
If ICANN only charges $0.18 per domain name, why am I paying $10? - jpatokal
http://webmasters.stackexchange.com/questions/61467/if-icann-only-charges-0-18-per-domain-name-why-am-i-paying-10
======
patio11
Running a registrar has close to a $500k a year minimum salary bill, which is
50k $10 domains even if you model them as having 0 COGS, which is in fact
highly contrary to fact. That's tricky to get to organically, so you start
doing things like paid marketing, and then realize that GoDaddy (et al) will
_happily_ spend $X0 to acquire $10 a year worth of domain business, both
because it has a relatively high LTV and, more importantly, because it has a
"backend." (e.g. GoDaddy made a $16 sale for me on bingocardcreator.com back
in 2006 and then sold me another ~$5,000 of domains and SSLs over the years,
and I don't even use the products where they _really_ make a killing, like
hosted shopping carts and what have you.)

Relevantly to HNers: you'll run into math like this for most software
businesses. Upfront costs are quite low and COGS may well be near zero, but if
you want to actually sustain the business, you get to pay market wages to
people, and it is very hard to pay market wages to technologists $1 at a time.
There was a story on HN today about a business which just learned this to its
sadness. They were not the first to figure it out and they will not be the
last.

~~~
kijin
One of the answers on SE also says something along the same lines. Although I
have no doubt that running a registrar costs a lot of money, this is the wrong
answer to the original question.

.com domains cost $10 because Verisign charges $7.85 for each of them _in
addition to_ the $0.18 ICANN fee. Large registrars, of course, get volume
discounts, and they might even sell new domains at a loss when they think they
can rip you off on add-ons and renewals. But by no means are they pocketing
the entire $9.82 as the question mistakenly assumes.

~~~
smcl
I'm not massively clued in on this so apologies if this is a bad question, but
what's Verisign's role in this? That's a decent amount of cash, what is the
service they provide for that?

~~~
lsc
I own the domain prgmr.com, and control the associated nameservers.

I can make smcl.prgmr.com, and give it to you. I can even point smcl.prgmr.com
at your own nameserver so you can make somethingelse.smcl.prgmr.com. You
could, in fact, sell other people [something].smcl.prgmr.com. domains, and so
on.

It's just a line in my dns config. (then dealing with abuse complaints and the
like)

Now, Verisign owns .com. There's no technical difference, really, between
.com, .co.uk, and prgmr.com. If you want smcl.com, you need verisign's dns
servers to cooperate, just as if you want smcl.prgmr.com, you need my dns
servers to cooperate. For this, verisign charges the registrar seven bucks and
change. The registrar tacks on a few pennies (or does the same with
advertising) and handles all interactions with you.

Verisign has a nice re-seller interface. That's what the registrar/registry
split is all about. But if I really thought people would give me money for
something.prgmr.com. dns entries, I'm sure I could come up with a re-seller
interface, too.

Personally, I think the current price is a little high, but mostly because I
don't like monopolies in general, and my feelings for Verisign can only be
described with superlative synonyms for hatred. Personally, if someone has to
have a monopoly on .com domains, I think a not-for-profit like ICANN would do
a better job.

It is a small injustice, though, for reasonable people with one or two domain
names.

(On the other hand, the registrars, the people who actually handle the
customer interaction, are ridiculously efficient. if you want a domain cheap,
you can get it for pennies over what the monopoly charges, or you can pay a
few bucks more, and get pretty good service, showing that when there is
competition, for-profit businesses can do a pretty good job.)

~~~
_delirium
I've been doing a little bit with .dk lately, and I kind of like their model:
DK Hostmaster handles almost everything. Due to lobbying from various hosting
companies, there is an arbitrary restriction that you can't register a domain
_initially_ with them, but instead have to go through a registrar (same as in
.com). I think this is mostly because it gives various hosting companies a
chance to upsell you on email/Wordpress/whatever, since you have to go through
one of them to get the domain. But then once you have the domain, you never
have to deal with them again, because you subsequently do your yearly renewal
directly through DK Hostmaster. You just log in, pay your $8.50 fee, and
that's that. And unlike GoDaddy et al, they aren't trying to sell you a dozen
services every time you try to renew.

~~~
pbhjpbhj
$8.50 still seems quite high given you're paying them to let you use their
interface to increment the expiry date on the domain. With the volume they
have and once the system is set-up there's got to be almost no action to take
beyond the maintenance of a few servers?

~~~
cpach
A registry is not just a MySQL database with some random domain names in it.

Have you considered what kind of resources and expertise that are required to
handle issues such as domain name disputes? For example, suppose Alice and Bob
run an informal business together, they have a clash and both of them make
claims of the business' domain name. Or if Mallory registers someone elses
company name and use it for nefarious purposes? [+]

[+] See
[http://swartz.typepad.com/texplorer/2006/04/wellknown_rock_....](http://swartz.typepad.com/texplorer/2006/04/wellknown_rock_.html)
for a particularly domain name anecdote involving Metallica and a Swedish VC
firm.

------
supermatt

      + $0.18 ICANN Fee
      + $7.85 Registry Fee (a.k.a Verisign's Ripoff fee)
      + $1.97 Registrar (who you register the domain through) Fee
      = $10.00 Retail Price
    

Amazingly, Verisign aren't the worst offender. The infrastructure to support
the registry MUST cost a fraction of that price - as proven by 'low-fee'
registries. I don't know how Verisign can continue to justify their price
hikes.

So you are aware, Verisign make just shy of $1 billion a year through this
fee. Thats a lot of salaries and infrastructure... The scumbags even tried to
increase the cost by 7% per annum to "ensure that .com directories run
smoothly amid increases in Internet traffic and heightened security threats."
before they forcibly had their prices frozen by the federal government in
2012. Make no mistake, Verisign have certainly been taking advantage of their
position as registry of .coms.

That said, I still think the price of TLDs is too low, as proven by the
proliferation of squatters. How to solve this, and where the money should go
is another question though...

~~~
dsl
Increasing the price of domain names has little effect on "squatting" (a term
I highly dislike). Parked domains create a large volume of available inventory
in ad markets, driving down costs in SEM.

~~~
Reedx
If it cost $500 to register a domain (or even $100 as they used to be), I
cannot imagine that it wouldn't significantly decrease the amount of parked
domains. So many are squatted because you only have to make back ~$10 in order
to pay for it, right? That's a small gamble. Buy a dozen domains and only 1
needs to do decently well in order to pay for the others.

Additionally, $10 is almost an impulse buy, so a lot of domains are picked up
in the event that it might be useful someday (I'm guilty of this).

It's so annoying when you have the _perfect_ name for a product only to find
that the domain is uselessly parked. And it seems to be 95% of the time.

~~~
wtetzner
And what if you wanted a domain name for a site that won't make money? People
that aren't businesses shouldn't own domains?

~~~
Reedx
They should, but domains don't have to cost as little as $10 for that to be
doable. Look at all the crap that people buy that's much more expensive and
offers less utility.

Though I wouldn't actually propose they cost $500, I think $100 or so is still
reasonable. Myself and many others bought them in the 90s for personal non-
profit use at that price.

Add a $100 surcharge which goes to the EFF or some other org of choice. Maybe
that doesn't even need to be yearly, but happens when a new domain is
registered and each time it changes ownership.

------
mkuhn
I am glad that domains are not $0.18. Imagine how many domains would be
available if domains were that cheap...

I gather that at that price domain grabbers would just start to register
everything (within reason). Then we would deal with some kind of secondary
market where domains would be priced by their attractiveness and not sold as a
common good (this obviously is already the case for many good domains).

~~~
marincounty
Yea, but what if they put a limit of, say 4 per IP address? If you wanted a
new domain, you would need to forfeit one? Or, even go farther, and tie a name
and social security number to the domain in order to keep track?

~~~
mkingston
Unless I'm missing some greater context, certainly your latter suggestion is
completely impossible in a global context.

------
smutticus
I follow this space and am currently doing some research into the
renewal/transition of the IANA contract.

[http://www.ntia.doc.gov/press-release/2014/ntia-announces-
in...](http://www.ntia.doc.gov/press-release/2014/ntia-announces-intent-
transition-key-internet-domain-name-functions)

For a good start read this and the linked PDF:

[http://www.circleid.com/posts/20140426_the_illusion_of_inter...](http://www.circleid.com/posts/20140426_the_illusion_of_internet_governance/)

TLDR; The DNS industry has an oversized representation in ICANN. ICANN makes a
ton of money, and no one really seems to care.

You can read the actual contract ICANN has with the government(NTIA) here:

[http://www.ntia.doc.gov/files/ntia/publications/sf_26_pg_1-2...](http://www.ntia.doc.gov/files/ntia/publications/sf_26_pg_1-2-final_award_and_sacs.pdf)

Mueller is someone who regularly criticizes ICANN. I don't always agree with
him, but I think he's right on with this one.

[http://www.internetgovernance.org/2014/04/16/icann-
anything-...](http://www.internetgovernance.org/2014/04/16/icann-anything-
that-doesnt-give-iana-to-me-is-out-of-scope/)

------
imjustsaying
How did Verisign get the .com TLD monopoly in the first place? I was a wee lad
when this all started and don't remember the history.

Can someone drop a good link describing why there wasn't a more distributed
approach to the .com TLD (and still isn't for new TLDs?)

~~~
zhte415
Verisign acquired Network Solutions, the administrators of .com.

The name registry was initially government funded, but privatized and sold off
in the early / mid 90s.

[https://en.wikipedia.org/wiki/Verisign](https://en.wikipedia.org/wiki/Verisign)
[https://en.wikipedia.org/wiki/Network_Solutions](https://en.wikipedia.org/wiki/Network_Solutions)
[http://mediafilter.org/caq/internic](http://mediafilter.org/caq/internic)

------
busterc
My related Ask HN: Would you prefer a non-profit domain name registrar?

[https://news.ycombinator.com/item?id=7156997](https://news.ycombinator.com/item?id=7156997)

~~~
jawns
Since I can't reply in that thread, I'll reply here ...

When you say non-profit, you could mean multiple things, at least here in the
U.S.

You might be talking about a 501(c)(3) non-profit, like Mozilla or Wikipedia.
Typically, when people think of 501(c)(3)s, they think of organizations such
as the Red Cross or Catholic Charities, but obviously (as with Mozilla or
Wikipedia) it can be practically anything directed toward the public good. One
common critique I've heard about nonprofits in the tech space is that they
have a hard time competing for the best talent (at least when it comes to
salary/benefits), but if you have a large volunteer base, and a lot of people
who truly want the project to flourish, then that's not a critical problem.

Or, you might be talking about a cooperative. A co-op is a non-profit in the
sense that (unlike a normal for-profit business) its primary goal is not to
make money, but to provide some benefit to its members. So, in the case of a
cooperative registrar (such as nic.coop), the members wholly own the
registrar, and it exists for their benefit. They may not care about generating
a profit, so long as the business satisfactorily provides a necessary service.

------
DigitalSea
It's like an employee of a company earning $70k per year working on a project
that will bring in $500k wondering why they're not getting paid more if the
company is making much more than their yearly salary in one go and the answer
is: overheads.

The domain aspect of a registrar is one very small part. You factor in
insurance, employee salaries, utilities, leasing of office space, purchasing
office equipment and computers, storage, maintenance (network and building). A
registrar is like any other business, it has to factor in its overheads into
the cost of their products. On-top of that, all businesses ensure they bring
in a little more than they're spending (ideally) and reinvest that back into
the business to improve service offerings and existing products.

Having said all that ICANN aren't the only registrar out there, Verisign are
probably the worse in my opinion. There are many men in the middle driving the
cost up as well. It's very much a shark industry.

------
pushkargaikwad
Domain business is one of the most shadiest business on the web. I wasn't
aware of the verisign fees but honestly, it is about time to either disrupt
whole domain industry or start democratizing it. Every registrar company take
its users for a ride.

------
andrewstuart
In a capitalist economy, companies buy goods and services at a lower price
than they sell them for. Positioning, branding and establishment of value
allow some sellers to sell at a higher price. Other sellers compete by selling
at a lower price and make a lower margin on the sale.

Technical folks such as those at Hacker News are focused on other things
typically than this sort of stuff but it's what gets salaries paid.

If you work at a commercial organisation you'll find the cost of producing the
goods or services that your company sells are (hopefully) less than the price
they are sold for.

If there is a wide disparity between cost and price then companies think this
is a good thing as it results in greater profit but typically attracts greater
competition.

~~~
zo1
_" In a capitalist economy"_ And yet the only reason the price is this high is
because there is a monopoly involved. Yes, government-granted, and given to
Verisign.

------
stevewilhelm
Value based pricing. [http://en.wikipedia.org/wiki/Value-
based_pricing](http://en.wikipedia.org/wiki/Value-based_pricing)

------
sytelus
A other answers have said, large portion of your money goes to Verisign.
Verisign is essentially government sponsored monopoly over .com and .net
domains. You may ask how did that happened when US supposed to so despise
monopolies?

Here's how:

Early on registries were free, funded by government and run by InterNIC. Then
government decided to privatize it. The contract to manage .com registry was
granted to a company called Network Solutions, Inc (NSI). At that time govt
actually paid [$5.9M][1] NSI to do this but then NSI managed to convince that
registrations should be charged to cover the cost. Eventually Verisign bought
Network Solutions and become the entity who manages .com registry.

Everyone was starting to realize that NSI/Verisign was becoming monoloy for
some very important function of modern economy. ICANN was formed in 1998 which
was charted to introduce competition in this area. But instead they ended up
doing almost exactly the opposite thing in next series of events.

Early in 2003 Verisign introduced a service called [Site Finder][2] which
redirected users to search engine if domain didn't exist. ICANN said this was
"overstepping the contract terms". Verisign shutdown the service but also sued
ICANN for preventing it to bring any improvements. Eventually ICANN had to
settle with Verisign and the prize of [settlement][3] was that Verisign would
be awarded renewal of contract _without any bidding_ plus right to raise
prices _without_ showing cost justifications. There were even terms that
indicated Verisign can even continue its monopoly for longer term. If you ask
me this is blunder and incompetence by ICANN at mega scale.

[Industry was furious][4]. Lot of people [commented][5] on ICANN's proposal of
settlement by saying that .com registry is not the property that ICANN owns to
leverage in settlements. Others said no other government agency knowingly
consented to unchecked price increase without cost justification. But it all
went to vein and ICANN directors voted 5-9 in favor of settlement. Due to
industry outrage US Dept of Commerce had to intervene and eliminate the clause
for Verisign's right to increase prices by 7%. You can say that Verisign
showed benevolence for not increasing prices to what was already considered
ridiculous.

In cases like this typically competitors brings in anti-trust suits. It did
happened against Verisign in 2010 but they [escaped][6] without a bruise
because the organization CFIT which had filed this case wasn't considered as
competitor or the one who had financial injuries. It also surprises me that
real competitors haven't come forward against Verisign to bring in large scale
anti-trust suit.

So when you pay that $10, it's ICANN's massive blunders of last decade to
allow Verisign continue absolute monopoly. Verisign has benefitted dearly with
this. They have $2 billion in cash and $1 billion of yearly revenues from all
the payments you hand out to them. Verisign's financial indicates that this is
their highest margin business.

One light at the end of the tunnel is that US government has [announced][7]
plan to relinquish the control of Internet which means ICANN might not have
authority to hand out monopolies any longer. Their stock too big hit when US
government announced this.

    
    
      [1]: http://en.wikipedia.org/wiki/Network_Solutions#History
      [2]: http://en.wikipedia.org/wiki/Verisign#2003_Site_Finder_legal_case
      [3]: http://www.cio.com/article/18286/ICANN_OKs_VeriSign_Settlement
      [4]: http://www.prnewswire.com/news-releases/godaddycomr-outraged-over-icannr-giving-verisignr-monopoly-55213652.html
      [5]: http://forum.icann.org/lists/com-renewal/
      [6]: http://domainincite.com/4676-breaking-verisign-settles-cfit-lawsuit-for-free
      [7]: http://www.washingtonpost.com/business/technology/us-to-relinquish-remaining-control-over-the-internet/2014/03/14/0c7472d0-abb5-11e3-adbc-888c8010c799_story.html

~~~
smutticus
You get your history right, but I don't agree with our analysis. The NTIA's
transition of IANA will most likely just result in increased autonomy for
ICANN. Which will result in them being granted increased power in delegating
monopolies to registries. ICANN made $400,000,000 in revenue in 2013. It's not
just the .com TLD, every gTLD that ICANN issues is a monopoly to its registry.

The bright side is that with ~1,300 new gTLDs being issued in 2014 the power a
single registry such as Verisign can wield will decrease. If Verisign wants to
charge $1,000 for a .com domain, you can just but a different domain under a
different TLD. Expect to see more new websites not using .com in the future as
these new gTLDs start propogating. Also, expect many more IDN gTLDs in coming
years as unicode character sets become preferable for people in countries that
don't use a latin character set.

