In my last blogpost I described our unique position in the domain name industry. The question that arises next is if it makes sense to sell domains at cost price.
The short answer is YES.
Our goal is to save our customers time, money, give them an excellent customer experience and help them grow. Most of our customers are hosting companies and they operate in a very competitive environment where every penny counts. They cannot survive if they cannot save money in buying and selling products they need to sell but are not their core business. Domains fit this description. Our customers need domains to offer bundled promotions or do other aggressive marketing offerings. And there is no hosting without a domain name.
Our flat fee prices are setup in such a way that for every euro of flat fee we get paid, our customers save at least 2 euro/dollar. In practice we see many cases where it is in fact 3 or 4 euro. That is a lot of money. And then we are only talking about direct savings. The savings in indirect costs are less visible but probably more significant.
So for potential customers it is a no-brainer to buy a flat fee subscription and save money immediately. We even help in consolidating portfolios. In most cases for free.
So are we crazy? The short answer is NO
Domain margins in wholesale are slowly but certainly going to zero. Because registrars do not add value to domain names it is a simple economic law. Every industry where no value is added to a product sees margins going down to zero until another business model is invented and changes the game. Amazon did it with books and later again with electronic books. Costco did it in the supermarket business. Netflix does it in the TV and DVD world. Spotify and Pandora do it in the music world just like Apple did it before with I-Tunes. The domain registrar business is simply the next business that will change and we are the first to do it.
How do we make money?
We make money in several ways:
– we make money on subscription fees. The yearly flatfee is our margin and we make money with it. Basically you pay us for the use of our software platform.
– we make money in the long-tail. We offer all domain extensions in the world. But except in the Supreme package where we sell all domains at cost price, in all other packages only the 40 or so most common gTLDs and ccTLDs are sold at cost price. All other domains that have competitive margins.
– we make money in up-selling and cross-selling other products like SSL. Our Supreme customers help us with their volume to reduce cost prices and we can sell at higher margins to our smaller customers but still give them a better deal than anywhere else.
– we keep adding new products and services to our portfolio, where we use our combined buying power to get better deals than individual customers can get themselves
– we develop our own software that we can sell to our customers. Our roadmap contains several software products that we developed in-house and we can sell to our customers. Most of those products are focussed on optimising business processes and reducing overhead. We are very good at doing that and are getting ready to let our customers benefit from these products we developed for our own use.
We see demand in our model is increasing rapidly. We keep innovating to help your business grow.