Assessing new gTLD competition by using Monte Carlo Simulation

1. New gTLD Market Evolution
Simulations for gTLD Market Competition
Kenny Huang, Ph.D.
Executive Council, APNIC
Board Director, TWNIC
New gTLD Review Group
huangksh@gmail.com

2. Value of gTLD
High ROI
Top search engine rankings of the domain name
Thereby to a high number of visitors
Count as significant traffic
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3. Concentration Ratio
CR4 : Four-Firm Concentration Ratio measures the total market
share of the four largest firms in an industry
CR4 Concentration Ratio Market Competition
CR4=0 % Perfect competition
CR4=100% Monopoly
80% < CR4 < 100% From oligopoly to monopoly
50% < CR4 < 80% Oligopoly
0% < CR4 < 50% From perfect competition to oligopoly
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4. Legitimate gTLD CR4 com/net/org/info
99.00%
eu mobi asia tel
98.50% 98.34% 98.37% 98.39%
98.21%
98.01% 98.09%
97.99%
98.00%
Concentration Ratio
97.50%
Infringe NTIA agreement & ICANN Core Value
“promote and sustain a competitive environment”
97.00%
96.50%
96.00%
95.50%
95.00%
2007 2008 2009 2010 2011 2012 2013
CR4 : Four-Firm Concentration Ratio measures the total market share of the four largest firms in an industry
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5. ICANN New gTLD Updated
applications
1930 34% Brand
IDN
gTLD names
1409 53%
Community
Geographic
Generic
6%
applicants
1155
3% 4%
How does competition affect the market? given that 1409 gTLDs successfully delegated
Design Assumption:
Total gTLD domains : 140,667,491 (2013 Jan)
Previous gTLD penetration : 250K – 750K DUM (Domain Under Management) in the 1st year
New gTLD names : 1409
New gTLD DUM : designed by probability distribution
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6. Back-End Suppliers
400
358
350 333
305
300
250 236
200
161
150
101 95
100 86
60 58
50
27 27 23 23 21 16
0
CR4=63.83%
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7. Perceived New gTLD Evolution
Legitimate gTLD
DUM
Post New gTLD
ƒ (DUM)
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8. Monte Carlo Simulation A: New gTLD Market Penetration Scenario
20% High Penetration : 250K-750K DUM/gTLD
50% < CR4 < 65% 80% Low Penetration : 5K-250K DUM/gTLD
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9. Monte Carlo Simulation B: New gTLD Market Penetration Scenario
10% High Penetration : 250K-750K DUM/gTLD
57% < CR4 < 78% 90% Low Penetration : 5K-250K DUM/gTLD
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10. Monte Carlo Simulation C: New gTLD Market Penetration Scenario
20% High Penetration : 100K-250K DUM/gTLD
67% < CR4 < 81% 80% Low Penetration : 5K-100K DUM/gTLD
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11. Monte Carlo Simulation D: New gTLD Market Penetration Scenario
10% High Penetration : 100K-250K DUM/gTLD
79% < CR4 < 89% 90% Low Penetration : 5K-100K DUM/gTLD
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12. Implications
• Market competition
– gTLD market will likely be oligopoly competition after new gTLDs
enter the market
• Name space expansion
– Magnitude of growth of total name space proven not to exist
– Name space maintains incremental growth pace.
• Registry business
– Majority of new gTLD registries will inevitably deal with cash
flow shortfalls.
– Exit plans may be exercised ahead of time for some registries.
• Large back-end suppliers are major beneficiaries from
the new gTLD policy
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