February 6, 2005
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After Google disclosed last week that it had been granted the right to sell domain names, the question in many minds was, "Why?"
By Bob Tedeschi
Why would the company, which just reported click-advertising sales of more than $1 billion in the most recent quarter, compete in a relatively low-margin business with Network Solutions, Yahoo, GoDaddy and others? Would it use its new registrar status to snap up expired domains and show ads to wayward surfers? Is this a move toward Google world domination?
"In a few years you'll be driving your Google to the Google to buy some Google for your Google," read one posting on Slashdot, an online technology forum.
Eileen Rodriguez, a Google spokeswoman, hardly quelled the speculation by explaining that the whole thing was really a learning opportunity for the company. Google "has become a domain name registrar to learn more about the Internet's domain name system," she said recently in an e-mail message. "While we have no plans to register domains at this time, we believe this information can help us increase the quality of our search results."
Rodriguez would not say how having registrar status might help Google improve search results. But Bret Fausett, who publishes Lextext.com, a Web log following the domain name industry, and who first disclosed the news that Google had become a registrar, said Google could improve the quality of search results by getting better access to the list of expiring domain names--a list available only to registrars.
When a domain expires and changes hands, Fausett said, Google can now more easily find, scan and index the new site, so it does not mistakenly point searchers to a site with irrelevant content, or place advertisers on sites with content that does not match their products or services.
That alone could profoundly affect the domain name market, which has rebounded partly because of another Google service, AdSense. Through AdSense, Google pays publishers to display text ads related to a site's content. Speculators often buy the expiring domains of even marginally popular Web sites and replace the site's content. But because the practice diminishes the usefulness of Google's search engine, the company has long sought ways to curb it.
Google's continuing refinement of its search technology underscores the intensifying competition in that market, which has carried Internet advertising back to life in recent years. MSN, Yahoo and others have seen Google parlay popular search technology into a dominant business by selling text ads to marketers whenever consumers search for words related to a business.
Among Internet users, Google remains the favorite search engine, with a 35% share of the market, according to comScore Networks, an Internet research firm. But that lead has been threatened by the ascendancy of Yahoo and MSN from Microsoft.
Simply selling domains is not going to swell Google's bottom line. "Domain name sales have really become a not-for-profit business," said Rich Miller, an analyst with Netcraft, an Internet consultancy in Britain. Companies that sell domain names now also typically sell more lucrative services, like hosting and Web site creation, to help businesses use the domains they have bought.
Bob Parsons, the chief executive of GoDaddy, argues that Google would have to profoundly change its business philosophy to succeed in Web hosting.
"Try to call Google and actually talk to somebody," he said. "It's not their forte. Now, they could acquire that, but at the moment it's a problem I don't have to deal with, so I'm not thinking about it. If they do, we'll go to work." But Web hosting does allow Google the opportunity to gain new customers and sell them other services. "There are lots of different ways they can use it in their business," said Miller. "Our first thought was that they might be doing something with Blogger or Gmail."
Blogger, Google's free Web log hosting service, assigns what is known as a subdomain to users. So instead of Blogger users having their own domain name (say, www.nameofblog.com), they are assigned the Web address nameofblog.blogspot.com. A more easily remembered name could attract more customers, analysts said, and could also be easier to find in a search because search engines often have difficulty turning up subdomains.
Google could also offer users the ability to quickly publish Web sites with Blogger technology, and team that service with a Gmail account and a matching domain name that Google could host. That has been the trend among domain name business in recent years, Miller said.
Until about two years ago, domain name registrars like Network Solutions and Register.com acquired domains from registries for about $6, and sold them to customers for $35 annually. While those companies still charge those fees, they have been challenged in recent years by companies like GoDaddy, which sells Web names for $4 annually, and Yahoo, which currently offers single domain orders for $5 annually.
These companies have increasingly relied on their hosting and Web site building services to increase revenues, particularly from millions of small-business owners. Yahoo, for instance, sells services ranging from a one-page Web site for $10 a year to a more comprehensive electronic commerce site for $300 a month.
According to Rich Riley, Yahoo's vice president and general manager for small business services, the company has "many hundreds of thousands of paying customers" for its Web hosting services, and market growth has accelerated since it revamped the service in August and offered less expensive services.
Among other things, Yahoo offers paying customers toll-free customer support--something also offered by competitors, who have grown accustomed to holding the hands of small-business owners. At first glance, such a labor-intensive business would not easily fit the business approach of Google, which has managed to generate billions in advertising dollars using a self-service approach with no phone support.
"Is it possible Google may jump into the hosting and domain name business?" asked Parsons, of GoDaddy. "Maybe. But the income they'd get from doing that is nickels compared to what they get from being the premier search company."
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