If ICANN only charges $0.18 per domain name, why am I paying $10? | Hacker News Reader

If ICANN only charges $0.18 per domain name, why am I paying $10?

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127 pointsjpatokal53 comments

Running a registrar has close to a $500k a year minimum salary bill, which is 50k $10 domains even if you model them as having 0 COGS, which is in fact highly contrary to fact. That's tricky to get to organically, so you start doing things like paid marketing, and then realize that GoDaddy (et al) will happily spend $X0 to acquire $10 a year worth of domain business, both because it has a relatively high LTV and, more importantly, because it has a "backend." (e.g. GoDaddy made a $16 sale for me on bingocardcreator.com back in 2006 and then sold me another ~$5,000 of domains and SSLs over the years, and I don't even use the products where they really make a killing, like hosted shopping carts and what have you.)

Relevantly to HNers: you'll run into math like this for most software businesses. Upfront costs are quite low and COGS may well be near zero, but if you want to actually sustain the business, you get to pay market wages to people, and it is very hard to pay market wages to technologists $1 at a time. There was a story on HN today about a business which just learned this to its sadness. They were not the first to figure it out and they will not be the last.

One of the answers on SE also says something along the same lines. Although I have no doubt that running a registrar costs a lot of money, this is the wrong answer to the original question.

.com domains cost $10 because Verisign charges $7.85 for each of them in addition to the $0.18 ICANN fee. Large registrars, of course, get volume discounts, and they might even sell new domains at a loss when they think they can rip you off on add-ons and renewals. But by no means are they pocketing the entire $9.82 as the question mistakenly assumes.

I'm not massively clued in on this so apologies if this is a bad question, but what's Verisign's role in this? That's a decent amount of cash, what is the service they provide for that?

They run the .com registry and zone, among other TLDs.

I own the domain prgmr.com, and control the associated nameservers.

I can make smcl.prgmr.com, and give it to you. I can even point smcl.prgmr.com at your own nameserver so you can make somethingelse.smcl.prgmr.com. You could, in fact, sell other people [something].smcl.prgmr.com. domains, and so on.

It's just a line in my dns config. (then dealing with abuse complaints and the like)

Now, Verisign owns .com. There's no technical difference, really, between .com, .co.uk, and prgmr.com. If you want smcl.com, you need verisign's dns servers to cooperate, just as if you want smcl.prgmr.com, you need my dns servers to cooperate. For this, verisign charges the registrar seven bucks and change. The registrar tacks on a few pennies (or does the same with advertising) and handles all interactions with you.

Verisign has a nice re-seller interface. That's what the registrar/registry split is all about. But if I really thought people would give me money for something.prgmr.com. dns entries, I'm sure I could come up with a re-seller interface, too.

Personally, I think the current price is a little high, but mostly because I don't like monopolies in general, and my feelings for Verisign can only be described with superlative synonyms for hatred. Personally, if someone has to have a monopoly on .com domains, I think a not-for-profit like ICANN would do a better job.

It is a small injustice, though, for reasonable people with one or two domain names.

(On the other hand, the registrars, the people who actually handle the customer interaction, are ridiculously efficient. if you want a domain cheap, you can get it for pennies over what the monopoly charges, or you can pay a few bucks more, and get pretty good service, showing that when there is competition, for-profit businesses can do a pretty good job.)

It hadn't even occurred to me that someone might have considerable control/ownership over large tracts of DNS servers. (Of course they do, I'd just never thought about it!). So anyway, I'd just like to say thanks, this is a really great explanation.

I worked for a registry a few years ago and the uptime the ICANN mandate are very very tough full redundancy on 4 separate continents.

Amazon, Google, Dnsmadeeasy, UltraDNS, Cloudflare all do it. I wouldn't say its that tough.

Disclaimer: Infrastructure engineer

Well maybe tough isn't the right word certainly expensive and unless your ex Telco and used to that level of redundancy a bit of a shock.

And Amazon AWS remind me how many major down time incidents have they had ;-)

> And Amazon AWS remind me how many major down time incidents have they had ;-)

Not sure if you were joking or not; I've managed thousands of instances in AWS across the world, and while us-east-1 continues to have issues occasionally, their DNS has been rock solid. Netflix uses them (with some UltraDNS for geolocation-based redirection, which Route53 doesn't support). That's good enough for me.

It's way easier to build a reliable DNS cluster than it is to build a reliable UNIX box.

Anycast works way better for UDP/dns than it does for TCP/http.

The idea behind Anycast is that you announce the address block your DNS cluster is on out many different locations around the world. At each location you have (usually a redundant cluster of) dns servers.

The router ahead of the IP of the person looking up an address on your nameserver will check it's bgp table, and then choose whichever location of yours is the fewest hops away. From that router's point of view, this is no different from you having one location with many different service providers.

If one of your locations goes away, it stops announcing the block, and all clients that would have gone to it instead use the next closest (hop-wise) location.

(this is actually one of the hard parts; if you have a setup where the dns server stops responding correctly but it's still announcing via bgp, you are broken.)

You generally don't use this for HTTP and other connection-based stuff, because a route flap is going to move your connection endpoint to an entirely new server. This causes a bunch of problems with your connection oriented stuff. (yes, you can sync connection state across servers... but the latency in that is going to kill you.)

I've built global anycast DNS clusters before :) Thanks for sharing the info though!

Protip: Perform service checks, and immediately withdraw your BGP route if a failure is detected.

Also, props for explaining why HTTP anycast is a pain in the casee. Even stateless it doesn't work well, which is why its usually done with DNS vs BGP/anycast.

>I've built global anycast DNS clusters before :)

Hah. I've only talked about it. It's one of those things I want to do before it's an obsolete skill, but it isn't at the top of my priority list.

You're not missing anything, trust me.

I've been doing a little bit with .dk lately, and I kind of like their model: DK Hostmaster handles almost everything. Due to lobbying from various hosting companies, there is an arbitrary restriction that you can't register a domain initially with them, but instead have to go through a registrar (same as in .com). I think this is mostly because it gives various hosting companies a chance to upsell you on email/Wordpress/whatever, since you have to go through one of them to get the domain. But then once you have the domain, you never have to deal with them again, because you subsequently do your yearly renewal directly through DK Hostmaster. You just log in, pay your $8.50 fee, and that's that. And unlike GoDaddy et al, they aren't trying to sell you a dozen services every time you try to renew.

$8.50 still seems quite high given you're paying them to let you use their interface to increment the expiry date on the domain. With the volume they have and once the system is set-up there's got to be almost no action to take beyond the maintenance of a few servers?

Yeah, I'm not too sure what the expenses and finances are like. They mention that they manage ~1m domains, so that's ~$8-9m/yr revenue. Maybe a bit less if a substantial percentage of domains are doing 3-year or 5-year renewals (which are discounted 10-20%). Not a trivial amount, but it's not hard to spend a few million $ on salaries, office space, a server room, etc. It's possible the service is also sending a surplus to its owner, the nonprofit Danish Internet Forum, but I'm not sure if that's the case.

A registry is not just a MySQL database with some random domain names in it.

Have you considered what kind of resources and expertise that are required to handle issues such as domain name disputes? For example, suppose Alice and Bob run an informal business together, they have a clash and both of them make claims of the business' domain name. Or if Mallory registers someone elses company name and use it for nefarious purposes? [+]

[+] See http://swartz.typepad.com/texplorer/2006/04/wellknown_rock_.... for a particularly domain name anecdote involving Metallica and a Swedish VC firm.

>You just log in, pay your $8.50 fee, and that's that. And unlike GoDaddy et al, they aren't trying to sell you a dozen services every time you try to renew.

The registrars are pretty efficient, if you ask me. I think that part of the system isn't broken. Yeah, if you want to save every penny, godaddy does that, at the cost of the shitty service and upsells.

If you are willing to pay just a few bucks more, there are a lot of good registrars who don't up-sell you. Joker.com is my favorite. I think it comes to another four dollars a year; less than half a dollar a month.

In terms of costs, keeping a few kb for the domain and associated contacts is almost nothing. Providing an API for resellers that is up 24h/24 is a bit more expensive but still doesn't justify the 8$/m. What's probably the biggest costs is the DNS servers. Verisign does have to have to maintain beefy DNS servers to reply to all .com subdomains queries.

Dude you, like, live in here!

Wow, and I get downvoted for saying how amazing that patio11 is so quick to react. Somebody's being an off-topic nazi?

Your comments are not substantial, that's what you're getting dowvoted for. Just press the triangular arrow pointing up if you aggree/applaud the reaction.

"There was a story on HN today about a business..."

Anyone remember what story this was? I do a lot of consulting and have been running some numbers of scaling things up lately and am coming to some similar conclusions on paper. Would really be interested in this.

I believe he's referring to App.net

article: https://news.ycombinator.com/item?id=7706274

COGS = cost of goods sold

  + $0.18 ICANN Fee
  + $7.85 Registry Fee (a.k.a Verisign's Ripoff fee)
  + $1.97 Registrar (who you register the domain through) Fee
  = $10.00 Retail Price

Amazingly, Verisign aren't the worst offender. The infrastructure to support the registry MUST cost a fraction of that price - as proven by 'low-fee' registries. I don't know how Verisign can continue to justify their price hikes.

So you are aware, Verisign make just shy of $1 billion a year through this fee. Thats a lot of salaries and infrastructure... The scumbags even tried to increase the cost by 7% per annum to "ensure that .com directories run smoothly amid increases in Internet traffic and heightened security threats." before they forcibly had their prices frozen by the federal government in 2012. Make no mistake, Verisign have certainly been taking advantage of their position as registry of .coms.

That said, I still think the price of TLDs is too low, as proven by the proliferation of squatters. How to solve this, and where the money should go is another question though...

exactly, not to mention a lot of registrars charge way more than $10 for a .com. last I checked Network Solutions charged $30+ for a .com! also how much do you think Verisign and other registrars contributed to OpenSSL this year?

Increasing the price of domain names has little effect on "squatting" (a term I highly dislike). Parked domains create a large volume of available inventory in ad markets, driving down costs in SEM.

If it cost $500 to register a domain (or even $100 as they used to be), I cannot imagine that it wouldn't significantly decrease the amount of parked domains. So many are squatted because you only have to make back ~$10 in order to pay for it, right? That's a small gamble. Buy a dozen domains and only 1 needs to do decently well in order to pay for the others.

Additionally, $10 is almost an impulse buy, so a lot of domains are picked up in the event that it might be useful someday (I'm guilty of this).

It's so annoying when you have the perfect name for a product only to find that the domain is uselessly parked. And it seems to be 95% of the time.

And what if you wanted a domain name for a site that won't make money? People that aren't businesses shouldn't own domains?

They should, but domains don't have to cost as little as $10 for that to be doable. Look at all the crap that people buy that's much more expensive and offers less utility.

Though I wouldn't actually propose they cost $500, I think $100 or so is still reasonable. Myself and many others bought them in the 90s for personal non-profit use at that price.

Add a $100 surcharge which goes to the EFF or some other org of choice. Maybe that doesn't even need to be yearly, but happens when a new domain is registered and each time it changes ownership.

It's essentially the Tragedy of the Commons. People come and claim part of the common green, which pushes newcomers out to the more undesirable real estate. I'm not convinced there is a workable market solution, though I'm also not convinced that there's a satisfactory regulatory solution.

There is nothing wrong with the term squatting per-se, it just gets mis-applied all the time (as by gp).

I didn't know Verisign was the ones taking so much; I thought most of it went to ICANN. I will pass this info on--I have always thought these fees were way to high. I was just blaming the wrong company. Sorry--ICAAN.

As to the cost of domain names, If they were higher--guys like that Godaddy dude and Zuckerman would just buy up larger blocks of domains.

Hopefully, one day when a premium domain actually does drop--anyone with a computer will have a chance to buy it, or at least have a lottery for the best names? Right now it's a slimy game.

I am glad that domains are not $0.18. Imagine how many domains would be available if domains were that cheap...

I gather that at that price domain grabbers would just start to register everything (within reason). Then we would deal with some kind of secondary market where domains would be priced by their attractiveness and not sold as a common good (this obviously is already the case for many good domains).

Yea, but what if they put a limit of, say 4 per IP address? If you wanted a new domain, you would need to forfeit one? Or, even go farther, and tie a name and social security number to the domain in order to keep track?

Unless I'm missing some greater context, certainly your latter suggestion is completely impossible in a global context.

Before 1997, they used to be free.

I follow this space and am currently doing some research into the renewal/transition of the IANA contract.

http://www.ntia.doc.gov/press-release/2014/ntia-announces-in...

For a good start read this and the linked PDF:

http://www.circleid.com/posts/20140426_the_illusion_of_inter...

TLDR; The DNS industry has an oversized representation in ICANN. ICANN makes a ton of money, and no one really seems to care.

You can read the actual contract ICANN has with the government(NTIA) here:

http://www.ntia.doc.gov/files/ntia/publications/sf_26_pg_1-2...

Mueller is someone who regularly criticizes ICANN. I don't always agree with him, but I think he's right on with this one.

http://www.internetgovernance.org/2014/04/16/icann-anything-...

How did Verisign get the .com TLD monopoly in the first place? I was a wee lad when this all started and don't remember the history.

Can someone drop a good link describing why there wasn't a more distributed approach to the .com TLD (and still isn't for new TLDs?)

Verisign acquired Network Solutions, the administrators of .com.

The name registry was initially government funded, but privatized and sold off in the early / mid 90s.

https://en.wikipedia.org/wiki/Verisign https://en.wikipedia.org/wiki/Network_Solutions http://mediafilter.org/caq/internic

My related Ask HN: Would you prefer a non-profit domain name registrar?

https://news.ycombinator.com/item?id=7156997

Since I can't reply in that thread, I'll reply here ...

When you say non-profit, you could mean multiple things, at least here in the U.S.

You might be talking about a 501(c)(3) non-profit, like Mozilla or Wikipedia. Typically, when people think of 501(c)(3)s, they think of organizations such as the Red Cross or Catholic Charities, but obviously (as with Mozilla or Wikipedia) it can be practically anything directed toward the public good. One common critique I've heard about nonprofits in the tech space is that they have a hard time competing for the best talent (at least when it comes to salary/benefits), but if you have a large volunteer base, and a lot of people who truly want the project to flourish, then that's not a critical problem.

Or, you might be talking about a cooperative. A co-op is a non-profit in the sense that (unlike a normal for-profit business) its primary goal is not to make money, but to provide some benefit to its members. So, in the case of a cooperative registrar (such as nic.coop), the members wholly own the registrar, and it exists for their benefit. They may not care about generating a profit, so long as the business satisfactorily provides a necessary service.

It's like an employee of a company earning $70k per year working on a project that will bring in $500k wondering why they're not getting paid more if the company is making much more than their yearly salary in one go and the answer is: overheads.

The domain aspect of a registrar is one very small part. You factor in insurance, employee salaries, utilities, leasing of office space, purchasing office equipment and computers, storage, maintenance (network and building). A registrar is like any other business, it has to factor in its overheads into the cost of their products. On-top of that, all businesses ensure they bring in a little more than they're spending (ideally) and reinvest that back into the business to improve service offerings and existing products.

Having said all that ICANN aren't the only registrar out there, Verisign are probably the worse in my opinion. There are many men in the middle driving the cost up as well. It's very much a shark industry.

Domain business is one of the most shadiest business on the web. I wasn't aware of the verisign fees but honestly, it is about time to either disrupt whole domain industry or start democratizing it. Every registrar company take its users for a ride.

In a capitalist economy, companies buy goods and services at a lower price than they sell them for. Positioning, branding and establishment of value allow some sellers to sell at a higher price. Other sellers compete by selling at a lower price and make a lower margin on the sale.

Technical folks such as those at Hacker News are focused on other things typically than this sort of stuff but it's what gets salaries paid.

If you work at a commercial organisation you'll find the cost of producing the goods or services that your company sells are (hopefully) less than the price they are sold for.

If there is a wide disparity between cost and price then companies think this is a good thing as it results in greater profit but typically attracts greater competition.

Hacker News is supposed to be half business - that's the point of it. Startups is where tech meet business.

"In a capitalist economy" And yet the only reason the price is this high is because there is a monopoly involved. Yes, government-granted, and given to Verisign.

Value based pricing. http://en.wikipedia.org/wiki/Value-based_pricing

A other answers have said, large portion of your money goes to Verisign. Verisign is essentially government sponsored monopoly over .com and .net domains. You may ask how did that happened when US supposed to so despise monopolies?

Here's how:

Early on registries were free, funded by government and run by InterNIC. Then government decided to privatize it. The contract to manage .com registry was granted to a company called Network Solutions, Inc (NSI). At that time govt actually paid [$5.9M][1] NSI to do this but then NSI managed to convince that registrations should be charged to cover the cost. Eventually Verisign bought Network Solutions and become the entity who manages .com registry.

Everyone was starting to realize that NSI/Verisign was becoming monoloy for some very important function of modern economy. ICANN was formed in 1998 which was charted to introduce competition in this area. But instead they ended up doing almost exactly the opposite thing in next series of events.

Early in 2003 Verisign introduced a service called [Site Finder][2] which redirected users to search engine if domain didn't exist. ICANN said this was "overstepping the contract terms". Verisign shutdown the service but also sued ICANN for preventing it to bring any improvements. Eventually ICANN had to settle with Verisign and the prize of [settlement][3] was that Verisign would be awarded renewal of contract without any bidding plus right to raise prices without showing cost justifications. There were even terms that indicated Verisign can even continue its monopoly for longer term. If you ask me this is blunder and incompetence by ICANN at mega scale.

[Industry was furious][4]. Lot of people [commented][5] on ICANN's proposal of settlement by saying that .com registry is not the property that ICANN owns to leverage in settlements. Others said no other government agency knowingly consented to unchecked price increase without cost justification. But it all went to vein and ICANN directors voted 5-9 in favor of settlement. Due to industry outrage US Dept of Commerce had to intervene and eliminate the clause for Verisign's right to increase prices by 7%. You can say that Verisign showed benevolence for not increasing prices to what was already considered ridiculous.

In cases like this typically competitors brings in anti-trust suits. It did happened against Verisign in 2010 but they [escaped][6] without a bruise because the organization CFIT which had filed this case wasn't considered as competitor or the one who had financial injuries. It also surprises me that real competitors haven't come forward against Verisign to bring in large scale anti-trust suit.

So when you pay that $10, it's ICANN's massive blunders of last decade to allow Verisign continue absolute monopoly. Verisign has benefitted dearly with this. They have $2 billion in cash and $1 billion of yearly revenues from all the payments you hand out to them. Verisign's financial indicates that this is their highest margin business.

One light at the end of the tunnel is that US government has [announced][7] plan to relinquish the control of Internet which means ICANN might not have authority to hand out monopolies any longer. Their stock too big hit when US government announced this.

  [1]: http://en.wikipedia.org/wiki/Network_Solutions#History
  [2]: http://en.wikipedia.org/wiki/Verisign#2003_Site_Finder_legal_case
  [3]: http://www.cio.com/article/18286/ICANN_OKs_VeriSign_Settlement
  [4]: http://www.prnewswire.com/news-releases/godaddycomr-outraged-over-icannr-giving-verisignr-monopoly-55213652.html
  [5]: http://forum.icann.org/lists/com-renewal/
  [6]: http://domainincite.com/4676-breaking-verisign-settles-cfit-lawsuit-for-free
  [7]: http://www.washingtonpost.com/business/technology/us-to-relinquish-remaining-control-over-the-internet/2014/03/14/0c7472d0-abb5-11e3-adbc-888c8010c799_story.html

You get your history right, but I don't agree with our analysis. The NTIA's transition of IANA will most likely just result in increased autonomy for ICANN. Which will result in them being granted increased power in delegating monopolies to registries. ICANN made $400,000,000 in revenue in 2013. It's not just the .com TLD, every gTLD that ICANN issues is a monopoly to its registry.

The bright side is that with ~1,300 new gTLDs being issued in 2014 the power a single registry such as Verisign can wield will decrease. If Verisign wants to charge $1,000 for a .com domain, you can just but a different domain under a different TLD. Expect to see more new websites not using .com in the future as these new gTLDs start propogating. Also, expect many more IDN gTLDs in coming years as unicode character sets become preferable for people in countries that don't use a latin character set.

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