New TLDs: a threat or an opportunity?

31-07-2011

ICANN recently voted to approve the roll-out of new top level domains, in a move that could transform the way we use the Internet. But for brand owners, it is a double-edged sword.

More is not always better. Many companies have ploughed enormous resources into their online presence over the last few years; the Internet has become a place not only for commerce, but for branding.

It provides unparalleled access to consumers, and more importantly than that, it allows consumers to enjoy unprecedented engagement with their favourite brands. Yes, there are dangers on the web (cybersquatting, counterfeiting, hacking, etc.), but for the most part, it has been a positive thing for brands, helping those who manage it well to become ubiquitous, to raise their profile and raise their profits.

That is about to change, but it is not yet clear whether for better or worse.

ICANN’s plans to open the TLD space are beyond the point of no return, and companies will have to deal with the fallout, like it or not. Billed as an expansion of the Internet, the plans massively increase the potential space available for brands to occupy, while concurrently increasing the space that brands will need to police.

And for $185,000 initial outlay for a .brand TLD, with $25,000 per year maintenance fees, it’s clear that not all brands will want to or be able to participate.

Early adopters

While most brands remain coy about whether they will choose to apply for a .brand domain, some have revealed their plans. One such, camera company Canon, announced its intention to purchase .canon as far back as March 16, 2010, more than a year before ICANN voted to approve the new TLDs. At the time, it said:

“With the adoption of the new gTLD system, which enables the direct utilization of the Canon brand, Canon hopes to globally integrate open communication policies that are intuitive and easier to remember compared with existing domain names such as canon.com.”

After ICANN’s vote, a Canon spokesman told WIPR that “we have taken great care to cultivate the Canon brand and the introduction of the new gTLDs will enable us to not only secure and protect the Canon domain name, but also make use of that exclusive name to establish a new brand structure on the Internet. “In addition, we would like to make use of the .canon domain name as a key means of communicating more effectively with our customers.”

He added that it is too early to provide specific examples of how the company will use .canon but it intends to be flexible once the new gTLD programme has been launched.

Communication

Canon seems to be banking on using the new TLD to improve communication with customers, but it’s not entirely clear that a .brand domain will do that. Many people, though by no means all, navigate the Internet using search engines, and it is unknown how .brand TLDs will affect the algorithm used to rank search results.

Flip Petillon, co-chair of the TLD and domain name practice at Crowell & Moring LLP in Brussels, says: “At the moment, nobody knows what the impact is going to be on the algorithm of a search engine. Google normally looks at the Internet user behaviour first and does not let the world see what its approach will be. We don’t know whether they will change their algorithm.”

But, he says, “you would expect the search engine to realise that (a .brand TLD) would become a more important location.” While it certainly seems likely that search engines will privilege the new TLDs, there is no guarantee that it will make it easier for customers to reach companies; indeed, for many brands, brand.com is already the leading result for search engines.

Besides, there are alternative methods for finding sites. Especially when looking for a brand website, many people navigate using direct navigation, by simply typing the name of the company they want to reach directly into the address bar, on the assumption that the company will own the .com domain related to that brand.

Again, it is unclear how this will be affected by the .brand TLDs, but it would seem that one of the main things a brand will have to consider is how to get its customers used to the new system.

Adam Scoville is senior counsel for brand protection at real estate franchisor RE/MAX, and vice chair of the Internet committee at the International Trademark Association. While he cannot comment on whether RE/MAX will look to purchase a .brand TLD, he observes that the process of changing consumer behaviour on the Internet will be challenging.

One of the key problems is likely to be the initially relatively small number of companies taking it up. Currently, it is reasonable to assume that brand.com will lead to the brand website; enabling .brand to inspire the same level of confidence will be difficult.

Scoville says: “This relies on aggregate promotion— the aggregate assumption that people are going to have a new TLD. It only works if there’s a large take-up.” This is further complicated by the fact that many large companies operate several prominent brands.

"One of the complaints about ICANN's process in developing the new TLD programme is that it hasn't properly shown the economic need or demand for such a system."

If a company operates a soft drinks brand and, for example, a shampoo brand, it is difficult to see the immediate value in having a .brand domain for the owner company. After all, how many customers know that Aquafresh toothpaste is owned by GlaxoSmithKline?

But it’s equally difficult to see companies investing in tens of .brand domains to cover every major brand they own. The resources required to manage such a wide portfolio of domains may well put some off.

Indeed, one of the complaints about ICANN’s process in developing the new TLD programme has been that it hasn’t properly shown the economic need or demand for the new system. ICANN counters that more than 100 companies have already publicly expressed an interest in applying for the new TLDs.

Benefits

It is clear that for certain types of businesses, a .brand TLD will be useful. One of the key advantages of owning a TLD is that a brand will have complete control over its presence in that space. In some industries, that will be a huge bonus. Banks, for example, will no doubt welcome the added security of being able to direct customers to a more secure, less vulnerable environment; it will create trust and confidence.

As Geoff Wicks, chief executive of domain name management company NetNames says: “Owning that whole space will help companies in terms of the way people think about their products. Owning that space could provide a level of security that would be very helpful.” Wicks also thinks that owning a TLD will “have real marketing relevance” for brands.

Petillon concurs, and adds that because “the registries have an obligation to be careful about allowing domain names in the extension, IP holders will be able to act and suspend infringing domain names". Rapid action can be taken. And because a brand will be wholly responsible for the content of its TLD space, there is not even any obligation to share the system with the public. Some companies may choose to use the space solely for internal purposes.

Money talks

How much is $185,000? For some companies, it’s a drop in the ocean. Nike spends many multiples of that on a single advertising campaign. For others though, it’s rather more significant. Clearly some companies will be priced out of the market, especially SMEs. That’s not necessarily a problem, though it might lead to a situation where large brands have inherent advantages when it comes to marketing their products online.

More concerning perhaps is the question of what happens when two companies want the same TLD. Brand names may be duplicated across industries (Polo for cars, fashion and confectionary), and companies may well feel hard done by if their customers end up confused by another company’s TLD that happens to share their name.

When a TLD is sought by more than one company, in the absence of agreement, the winner will be the person prepared to pay most for it in an auction. The victors are likely to be those with deep pockets.

ICANN may not be too worried about this. After all, the money raised from the new TLDs goes back into its coffers, allowing the not-for-profit to fund its expenses (including litigation expenses), and possibly other development opportunities. As Kurt Pritz, vice president of stakeholder relations at ICANN, says:

“Possible uses of auction funds include formation of a foundation with a clear mission and a transparent way to allocate funds to projects that are of interest to the greater Internet community, such as grants to support new gTLD applications or registry operators from communities in subsequent gTLD rounds, the creation of an ICANN-administered/community-based fund for specific projects for the benefit of the Internet community, the creation of a registry continuity fund for the protection of registrants (ensuring that funds would be in place to support the operation of a gTLD registry until a successor could be found), or establishment of a security fund to expand use of secure protocols, conduct research and support standards development organisations in accordance with ICANN's security and stability mission.”

The future

While many still have reservations about ICANN’s plans, it does now seem that the expansion of the TLD domains space is unstoppable. The question for brands will soon change from ‘Do we want this?’ to ‘How do we deal with it?’ As with anything of this nature, the proof will be in the practice—in three or four years’ time, we will have a much better idea of how the new TLDs are being used, how customers’ behaviour is changing and how the intellectual property challenges will pan out.

In the meantime, lawyers and domain name service providers are likely to enjoy a boom. And for those companies that do elect to purchase a new TLD, it will be a long time before it can wholly replace their existing online operations. It looks like a case of both existing TLDs and the new system, rather than an either/or.

One thing’s for sure: for good or bad, the Internet will continue to occupy brands for the foreseeable future.

This article was first published on 01 August 2011 in World IP Review

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