Domain name market evaluation and policy development for Taiwan government

1. Domain Name Market Evaluation
& Policy Development
Dr. Kenny Huang 黃勝雄博士
huangk@mindext.com
Executive Council, APNIC
Board Member, TWNIC
1

2. Internet Statistics by Region
Population Internet Users Internet Users Penetration Growth Users %
World Regions
( 2011 Est.) Dec. 31, 2000 Latest Data (% Population) 2000-2011 of Table
Africa 1,037,524,058 4,514,400 139,875,242 13.5 % 2,988.4 % 6.2 %
Asia 3,879,740,877 114,304,000 1,016,799,076 26.2 % 789.6 % 44.8 %
Europe 816,426,346 105,096,093 500,723,686 61.3 % 376.4 % 22.1 %
Middle East 216,258,843 3,284,800 77,020,995 35.6 % 2,244.8 % 3.4 %
North America 347,394,870 108,096,800 273,067,546 78.6 % 152.6 % 12.0 %
Latin America /
597,283,165 18,068,919 235,819,740 39.5 % 1,205.1 % 10.4 %
Carib.
Oceania /
35,426,995 7,620,480 23,927,457 67.5 % 214.0 % 1.1 %
Australia
WORLD TOTAL 6,930,055,154 360,985,492 2,267,233,742 32.7 % 528.1 % 100.0 %
(Internet World Statistics, 2012)
2

3. Internet Population & Penetration
Internet
Population
Internet
Penetration
(Internet World Stats, 2012) 3

4. Internet in Numbers
(Pingdom, 2012)
3.1 B email accounts (end of 2011)
555 M websites (end of 2011)
220 M total registered domain names (July 2012)
103.1 M .com
86.9 M ccTLD
14.7 M .net
9.97 M .org
800 M facebook users (end of 2011)
1.2 B mobile subscribers (end of 2011)
4

5. DNS & Its Working
Simple view of the DNS and its working, From “The Pharming Guide”
by G. Ollmann, 2005
5

6. Domain Name Market Structure
ICANN
Domain Name Authority
Registries
Who are managers of TLDs
Registrars
Companies that sell TLDs
Resellers
Companies that are not registrars themselves
but use technology of another registrar
Registrants
Who buys domain names
6

7. Current TLD List
.aero .asia .biz
.cat .com .coop
.edu .gov .info
.int .jobs .mil
.mobi .museum .name
.net .org .post
.pro .tel .travel
.xxx
(ICANN Registries, 2012)
7

8. 245 out of 260+ Country Codes
of the World
8

9. Model for Naming, Addressing & Routing
General Internet Routing Scheme
(Bernard M Hauzeur,1986)
Routing by Name
(Bernard M Hauzeur,1986)
9

10. Analytical Framework for Identifier Resources
Rationing Methods
First-Come/First-Served
Layer 3 : Policy DN registration
Decisions about Rights
Administrative Fees
Layer 2 : Economic discourage those who might consume too much
Decisions about Rationing Scarcity
Market Pricing
Layer 1 : Technical determined by demand and supply
Coordination to ensure Uniqueness
Administrative Rules
easy to implement but unable to reflect demand & supply
Merit Distribution
“beauty contests” but would be intensely political
(Milton Mueller, 2004)
10

11. Competitiveness of Industry
Concentration Ratio CRm= Σmi=1 si
Four-Firm Concentration Ratio measures the total market
share of the four largest firms in an industry
No concentration
0% means perfect competition or at the very least monopolistic competition.
If for example CR4=0 %, the four largest firm in the industry would not have any
significant market share.
Total concentration
100% means an extremely concentrated oligopoly. If for example CR1= 100%,
there is a monopoly.
Low concentration
0% to 50%. This category ranges from perfect competition to oligopoly.
Medium concentration
50% to 80%. An industry in this range is likely an oligopoly.
High concentration
80% to 100%. This category ranges from oligopoly to monopoly.
11

12. Value Chain and Five Forces Model
Porter’s Five Forces Model
12

13. SWOT Analysis
13

14. Decision Making Methodology:
Four-Quadrant Matrix
Stephen Convey. (1994). First Things First: To Live, to Love, to Learn,
to Leave a Legacy. New York: Simon and Schuster, ISBN 0-684-80203-1.
14

15. Global Domain Name Market Overview
Total : 225 Million names
ccTLDs : 90.6 Million (40.2%)
(Verisign, 2012)
.com : 103,591,675
.net : 14,746,618
.org : 9,999,090
(2012.06.30)
15

16. COM/NET/ORG DN Counts
COM NET ORG
2004 32,390,225 5,190,241 3,226,527
2005 43,303,414 6,475,384 4,046,832
2006 57,543,658 8,450,170 5,424,925
2007 70,745,010 10,584,307 6,331,208
2008 78,361,107 11,956,290 7,246,015
2009 83,586,300 12,587,589 7,895,072
2010 91,164,993 13,515,715 8,703,984
2011 98,884,902 14,328,728 9,615,985
2012 103,591,675 14,746,618 9,999,090
(hosterstats, 2012)
16

17. COM/NET/ORG DN Histogram
140,000,000
y = 9E+06x + 3E+07
120,000,000
103,591,675
98,884,902
100,000,000
91,164,993
83,586,300
78,361,107
80,000,000
70,745,010 COM
NET
60,000,000 57,543,658
ORG
43,303,414
40,000,000
32,390,225
y = 1E+06x + 5E+06
20,000,000 14,328,728 14,746,618
11,956,290 12,587,589 13,515,715
10,584,307
6,475,384 8,450,170
5,190,241
0
2004 2005 2006 2007 2008 2009 2010 2011 2012
(hosterstat,2012) 17

18. gTLD DN Counts
120,000,000
103,120,068
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
14,724,169
9,967,847
7,844,252
3,571,727 2,237,838 1,043,405 274,496 205,266 197,657 118,324
0
.com .net .org .info .eu .biz .mobi .tel .name .asia .xxx
(hosterstat,2012) 18

19. ccTLD DN Counts
16000000
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
23
(hosterstat,2012) 19

20. ccTLD DN Counts/ Inhabitant
0.35
0.30 0.29
0.25
0.21 0.21
0.20
0.18
0.16
0.15
0.13 0.13
0.12
0.11 0.11
0.10 0.09
0.06
0.05
0.05 0.04 0.04
0.03 0.03 0.03
0.02 0.02 0.02
0.01 0.01
0.00 0.00 0.00 0.00
0.00
20
20

21. gTLD DN Counts by Country
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0
25
(webhosting,2012) 21

22. c/g Ratio by Country
18.00
15.74
16.00
14.00
12.00
10.00 9.67
8.12
8.00 7.66
6.90
6.04
6.00 5.73
5.22 5.19 5.02
4.65
4.00 3.45 3.33
2.53 2.44 2.32
2.12
1.75 1.55
2.00
1.18 1.01
0.92 0.68
0.65 0.49 0.47
0.25
0.00
4
c/g Ratio : ccTLD registrations/gTLD registrations 22

23. Sales Market (1/3)
• Sales Market Category
– Retail market
– Trade market
• Baseline Assumption
– Market price USD10 /name
• Global DN sales market estimation
– Total 2.25B names
– Sales market : USD 22.5B per year
23

24. Sales Market (2/3)
DN Trade Marketplace @Sedo
24

25. Sales Market (3/3)
DN Trade Marketplace @Sedo
Top Category 2010
25

26. Equity Market (1/4)
DN Policy vs. DN Stock Price (John Matson, 2012)
1. June 26, 2008 – GNSO Approves New gTLD Policy
2. June 20, 2011 – ICANN Boar Approves New gTLD Program
3. Jan 12, 2012 – New gTLD Application window opens
4. May 30, 2012 – New gTLD Application window closes
Measure the financial performance of publicly traded stocks associated
with DN market : Tucows (TCX: Toronto), Verisign (VRSN: Nasdaq), Neustar (NSR: NYSE),
Top Level Domain Holdings (TLDH: London) and Demand Media (DMD: NYSE)
Growth from Date to 30 May 12
Company 26 JUN 2008 20 JUN 2011 12 JAN 2012 30 MAY 2012 26 JUN 2008 20 JUN 2011 12 JAN 2012
TCX 0.60 0.81 0.76 1.43 138% 77% 88%
VRSN 38.24 32.74 36.01 38.62 1% 18% 7%
NSR 21.69 25.75 35.96 32.95 52% 28% 8%
TLDH 3.50 10.05 8.30 8.07 131% 20% 3%
DMD 14.58 7.05 9.13 37% 30%
DJ 11347 11935 12422 12420 9% 4% 0%
IXIC 2316 3653 2711 2837 22% 22% 5%
26

27. Equity Market (2/4)
DN Market Valuation
Price @7/13/2012 Shares Outstanding Market Value
TCX $ 1.22 46,238,000 $ 56,410,360
VRSN $ 43.17 157,988,000 $ 6,820,341,960
NSR $ 32.78 66,906,000 $ 2,193,178,680
TLDH $10.1 4,751,049 $47,985,600
DMD $ 11.83 83,915,000 $ 992,714,450
Five Firms Aggregated Value : $10,110,631,050
27

28. Equity Market (3/4)
VRSN Profile
VRSN
Number of Names = 103591675 (com)
+14746618 (net)=118338293
Unit Gross Profit (com) = $7.85 - $0.2=$7.65
Unit Gross Profit (net)=$5.1-$0.2=$4.9
Gross Profit = $864,734,742
P/E Ratio =42.5
Market Value =$ 6,820,341,960
Net Profit=$160,478,634
(Bloomberg, 2012)
28

29. Equity Market (4/4)
The Journey to Profitability
• DN business is a recurring revenue
business model:
2t
– The previous year’s efforts count
t
– Sales growth speed outpaces the
sales efforts Sales base from existing
recurring customers
• Previous year’s efforts count: $
– Do not need to start from scratch
Sales
every year Sales growth
outpaces sales efforts
– Less vulnerable and volatile
• Sales growth outpaces sales efforts:
– Explosive growth at upward
economic environment
Recurring
– Stable growth at downward
economic environment
Time
t 2t 3t
29

30. TW Registry / Registrars
• Registry • Registrars
ccTLD: .TW TISNet
Asia Pacific Telecom
Operator:
Chunghwa Telecom
TWNIC
Net Chinese Co.
PC Home online
Sparq Telecom
• Policy & Regulation TFN Telecom
– Telecom Act 21 Neustar
– Domain name registration & Webcc
administrative policy
IP Mirror
(92.02.11)
30

31. .tw DN Histogram
600000
y = 29729x + 142864
512399
503109
500000
444467
406669
400000
356182
332022
310579
300000
264680
238917 241585
226181
196451
200000
100000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
(TWNIC, 2012)
31

32. com.tw DN Histogram
250000
y = 10459x + 62610
200000
187098
180471
172255
155980
150000 145644
135478
125535
110074
100000 96129
92624
86367
79496
50000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
(TWNIC, 2012)
32

33. ascii.tw DN Histogram
100000
y = 8847.9x + 18077
90000
80000
73267
71920
70000 68494
60000 58090
50000
45487
40000
32159
30000
24863
20000
10000
0
2006 2007 2008 2009 2010 2011 2012
(TWNIC, 2012)
33

34. Registrar Market Shares
1.95
2.02
1.94
6.48
26.41
中華電信
7.57
NeuStar
亞太電信
網路家庭
網路中文
8.67
WebCC
新世紀資通
IP Mirror
協志科技
9.68
台灣固網
24.08
11.2
(TWNIC, 2012)
34

35. Total gTLD Names in Taiwan
Total gTLD Names in Taiwan : 67,694
Rank TLD Total Domains Market Share Net Gain/Loss
1 COM 54,027 79.8106 % 121
2 NET 5,020 7.4157 % 6
3 INFO 4,602 6.7982 % 12
4 ORG 2,721 4.0196 % 14
5 BIZ 954 1.4093 % 3
(webhosting, 2012)
35

36. Innovation vs. DNS
Correlation between Incorporation and DN
(Nominet, 2010)
36

37. Competitiveness of DN Industry
Concentration Ratio CRm= Σmi=1 si
Four-Firm Concentration Ratio measures the total
market share of the four largest firms in an industry
CR4= 94.66% gTLD (com/net/org/info)
Monopoly Market
Registry Actual Volumes vs Projected Volumes
(ICANN, 2010)
By year 4, seven of the gTLDs had missed their
projections by an average of negative 83%. Infringe NTIA agreement & ICANN Core Value
“promote and sustain a competitive environment”
37

38. Registry/Registrar Reversed Structure
Post new gTLD Stage
22 gTLDs
248 ccTLDs
Registries Registries
22 gTLDs
248 ccTLDs
1930 new gTLDs
New gTLD
Registrars Registrars
1016 Accredited Registrars 1016 Accredited Registrars
38

39. New CDN gTLD
• 1930 gTLD applications
• 116 IDN gTLD :
– Chinese : 73
– Arabic : 17
– Japanese : 9
CDN New gTLD Applications
– Korean :3
一号店 公司 天主教 慈善 書籍 盛贸饭店 诺基亚 香格里拉
世界 公益 娱乐 我爱你 机构 移动 谷歌 電訊
中文网 商城 娱乐 手机 机构体制 网址 购物 點看
亚马逊 商店 家電 手表 欧莱雅 网址 通用电气公司
企业 商标 工行 招聘 淡马锡 网店 通販
佛山 嘉里 广东 政务 深圳 网店 集团
信息 嘉里大酒店 广东 政府 游戏 网站 電訊盈科
信息 在线 广州 新闻 点看 网站 飞利浦
健康 大众汽车 微博 时尚 珠宝 网络 食品
八卦 大拿 微博 普利司通 盛貿飯店 联通 餐厅
39

40. 40

41. DN Market Value Chain
Backend
Registry Software
VCb
VCa Operators b2 Vendors b1
Registries/
Registries
a1 Registrars
DN Trade
Registrars Resellers Marketplace Brokers
a2 a3 Market c1 c2
DNS/Web DN
Hosting Holders
d1
VCd Cloud
Services
Server
Hosting
VCc
d3 d2
41

42. Value Chain Analysis
• Primary VC (value chain) • Primary VC isn’t meant to
– VCa come with missing links
• Assess missing links in VC – Market saturation
• VC with missing links isn’t
• Core competitiveness meant to be the primary VC
– Irreplaceable link in a VC • Primary VC doesn’t last
forever
– Things vary over time
– Registry/Registrar reversed
structure
42

43. VC Matrix Assessment
VC Value Uncertainty
node P1 P2 P3 Mean P1 P2 P3 Mean
a1 5 4 5 4.67 4 5 4 4.33
a2 4 4 3 3.67 2 3 2 2.33
a3 1 2 1 1.33 1 2 2 1.67
b1 3 3 2 2.67 2 2 1 1.67
b2 3 3 4 3.33 4 3 2 3.00
c1 3 2 2 2.33 2 3 3 2.67
c2 2 1 2 1.67 3 4 4 3.67
d1 3 2 3 2.67 2 1 1 1.33
d2 3 3 3 3.00 2 3 2 2.33
d3 4 5 4 4.33 3 5 4 4.00
43

44. VC Value Distribution
5.00
a1
a1 a2
4.00 d3
a3
c2
b1
Uncertainty
3.00 b2
b2
c1
d2 a2 c1
2.00
c2
a3 b1
d1 d1
1.00
d2
d3
0.00
0.00 1.00 2.00 3.00 4.00 5.00
Value
44

45. Taiwan DN Policy Strategy
5.00
a1
Deprioritize and source Risk mitigation
alternative technologies a1 a2
4.00 d3
a3
c2
b1
Uncertainty
3.00 b2
b2
c1
d2 a2 c1
2.00 Strengthen industrial
competitive advantage c2
a3 b1
d1 d1
1.00
d2
Develop fair competition d3
environment
0.00
0.00 1.00 2.00 3.00 4.00 5.00
Value
45

46. References
1. Bernard M Hauzeur. (1986). A Model for Naming, Addressing and Routing. ACM Transactions on Office Information
Systems. Vol. 4, No.4 Oct 1986 P293-311
2. Deborah A. Garza. (2008). Letter to ICANN: ICANN's Draft RFP for New gTLD. Dec 3 2008. From
http://www.ntia.doc.gov/files/ntia/publications/icann_081218.pdf
3. Elizabeth Feinler (July–September 2010). "The Network Information Center and its Archives". Annals of the History
of Computing (IEEE) 32 (3). DOI:10.1109/MAHC.2010.54
4. GNSO.(2007). Introduction of New Generic Top-Level Domains, gNSO Board Report. September 11, 2007
5. Hosterstats. (2012). ccTLD Domain Name Counts 2012. From
http://www.hosterstats.com/DomainNameCounts2012.php
6. ICANN Registries. (2012). Registries Listing. From http://www.icann.org/en/resources/registries/listing
7. Internet World Stats. (2012). Internet World Population Statistics. From
http://www.internetworldstats.com/stats.htm
8. Michael Porter. (1996). The Five Competitive Forces That Shape Strategy. HBR Must Read on Strategy. Harvard
Business Review 1996.
9. New gTLD. (2012). Reveal Day 13 June 2012 - New gTLD Applied-For Strings. From
http://newgtlds.icann.org/en/program-status/application-results/strings-1200utc-13jun12-en
10. Pingdom. (2012). Internet 2011 in Numbers. From http://royal.pingdom.com/2012/01/17/internet-2011-in-
numbers/
11. Sedo. (2010). Sedo's Domain Market Study 2010. From
http://sedo.com/fileadmin/documents/pressdownload/2010Market_Study.pdf
12. U.S. Department of Commerce. (1998). Memorandum of Understanding between the U.S. Department of
Commerce and Internet Corporation for Assigned Names and Numbers. From
http://www.icann.org/en/general/icannmou-25nov98.htm
13. U.S. Department of Commerce, National Telecommunications and Information Administration. (1998). Statement
of Policy : Management of Internet Names and Addresses, 63 Feg. Reg. 31741.
14. Verisign. (2012). The Verisign Domain Report. Volume9 Issue1, Mar 2012
15. Webhosting . (2012). Total Domains in Taiwan. From http://www.webhosting.info/registries/country_stats/TW
16. Wikipedia. (2012). List of Countries by Population. From
http://en.wikipedia.org/wiki/List_of_countries_by_population
17. Xahlee. (2010). Domain Names， Cybersquatting， Resell Market. From http://xahlee.info/js/domain_names.html
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