The problem with Vanity TLDs

Part of the new ICANN plan for gTLDs -- which I outline here -- includes plans for "community domains" where the operator can prove they are the exclusive agent for a particular community.

The name sounds nice but it is expected that most of these will actually be vanity TLDs, where a company seeks to have a TLD for their name, with a web site like www.theirname when they used to just have or want theirname.com.

It's supposed that we might see domains like .ibm or .microsoft and the like. Domains for big companies with world-famous trademarks. They need to be big and world famous because if somebody disputes the name it can interfere with the application.

The result of this, I believe will be to create a new, expensive domain space for very rich companies. It is likely that having a TLD will be considered a prestige thing. If several major companies do it, it will create an impression that to be a serious player on the web, you had better have the .yourname TLD. This will be similar to the desire all companies have to have theirname.com, with the addition that it will demonstrate that you are rich and your brand is famous or unique. Companies want to present that image, and more to the point don't want to present the image of being 2nd rate.

The cost of a TLD application is large -- $185,000. And you have to run a TLD name server, though that's not too hard if you are not selling domains within it. A large number of companies have paid sums in this range to get the right .com domain, or in particular to buy such names from people who had them legitimately (ie. were not cybersquatters who could be unseated by other legal or extra-legal means.)

The cachet of a TLD will have a strong pull for startups with lots of funding, though no bootstrap-funded startup is likely to pay this high price.

Some of the corporate TLDs will truly be community TLDs. For example, a number of companies have already offered their users addresses within existing premium .com domains. Apple gave out mac.com addresses to users. Yahoo, Hotmail and many other e-mail providers give out short E-mail addresses to users, often for free. I expect some companies might hand out web sites to users or customers, particularly in areas like blogging.

Unlike the generic TLDs, this does not offer the selling of generic phrases to the highest bidder. (Presuming that companies like Apple Computer are forbidden from getting .apple because of its generic meaning.) So why is it a bad idea?

• It just punts many of the problems and battles we had in .com to the higher level of the root. There is nowhere higher to punt the problems when they happen again. (To be fair, the application procedure tries to deal with many of the problems we've seen before, but not ones we have yet to see.)
• It will mean a big explosion of TLDs. This breaks the common trick at many sites of letting users access local subdomains without typing the local master domain. At many companies, if you enter "mail" they give you "mail.yourcompany.com" which is nice. With thousands of TLDs, collision is assured, causing all sorts of problems. If TLDs had to end with dots it would help, but they don't.
• It creates a three-tier world. The big boys who have TLDs, the cheaper boys who have .com names and the losers who have .net or other new TLDs. At the same time it adds very little value.