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Domain summit 2024

Number Crunching

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You asked for it you got it.

As an ICANN accredited registrar, my cost currently for a CNO domain are roughly $6.25 a domain that we must pay to Verisign and ICANN. BTW, this is supposed to go up at the beginning of next year to somewhere around $6.50-$6.75.

Now this price does not include any salaries, benefits (health insurance, life, social security, FICA, and other taxes), bandwidth costs, server costs, credit card processing, charge back fees, rent, parking for employees, or other costs associated with running a business.

Since we are in the domain business, we as a registrar have determined our costs to run our business about $1.00 per domain. So I will use this as my basis for all comparisons.

So all registrars initial cost to sell a domain is as of today is roughly $7.25. This is their break even cost. If they go higher than this they are making money.

Any registrar that is selling a domain for less than this is either losing money, hoping to make the loss up with upsells (hosting/redirection, stock art, DNS/nameservers, email forwarding/pop3), has another scheme to make money (purchase x credits at $6.95, if you don't use them in a year, you are SOL), or just plain stupid.

So let's take enom, somebody mentioned that they purchased domains from enom for $6.95 a year.

1. As you can see the average cost for a domain is $7.25 a domain. So enom is probably already losing roughly 50 cents a domains with you purchasing those domains.
2. Upselling. Enom doesn't offer paid hosting, they do offer 100 email rules, and map my domain (like who is going to pay for that), they do provide free DNS, so what do they upsell, nothing!
3. Scheme. Can't find one expect for that they are not making any money.
4. Enom is supposed to be owned by some large corporation, called Syllogistics LLC, more infrormation can be found at http://www.icann.org/registrars/accreditation-qualified-list.html


So based on this information, to really make money enom has to sell domains at least at $8.60 a domain to break even.

$6.25 for the domain
$0.75 per sale per domain for credit card processing.
$1.00 per domain for salaries, etc....
$0.25 for DNS.
$0.25 for 10 page free site.
$0.10 Domain Registry of America, Domain Registry of Canada, Domain Registry of Europe.

Yeah I know the last one is wrong, but so what.... We all know who they are so why not admit it.

So the minimum cost that enom can charge and actually make one penny is $8.60 a domain. If you are getting less than $8.60 a domain, enjoy it while you can. If you are being charged more, enom is actually making money on you, so enjoy it.

That's it from me tonight.

Godaddy, is tomorrow....

Donny
 
Domain summit 2024
M

Mik

Guest
You are basing this on the average cost of a domain which *you* calculated based on *your* knowledge of *your* specific company's registration backend.

While I appreciate your number crunching it is entirely possible that enom's business model is such that due to the sheer number of registrations and having a technological backend advantage as well as the hundreds maybe thousands of resellers handling tech issues that they can indeed afford to offer lower prices on *some* registration. Not everyone gets the 6.95 deal and i'm sure with the volume they put through enom can get cheaper merchant charges than their .95 +3%, so there's your side scheme/upsell, they push those charges onto everyone who uses their system to resell.

Volume + tech + fanatics = possible to offer lower prices than you without going broke.
volume + tech +fanatics + merchant charges = They might even be making more money than you think.
Not a flame, just a different perspective on the business model.
 

Guest
You are basing this on the average cost of a domain which *you* calculated based on *your* knowledge of *your* specific company's registration backend.

I have talked with quite a few registrars about this, and the break even cost for all of them is roughly in the $7.25~$7.50 range. If they charge less than this, they are losing money on that domain. If they charge more, they are making money.

As far as credit card rates go as you mentioned they are charging $.95 +3% per transaction. So they are probably making about $1.02 per transaction with taking out the merchant fees. Now this $1.02, wil also need to pay for any charge backs or fraud that comes with domain names. This averages about 2~3% of all transactions. So not only will the registrar eat a domain, but they will get slapped with chargeback fees, domain fees, and they lose the money they originally had. Fraud/Chargebacks suck!

Overall I have dealt with many people at enom from the CEO to the programmers, to support personnel. They are all very nice and knowledgeable people.

Their model for offering resellers such low prices on domains is a great idea! But it doesn't matter how many domains you sell or resellers you have, if you are only making 25 cents a domain, and you sell 75,000 a month, you are still only making $18,750 a month in profit. And that's not much for a company of around 50 employees.

Again just my opinion...

Donny
 

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There are enom resellers that pay $7.95 or $8.95 per domain.

Do you have knowledge of the specific ratio of enom resellers that pay $6.95, $7.95 and $8.95 and the number of retail customers that pay much higher prices?

It would seem you would need to know these numbers in order to make a complete analysis of their business model.

Just curious
 

Guest
With the registration volumes they enjoy, I would imagine their admin costs would be reducing thanks to the shared nature of fixed costs (economies of scale).

I would worry more about the people competing on price without having the volume...
 

Guest
Well the only people that would know how many resellers are getting $6.95, $7.95 or $8.95 would be enom. So that's really hard to judge. I assume it's based on the number of domains you have resold with them or how many you personally own. I'm not really sure.

Once you start selling over 500 domains a day, your cost per domain stays about the same. You are still going to have a 2~3% chargeback/fraud rate, you are still going to have the same amount of support problems (I know that support is supposed to be handled by the reseller with enom, but trust me they still handle support for those customers), you still have the same amount of spam complaints, invalid WHOIS complaints, WIPO disputes, lawsuits, etc...

So once you hit that 500 domains a day your cost are going to be about the same overall. Unless you have 500 people working for you and you only sell 500 domains a day. Then you should be polishing up that resume.

safesys - You are 100% correct that no reseller should attempt to low ball a true registrar. Today it's not possible. I remember when we first launched directNIC, we were getting domains for $10 from openSRS and selling them for $15.00. You could not find a CNO domain cheaper anywhere else. And we started getting people buying domains like crazy.

I remember one day we sold like 12,000 domains and we had basically 1 person in support, myself (I wrote the entire front end of directNIC), and another programmer in Tennessee who wrote the backend to register the domains. That same day our support guy walked in and I said I hope you had a good night sleep, you have over 2,000 emails to answer today. Within the week we hired 10 people to help us handle everything.

I still have the emails from two very large registrars telling us that we will be out of business within 6 months. And that we should not try to undercut their prices.

But that was then, and this is now. Now you have enom and godaddy trying to lowball each other to get more of the reseller market. OpenSRS who is not budging on their price, but still gets about the same number of new resellers as enom and godaddy. And you will have the reseller who wants to sell their domains they get for $7.95 a year for $8.00 or $8.50. Because they think they will have thousands of people buying from them. Think again!

Enough from me.

Donny
 
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