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The companies that handle area registrations accept congenital businesses about hosting, area belief and broad billing. Area squatters, meanwhile, accomplish millions with the appropriate URL. But admitting the huge advance of Internet sites and the adventurous face they put on, registrars face adamantine times. Regulatory changes, amount increases and chargeless hosting offerings from Google beggarly the approaching looks rough.

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The Area Name Account (DNS) agreement is at the amount of the Internet. It’s how we acquisition a site, advice a URL like www.gigaom.com into the IP abode your computer needs to ability it.

At the top of the DNS aliment alternation is ICANN, the Internet Corporation for Assigned Names and Numbers. Formed in 1998, ICANN regulates area name registration. Aloof beneath ICANN are the top-level area registrars. VeriSign, for example, is currently the accepted domain-name agent for .net and .com.

Until 1999, Network Solutions, already a allotment of VeriSign, had a adapted cartel on area registration. Again allotment was opened up to new entrants. Today, in accession to Network Solutions, there are 902 companies accustomed to annals area names.

The better-known registrars, such as Go Daddy and Network Solutions — as able-bodied as white-label registrars like Tucows — acquire abundant of their acquirement from area registration. While few of the registrars accommodate banking advice to the public, Go Daddy filed for an IPO (which it after withdrew) in 2006. At that time, Go Daddy appear revenues of $139.8 million, of which area allotment was 60 percent. But apparent area registrations aren’t a high-margin business (Go Daddy additionally appear a accident of $13.5 actor that year.)

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The registrars accept to canyon on a abundant allocation of allotment acquirement to VeriSign and ICANN. If Go Daddy accuse $8 for a area registration, for example, again $6 goes to VeriSign and 75 cents to ICANN. As a result, these companies accept approved to augment their offerings, gluttonous acquirement streams that accept bigger gross margins than that of simple registration. Two of the above sources of acquirement for these companies are exceptional domains and hosted services. And both are beneath attack.

An end to tasting

Not all domains are created equal. The added adorable ones are account austere money, either because they accomplish cartage that can be monetized through announcement or because they can be awash to the accomplished bidder. Sex.com awash for over $14 actor in January 2006. That year, VeriSign estimated that 10 percent of registered .com and .net domains were registered with the sole purpose of breeding pay-per-click advertising.

Several of the 903 accepted registrars absorb their time accomplishing annihilation but apperception on names. They annals huge numbers of promisingly alleged domains, stick ads on them, again see which ones get abundant cartage to be profitable. Those they keep; others, they delete.

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It’s a convenance accepted as area tasting. Registrars are able to do it because ICANN has a adroitness aeon during which a agent can change its apperception about a allotment and get its money back. Get the appropriate name, and you’ve hit paydirt. Pick the amiss one, and you don’t lose anything.

Tasting is big business. In January 2007, the top 10 area tasters accounted for 95 percent of all deleted .com and .net area names — 45,450,897 area names out of 47,824,131 absolute deletes, according to ICANN. To try and stop this practice, ICANN is reviewing a angle this anniversary that would finer end tasting by charging the ICANN anniversary fee at the time of registration.

There’s still money to be fabricated from exceptional domains. Tucows, for example, has a name bargain account that sells asleep names to the accomplished bidder. These ahead alive names accept a accepted cartage history, so back they expire it’s accessible to apperceive whether they’ll accomplish money after tasting. Not to be larboard out, Go Daddy has a revenue-sharing account alleged CashParking that encourages bodies to host their bare domains with the agent and breach the consistent (if any) ad revenue.

Other registrars accept agnate approaches: Network Solutions offers exceptional domains that it says are “priced college than unregistered area names based on a array of belief including the cardinal of characters in the domain, the cardinal of years the area has been registered, accommodation and acceptance of the keyword, and the cartage it generates.”

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Google Apps a chargeless alternative

Restrictions on tasting aren’t the alone affliction for registrars this year.

Large companies usually run their own DNS servers, advancement ascendancy over which machines handle mail, web and added services. But millions of abate companies await on turnkey hosting. This is a above antecedent of acquirement for registrars, who assignment adamantine to upsell web and mail casework back barter annals their domain. Back smaller, non-technical area owners register, the argumentation goes, they appetite a array of casework after accepting to anguish about what goes where.

Network Solutions focuses on baby organizations that appetite a turnkey Internet presence. “Our focus is absolutely on the baby business. They don’t allocution about hosting,” said Susan Wade, a aggregation spokesperson. “When you ask them, ‘Do you currently bazaar your business on the web?’ they say, ‘Yeah, we’ve got a web site.’ The majority of our barter are actual abundant non-technical.”

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Tucows, on the added hand, focuses on white-label administration and casework such as e-mail and anti-spam through ISPs that resell them. Tucows manages over 7 actor domains, and handles announcement for an added 1.1 million, authoritative it one of the bigger wholesalers.

For Go Daddy, its IPO filings acknowledge that hosting generated $30.6 actor in revenues in 2005. Go Daddy targets a hardly altered articulation of the market, giving its somewhat added abstruse subscribers greater adaptability to configure their DNS records. This appeals to companies that charge to breach up their services, accepting hosting from one company, mail from another, and application Go Daddy’s DNS to accomplish it all assignment able-bodied together.

That may be the archetypal of the future. Tomorrow’s IT basement will be an archipelago of sites and servers, stitched calm by a axial DNS. Applications, from online accord to activity administration to sales force automation, will all be run by third-party sites application a Software-as-a-Service model. It’s an end to one-stop arcade for hosters.

Google is action that alike baby businesses will unbundle their DNS from their e-mail and hosting application its Google Apps service. While Network Solutions’ acceptable chump abject may not be abstruse abundant to run their own servers, Google is adamantine at assignment authoritative it accessible for them to unbundle their casework by admixture artlessness on the business of hosting.

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It’s cryptic whether Google will succeed. “Google’s a threat, but they assume to accept an ad-centric business model,” observes BMO Capital Markets analyst Thanos Moschopoulos. “It’s cryptic how acceptable they’ll be at accouterment chump abutment for those that charge it, which is one of the amount adds of a archetypal hosting company.”

In a contempo buzz interview, Mark Salerno, Network Solutions’ VP of R&D, compared his company’s offerings to Google’s. Both companies accept folio conception tools, web mail, ascendancy panels and calendars, he noted. “In a lot of means their Google Apps is their comedy into the hosting space,” he said. “The catechism is, will that alone allure abstruse users?”

Feeling the squeeze

ICANN wants to end area tasting. Google’s bistro abroad at hosting margins. Since best of the registrars don’t broadcast revenues in detail, aloof how abundant of a blackmail this represents isn’t clear. Some — like Tucows, banker eNom, and Go Daddy’s Wild West Domains broad business — are bigger positioned to acclimate the storm by absorption on resellers and bounded ISPs.

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But no amount how you attending at it, 2008 will be a boxy year to be a registrar.

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