Porter's Five Forces Analysis

As mentioned earlier, since domain generation is offered for free as part of the domain registration process, the industry analysis for domain generators' and for domain registration will be the same. However, there are substantial differences between affiliate registrars an accredited registrars, which require two separate industry analyses to be performed for both groups. 

Affiliate Registrars

  (See Exhibit 2 for a standard industry attractiveness worksheet) 

  Threat of New Entrants

In most cases the volume of registrations of an affiliate registrar substantially affects its cost of registration. Therefore, large firms, often operating in other business spheres (i.e. web hosting, web design, consulting etc.) have competitive advantage over smaller businesses. Most of these large firms have established brands (e.g. Interland - VeriSign Global Registry Services affiliate) and can offer incentives for registering domain names or cooperatively advertise registration with other products or services. Event though large firms have a clear advantage competitive position and dew to the high market growth, new entrants are highly unlikely to affect their current sales, from the technological or financial perspectives, barriers to entry are virtually nonexistent, since it extremely easy to set up an affiliate account with one of the accredited registrars and does not require any financial investments except for primitive web development, hosting and maintenance. Customers do not incur significant costs in switching suppliers and the distribution channels are readily available.

Overall Rating: Negative (please see part 1 of Exhibit 2)

Bargaining Power of Buyers

Domain name buyers are highly sensitive to price and do not face any significant costs when switching the registrars. There are thousands of alternative registrars that can be located through online directories or search engines and buyers can easily switch between registrars. Most of the potential buyers know about the registration procedure and have all the information they need to make educated purchasing decisions with respect to domain registration.  Many high-volume customers develop web sites and become affiliate registrars in order to capitalize on commissions from the accredited domain registrars or to qualify as resellers for wholesale accredited registrar and buy domain names at a highly discounted price.

Even though buyers are very powerful, branding strategies create some level of customer commitment. Accredited registrars like VeriSign  Global Registry Services (Network Solutions), Register.com or Tucow's DomainDirect.com and openSRS attract customers with their names and the perception of reliability and quality.

Other two very positive factors are the large number of buyers relative to the number of registrars, which decreases their overall bargaining power and the presence of uneducated first-time buyers, which bring revenues to many affiliate registrars that are well positioned with search engines and in online directories. 

Overall Rating: Moderately Negative (please see part 1 of Exhibit 2)

Threat of New Products or Services

At present the only substitute for a domain name is an IP address, which does not represent a significant threat due to the reasons described earlier.  However, there is a limited number of gTLDs available, with "com" being the most popular one. The new alternatives to current gTLDs are ".biz", ".info", ".firm" and others. These new extensions may affect the domain generator market, since there will be more meaningful names available for registration; however they should not substantially affect affiliate registration business.

Overall Rating: Very Positive (please see part 1 of Exhibit 2)

Power of Suppliers

Since there are many accredited registrars with affiliate programs, it is very easy to switch without any technological and/or financial loss. For outsourcing affiliate registrars that outsource the domain registration capabilities from wholesale accredited registrars the switching expenses may be higher due to the need to integrate another registrars' systems with their web sites; however in most cases this can also be easily done.

Overall Rating: Very Positive (please see part 1 of Exhibit 2)

Levels of Rivalry

Virtually nonexistent switching costs and lack of differentiation are causing the registrars to compete with all possible means. However, it is very hard to compete against a large number of companies of the same size especially when the costs of registering a domain name are very close.

Affiliate domain registrars compete primarily for search engine positions or online directory placements and try to achieve the optimum balance between sales, income and registration price.

Explosive triple digit market growth also attributes to lower levels of rivalry.

Overall Rating: Positive  (please see part 1 of Exhibit 2)

Overall Industry Outlook: Positive