In its second-largest acquisition, Amazon buys the company for $970 million.
Retailers need to consider how the coming onslaught of new Internet domains—set to start hitting the web early next year—will impact their brand and retailing strategies.
Since the '90s, "dot-com" has been synonymous with "web site." However, the ".com" extension on the end of an Internet address—also known as the address' generic top-level domain, or gTLD—may soon be just one of many ways merchants set up shop on the web.
For the first time since 2004, the Internet Corporation for Assigned Names and Numbers (ICANN) this summer began approving new gTLDs for use in Internet addresses, with the first ones likely to hit the web in early 2014, experts say. Among the approved retail-related domains is .clothing, awarded to registry Donuts Inc. ICANN is an international non-profit organization that coordinates the names and numbers that make up web addresses.
Big e-retailers are staking their claims. Amazon.com Inc., for example, has applied for 76 domains. If Amazon is granted ownership of .book, one of the domains it's applied to own, consumers might soon be able to visit Amazon.book or Kindle.book to find their next read without visiting Amazon.com directly.
In addition to allowing more choices on the web, the forthcoming gTLDs will introduce new alphabets—Cyrillic, Chinese, and Arabic—into the Internet address naming system, which will help increase global Internet use, says James Cole, global communication director at ICANN. Today, just 21 top-level domains are available, including .gov, .net and .org.
"This has the potential of altering business models," says Nao Matsukata, CEO of domain name consulting firm FairWinds Partners LLC, whose clients are applying for more than 100 new gTLDs. "Any e-retailer should be watching this development carefully, and either using it to its advantage as a participant or finding ways to deal with it. No one should ignore it."
The retailers that have applied for their own brand names—a list that includes Amazon (.amazon), Wal-Mart Stores Inc. (.walmart) and apparel retailer Express Inc. (.express)—hope to protect their names from being used in web addresses by other parties—for instance Sandwiches.express—because they'd own the gTLD and be able to decide who else can use it. They'd also be able to create new marketing opportunities with sub-domains, such as Accessories.express or Holidays.express, Matsukata says, or issue customers custom e-mail addresses, for instance giving a VIP club member JohnDoe@retailer.vip.
Most retailers, though, chose not to apply for a branded gTLD that they could control—applications cost $185,000 apiece. But they will have opportunities to purchase web addresses that use generic domain names, such as .shoe or .flowers, via online registries open to anyone like GoDaddy Operating Co. LLC and Network Solutions LLC. Part of ICANN's process for deciding which applications it will grant, and to whom, includes its evaluation of how an applicant plans to make generic domains available to other parties just as .com, .biz and .net are today. The trick for retailers is to figure out which web addresses to corner and how to use them to gain a competitive edge online, while also protecting their brands from abuse by others.
"I want to protect my brand and also defend any niches that I've established," says Mark Carson, co-founder of e-retailer Fat Brain Toys, which sells online at FatBrainToys.com. To do that, his business plans to buy FatBrain.toys and some more generic addresses like Wooden.toys when the .toys domain becomes available.
"I don't necessarily see that much short-term upside in acquiring a domain like Wooden.toys, but I'm not about to let a competitor—or a future competitor—get a free pass," he says. "I don't think the manual has been written yet on future uses for these domains."
Since ICANN began accepting new gTLD applications in January, more than 500 organizations in 60 countries collectively applied for 1,930 domain names, including retail-oriented extensions like .gift, .jewelry and .home, ICANN says. In all, some 230 domains have attracted applications from more than one party. They include: .shop, .buy, .cars, .coupons .play, .book, .video, .wine, .art, .vip, .golf, .home, .store and .app. The last, .app, drew 13 applications.
Applicants don't automatically win ownership of the gTLDs they apply for, even if no one else applies. Each application goes through a phase where it is open to review by the public and by ICANN committees. For instance, ICANN's Governmental Advisory Committee, which represents nations worldwide, objected to both .amazon and .patagonia because the names also represent geographic areas. Amazon continues to push for .amazon, but outdoor apparel retailer Patagonia Inc. withdrew its application for .patagonia, Matsukata says.
As of mid-September, 1,745 applications had passed ICANN's initial evaluations, meaning they met the organization's eligibility requirements, and 121 were withdrawn.
In some cases powerful competitors are contending for a domain with considerable commercial value. For example, Wal-Mart, the leading retailer of groceries in the United States, and supermarket chain Safeway Inc. have both applied for .grocery. ICANN will decide whether to grant either retailer control over it.
It's a balancing act. "One of ICANN's key commitments is to promote competition in the domain name market while ensuring Internet security and stability," ICANN's Cole says. "New gTLDs help achieve that commitment by paving the way for increased consumer choice."
Some applicants propose restricting which organizations they will allow to have web addresses that use a generic domain they applied for. For instance, Wal-Mart in its .grocery application says that it will consider allowing outsiders to purchase .grocery addresses only after it has had about three years of exclusive access to the domain. It says that time frame will allow it to establish its internal strategy for using .grocery, writing that it applied for the domain "with the goal of promoting and protecting Wal-Mart's online presence and identity, expanding Wal-Mart's marketing and promotion efforts and providing a secure channel for delivery of online products and services." The retailer did not respond to a request for further comment.