The wholesale cost of a domain comes down to how the top-level domain (TLD) is regulated, the financial incentives of its registry, and market forces. Read between those lines and you might be able to guess where prices will go next.
A domain’s TLD is the bit that comes after the dot - .co.nz, for example, or .com. When you register a new domain you’ll see that they are priced by TLD. That’s because different TLDs are subject to different rules, and managed by different registries with different operating models.
If you want to predict where wholesale prices are going to be when you renew your domain in the future, here is where to look for clues.
Who’s setting the wholesale price?
When you secure your new domain name, it’s yours for a set period (usually 1 to 10 years). Prices will change over time, so by the time your domain needs renewing you’ll quite possibly be looking at a higher dollar amount.
While the final price is set by your provider (like us), a big chunk of the cost goes straight to the TLD registry. No matter who you buy from, that wholesale cost is fixed. Let’s look at three examples of how different TLDs are managed, and how their prices are affected.
Example 1: .nz is regulated and operated as a public good
Here in New Zealand the .nz domain space is controlled by InternetNZ (and its subsidiary, the Domain Name Commission), which is a not-for-profit organisation set up to “work for an Internet that benefits all of Aotearoa”.
Obviously, it would be against the public interest if the wholesale cost of .nz domains suddenly doubled or tripled.
A slice of every .nz registration goes to InternetNZ, which helps to fund its operations. InternetNZ’s Memorandum of Understanding (PDF) with the Government says that any surplus that InternetNZ realises from operating .nz “would be used to promote and protect the Internet and Internet users in New Zealand. That is the charitable object at the core of InternetNZ’s constitution.”
The same MoU commits InternetNZ to operating an “open and uncapturable” market for .nz domains, and to managing .nz “in the public interest”. Obviously, it would be against the public interest if the wholesale cost of .nz domains suddenly shot up.
Example 2: .com is regulated by ICANN, but with a private operator
.com is operated by a private registry, Verisign, with ICANN acting more or less as the regulator.
Other TLDs are regulated in different ways. We’ve written about ICANN and .com domains before, and there’s quite a long story there. But for now what’s important to know is that after many years of keeping a tight lid on the price of TLDs like .com and .org, the relevant regulators are now taking a looser approach.
Unlike the .nz system, which commits profits to charitable purposes, the .com system is operated by a private registry, Verisign, with ICANN acting more or less as the regulator. Every .com registration adds a little to Verisign’s bank balance, so it would be no surprise if .com wholesale prices went up every time the regulator allowed it.
Example 3: Many TLDs are privately owned and operated
Unregulated domains have seen the fastest wholesale price-rises in recent years.
If you’re read our article about the price of .kiwi domains, you’ll already know that a lot of novel TLDs, all created since 2012, were designed as products for a single private owner/operator. In the case of .kiwi, a company called Dot Kiwi Limited is the price-setter, unbound by any regulation. Wholesale prices in these cases are whatever the market will bear.
More than 240 of these TLDs - from .academy to .zone - have since been brought together under the ownership of Donuts Inc (soon to be known as Identity Digital). These sorts of mergers and acquisitions don’t exactly have a track record of leading to lower prices.
Unregulated domains have seen the fastest wholesale price-rises in recent years. In the case of .kiwi, new registrations appear to have tailed off, which means that existing customers are almost the only source of revenue growth for the company.
When you register a domain, you buy into a system
It’s hard to change a domain name once you’re committed. Especially if you’re registering a domain that you want to keep for a long time, it matters which system you buy into.
If you have a domain on a privately-operated TLD (like .kiwi), you are taking on some risks.
There’s no regulator to protect you from price-gouging. The owner has costs to cover, profits to make, and not many other incentives to consider.
If you’re looking at niche or uncommon TLDs, bear in mind that those costs have to be spread over fewer customers.
If the owner is acquired by an operator like Donuts Inc, you’ll find yourself beholden to a completely different registry - one that’s looking to make a return on its investment.
Dollars to Donuts? It pays to know who owns a TLD before you buy in.
Regulated registries are more likely to keep price rises down. Taking .com as an example, wholesale price rises have been measured in percentage points rather than orders of magnitude.
Finally, there are the not-for-profit systems like the one that keeps .nz running. These have historically offered more price stability and fewer surprises.
Don’t forget to shop around
Whatever TLD you’re interested in, you have a wide range of providers to choose from - including us. Everything we’ve said above is about the wholesale prices that these providers pay. When it comes to setting the final price for customers like you, there’s a lot of variation in the market.
Taking .nz domains as an example, a change of provider can make a difference of $50 a year, or more. So take the time to compare providers, not only on price but also:
Charges for renewals (look out for introductory specials that mask high standard prices).
Charges for privacy and other add-ons.
Charges to make changes to DNS or nameservers.
The option to auto-renew domains.
Service and support.
Reliability and uptime.
The tools that you’ll be given to manage your domains - especially if you manage dozens or hundreds of them.