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$2 Million Wasted on Economic Studies for New TLDs

December 9, 2010Domaining, Domainnamewire, economic studies, new top level domains, Policy & LawComments Off on $2 Million Wasted on Economic Studies for New TLDs

Economic studies about new top level domain names are futile.

Depending on which transcripts I read from the ICANN meeting in Colombia this week, ICANN has spent $1 million to $2 million on economic studies about new top level domain names to date.

This is money wasted. Not just because the reports — particularly the first two — were extremely weak. But because getting an answer will require too many baseless assumptions. In other words, the exercise is futile.

The first two major reports were a joke and seriously tarnished the reputation of ICANN. The first report from Dennis Carlton was a complete whitewash. It was like when companies commission a whitepaper to reinforce their stated point of view and pitch their product. Then ICANN paid more for Carlton to re-evaluate his first report. Not surprisingly, Carlton’s re-evaluation agreed with his first report.

Then ICANN turned to different lead researchers (although through the same main outfit) for another round. The new analysis is certainly better than the first. There’s plenty to find at fault with the latest “study”, but I think the conclusions are on target.

So Why is ICANN spending domain registrants’ money on these reports? Because it has to. In an effort to slow down or derail the new TLD process, opponents are making what I call the “economic study” argument. They say that the benefits and costs of introducing new TLDs must be quantified, or at least shown that the benefits outweigh the costs, before going forward.

This is impossible. We know there are potential benefits. And guaranteed costs. But figuring out what those are is never going to happen in advance of releasing new TLDs.

Benefits:

-Money for the domain channel. New TLD applicants make money, registries make money, registrars make money, ICANN makes money, domain bloggers make money from advertisements, and perhaps some registrants make money, too. That creates jobs and wealth. That’s a benefit. But your guess is as good as mine as to what this adds up to.

-A sense of community. Here I’m referring to both localized TLDs such as .nyc as well as — and more importantly — IDN top level domain names. I’d love to see someone try to put a number on what this is worth to the greater good.

-New ways to use the web. Supposedly some people have nifty ways to use TLDs that are outside the realm of what you can do with them today. I haven’t heard any that can’t be done on a plain-old .com. Seriously, I doubt anyone has thought of the killer application. Yet. But some day someone will. And it could be a game changer.

Costs:

-Trademark holders have to spend money defensively registering domains or even feeling compelled to get their own TLD. How much will this cost? Both sides have tried to quantify it. Proponents of new TLDs come in really low, opponents say it will cost the GDP of a small country. The truth is we don’t and can’t know. Consider this: will the cost be different if there are 10 generic new TLDs versus 500 new generic TLDs?

-User confusion. Lots of people will be confused when they see TLDs they’ve never seen before. They might end up at .com instead. How many people? What will the “cost” be to them? Will they end up getting phished? How much is their time and inconvenience worth? Yeah, put a number on that one.

-Costs to domainers. New rights protections may be abused and use to hurt legitimate domain name owners, even in .com. But then again, .com owners might get a flood of traffic from people looking for the .play equivalent. (I’m including this as a joke. It’s not like this would actually be considered in an economic report.)

-Legal challenges. A lot of money will be spent on lawyers. ICANN is setting aside a third of application fees for this. And there will be more governmental interference in the web. There’s a chance that ICANN could implode, landing the domain name system in a complete mess and control by another entity. Quantify that.

This isn’t a complete list of the benefits and costs of new TLDs. But even with this short list, I think it’s impossible to put a “real” number on it.


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