Backing Out: Before Withdrawing a New gTLD Application, Consider the Costs

FairWinds Partners —  February 25, 2013

General Motors’ decision to withdraw three of its five new gTLD applications, which became public last week when the status of those applications changed on ICANN’s website, left many of those connected to the New gTLD Program – both applicants and observers – scratching their heads.

The decision to abandon the application for .CHEVROLET was understandable, considering that the company had also applied for .CHEVY. But to leave behind .CADILLAC and .GMC, both of which correspond to well-known GM brands, was perplexing, considering the high level at which the automobile industry is participating in the New gTLD Program, with nearly every major auto manufacturer applying for their flagship brand as well as sub-brands. Ford, for example, applied for both .FORD and .LINCOLN, BMW applied for .BMW as well as .MINI, and Toyota applied for both .TOYOTA and .LEXUS. Fiat notably applied for six gTLDs, including .FERRARI and .MASERATI.

Of course, there is always a cost factor to consider. Withdrawing a gTLD application now, when Initial Evaluation is underway but the first results have not yet been posted, means a refund of 70 percent of the application fee, or $130,000 per application.

But at this point in time, when it is clear from the sheer size of the New gTLD Program that new gTLDs will undoubtedly have an impact on the way businesses and consumers use the Internet, but it is not yet clear exactly what that impact will be, it’s worth considering another cost: the opportunity cost of withdrawing.

Now that applications have been submitted, new gTLD applicants are moving through evaluation on the path toward delegation. ICANN has indicated that the first new gTLDs could launch as soon as late April or early May of this year. There is no doubt that some applicants may want to launch as soon as possible, but for those that are not interested in diving headfirst into this as-yet unknown territory, there are multiple points at which they can delay the launch of their gTLDs. If you pull together all of those possible delays, an applicant could easily delay the launch of its gTLD – and the onset of the fees associated with operating that gTLD – for more than three years. 

Additionally, once the gTLD is launched, a company has the option of warehousing it, or meeting the minimum requirements to keep it active, until it is ready to begin using it more actively. Warehousing a new gTLD could cost a company as little as $75,000 per year.

Here’s where the opportunity cost comes in. Of course, spending $75,000 per year, even a few years down the road, is more expensive than receiving $130,000 up front, right now. But at this point, the new gTLD train has left the station for the foreseeable future. It is possible that ICANN won’t give the public another chance to apply for gTLDs for another five or ten years, or more. If that happens, applicants that chose to withdraw their applications will have no choice but to wait.

The bottom line is, withdrawing a new gTLD application is irreversible, and the decision must be made at a time when there is still little information in the marketplace. On the other hand, now that the time and money have already been invested in applying, applicants have the option to take a cautious, wait-and-see approach to launching their new gTLDs, taking the time to learn from others and make a more informed decision later.

So the question is, what is the opportunity cost of sitting on the sidelines of what will become the biggest change to the Internet since the introduction of .COM? And is that worth more than a refund of $130,000?