Domain names are a significant cost factor in many businesses. Professional domainers and webmasters running a large number of sites can incur large registration and renewal fees. Certain expenses are mandated by the Internet Corporation for Assigned Names and Numbers (ICANN) and Verisign, while others are added on directly by the domain registrar for overhead costs and additional features like private domain registration.
Domain names were introduced in 1985 and started off with only six top level domains, such as .com and .gov. It was not until 1998 that ICANN was formed to control domain naming. Additional top level domains were added periodically, and today there are many applications for top level domains that get approved. The original pricing for domain names were very steep compared to today's average of approximately $8-$10 for a .com domain name. In 1995 Registering a .com domain for two years cost $100.
Top Level Domains
Top level domains are implemented by ICANN for a variety of reasons. Top level domains are also known as domain extensions. Dot-com domains are sometimes called commercial domain names, but they are used for countless types of sites. According to Whois.sc, there are 87,929,131 active .com domain names.
Top level domains are also implemented for specific industries and technologies. Mobi domains are used to indicate websites designed for mobile web users. Mil domains are websites created by the US military for various branches. Edu domains are associated with an institute of learning such as a college or high school.
Domain name prices vary greatly between top level domains. While .com, .org, .net, and .info are usually in the same general price range of $8 to $10 a domain, certain extensions such as .tv and .vs range in the $20 to $40 range for a year registration.
Verisign is one of the largest network infrastructure providers, and through an agreement with ICANN, sets base pricing on .com and .net as it controls the DNS for these two extensions. The base prices are the prices that a domain registrar pays Verisign for client domain registrations. In 2010 the base prices for .com domains are $7.34 and .net domains are $4.65.
ICANN charges a fee for each domain name registered. The fee is 20 cents per domain. Domain registrars also pay fees to ICANN before gaining the ability to offer domain names to the public. There is a $2,500 application fee, a $4,000 annual fee, a variable fee that ranges from $1,200 to $2,000, and the domain name fee (typically passed on to customers). A domain registrar must also have $70,000 in working capital and $500,000 in business insurance before being approved by ICANN.
Domain registrars also offer many different prices between companies. One company might charge $8.81 for a .com domain, while another is charging $35. The price difference is caused by many different factors. A domain registrar might offer privacy settings that add to the cost, or have higher overhead due to superior customer service. Registrars may also run sales on certain domain name extensions, hoping to gain the money back through bundled web hosting packages or full price domain renewals. An example of the second situation occurs with the plethora of domain registrars that offered 99 cent .info domains that renewed at the full cost the year after, usually around $7 or $8.