Rival Grabs Chunk of Domain Market

The battle is heating up for the No. 2 spot in the domain registration

Network Solutions remains the dominant player in selling domains, with
more than 2 million registrations last quarter. But there’s a catfight shaping
up for second place.

In the quarter ended June 30th, Bulkregister.com moved into the second spot, ahead of register.com , the first company accredited by the Internet Corp. for Assigned Names and Numbers to compete with Network
Solutions, which recently became a unit of Verisign Inc.

In just its second quarter in business, Maryland-based Bulkregister racked
up 721,000 registrations, edging out Register.com which handled 678,000
domains in Q2.

As part of its battle plan for regaining the top spot among also-rans,
Register.com is expected to give a nod to penny-pinching domain customers
next week. Although the company has to date resisted being drawn into
price-based competition, sources said Register.com will unveil a new brand
that will offer bulk registrations at prices lower than the competition.
According to SEC filings, the company also intends to launch a
commission-based domain auction business in the near future.

While the domain name market overall is expanding rapidly, Register.com
actually saw its registrations drop 25 percent in the quarter just ended,
following its blockbuster Q1 in which it took in over 900,000 registrations.

In its amended form S-1 filed with the SEC Thursday, Register.com
acknowledged that the continued introduction of competitive registrars like
Bulkregister.com have “made it difficult for us to maintain our current
market share.”

But Richard Forman, CEO of Register.com, said Friday that his company
doesn’t measure its success solely by the number of registrations it takes

“Just being the market share leader is not relevant today. It doesn’t mean
anything. All Bulkregister.com is offering is domain names. There’s no
business opportunity beyond that, so it’s not a sustainable business model
long-term,” said Forman.

A more important statistic for Register.com, according to Forman, is the
number of domain customers who also sign up for its value-added services
such as hosting and search engine submission. Forman reports that in the
second quarter nineteen percent of the company’s domain registrants also
signed up for such services. That figure is up from eight percent in Q1. As
a result, Register.com’s revenues soared 60 percent in the latest quarter,
despite the downturn in registrations.

Bulkregister’s president Tony Keyes said in a statement Friday that his
company’s growth indicates that its core clients — ISPs and web
developers — have been “disenfranchised from the domain name registration
industry for years with exorbitant prices and predatory practices.”

But Forman says Bulkregister’s success is largely due to its catering to
domain speculators who shop based on price alone and who register dozens of
domains at once and never develop Web sites for them.

To defend its higher-margin business, register.com last week accused Verio,
the big hosting firm, of trying to poach its customers by harvesting email
addresses and other contact information from register.com’s online database,
and then telemarketing and spamming those customers. Verio reportedly
defended the marketing tactic as a “normal business practice.”

As the battle for second place in the domain business intensifies with new
registrars joining the fray, expect the jockeying of players to continue,
said Paul Merenbloom, an analyst with Prudential Securities.

“When you see any market that’s new and emerging open up for strong
competition, the rate

of growth is going to be inconsistent for a long

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