'.shop' domain extension has highest potential value, chances of success for companies, study finds

Cindy Allen

CAMBRIDGE, Massachusetts , June 18, 2012 (press release) – The largest Internet domain name marketplace and monetization provider, Sedo, today announced results of a study that analyzes the potential value of new generic Top Level Domains (gTLDs).

On June 13, 2012, the Internet Corporation for Assigned Names and Numbers (ICANN) revealed a list of nearly 2,000 applications it had received from organizations seeking to manage new domain extensions that will join .com, .net, .org and 18 other suffixes that currently exist. According to a statistical analysis by Sedo, the top 10 most valuable domains being sought are:
1 SHOP
2 WEB
3 SITE
4 MUSIC
5 HOTEL
6 ONE
7 BLOG
8 ECO
9 SPORT
10 LOVE

The analysis was calculated by economist, researcher and domain pricing expert, Thies Lindenthal. In addition to serving as Product Manager for Domain Pricing Strategies at Sedo, Lindenthal is also the creator of IDNX, the first scientific-grade domain price index.

“Many factors make domains unique and difficult to compare side by side, but analyzing hundreds of thousands of domain transactions on Sedo’s marketplace – and applying real estate pricing methodologies – has provided significant insight into the factors that determine domain value,” said Lindenthal. “New gTLDs are actually not that new, they’re really just traditional domain names on steroids. We should evaluate their fundamental strengths in a similar way to how we traditionally price domain names.”

Cost Versus Value

Considering the substantial cost associated with applying for and managing a new TLD, this research can help companies justify their potential investment by identifying extensions with the best chance of success. The cost involved in the new TLD process includes an $185,000 application fee, on top of a $25,000 annual fee and any operational costs that will be assumed by whoever is awarded the registry. In addition, gTLDs that have multiple organizations applying for them could go to auction, driving the cost up even more.

In addition to providing insight for companies competing to manage new TLDs, this ranking also gives end users a better idea of the domains in which they should invest their time and marketing budgets once the new extensions are launched.

Research Methodology

The ranking to predict new gTLD effectiveness is derived from a formula of five criteria that typically affect a domain’s value. Those criteria are:

Number of applicants for the new gTLD
Number of Google searches for keywords or terms within the new gTLD
Expected Cost-per-Click of online advertisements that include the gTLD as a keyword
Number of registered .COM domains that include the gTLD at the end of the keyword (e.g. MyShop.com as compared with My.Shop)
Number of preregistrations according to UnitedDomains.com

The first indication of which factor matters the most comes simply from counting the number of applications for each gTLD. If there are a lot of investors trying to secure a particular keyword, it’s a strong indication that the word will be a valuable top level domain. For example, thirteen applicants paid at least $185,000 trying to win .APP, indicating a high valuation.

For others extensions, competition is not as strong. Only Google and Microsoft stepped into the ring to acquire .DOCS, for example. The fact that most companies expected these heavyweights to vie for this TLD will have deterred their own application, suggesting that an exclusive look at total applications will be a misleading factor. However, statistical analysis overcomes this difficulty.

Exploratory research helped derive weights for each of the five factors by means of a regression analysis. Technically, the number of applicants per domain is explained by the TLDs’ scores along the other four dimensions. Using these weights, each new gTLD was ranked according to its fundamental strength. Using these estimates and the data collected in each category, a ranking of the intrinsic quality of each new extension is created.

For an additional breakdown explaining how the ranking was derived, including a Top 10 list for each of the five criteria used, visit http://bit.ly/M0FpGy.

About Sedo

Sedo, an acronym for “Search Engine for Domain Offers,” is the leading domain marketplace and monetization provider. Headquartered in Cologne, Germany and with offices in London, England and Cambridge, Mass., Sedo has assembled the world's largest database of domain names for sale, with more than 15 million listings. The success of Sedo's model has attracted a global base of more than 1 million members.

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