, .gov for government agencies, .mil for military, .org for non-profit organizations, and .net as a catch-all for anything that didn’t fit into the other TLD categories.

Domain name registrations were free initially and done on a first come, first served basis. By late 1987, there were over 10,000 registered domain names as more universities and companies connected to the internet. However, the process for registering and managing names became labor intensive as the scale increased. This led to the creation of the first domain name registrar company, Network Solutions, in 1991.

The early domain name system was also very US-centric until the late 1980s when other countries began connecting to the internet and establishing their own country code top level domains like .uk for the United Kingdom and .de for Germany. This marked the beginning of the expansion of domain names beyond the original six generic TLDs.

The Explosive Growth of .com

In the 1990s, the commercialization of the internet led to the explosive growth of the .com top level domain. With more businesses establishing an online presence, there was huge demand for .com domain names. In 1995, there were fewer than 100,000 .com domains registered. By the end of 2000, this number had grown to over 30 million.

Network Solutions enjoyed a monopoly on .com registrations until ICANN introduced competition from other registrars in 1999. This drove the cost of registering a .com name down from $100 initially to just $10. With lower prices and greater efficiency, .com registrations only accelerated.

It was also during the dotcom boom that domain name investing and speculation really took off. People began buying up domain names related to common words, products, companies, industries etc. hoping to sell them later at a profit. Some domain investors registered thousands of domain names, many of which were never even used.

Of course when the dotcom bubble eventually burst, many of these speculative domain investments didn’t pan out. But domain name investing remained a popular activity, especially as high profile reports surfaced of domains like business.com or beers.com selling for millions of dollars.

The .com dominance continued into the 2000s. Even as ICANN introduced more TLDs, none were able to achieve anywhere close to the adoption rates of .com. By the late 2000s over 80 million .com domains were registered.

New gTLDs – .biz, .info, .name etc.

In 2000, ICANN began a process to introduce 7 new generic top level domain names to complement .com, .net and .org. These were .biz for businesses, .info for informational sites, .name for individuals, .pro for professionals, .aero for aviation industry, .coop for cooperatives and .museum for museums.

They began accepting registrations for these New gTLDs in 2001. However, uptake was quite slow and by 2003 there were only around 3 million domains registered across all 7. The .info TLD grew the fastest mainly because many domainers registered .info versions of their .com domains. But none of the New gTLDs posed any real threat to .com dominance.

A few more gTLDs trickled in over the years like .jobs, .travel and .mobi but met similar lackluster adoption. The New gTLD program was generally seen as a failure and it took ICANN until 2011 to try again with a new massive expansion.

New Expanded gTLD Program

In 2011, ICANN initiated a massive expansion of generic top level domain names, allowing essentially any company or organization to apply for and operate their own gTLDs. Some of the first new gTLDs like .xxx for adult sites and .post for postal services launched in 2011.

But the floodgates really opened in 2013 and 2014 with hundreds of new domain extensions going live. These included branded TLDs like .microsoft, .google, .canon and .abc. There were also generic TLDs like .online, .app, .shop and .store. In total, over 1,200 new gTLDs were added within just a few years.

However, these new gTLDs faced an uphill climb against .com which was entrenched in most internet users’ minds as the standard domain extension. Some of the new gTLDs like .link, .guru and .club have achieved decent adoption numbers in the millions. But most remain fairly niche and underutilized. .com still holds over 40% share of all TLD registrations.

That being said, the New gTLD program achieved ICANN’s aims of promoting more innovation and choice in the domain industry. The program demonstrated that the DNS system can handle additions of hundreds of new gTLDs without breaking. And companies now have more options if their ideal .com name is not available.

Country Code Top Level Domains

While .com was taking off globally, many countries also established their own country code top level domains in the 1990s. Usage and regulations for these ccTLDs (like .co.uk for UK, .fr for France, .jp for Japan etc.) vary. Some like Tonga’s .to are open worldwide like gTLDs while others like .us and .ca have restrictions.

Most ccTLDs follow rules and regulations set by the government or nonprofit entity delegated to manage the TLD for that country. This differs from generic TLDs like .com which are operated by private companies under contract from ICANN. There are now over 250 active ccTLDs.

Some ccTLDs have become popular globally like .io, .tv and .cc. Usage of ccTLDs varies greatly by region – Europeans tend to favor .co.uk, .de, .nl etc. while Americans overwhelmingly use .com. But ccTLDs collectively represent around 40% of the domain name market, giving them a major share especially as more people go online globally.

New Uses and Users

In the early 2000s, domain names gained importance beyond just for branding websites. Blogging platforms like WordPress and Tumblr popularized the use of custom domain names for personal blogs and sites. And social media sites like Facebook and Twitter allow users to create custom URLs with their handles.

Domain names have also become part of branding for mobile apps, Internet of Things devices, cryptocurrency wallets and more. The growing custom domain name market includes individuals, small businesses and non-tech organizations that historically were less likely to own domains.

Usage of domain names is now going beyond the Latin alphabet as more internationalized domain names (IDNs) supporting local scripts launch. IDNs for Chinese, Arabic, Cyrillic and other scripts represent another growth segment.

In the early days, domain names were used predominantly by large companies, tech startups and institutions. But the domain name ecosystem today serves a much broader and more mainstream audience.

The Rise of New Registrars

Network Solutions enjoyed a profitable monopoly on domain registrations until 1999 when ICANN introduced registrar competition. This opened the doors to companies like Register.com, Tucows and eNom that helped make domain names more affordable and accessible to small businesses and individuals.

The 2000s saw even more new entrants like GoDaddy, Namecheap and Moniker become leading registrars. Healthy competition between registrars kept driving domain prices lower. Today, users can register new domain names for as little as $1 to $10 per year.

In the 1990s and early 2000s, bulk preregistration of domain names was popular with investors who would acquire thousands of names from Network Solutions and other registrars during promotions. This led to a vibrant aftermarket for domain names.

But as prices dropped and inventory expanded, domain name aftermarket sales have declined. The rise of new TLDs plus increased competition further moderated wholesale domain name prices and demand.

However, premium domain names consisting of short dictionary words, single keywords or valuable acronyms still command healthy sale prices from end-users and larger companies. This niche high end domain market persists alongside the commoditized bulk domain name market.

The Emergence of Drop Catching

Every day, thousands of registered domain names expire and become available for re-registration if not renewed on time. In the early 2000s, this spawned a practice known as drop catching.

Companies would setup systems to monitor expiring names and automatically try registering desired names as soon as they became available. This allowed them to quickly scoop up potentially valuable expired names.

Drop catching drove up competition for good expired names. Registrars responded by building drop catching services into their own systems. This allowed users to backorder names approaching expiry. Users no longer needed custom systems to participate in drop catching.

The rise of new TLDs which have to be renewed annually also increased the pool of potentially good names expiring daily. However, the best expired names typically get snapped up immediately by the many competing drop catch systems. The market has become saturated, leading to a decline in this sector over time.

The Secondary Marketplace

The original wholesale domain name aftermarket primarily existed through various forums and auction sites where brokers would trade names. But in the late 2000s, full featured domain marketplaces began emerging that made buying and selling domains much easier.

Sites like Sedo, Afternic and Flippa introduced end-to-end domain listing, escrow and transfer systems. These new secondary marketplaces opened domain investing and sales to a broader audience beyond mainly brokers and large buyers. Listing domains for sale became as simple as creating an account and entering a name.

These platforms enabled easier listing, discovery and transfers for the long tail of users with just a handful of names to sell. They remain popular for their large inventories of available domains spanning new TLDs and ccTLDs beyond the old .com focused forums. The secondary marketplace model accounted for a large share of aftermarket sales in the 2010s.

However, as premium domain values declined, secondary marketplaces saw decreasing transaction volumes. Major sales still happen but the typical name listed for a few hundred or thousand dollars see limited interest nowadays. This followed the broader decline of smaller scale domain investing as prices dropped.

The Rise of Parking & Monetization

In the early 2000s, domain monetization and parking services emerged that allowed domain owners to generate ad revenue from unused names. Companies like Sedo, GoDaddy and NameDrive setup automated systems that displayed contextual ads on domains based on the name itself.

So if you owned coffee.com but weren’t ready to develop it, you could point it to a parking service to display ads about coffee and earn some income. This made it more feasible for investors to register domains speculatively without a specific buyer in mind and still profit.

Domain parking became a multi-million dollar industry in the 2000s at its peak, enabling investors to earn thousands per month from premium portfolio domains. However, revenue declined over the years as Google cracked down on low quality ad heavy parked pages. New gTLDs also exponentially increased the number of domains competing for parking revenue.

While still around, parking today generates small amounts for the average domain name. Most monetization focuses on premium names owned by end-users, not portfolios. But parking was pivotal in the growth of domain investing by making names profitable pre-development. This drove millions of registrations across TLDs like .info purely for ad revenue potential.

The Startup Boom

In the mid to late 2000s, technology startups began proliferating at a rapid pace. Attracting venture capital and scaling fast, these startups looked to make big splashes quickly. Many sought out premium domain names to establish their brands.

Sales of domains like fb.com for Facebook, lo.com for LiveOps and tw.com for Twitter highlighted how the startup boom was creating new demand for domains. Startups also drove up .io domain prices as this TLD became the preferred choice of many tech companies.

Beyond headline sales, even lesser startups sought out quality one word .com domains which were perceived as essential for any credible internet business. Startups flush with funding generally didn’t mind paying premium prices of $10,000 to $100,000+ for domains that fit their brands.

This marked a shift from earlier decades when startups mostly opted for longer less desirable domains they could register cheaply or for free. The competitive funding environment made premium names more of a startup priority and must-have.

The Rise of Domain Servers & Parking Companies

In the mid-2000s, domain-focused web hosting and parking companies emerged to cater to the domain investment and monetization market. Companies like InternetTraffic.com, DomainNameSales and SmartName offered services aimed specifically at portfolio owners.

These domain servers provided unlimited hosting at bulk discounts along with built-in parking and sales pages. This enabled easy monetization and listing of entire portfolios using consolidated tools and DNS management. Domainers could point all names to their servers instead of juggling many accounts.

Companies in this space like Dynadot and Igloo also built out premium services focused on reducing time listing domains for sale or rent across multiple platforms. Domain investors became a significant customer segment for certain hosting and parking providers in the 2000s.

However, both domains under management and revenue per name have declined industrywide. Many companies folded or pivoted as the investment boom cooled off. But niche providers catering to portfolio owners remain active in servicing this market.

The Google Effect

Early search engines like Yahoo, AltaVista and Lycos ranked sites largely based on keywords and page content. This allowed creators of “portal” sites built purely to rank for many terms to do well in early search results. Domain names themselves carried little weight.

But in the 2000s Google’s focus on trust and authority boosted the search visibility of sites using premium, relevant domain names. Owning a descriptor .com name became vital to outranking sites with generic TLDs or domains not closely tied to their topics.

This “Google effect” made keyword rich domains increasingly coveted. Whereas companyname-site.com may have sufficed earlier, having the exact branded companyname.com domain became very advantageous. The closer a domain name matched the search term, the bigger the SEO boost.

Domainers responded by targeting more keyword-rich domain names across TLDs. Generic business terms, product names, news sites and other high search volume phrases grew more desirable. Google’s algorithm updates emphasized domain name relevancy in ranking, driving demand.

Defensive Registrations

As companies increasingly valued shorter, brandable domains, many adopted bulk defensive registration strategies. They would preemptively buy up domains related to their brand, products or trademarks to prevent others from registering them.

Defensive registrations became common during the rapid gTLD expansion as companies sought to secure .companyname versions across hundreds of new extensions. A single brand would often register their name across dozens or even all current TLDs.

While most of these defensively registered domains just redirected to the core .com site, they allowed brands to control and protect their online identity. Defensive registration spending became a notable cost factor that drove registries’ registration numbers for new gTLDs.

But this also resulted in many premium domains being effectively warehoused and unused for any real web presence. As speculators moved out, big brands and corporations became essentially the only buyers at name auction events purchasing names for defensive reasons.

The Rise of Domain Tasting

Domain tasting refers to the practice of temporarily registering domains during the 5 day add grace period (AGP) to test their traffic potential before deciding to keep or delete them. Tasters would set up pages full of ads on parked domains and refund any that didn’t earn enough.

ICANN rules let registrars offer AGP refunds to customers essentially as a trial period for names. But this was abused by tasters testing domains at scale to only keep profitable ones while returning the rest for full refunds. Tasting became widespread in the mid-2000s, enabled by some registrars offering easy mass tasting services and APIs.

At its peak, over 75% of new .com registrations were deleted during AGP, costing millions in wasted admin costs and registry fees. In 2008, ICANN instituted a policy deterring tasting by requiring fees for domains deleted during AGP. This led to a dramatic decrease in domain tasting activity.

However, some registrars still facilitate limited testing of names via add-on tasting packages. While not at previous scale, domain tasting persists today as a tool used in assessing newly registered names. But excessive domain tasting is generally discouraged inregistrar agreements.

Internationalized Domain Names

Internationalized domain names (IDNs) containing local scripts like Chinese, Arabic, Cyrillic etc. began rolling out in the early 2000s. This allowed web addresses in languages beyond Latin alphabets. Adoption was initially slow but grew steadily in Asia and other regions.

By 2021, there were over 15 million registered Arabic domain names across TLDs like .شبكة and .السعودية. Chinese IDN registrations exceed 3 million across .中国 and .中文网. Other IDN TLDs cover scripts from Russia, Thailand, Korea and more.

IDNs opened the domain name space to speakers of non-English languages with native alphabets. This drove millions of new registrations from populations previously underserved by domains restricted to Latin scripts. IDNs are now an established domain sector especially across Asia and the Middle East.

New IDN TLDs continue launching, broadening access for speakers of diverse languages. Major registries report IDNs representing 10% or more of new registrations. While still a fraction of global domains,

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