In recent months, the definition of normal has changed for institutions, individuals and industries. When the future seems blurry, at Radix we go back to the data and ideas of the past to get some perspective.
In our exclusive Radix Speak series, we bring you in-depth insights into how the domains industry and everything related to it will evolve in the coming months so we can all be better prepared for it.
To start this series, we have Bala GR, Head of Business Intelligence at Radix, who has been studying and analyzing domain industry data since 2008 to assess how 2020 might shape us.
Much has already been said about the bizarre turn of events that have held the global economy in suspense this year. Of course, we expected a recession; it was a long time ago. What we didn’t expect was a pandemic and global self-quarantine for months. In a few years, we will return to 2020 with as much wonder as absurdity.
Speaking of hindsight, this year is the perfect opportunity to examine the 2008 recession. After all, it is our only benchmark in these uncertain times. While a decade has passed since then, there are trends that might help us make a fair prediction of what lies ahead this time around.
Give meaning to the past
For the new domain name industry, this is the very first experience of an economic downturn. For us and our new domain name registry friends, examining the trends in inherited domains immediately before and after 2008 can be quite suggestive at this point.
So that’s exactly what we did. We looked at all the relevant data we could find for the years before and after 2008. Was it useful? To a large extent, yes.
Assumptions and data details:
- Old gTLDs include .com, .net, .org, .info and .biz
- All data extracted from monthly ICANN registry reports. New registration data for .COM and .NET in ICANN reports begin from April 2007, therefore 2003-2006 data is estimated based on mixed retention ratios and Q1 2007 is based on quarterly ratios. New registration data for .ORG and .BIZ in ICANN reports start from January 2007, therefore 2003-2006 data is estimated based on weighted retention ratios
As shown in the table above, from 2004 to 2008, the DUM increased by at least 20% year-on-year. However, in 2008, year-on-year growth slowed to 12% ~, then to 6% ~ year-on-year in 2009.
In addition, the new registrations data for legacy gTLDs indicates that 2008 saw a decline compared to 2007 and recovered only 0.69% ~ in 2009 compared to the previous year. This was a significant departure from the good trend for new registrations in previous years. What is interesting is that new registrations failed to regain steady growth, even until 2012.
Of course, for our industry, profitability depends on the renewal rate. It’s not hard to guess that with the number of new listings declining in 2008, gross renewals also had an impact, growing only around 6% in 2009.
To get a clearer picture of the renewal trend, we have made some assumptions. For example, we estimated the overall DUM retention percentage based on the previous year, then assumed a renewal rate of 85% for the second and subsequent renewals.
We then estimated the retention percentage of new listings for each year, resulting in an estimated renewal rate for the first time.
Assumptions and data details:
- The numbers mentioned above are for .com, .net, .org, .info and .biz domains
- All data extracted from monthly ICANN registry reports.
- Retention rate of the 2nd and subsequent presumed at 85%
- Estate tasting rates and models were excluded from these assumptions
And as can be seen here, too, first year renewals fell to 45% in 2009, down from a much higher average of around 58% in previous years. This could be attributed to the general sentiment of the market during this period, the quality of the names and the general pressure on companies.
What does this mean for us? Three words: Proceed with caution
Based on publicly available data, the domain industry as a whole has reported an increase in domain name registrations since February 2020. New registrations of old gTLDs jumped 5% ~ in March 2020 and 10% ~ in April 2020 when compared to the 2019 average monthly registrations. (Refer to the table below)
This is great news for our industry. In fact, we’ve also seen a 15-20% increase in enrollment volumes at Radix. This is not limited to standard domain registrations; We also saw a 22% increase in premium domain registrations and a 15% increase in premium domain revenue in March-May compared to the previous six months.
While .online saw a 45% increase in premium registrations and a 38% increase in revenue, .store saw a 70% increase in premium registrations and 93% in revenue. This is clearly an indication of the urgency in all industries to go online with meaningful and brand-worthy names.
It’s too early to celebrate, however. While we would expect these recordings to be supported by meaningful use, we must take into consideration that this increase could be the result of reactive and instinctive reasons. So obviously we have to be careful when forecasting renewal rates for next year.
However … and that’s a big Nevertheless
We cannot ignore the fact that times are very different now compared to 2008. Society today is more dependent on the Internet than ever before. And if that wasn’t enough, the pandemic has further accelerated the transition from offline to online for businesses at all levels.
This is a unique situation for our industry. As more and more neighboring businesses, institutions and even services go online and rapidly evolve their use of technology, our industry will play a crucial role in this mix.
So our guess is as good as yours when it comes to anticipating the future. At Radix, we live and breathe data! And yet, at an interesting time like this, there is no data we can rely on 100%. For what it’s worth, we looked at the past. As for the future, it seems to be hanging on to this great “however” we spoke of above.