22 Domains Such As .com Aren't Enough?

It's likely the biggest virtual real estate expansion this year that you've never heard of — a massive growth of the Internet that, like the land rushes of yesteryear, will have winners, losers and possibly unintended consequences.

The generic top-level domain (gTLD), the last portion of an Internet address, such as .com, .org, .edu or .gov, will be dramatically expanded. Companies already have lined up to haggle, bargain and — if need be — fight over them.

Currently, there are roughly 200 million domain names worldwide, with .com being the most commonly used gTLD, according to the Internet Corp. for Assigned Names and Numbers, a nonprofit organization that oversees various Internet-related tasks. Last year there were 22 gTLD domains, and by the end of 2014 roughly 1,000 new domains will be introduced on the Internet, Icann said.

"It's an industry vertical that's ripe for the picking," said Erik Ludwick, chief executive of What Box?, a Los Angeles-based Internet domain company. He says the market potential for domains is a "virtual swampland" because "no one knows" if they'll turn a profit.

Wading Into The .swamp

BMW already has applied for .bmw. The Vatican has requested .catholic, while Apple (AAPL) has dibs on its namesake .apple. The Boston Globe newspaper has applied for .boston, while New York and London will have their own domain names. Google (GOOG) has sent in 102 applications and Amazon (AMZN) has 76 applications of its own for gTLDs, including .music, .book and .shop.

Besides tech giants, big cities and major automakers, other companies are getting into the mix. Donuts, a $100 million Bellevue, Wash.-based company built for the purpose of buying new domain names, has been among the most aggressive bidders, applying for more than 300 domains ranging from .pets to .guru to .poker.

"The whole purpose of the program is to bring new variety and choice to people who need Internet identities," said Mason Cole, vice president for communications at Donuts.

The process of expanding Internet domain names has been in the works for several years. Those getting in on the ground level have to part with cash — the application fee is $185,000. These proceeds will not go into Icann's general fund, but instead will be stored by Icann until both it and the larger Internet domain business community decide what to do later on with the money, said Cyrus Namazi, an Icann vice president.

About 40% In Dispute

Icann received nearly 2,000 applications from 1,000 different entities. Roughly 40% of the domains are being contested by 231 applicants, with some of the names being decided by auction. The others will be decided by the bidding parties themselves through negotiations. Icann takes up to 25 cents of every domain name sold and charges other fees.

The project will "enable and provide a new blank canvas" to allow businesses and other domain holders "to have their own distinct virtual identity," Namazi said.

What each participant in this domain name boom intends to get depends on what it wants. Businesses like Donuts and What Box? are hoping to profit from their ventures, while others may end up buying domains simply to block other people from using them to dilute their trademarks.

Although the Internet has a large U.S. stamp on it, the World Wide Web is indeed global with national domains. These aren't called gTLDs, but rather ccTLDs, as in country code top-level domains. Germany is .de, Ireland is .ie, Canada .ca and France .fr, even though many domain names within nations just use the popular .com. Sochi.ru is plastered everywhere at the Winter Olympics.

One key goal to expanding the Internet was to expand non-Latin characters — available since 2010 — for use in nations where the dominant languages include Arabic, Russian, Japanese or Farsi, Namazi said.

But it's not all wine and cheese — or beer and bratwurst. Businesses that have a specific brand might find themselves spending more to defend their trademarks from competitors, said Andrea Calvaruso, a partner and intellectual property lawyer at Kelley Drye & Warren.

"This whole rollout is opening up all kinds of cans of worms," Calvaruso said.

For example, Merck & Co. (MRK), the New Jersey-based pharmaceutical giant, and Merck KGaA, a German drug and chemical maker, both have filed for the .merck domain.

Anti-competitive concerns also exist, with some critics questioning whether one company should be allowed to own certain domains — such as .book or .search — that they believe should be open to the public and could be used to hoard market share.

"If there are things that one particular company controls and they get to say who gets to use it, that could be very problematic," said John M. Simpson, director of the Privacy Project at Consumer Watchdog, a Santa Monica, Calif.-based advocacy group.

Nevertheless, GoDaddy — the leading domain name retailer — already has opened name pre-registration for several new gTLDs, including .photography for $24.99 and .estate for $39.99. The domains' wholesalers, such as Donuts or What Box?, will receive a percentage of the sales.

"It's a matter of opening up another opportunity, another source of creativity and innovation in a space," said James Cole, global media coordinator at Icann. "It's a whole different ballpark now."