Google: web hosting next?

Google has become an accredited domain name registrar, hinting that that the search giant may follow rival Yahoo! into the web hosting business. This would help the search giant to diversify its revenue sources, which are currently heavily dependent on the volatile advertising market.

The company has become a paid-up ICANN-approved registrar, according to the latest list of accredited companies, published by the Internet Corp for Assigned Names and Numbers over the weekend.

The accreditation means Google will be able to sell domains ending in .com, .org, .biz and other suffixes. Google spokespeople did not return calls for comment on the move, but there are a number of ways it could use its new capabilities.

Its only existing service related to domain names is AdSense for Domains. People who have registered web addresses but not published a web site can park the domain with Google. Visitors are presented with a collection of text advertisements.

Domain registration could alternatively prove a nice revenue-generating add-on to other existing services. Offerings such as the Blogger.com blogging service, or the Gmail web-based email service, could benefit.

But for many companies in the fiercely competitive domain registration business, domains are sold with very low margins or at cost, merely as a means to sell value-added services such as web hosting.

Yahoo, Google's chief competitor, has been in the domain name game for some years, though it chooses to act as a reseller for Australia-based Melbourne IT Pty, rather than getting its own ICANN accreditation.

Yahoo's recent strategy has been to offer registrations at below cost, urging customers to upgrade to premium services such as web hosting and email. The company charges $4.98 a year for a .com name, losing at least a dollar on each sale.

According to data collected by NetCraft, Yahoo hosted 343,336 active web sites at the end of 2004. The number of domains the company manages is likely much higher, as NetCraft's numbers exclude 'parked' and inactive domains.

Google currently derives its revenue overwhelmingly from advertising. It publishes text ads on its own and third-party sites, triggered by keywords entered as search terms or appearing in the text of the page.

Some of its key competitors, by contrast, have a range of subscription-based services, providing a little insulation from the roller-coaster advertising market that claimed the lives of so many dot-com companies during the bust years.

Yahoo, for instance, sees about 15% of its revenue coming from non-marketing activities, and its search-based ad revenue is estimated to contribute not much more than half of its total advertising revenue, according to reports.

Even for Google to get into plain old domain registration would be enough to provide a reliable subscription-based revenue stream, although premium add-on services would be required if the company wanted it to be material to its business.

Domain registration has become fiercely competitive since the market was opened to competition five years ago. There are now hundreds of accredited registrars, though many of them use their accreditations for purposes other that selling domain names.

It is now common practice for individuals and small companies to horde potentially high-traffic domains, and put up pages filled with cash-generating advertising links, such as those offered by Google AdSense and Yahoo Overture.

Getting an ICANN accreditation grants these firms access to the .com registry, operated by VeriSign, enabling them to pick up domains whose registrations are expiring. Shell companies are often created, purely to get ICANN accreditations, to this end.

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