As the leading consulting firm to the Domain Name industry, we work with many of the existing gTLDs, ccTLDs and new gTLDs. During our engagements we do a lot of listening (as well as work) and this gives us a unique perspective on the key challenges the industry is facing. Recently, we are hearing feedback from many leading registries and registrars about their need for more dynamic pricing and promotions and their concern that there may not be enough flexibility in their billing systems to speedily handle their promotion plans.

The Macro View

• Growth rates in the overall Domain Name industry (existing gTLDs & cctLDs) have shrunk or disappeared and in a cut-throat marketplace, pricing and promotions are seen as a key tactic to survive
• Over 300 new gTLDs have completed their launch phases (Sunrise, Landrush & early GA) and now are focused on stimulating demand for their strings through innovative sales & marketing programs
• The explosion of gTLD choices has changed the Registry:Registrar dynamic from Few: Many to Many: Many, and this has led to increased complexities for the Registrar community on how to manage their expanded inventory

The Challenge

As the Domain Name industry matures and new gTLDs come into the market place, the old way of selling domain names with a fixed, static price and paid using the “top-off” model is going away. More and more Registries are moving to sophisticated pricing and marketing programs along with selling domain names on credit terms to Registrars.

While the use of credit terms and dynamic pricing plans help Registries drive business and brand awareness, they have greatly increased the back-office accounting headaches for both the Registries and the Registrars.

Registrars now have to figure out how to accurately reconcile, voucher and pay all the multiple TLDs each in various stages of launch, with different pricing policies, variable renewals, and premium names.  

Registries now have to accurately compile all domain activity, assign correct pricing, calculate taxes and discounts plus account for any marketing rebates or credit in preparing invoice, manage credit risk, resolve disputes and account for cash receipts in more complicated ways to allow aged receivable reports to be more accurate. Registries are finding out that their back-end providers may not always be able to adequately handle more complex pricing & promotions options, or the time required by the back-end providers to change the pricing tables hampers the effectiveness of the proposed promotions.

The bottom line: some registries and registrars feel that are being thwarted by their finance & billing systems as they try to compete in the new world order.

The Future

The expansion of new gTLDs and the lower growth rates across the entire industry is making it much more competitive for registries and registrars. The days of the simple single wholesale price reduction planned months ahead for registries are limited and more dynamic pricing with marketing incentives pinpointed at specific markets (probably all run in parallel) and rolled out overnight will be required. These business-led pressures will put additional stress on billing & finance systems, and those who invest in smart back & front office systems capable of handling these requirements will prosper.

If you’re interested in reading more about this topic, please check out our latest blog post on billing systems at http://architelos.com/category/blog/