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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 c
by patio11 13y ago
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.
- kijin 13y agoOne 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.
- smcl 13y agoI'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?
- 0x0 13y agoThey run the .com registry and zone, among other TLDs.
- lsc 13y agoI 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.)
- mkingston 13y agoIt 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.
- 13y ago
- smartial_arts 13y agoDude you, like, live in here!
- smartial_arts 13y agoWow, and I get downvoted for saying how amazing that patio11 is so quick to react. Somebody's being an off-topic nazi?
- pearjuice 13y agoYour 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.
- BorisMelnik 13y ago"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.
- jonathanberger 13y agoI believe he's referring to App.net
- rgbrenner 13y agoarticle: https://news.ycombinator.com/item?id=7706274 https://news.ycombinator.com/item?id=7706274
- cholmon 13y agoCOGS = cost of goods sold