Archive for October, 2014

What’s the ROI on a $20m TLD auction?

Monday, October 20th, 2014

RyanBakerBy Ryan Baker

Ryan Baker, ARI Registry Services’ Industry Consultant, offers insights into valuing a TLD and crafting a winning auction strategy to help applicants in contention sets secure their highly prized TLDs.

ICANN have taken a solid stance in regards to contention sets, with those yet to be resolved soon to be forced into auctions of last resort in the coming months. As expected, this has increased the velocity of private settlements between applicants, either via deals or private auctions.

It seems like most applicants (wisely) don’t want to see their funds going into ICANN coffers unnecessarily.

While the prices paid for TLDs at private auction are a closely guarded secret, talk abounds in industry circles of prices approaching US$20 million for some contention sets.

Are these prices an outstanding investment or sheer lunacy?

The answer lies in being able to implement a strategy that generates solid revenues, whilst understanding the true costs of running a TLD.

Take for example the .sex TLD which was recently reported as having sold for USD 3 million. Intuitively this could appear to be a bargain for perpetual ownership of such a strong keyword TLD, considering the size of the industry, and the fact that directly comparable but much less flexible assets sex.com and sex.xxx sold for $13 million and $3 million respectively.

Or was the price tempered given potential concerns of ‘unexpected’ delays or political concerns such as those that impacted the .xxx TLD or queries over the competitive impacts of .xxx, .adult, .porn etc.?

While domain industry hyperbole over auction prices may be no more than scuttlebutt, there can be no denying that there have been some exceptionally high auction prices through the transparent ICANN auction of last resort process, such as .vip ($3M), .buy ($4.5M) and .tech ($6.7M).

What price is too high to pay?

At some point, without an amazingly viral marketing campaign and a magically cheap operating plan, the operations of your TLD can send you broke within a short matter of time.

Having being tasked by some applicants to assist in this very issue, I’d like to share the first two questions I am generally asked when sitting down with customers to define a TLD auction strategy:

1. How do you appropriately value the asset to gain enough capital to win at auction?; and
2. At what price does this TLD become unsustainable in terms of ROI?

The answer to both of these questions can only be divined after comprehensive analysis of both sides of the ledger; the potential revenues AND the real-world costs. Each has their own significant considerations.

Revenue

Calculating forecasted registrations from Sunrise and ten years of operating is relatively simple.

However, smart applicants are thinking beyond just x% of the total target market * wholesale price and realizing that the real benefit of operating a TLD is in finding the hidden value of these complex assets.

The value in the key partnerships, spinoff properties, premium domain name sales and associated businesses (just to name a few) which will make far more revenue than just domain name sales.

Costs

The second part of any good analysis is costs.

There is no such thing as a free lunch, and in the case of a TLD, you’ve got the obvious costs such as your registry, marketing and registrar management, and the not so obvious including managing ICANN compliance and dealing with an increasingly volatile regulatory environment.

Each of these has the potential to send your business spiraling backwards if not managed correctly.

Understanding and predicting all of these cost centres is one of the most important elements of working out your TLD’s potential ROI. To effectively complete this task, you really need the insight of folks that have been managing TLDs for many years.

Next steps?

Firstly, you’re not alone here. If all of this applies to you, you can rest assured that it’s impacting your competitors too.

However, it is time for you to get serious. If your auction strategy can achieve more ROI than your competitors, then you’ll enter the auction with a strategic advantage that could prove the difference in your one shot at securing your TLD

A good auction strategy relies on two fundamental principles:.

1. Knowing what value the TLD represents to you
2. Knowing what value the TLD represents to your competitors

If you aren’t absolutely certain you know the answer to the two elements above, you might be blowing your one and only chance.

Having a clear vision, a strong auction strategy and some help from those with experience in the process will ultimately decide whether you walk away on auction day with big frown or a profitable TLD.

By Ryan Baker
Industry Consultant
ARI Registry Services

Grand Final marketing dominated by .com.au domain names

Wednesday, October 8th, 2014

Adrian KinderisBy Adrian Kinderis

This year’s AFL and NRL Grand Finals set viewership records for the number of people who tuned in to watch the matches.

A whopping 4.6 million people watched the Rabbitohs beat the Bulldogs on Sunday night, making it the highest rating television program this year. Meanwhile, the AFL Grand Final saw 4.2 million people tune in, which is no mean feat either.

Clearly, our footy finals represent the premier stage for high-reach, large-impact television advertising in Australia.

As I do every year, I wanted to see how advertisers in Australia use the AFL and NRL Grand Finals to engage viewers, deliver a compelling message, and most importantly generate a call to action.

Here’s what I found:

The stats

Like in previous years, .com.au domain names were the primary call to action seen in the ads for both Grand Finals. Out of the 55 ads aired during the games, 41% included a .com.au domain name while only 12% referred to a .com domain name.

Domain names were clearly the best on ground in terms of advertising call to actions. While social media holds a prominent place in advertising nowadays, it was left on the bench during the Grand Finals, with less than 10% of ads referencing either Twitter or Facebook.

This is remarkably consistent with what we saw in 2013 and 2012.

Telephone numbers, mobile apps and search were the remaining calls to actions seen, while a quarter of ads chose to run with no call to action.

Implications

As I’ve reported over a number of years now, domain names – and in particular .com.au domain names – remain the mainstay of marketing calls to action.

The most interesting observation is the decline in use of social media in advertising. Despite all the hype around social, it appears marketers have reverted back to the tried and tested formula of domain names. Social has its place, it’s just not in Grand Final TV advertising.

To me, this suggests that marketers still believe that the website remains a foundation of any direct response lead marketing strategy, especially when a 15- or 30-second ad slot costs upwards of $100,000.

Social as a call to action

It seems the novelty of social has abated and Australian marketers are now integrating social as part of a wider digital strategy, instead of splashing it around in every advertising campaign.

On almost all occasions, social was introduced in conjunction with the domain name and not instead of it. This shows that marketers now have a greater appreciation of the role domain names and websites play in generating awareness and education, and the role social media plays in encouraging engagement and conversations.

Social has a place; it just isn’t the only place for a brand to exist.

Search as a call to action

One trend I have been following closely this year is the emergence of search-based calls to action. I was pleased to see that there was a stark drop in search calls to action in the advertisements at this year’s Grand Finals.

Brands such as Holden, ANZ, BMW, Harvey Norman and many others are increasingly ditching domain names in favour of directing viewers to use a search engine like Google to find their website.

I’ve been a vocal critic of search-based calls to action (as you can read here in my blog) because I think they’re ineffective, unnecessary and provide competitors an opportunity to steal your customers.

For instance, in the NRL Grand Final, Holden directed viewers to search for ‘VF Changes Minds”. This is difficult for viewers to remember during an ad break and if they do get a chance to search for the term (as I did), they’ll also be exposed to a competitive environment and view search results from news stories, Holden dealers and automotive forums.

There’s no guarantee that searching for “VF Changes Minds” will result in someone visiting the Holden website and I think the practice is a wasted opportunity for customer engagement.

2015 Grand Finals

It is clear that domain names will continue their dominance and I don’t expect any changes here come 2015.

.com.au is Australia’s home on the Internet and it will remain the authoritative source of truth for Australian businesses online. When given the chance to engage with more than 4 million Australian TV viewers, a .com.au domain name is the perfect call to action.

What will change by 2015 is the domain name landscape and the creative options marketers have at their disposal.

Right now, the first of hundreds of new Top-Level Domains such as .melbourne, .sydney and .afl are being launched, offering marketers an additional option in their ‘.menu’ of calls to action.

Only last week we launched the .melbourne Top-Level Domain and savvy brands such as the Bank of Melbourne, Melbourne Festival, Flower Drum Restaurant and The Marriner Group have become some of the first businesses to adopt a .melbourne web address. Check out www.live.melbourne for more information.

Come Grand Final time 2015, we expect many more major brands to be sporting a .melbourne, .sydney or any other type of new domain name alongside their .com.au web address.

There are many benefits for adopting one of these new domains, from potential improvements to SEO and message recall, to being able to get the exact match name you always wanted.

It will be interesting to analyse the impact of new Top-Level Domains next year and I hope to see a .melbourne or .sydney domain featured next in year’s Grand Finals.

By Adrian Kinderis
CEO of ARI Registry Services