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Why Are Brands Abandoning gTLD Applications?

MediaPost.comMediaPost.comA number of brands have recently fallen from the list of visionary companies applying for gTLDs. Hasbro’s Transformers, Hilton, GM’s suite of gTLDs and Heinz have all decided to pull their gTLD applications, opting out of participating in the first paradigm shift of the Internet.

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Why? There two likely reasons -- companies are having difficulty responding to ICANN’s clarifying questions that were designed more for an open registry than for brands, or they are balking at the costs associated with applying for and migrating to a gTLD environment.  

In the grand scheme of business, both of these reasons are shortsighted, as companies with gTLDs will have significant brand differentiation and innovation opportunities as compared to those who have not applied.

The clarifying questions that may be troubling to brands involves explaining their gTLD strategies and financial models, as brands may not have determined their exact strategies or financial models at this point. However, a response does not need to include a full-blown list of plans.

For most brands, their gTLD strategy simply involves a migration of their .com business model into a top-level domain environment. While this could certainly evolve as new ways of using gTLDs are revealed, the basic model is pretty straightforward. In addition, costs are projected to be the same as operating a .com, plus the specific registry functions of a gTLD, and revenue should not be expected to change at the get-go.

The other primary reason that brands may be dropping off is that they question the value of continuing the application process and see the cost of operating the gTLD as much higher than with .com. While there is certainly a higher cost involved, I would challenge brands to consider whether the cost savings from dropping out is worth more than the value of moving forward. The answer for any large company is “no.”  

To break this down:

1.  The cost to apply for a gTLD is $185K.

2.  The cost to migrate .com over and run the gTLD is approximately $250K per year (before you consider investing in innovative ideas). This cost represents significantly more opportunity and responsibility than .com, as brands own and can therefore leverage all the Big Data opportunities.If gTLDs don't change everything, then this costs about as much as a bad ad campaign or a spot during the SuperBowl that doesn’t work. For big car companies, hotels or even the mighty Transformers, this amounts to a rounding error. 

3.  If gTLDs do change the way everyone uses the Internet, then this is a cheap investment for owning critical Internet real estate and being one step ahead of competitors. And if gTLDs do transform the digital world and you abandon, then you are likely to go through this process again in the next round -- not to mention wasting the investment thus far. 

4.  I have talked with many C-suite executives at Fortune 500 companies, and most of them don’t want to be the leader who didn’t make a relatively small investment in the next big thing just because they couldn’t figure out how to answer some challenging questions.

This gold rush of the Internet is a calculated risk worth taking -- acquiring the real estate you want is critical, and the price is well worth it. If everything changes and you have drop out while competitors stayed in, you could lose market position.

So don’t quit while you are ahead. Think creatively, get better advice, and consider that the cost of dropping out is far greater than staying the course of opportunity.

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