What’s the P&L for the Brand gTLD?
For many companies, the gTLDs have added significant line items to the budget. In the application phase there was the filing fee of $185,000 plus legal and consulting fees to get the project off the ground. As the asset moves from acquisition to management, there will be registry operator, registrar, data escrow, ICANN and other fees. And, in brand protection there will be an increase in fees to monitor, protect and utilize Sunrise periods across thousands of new top level domains.
For many brand gTLDs, the decision to apply was defensive in nature, and accordingly, not a lot of effort went into creating a P&L. Some companies were strategic enough to recognize this was a capital acquisition and treated the digital real estate as just that – a capital expense that can be amortized over its useful life, which is typically considered 15 years as an intangible asset. Others may be able to place it in an IP Holding company and utilize certain tax credits for research and development. While some may have simply absorbed the cost in legal or spread the line item across departments as a budget item.
As companies move forward, though, creating a clear P&L and determining how to account for the business of the gTLD is still unclear. In most instances, a digital operations P&L is really where the gTLD belongs, in which case revenue and intangible value can be benchmarked against costs.
Companies who did not capitalize the acquisition cost should look at the investment to be made in building out the gTLD and consider structuring it as a capital asset to provide greater advantages to the investment structure and then allow for line items budgets to be formed as it integrates into the digital operations budget.
The P&L of the gTLD will largely involve four basic use cases: a digital marketing platform, data mining and analytics, disruptive business models and an internal platform for knowledge sharing. Each one could have a distinct P&L, but yet there will be economies of scale across these various use case in cost management. This is where the gTLD starts to have real value for the corporation. Those costs of operating the gTLD can be spread across numerous use cases.
Digital Marketing Platform. As a digital marketing platform, the new gTLD may transition typical revenue generated from .com operations into the new gTLD. Accordingly traditional online revenue generation such as advertising, direct product sales, click through revenue, subscription based content are all potential sources of revenue. Certain other intangibles such as improved SEO and competitive advantage as a market leader, improved security and consumer confidence could also be calculated as part of the return on investment. But there are also new opportunities such as building a social network or niched search in your industry category, building affiliate programs as a vertical integrator or becoming a channel of content on the internet within your product category. These all create new revenue sources while the underlying costs are contained based upon economies of scale of the gTLD.
Data Mining. Another key platform is to use your gTLD to track data across the ecosystem. While this is likely a cost that will be incurred, unless you plan to sell that data, the benefit received can be offset as an intangible value. Consider what you pay for tracking data today and how you use that data. Can you reduce costs, improve value, or could you leverage that information if you strategically design the gTLD experience for the consumer?
Disruptive Business Models. The opportunity for new products or services from your company as disruptive thinking about the evolution of the internet produce new disruptive sources of revenue. As these disruptive ideas are developed, the P&L can be customized, but still leveraging the economies of scale of the asset.
Internal Platform. A final use case is to use the gTLD as an internal platform. While this is more about creating more productivity and efficiency, there are potential P&L models to be built by comparing it to what you might acquire from other providers and/or considering licensing similar technology to other gTLD owners.
The future of the gTLD may be evolving within your company, but a clear capitalization strategy and P&L approach could be important to your company’s investment in this new digital real estate. Before allocating to a marketing, IT or even Legal budget, consider how you build the business case and capitalize the asset for maximum economic impact.