10/03/13

Coming soon

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.

Amy Dusto , Associate Editor

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.

Wal-Mart's intention to keep use of .grocery for itself illustrates how e-retailing could change depending on who wins control of new top-level domains. Retailers must be ready to react, Matsukata says. The way e-retailing changes, or if it does at all, will depend on how the first companies to own the new gTLDs use them. For example, big brands like Nike (.nike), Tiffany (.tiffany) and Wal-Mart have considerable market power, he says, and if they begin advertising their .nike or .tiffany addresses consumers might start using them right away. "But they may never make that investment," he says. "If that's the case, there may never be a high adoption." Neither Nike nor Tiffany responded to a request for comment.

While companies of Wal-Mart's heft can bid for top-level domains, most retailers will be looking to buy new second-level web addresses from owners of these new domains. Today a .com address bought from a registry typically costs less than $15 annually. Even if the new addresses are in the same price range, the total bill might add up if retailers and brands decide they must buy numerous web addresses to protect their brands. For example, a major brand like Nike may want to acquire URLs seemingly unrelated to its product category, such as Nike.camera, just to keep others from misleading shoppers into thinking it's a Nike-operated site.

Buying up all those addresses could be expensive if there are scores or hundreds of new top-level domains, warns David Weslow, a partner at law firm Wiley Rein LLP who focuses on trademarks, copyrights and domain names. A retailer that decides it has hundreds of addresses to corner—perhaps ourcreamer.coffee, ourbeans.coffee, ourmugs.coffee, etc.—may have to invest thousands of dollars annually to accomplish that.

One of the first new gTLD owners, .Club Domains LLC, which as of June 6 owns .club, plans to keep the domain priced competitively with .com, says Jeffrey Sass, chief marketing officer. He says he expects retailers will be among those who want a .club address, as many of them already use the term to describe their loyalty programs. ".Club would make sense for where they target those programs [on the web]," he says. "Their customers and fans can gather there."

To help spur early adoption of the domain, the first batch of .club web address buyers will have access to .Club Domains' founders' club. Sass says those buyers will be provided with information to help them use and promote the .club domain in their businesses.

Such a new domain lends itself to social sharing, says Terry Rowinski, chief operating officer of BuySeasons Inc., which operates e-commerce sites for party-oriented brands including BirthdayExpress.com, CelebrateExpress.com and BuyCostumes.com. BuySeasons plans to buy up several domains, in particular ones with the .party address ending, and drive customers to them for specific parts of the party-planning process. For example, the retailer could create Invitations.party, DŽcor.party and Photos.party, perhaps using the last one to encourage customers to share photos of their in-progress events, Rowinski says.

The new gTLDs could also prove useful for affiliate marketing, he adds. For example, BuySeasons could give an influential party planner a dedicated .party web address to help drive traffic to its e-commerce businesses.

"We'll probably need a little bit of time to see what's happening," Rowinski says. BuySeasons won't necessarily fall behind if it doesn't jump on the new domains as soon as they're available, he says, but it might miss the chance to launch a new marketing program in a cleaner way than it could with a less-specific .com address.

One of the many open questions is how search engines will treat web sites that use the new domains. Google Inc. and Microsoft Corp., operator of the Bing search engine, have not specifically said how they might change their algorithms in response to the slew of new web address endings. "Google will attempt to rank new TLDs appropriately, but I don't expect a new TLD to get any kind of initial preference over .com, and I wouldn't bet on that happening in the long-term either," wrote Google search engineer Matt Cutts in a blog post last year. Google and Microsoft both declined to add further comments.

Niraj Shah, CEO of home goods e-retailer Wayfair LLC, is certain that no matter which new gTLDs hit the web, Wayfair's current brand web sites will continue to appear high in Google search results as Wayfair continues to enhance them in ways that draw more traffic, he says. He also contends that .com will remain the most common default address ending in the United States. "While I think the top-level domains are an important thing to watch, they will have a limited effect on online retailing," Shah says.

But experts say one key benefit of introducing the new domains is to make web addresses more relevant to consumer queries in search engines—a known factor in how search engines rank results. "While speculative, I think it's reasonable to assume that SEO value will be ascribed to the right of the dot more as it becomes more relevant to the content of the web site," says Jim Rogers, vice president of marketing for enterprise services at Neustar Inc., which is helping retailer clients, including Amazon and Netflix Inc., apply for more than 100 gTLDs. "Today with a .com, .net, etc., it doesn't necessarily reflect the web site in any way."

With specific brand, topic or product names to the right of the dot, he says search engines could assume that when a consumer types in "couch," for example, a ".furniture" web site is likely to be relevant. On top of that, if the owner of .flowers ensures that retailers that don't sell flowers can't buy a .flowers address, for instance, it provides another layer of verification for consumers that the sites they're visiting are what they purport to be, he says.

Although the flood of new gTLDs isn't expected to hit the web until early next year, retailers can take a few steps to prepare for them before they arrive, Sass of .Club Domains says. First, they can register their trademarks with ICANN's Trademark Clearinghouse. Any retailer who does becomes eligible for first dibs on many of the new gTLDs during a "sunrise period," usually 30 or 60 days when brands with trademarks related to the domain's category are able to purchase or bid on (if multiple brands are interested) their desired web addresses. For instance, online shoe retailer Zappos Inc., an Amazon company, could purchase Zappos.shoes in the sunrise period for ".shoes," before the domain becomes publicly available. The Trademark Clearinghouse charges $150 per year per trademark, with discounts for multiyear registrations.

Retailers can also preregister directly with registries that they know will be selling the gTLDs they're interested in, Sass says. That way they will be notified as soon as a particular domain is eligible for sale; retailers that also register their trademarks with the clearinghouse will receive those notifications at the start of the sunrise period. Most major registries offer this service, including 1&1 Internet Inc., which says so far the top 10 preregistered domains on its site are: .web, .inc, .blog, .online, .shop, .news, .app, .tech, .site and .mail. As of mid-September, nearly 1.5 million organizations had pre-registered with 1&1 Internet, according to a live counter on its web site.

With so much interest already in the new gTLDs, retailers that don't seize the opportunity to reinvent their online presence may find themselves a step behind their competitors' newer, more relevant e-destinations.

amy@verticalwebmedia.com

@AmyDusto

Topics:

.Club Domains LLC, 1&1 Internet, Bing, BuySeasons Inc., David Weslow, Domain name registry, Donuts Inc., FairWinds Partners, Fat Brain Toys, GoDaddy, Google, gTLD, ICANN, Internet addresses, James Cole, Jeffrey Sass, Jim Rogers, Mark Carson, Matt Cutts, Microsoft, Nao Matsukata, Network Solutions, neustar inc., Niraj Shah, October 2013 Magazine, Terry Rowinski, top-level domains, top10stories2013, wayfair llc, Wiley Rein LLP

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