AusRegistry’s domaination plan

Domain names have taken on more significance (and value) than just the web’s version your business’s location. AusRegistry’s Adrian Kinderis tells how his business took a niche and shaped it into a mainstream money maker.

The AusRegistry business, which was set up to register domain names, has grown to have revenue of $20 million. Founder Adrian Kinderis talks about how the business grew, what’s ahead, and what is happening with top level domain names.

Amanda Gome: What niche did you see when you started AusRegistry in 2000?

Adrian Kinderis: We were a retail business. Simon my business partner originally wanted to set up a mobile phone store online, and went to register a domain name and found it to be a very clunky and very cumbersome process. We did a bit of research and started a company retailing domain names because we thought we could do it better in the Australian landscape.

What was the competition like then?

Back then .au really wasn’t the dominant brand and .com certainly was. Melbourne IT was seen as the darling of the dot-com boom within Australia. They were the wholesale provider of .com.au, but they were also dealing at a retail level. So they were tough competition given that they were able to service their clients as well as service the rest of us as their resellers.

They were also at that time the first ICANN (Internet Corporation for Assigned Names and Numbers) accredited registrar. ICANN is the global governing body that governs the GTLD namespace, the Generic Top Level Domain namespace. So we quickly went about trying to get our accreditation at that level so that we could take on Melbourne IT and I guess act as an alternative in the market.

How much money did you start with?

We got a seed investor. Back then it was tens of thousands of dollars, but we thought it was millions, as you do when you’re first starting out. It was a couple of years before we took a salary out of the company and did nothing but pour every cent that we had into getting where we were.

How much education of the market did you have to do back then?

There were sort of two levels of education. There was our own education. I had a background in marketing and Simon had been a bit of jack-of-all-trades, so we were educating ourself about these domain names and we were trying to get in touch with businesses and educate our prospective retail customers about what domain names were and how they worked.

How did you educate them?

We looked for corporate groups and different councils speaking out to small businesses. We just sort of got on the road and knocked on doors and tried to speak. We looked at corporates that had reasons to have big domain portfolios and tried to go and speak to them and through that way. We didn’t have a lot of money to spend of marketing, explicit marketing, but we did a few little niche things here and there and tried to look online.

How did you strategy changed?

Strategy changed significantly when .au came up and the monopoly got taken away from Melbourne IT and offered for general tender for the running of a .au namespace. This took our business from what was a retail name that was selling domains to the public to look at the wholesale opportunity of running the actual registry itself. And we thought we had the expertise and so we got onboard a couple of consultants and put every cent we had into putting forward this tender.

We partnered with an overseas international player, submitted our tender response and won. And that was in 2002, so we sort cut our teeth at the retail level and learnt a lot about the technology, and then elevated ourselves up to the wholesale level of running the registry and won and set about building the registry there on. And it was sort of an eight month massive task of building this mission-critical infrastructure and getting it off the ground.

So you were in your early 30s there. You’re 35 now. What were some of the mistakes you made building the company?

We were two young guys – and when you’re dealing with corporates we wanted a bit of silver hair when walking into a room and trying to talk to folks that matter. And that was the biggest challenge we had – trying to come across with credibility when you’re just two young guys. We had the product, we had the knowledge, but you’ve still got to break down those barriers.

One of the consultants that helped us write the bid came on as a shareholder We used to bring him into the meetings and he would help out from just giving that little bit of security.

The other challenges were dealing with banks, and when you’ve come from a company where you’ve scrounged around for a few pennies and we had to try convince them of this business model; that once we’ve built this infrastructure and turned on the tap, the money comes in.

So who in the end did you go with? Who saw the light and came on board with you?

ANZ ended up being a strategic partner, they certainly helped out there.

What did you need?

Understanding. The problem we had was that there was going to be a six to eight month delay from the announcement of the tender and the awarding of the contract to actually going live. We only receive our money once you start going live, you see. So it was just that bit of a leg up during that time where the ANZ were able to come and help out.

What about with staffing?

Probably the smartest things we did was go to Melbourne University and post a few little leaflets up on their computer science noticeboard, and we ended up getting 20 university students that were taking a break. That was a really smart thing, so we got some cheap resources behind the project.

What’s changing in the landscape at the moment? What’s happening with domain names?

You can certainly see now that .au is the dominant brand within Australia.

If you go into Europe, .info is a very strong brand, but it’s not all that strong in Australia and I think that’s got to do with the policy that AUDA (Australian Domain Name Administrator) has maintained in ensuring that you must be a registered business in Australia in order to have a domain name, and that lends itself to having a credible namespace and not having a lot of instances of cyber-squatting.

Are people buying a lot more domain names than they actually use? What trends are you seeing just in the domain name?

When we first came into it there was a profitable little business called domain monetisation, and what that is is where people buy up portfolios of names and they try to make them relevant and generic. What they’re hoping for is for people to directly type those names into their browser. What they then do is present advertisements, usually from Google, on those ads, and people click through to go to where they want to go. So every time people click through they just get a couple of cents here, a couple of cents there.

But some of these guys on the global market, and it happens more so in the .com name space, are marking hundreds of thousands of dollars a day through their domain portfolios.

But they own 700,000 and in some cases millions of domain names in order to do this.

There’s also the auctioning of domain names. People now see it that there is an intrinsic value in their domain name. Now rather than just let it expire, they’ll renew and try to sell it, potentially at auction, and there is a lot of interest in these domains depending on how much traffic they had going to them before.

And what are the prices for domain names?

Well I think the times of hearing about business.com going for $US7million are over, because I think people are getting a lot more clever about the value, but we’re hearing of some domain names that are still going in the .au namespace for tens of thousands of dollars.

There’s been a change of policy just recently whereby you can sell your name. You never used to be able to do that in .au. There was no transfer of registrar. So it’s very embryonic and it’s early on in its lifecycle this whole auctioning and trading of domain names between registrars. We’ll see that come along and develop, but at the moment people are asking exorbitant prices but you’re not seeing any sales.

Now who’s running those market places?

The registrars generally are at this point. So the guys that are retailing the domain names, and then they’ll say if you want to come and buy any name you want, come to us, but at the same time here’s the list of domains on our books. Would you like to put in an offer?

Explain about top level domains. Are they just going to be for big global companies to buy?

We’ve got generic top level domains which are the .coms and the .nets and the .orgs. And then you’ve got country code top level domains which are the .au, .uk, .nz and so on. So what ICANN, the global governing body, is doing is coming up for competition within .com and looking for a process for which they could do that.

They’ve spent the last four years working out an effective way to implement these new names, but effectively what they’re now doing is hopefully by the end of the year they will open up for applications for people to submit applications for .whatever they want. That could be .tree, .apple, .paris, it could be a city name. You can have .whatever you want, but there are rules.

How much will it cost?

It’s tough to say at this time. ICANN have currently put forward a price of $US185,000 in order for application. The newest version of that draft document came through recently. I understand that if you want to pull out of the process at any time you are refunded some of that money.

But it is an expensive exercise to get involved. Because clearly you don’t want to just open it up to small operations and it would be unwieldily for ICANN to have to deal with millions of registries at that level.

Well, too bad.

ICANN have to be careful that the decisions they make doesn’t ultimately ‘break’ the internet.

We don’t know what’s going to happen to top level domain names and whether anyone will take any notice of them. But if it does take off aren’t we going into a global space where a very dominant player can own that market online?

Yes, that’s right, but they can certainly own it, they keep the policy for themselves. So let’s take an example, let’s take IBM.

IBM could go and get .ibm and they could choose to only allow their marketing department to register any names. So very different to what we experienced in .com where it’s opened for anybody to register domain names.

We’re seeing different business models coming through and that’s fine. ICANN are happy for that to happen because that just means now we’re seeing the top level domain space being used for a very different purpose. It’s not a catch-all any more. It’s not just one big bucket like .com is, where you’ve got florists and concreters and everybody else all in one bucket. Now you’re getting very specific top level domains.

Another example might be that Murdoch decides that he wants to go for .news and he might want to put cnn.news and heraldsun.news in there, and that could be opened up for anybody that wants a .news website or a .news domain name I should say.

So the possibilities are endless, and yes you are giving ownership of these domain spaces to whomever that is successful in their application.

Rupert will be able to outbid anyone.

It’s not always an auction process. There is what they call the notion of community. Community is given precedent over what would be an open name space. If you were the Motion Picture Association of America, and you want to go and get .film, you are given more points in the process because you’re representing a defined community.

Whereas if I wanted to go for .film and I’m not representing anybody and I wanted to open it up, I will come second to someone actually representing community. Now if an MPAA or somebody else wanted to get .film and went up against me and we were both just going in an open sense, you’re right – it does come down to auction in that point in time, and whoever has the deepest pockets and the most money will win.

When does the bidding open?

We’re still waiting on ICANN to confirm that, but what they have said in the associated documentation with this latest version of the draft is that it won’t be before December of 2009. So we won’t see the application period open until late this year or early next year.

What’s your prediction of how this market will grow?

That’s a great question because it’s one that we often debate about here. I think you’re going to see hundreds of new name spaces. Maybe not thousands but certainly hundreds. I think when ICANN first started this they thought they might see tens, but I think there really is a general interest and our organisation as a registry services provider, so we’re the technology partner to make them work, we’re getting approached by organisations, by individuals, by entrepreneurs and by in fact governments of countries to come and help them run their name spaces.

So you’re seeing everything from city names as you said. It might be .paris, it might be .dubai, it might be .sydney to folks just wanting generic names like .television or .phone, things that have never existed before. And then as I say corporations like the IBMs or the PricewaterhouseCoopers, these different organisations, the Coca Colas of the world, that want to have their own name space on the web.