Donuts Inc.

Renewal Trends: Day 10

Day 10

It's Day 10 and 81,569 Donuts names have now completed their first renewal cycle. These names are from 21 different TLDs and almost all were registered during the general availability phase of their TLDs (i.e. after Sunrise and after the Early Access Program, or EAP). The renewal rate on these 81,569 names is 68.4%.

The three largest TLDs in this group are .GURU, .PHOTOGRAPHY and .BIKE. The individual rates for those TLDs are 63.4%, 75.7% and 74.0%, respectively. .GURU saw more speculative buying than did other Donuts TLDs, hence we think its rate will be below our average.

In March and April we expect the cumulative rate on all Donuts names to stabilize around 70%, and then trend upwards toward 80% as the average age of registrations increases and the proportion of names with website content continues to grow.

Why do renewal rates matter? Because they indicate the health and quality of a TLD. A TLD with a low or declining renewal rate is something domain retailers and investors should be cautious of, as low renewal rates reduce the long term value of the customers buying the names. That's why we've been paying particular attention to the renewal rate on .COM and .NET names that were newly registered in 2014. The blended renewal rate on all .COM / .NET names is 72%, but that number is heavily weighted by names that were bought years ago, are consistently used, and are renewed every year ('blended' means the combination of older names that have been in use for years and have high renewal rates with newer names that are just going through their first renewal cycle). Our interest is the .COM /.NET names that were first registered in 2014, and the renewal rate for those names, according to third party analyses, is 50% and declining.

Why should you care that new .COM names are renewing at 50% or lower. The entire population of .COM renews at 72% which means it's a healthy TLD, right? Well, not if you're a registrar who's deciding where to spend marketing dollars on new customer acquisition in 2015. If you spend those dollars acquiring more .COM customers you'll need to figure a 50% renewal rate into your calculation of lifetime value / return on campaign. Don't calculate that return at 72%. It's similar if you're a domain investor. As great as those old .COMs are, when you buy a .COM from the registry in 2015 you're buying into 2015 quality, and that quality has declined to the point where names will soon renew below 50%. If you're in the business of buying or selling domains, rather than being a user of them, you should have a good look at current year renewal rates for the TLD you're interested in. It'll surprise you.

Richard Tindal
Donuts Inc