When you register a new domain, you might notice a wide range in pricing. While some domain extensions are fairly inexpensive, others cost hundreds or even thousands of dollars. Since all domain names work the same way, why do you have to pay so much for some domains?
Below, we’ll examine the reasons why some domains to cost more than others.
Registries and Registrars
First, it’s important to understand who sets the prices for domain names.
You purchase domain names at a domain name retailer like Namecheap. These retailers are called registrars.
The registrars reserve domain names through wholesalers called registries. These wholesalers in turn control each top level domain option (TLD). This is the part to the right of the dot in your domain name, like .com, .net, or .biz.
An easy way to think of it is to imagine the registrar is Target, and the registry as Coca-Cola. You can’t buy soda directly from Coca-Cola; you have to buy it through a retailer like Target.
Just like with soda, both the retailers and wholesalers of domains set prices. The wholesalers set a price that the retailers have to pay whenever a customer registers one of the wholesaler’s domain names. Like with any store, the domain retailer will generally add to the wholesale price (or “mark it up”) when making the domain available for purchase.
For example, a company called Verisign is the wholesaler for .com. Whenever a retailer like Namecheap registers a domain for a customer, it has to pay a fee to Verisign, so the retailer has to charge at least that much to break even, and more to make a profit.
Domain Costs Vary Considerably
You’ll see a lot of different prices for domain options when you search at Namecheap. Namecheap offers domain options for as little as $.88. But some top level domains are much, much more expensive.
For example, do you want to register the TLD .sucks? Prepare to pay hundreds of dollars. And it doesn’t stop there. A few domain options are even more expensive. Fittingly, you’ll have to be quite wealthy to buy a .rich domain, which will set you back almost two thousand dollars.
So Why Do Some Domains Cost So Much?
As your registrar, Namecheap adds just a little bit to each domain name it sells to cover expenses. So when you see a big difference in price, that’s because the wholesaler charges a lot more for that domain name.
Some domain names have fixed wholesale prices negotiated between the registry and a non-profit called the Internet Corporation for Assigned Names and Numbers (ICANN), which is like a regulator for domain names. The wholesale price for older domain options like .com, .net and .biz are limited by the regulator. That’s why these domains are generally inexpensive to register.
But the regulator doesn’t control prices on any of the new TLD options that have appeared recently, such as .club, .shop, and .news. The wholesalers for these domain names can charge whatever they want for these new web addresses, making them subject to the open market rules of supply-and-demand and resulting in wide price ranges. The regulator also doesn’t limit what wholesalers of two-letter country domain options like .us and .ca can charge.
Is It Worth Buying an Expensive Domain?
Let’s say the domain name you really want costs $50 per year, but you could settle for a second choice that’s only $10. You’d be wise to think twice before passing on the more expensive one just to save a few bucks.
Your domain name is your brand. It’s your identity on the web, your calling card, the web address you’ll give to your customers and friends. Something this crucial to your online presence is not something to skimp on. So even though your first choice is more expensive, it may be worth the price.
Now that it’s on your mind, why not register your next domain with Namecheap? Right now .com domains are just $5.88—grab one while they last!
Andrew Allemann is editor of Domain Name Wire, the longest-running blog covering the business of domain names. Domain Name Wire has covered the business of domain name investing for over ten years.