Thomas White Global Investing
Colombia
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October 7, 2011
A Postcard from the Americas
Colombia: Capitalizing on its name

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Colombia has made a tidy sum selling its “.co” domain to more than a million entities.

What is in a name? Millions, if you ask Colombia. Besides coffee and coal, a Colombian export that is now in great demand is the “.co” domain name assigned to the country. Firms such as Amazon (a.co), Twitter (t.co), Apple (apple.co), Overstock (o.co), and Google (g.co) have all snapped it up for tidy sums!

In fact, more than 1 million web addresses with the “.co” suffix, or top-level domain (TLD) as it is technically called, have already been bought by businesses, start-ups, and other entities in over 200 countries, according to Juan Diego Calle, chief executive of .CO Internet, the Miami-based company operating the “.co” domain under license from the Columbian government. Through this deal, Colombia gets 25% of the revenues the internet firm generates from each new “.co” registration. Calle, a Harvard-educated native of Colombia, has said that by selling “.co” domains, his company garnered $20 million in 2010 and expects to collect around $30 million this year.

So what makes the “.co” suffix such a prized possession? For businesses looking to build a presence on the Internet, it is the sheer difficulty of obtaining a suitable web address with the immensely popular “.com” domain. Since the beginning of the Internet domain-name system 26 years ago, more than 90 million websites have been registered with the “.com” suffix. Therefore, trying to obtain a suitable website address with the “.com” suffix is a bit like creating a new email ID. Practically, all the acceptable combinations have been taken and the ones that are available do not sound meaningful.

This is where the “.co” TLD has a unique advantage. It is universally believed to be an abbreviation for “company.” Most importantly, “.co” has nearly the same connotation as “.com.” Indeed, the Internet Corporation for Assigned Names and Numbers (ICANN), which is globally responsible for managing the Internet domain-name system, oversees 22 generic TLDs, including “.com” and “.gov,” and about 255 country-specific TLDs such as “.uk” and “.jp.” But among these, only “.co” can be considered a viable alternative to “.com.” The majority of the generic TLDs, like “.edu,” have restricted use while most of the country-specific TLDs either sound inappropriate or are not sold by their governments.

Established businesses with existing web addresses, however, have a different set of incentives to buy a “.co” TLD. For some, especially those that are very well-known, a URL with a “.co” suffix is absolutely necessary to neutralize cyber squatters, who are people that buy domain names with the sole intention of selling them at substantially higher prices later. For others like Overstock (o.co) and Amazon (a.co), having a shorter, 3-letter URL that links to their websites is enormously useful in this age of Twitter and crisp messaging. Short URLs are also favored because they can be shared and remembered easily. In this context, Montenegro is another country that has benefited from selling its “.me” TLD. To take advantage of the fact that “me” is a recognized English word, Facebook bought the “.me” TLD and registered its short URL fb.me.

Significantly, some of the internet industry conditions that have been favoring the “.co” business may change adversely in the near future. ICANN is taking steps to increase the number of generic TLDs. Therefore, by next year, companies will get the green signal to create more relevant domains such as names of places or brands. So, it would not be unusual to see URLs like ipad.apple. Knowing that such a trend will increase competition for the “.co” domain, .CO Internet has intensified its marketing efforts.

Way back in the 186os, when Colombia was being established, its founding fathers decided to name the country after Christopher Columbus, the legendary navigator who undertook great voyages in search of resources and riches. Today, fittingly, Colombia appears to be trawling the digital landscape, looking to monetize its domain name. Columbus would have approved.

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