A controversial change to the Internet addressing system approved today opens up many new opportunities for retailers, and the specter that they may have to spend heavily to protect their online brands.
ICANN, the organization that oversees the Internet address system, voted at a meeting in Singapore to allow companies and organizations to apply for new top-level domains in addition to the 22 domains already in existence, such as .com, .gov, .org and .net. The idea, which has been under discussion for several years, is that cities could create domains such as .Paris and .NYC, and manufacturers and retailers could create domains based on their categories of their own names, such as .cameras and .Nike.
“Today’s decision will usher in a new Internet age,” said Peter Dengate Thrush, chairman of the board of ICANN, the Internet Corporation for Assigned Names and Numbers. “We have provided a platform for the next generation of creativity and inspiration.”
The new domains will make it easier for major brands to communicate with customers and offer personalized services, says Armando Dacal, senior vice president of sales and marketing for Melbourne IT Digital Brand Services, one of several companies that registers Internet addresses on behalf of domain owners.
For example, instead of Nike Inc. offering a domain name today such as Nike.com/JustDoIt, Nike could create a web address JustDoIt.Nike.com. Camera maker Canon Inc. could offer each customer her own personalized sub-domain, such as MariaPerez.Canon where Maria could upload her photos and share them with friends. “There are some clear benefits to brand owners in simplifying communications to consumers,” Dacal says.
But there are also costs and a slew of potential competitive issues that retailers and consumer goods manufacturers will just now be forced to address, says David Weslow, an intellectual property law in the law firm of Wiley Rein. “There were a lot of organizations waiting to see it would be approved,” Weslow says. “After today’s vote, it’s clear it’s going to happen.”
In its vote today, ICANN approved a timeline and a description of application procedures that run roughly 350 pages. ICANN will accept applications for new top-level domains from Jan. 12, 2012, through April 12, 2012, then evaluate the applicants. Financial stability, an organization’s good reputation and technical capabilities will all be considered by ICANN, Weslow says. ICANN could approve new domain names as early as November 2012, and Weslow says the new domains could begin to function as early as the first quarter of 2013.
The cost to apply is $185,000, a fee likely to keep out all but the largest companies or government agencies. The cost of launching a domain that would just be used by a single company, such as .Walmart, is likely to be at least $350,000, Weslow estimates. The cost would be greater, he says, for a category name such as .camera or .NYC that would be selling sub-domains to many other entities, such as Marriott.NYC or Nikon.camera.
While this is mainly of immediate concern to large organizations that could potentially create their own top-level domains, Dacal of Melbourne IT says it will also open up new web addresses for much smaller players. For instance, a hotel called Seaside that was unable to acquire the domain Seaside.com, might be able to nab Seaside.hotel, if someone creates the .hotel top-level domain.
One of the concerns among large brands is whether they will have to register their names as sub-domains to all the new domain names, to prevent someone else from benefiting from their brand names. As new top-level domains have emerged in recent years, such as .Asia and .biz, Weslow says, “We’ve taken the approach, ‘Let’s think of what the harm would be if someone unaffiliated were to register a site name in that registry. What are the chances consumers will try that extension?’”
Companies will have to set priorities, based on the likelihood that a sub-domain containing a trademarked name would be used by consumers, he says. “For other than the largest companies it’s not going to be practical to defensively register across all new registries,” he says.
He says ICANN will not allow trademarked names to be licensed by anyone other than trademark owners. But he says there could be controversies where companies have similar names. For example, Delta Air Lines and Delta Faucets could both apply for the domain .delta. If such a dispute could not be resolved privately, Weslow says the domain name would be auctioned off to the highest bidder.
Another trademark and domain name attorney says ICANN's move is controversial, in part because the organization has not demonstrated the need for the new top-level domains. "And the system is certain to create major headaches for companies because of the need for increased monitoring of all the new domains, and the real potential for cybersquatting and creation of bogus addresses," says Janet Satterthwaite of the Venable law firm in Washington, DC. She estimates a company planning to apply for a top-level domain should budget as much as $500,000 for the first couple of years to cover the licensing fee, attorneys fees, consultant fees and fees of registry service providers.
ICANN says it expects about 500 applications in this round. And the organization has not said when it will reopen applications after this round. Weslow says that might lead some large organizations to apply now lest they get shut out of attractive domains for several years before ICANN takes new applications.
Melbourne IT says 150 organizations have expressed interest to it in applying for a new top-level domain, and 92% of them indicated their first choice would be a domain of the .brand type, such as .Canon. (Canon is one of the few companies to publicly indicate it plans to apply for a domain that incorporates its name.) A further 11% of those organizations say they are interested in more generic domain names, such as .bank or .hotel.