Will New Top Level Domains End the Rent-Seeking of Domain Name Speculators?

Thousands of people all over the world have spent the past 15 years making millions by scalping web domains that people who might put them to legitimate use would otherwise be able to register for less than $10 at their favorite domain registrar. Now ICANN, the Internet’s ruling body, is going to allow anyone to create a new Top Level Domain, potentially exploding the amount of internet real estate available to us all.

Existing top level domains – .com, .org, etc. – have become crowded. It’s as if the inventors of the Internet never imagined that the metropolis represented by .com could ever fill up. But so it has – and, for the most part, with some rather unseemly characters.

Ever wonder why your favorite Internet service appears to have been named by a toddler with a cold or a politician fond of spewing folksy word salad? Aside from the enhanced trademarkability of weird names, it’s mostly down to the fact that all the good domains – the ones composed of words you might find in the dictionary – have already been purchased by people who don’t plan on doing anything with them beyond filling them with advertising.

Here’s a completely random example: You’d think that typing “insoles” into your browser’s URL bar would take you to a site that might help you find them, but instead you land on a page with a bunch of links. And yet every day, millions of people do just this – instead of going to a search engine, they type things into that bar, letting domainers direct them, at a profit, to whatever advertisers have bought those links.

Worse, perhaps, than the effects on the user of this dictionary-based squatting are its consequences for publishers and businesses. If you have an existing trademark, you can force someone to give you the domain corresponding to it. But what if you’re just starting a business? Prepare to negotiate with domainers who will charge you a handsome price for whatever site you seek. And you thought the Internet was supposed to be a democratizing force.

Once ICANN unleashes the floodgates of new top level domains, allowing anyone with $200,000 to become a provider of everything from .eco to .gucci, the most important question is: will Google and other search engines look upon them with the same favor as the .com’s of the world? Will users? If not, then ICANN’s quest to increase the effective size of web real estate will have failed.

But if this works, it could have the salutary effect of reducing the gatekeeper role that private individuals who own large number of domains currently play. By exploiting an artificial scarcity, these toll-takers have extracted huge sums from legitimate businesses and publishers simply looking to hang up a shingle on the web.