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Tim Quast
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Free Site Registration

January 1, 2001

Prospering From Disaster

By Omar Sacirbey

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  • Prospering From Disaster

Dotcom companies are falling on hard times but the folks who assign them their domain names couldn't be happier. Seven new suffixes are joining the established but overextended.com, .org and other suffixes. Spearheading the campaign is the Internet Corporation for Assigned Names and Numbers (ICANN), the Marina Del Rey, Calif. company chosen by the U.S. government in 1988 to handle Internet naming functions.

Among the many registration companies accredited by ICANN to assign names are Register.com (Nasdaq: RCOM), VeriSign (Nasdaq: VRSN), and Catalog.com (Nasdaq: CLGC).

TLD Decision

Strong competition in domain names began only last February, resulting from an earlier ICANN decision permitting five entities to sell so-called top level domain names, or TLDs. Until then, Network Solutions (Nasdaq: NSOL) had a monopoly on domain names as both a registry and a registrar. (A registry records all domain name registrations; a registrar acts as an intermediary between the registry and the registrants that buy domain names.)

Much has changed since then. In June, Internet authentication provider VeriSign acquired Network Solutions, and with it its rights as the one and only registry. (That's significant because Network Solutions was getting a cut of every completed registration. Today, there are some 24 million registered domain names. Competition has multiplied, with 159 registrars accredited with ICANN through Nov. 10.)

With competition intense, and affecting registration prices, another challenge facing Register.com, and scores of registrars that mostly or exclusively do registrations, is diversification.

"For those who only do name identification and name management, it definitely behooves them to do several things. Identification and management are part of a bigger business plan," said Prudential Securities analyst David Breiner.

Indeed, the majority of ICANN-accredited registrars supplement, or even marginalize, their registration businesses with other services ranging from web-hosting and Internet security to DSL access and database marketing products. In addition to registration services, IPO candidate Catalog.com provides design, creation, hosting and maintenance services for web sites. It also creates and hosts catalog and auction sites using a proprietary e-commerce application, and integrates customer web sites with its back-office computer systems.

"The trend, as with most Internet service offering companies, is to offer more services," said Jack Ripsteen, an analyst at Chase H&Q.

Moderate Volume

The new TLDs are a windfall to the registration business. Analysts expect registrars to reap at least moderate near-term increases in volume. "It creates more inventory for companies to offer their customers," Breiner said. But competing registrars face the challenge of leveraging the inventory to gain the upper hand in a highly competitive market.

"ICANN's historic decision to approve the creation of new domains is a tremendous win for this industry and for the worldwide Internet community," said Register's president Richard Forman in a prepared statement. He added that, "creating new domain extensions will not only generate potentially millions of new domain names, but they will also create additional value for consumers, businesses, professionals and non-profits over and above what is offered through the current system."