For marketers, the domain name system (DNS) can be a little tricky to navigate.

If you’ve ever been tasked with buying a domain name, you’ve probably heard of terms like hyper text transfer protocol, subdomains, top-level domains, and more. Now, whether or not you remember the function of each part is an entirely different story …

So before we dive into anything technical, let’s start with a quick deconstruction.

Example: www.hubspot.com

This address is made up of three main parts: before, between, and after the dot. Before the dot, you’ll find the subdomain (www). Between the two dots, you’ll find the domain name (HubSpot). But what we’re going to dive into below concerns the text that comes after the dot: the top-level domain (TLD).

Back in the 1980s, the internet was introduced to a handful of generic TLDs: .com, .org, .net, .edu, .gov, .int, and .mil. Since then, the Internet Corporation for Assigned Names and Numbers (ICANN) has expanded the domain name system, and introduced a new wave of TLDs known as Brand TLDs.

What’s a Brand TLD? Who has one? And how are they using them? Keep reading.

What Are Brand TLDs?

A Brand TLD is like any other TLD (think: .com, .org, or .net), but instead of a generic term, it is the brand’s trademark (think: .bmw, .apple, or .google).

A Brand TLD is proprietary, meaning only the brand can register second level domains such as drive.bmw, mac.apple, or search.google.

In terms of security and innovation opportunities, there are many considerations. It starts with understanding that the DNS is the very foundation of the internet. Without the DNS there is no Internet. Everything runs on the DNS. Owning a proprietary space at the root of the DNS offers opportunities for innovation, security, trust, and control that are entirely new. Never before have brands been able to own a proprietary slice of the Internet at the root level.

In terms of SEO, “early use cases indicate no negative search impact, and even potential benefits,” according to Neustar. “New TLD holders should (as now) focus on building highly relevant content on their .brand and .generic to earn search visibility,” they went on to explain.

However, it’s important that marketers that are considering a switch continue to monitor the impact that these new TLDs have on the brands currently employing them, as it’s too soon to determine the long-term effects.

Why Now?

ICANN is the governing body that sets rules for the internet. In 2008, ICANN approved a program to radically expand the domain name space with the introduction of new TLDs. In 2011, ICANN began accepting new TLD applications from entities across the globe. Any entity could apply to own and operate a new TLD, however, the application fee was a steep $185K.

In 2012, ICANN announced they received 1,930 new TLD applications of which approximately 1,400 were unique, separated into five categories: Generic, Geographic, Community, Internationalized Domain Names (IDNs), and Brand. Just over 600 brands applied in Round 1. (You can check out the complete list of brands here.)

What does the program status look like today?

By February 2014, new TLDs began to rollout. As of May 1, 2016, there were 17.2 million new domain names registered across 978 delegated new TLDs. In comparison, this represents approximately 13.5% of the entire .com population (around 125 million), which took 30 years to reach.

As of December 2015, there were a total of 314 million domains registered. As 2016 progresses, we expect to see the remaining 300 to 350 new TLDs delegated to the internet. In fact, ICANN just recently announced the program’s 1,000th delegation, stating that there are nearly 50 times as many generic TLDs now as there were in 2013. It’s expected that the pace of change will accelerate as public awareness and usage grows.

ICANN has committed to future rounds to allow brands and other entities to apply for additional new TLDs. Industry insiders expect Round 2 to be heavily participated by Geographic and Brand TLD applications.

Why Many Big Brands Are Making the Move

According to Neustar’s FAQs of New TLDs list, “new Brand TLDs offer a unique and significant opportunity to drive brand affinity, build trust, enhance security, and engage customers.” And that’s largely why we are starting to witness leading brands deploying initial use cases.

Business leaders are engaging and beginning to understand the new Brand TLD capabilities that can improve business performance. To help illustrate these benefits, let’s take a look at a couple of key selling points:

1) Cost Benefit

Naysayers about these new TLDs complain that applying for and operating a Brand TLD will add significant cost burden to the business, and offers little benefit. And they’re partially right: the initial investment is up there. However, it’s important to consider what it means for the future of brand digital identity management.

For this reason, you should quickly unpack the relative value of a Brand TLD compared to current domain market conditions and status quo domain portfolio practices.

What are domain names worth?

Due to scarcity and the power of language, one word domains can be valued in the millions of dollars. On Wikipedia’s list of most expensive domains, you will find market values ranging from $35 million for insurance.com to $3 million for loans.com.

One-word domains — also referred to in the industry as “category killers” — are extremely valuable. Why? Because they are short, memorable, and mean something to audiences.

Now compare that to the cost to acquire and operate a Brand TLD priced at a few hundred thousand dollars and offering an unlimited number of one-word branded properties that are authentic and trusted. The comparative cost vs. benefit to acquire and operate a Brand TLD is nominal.

What does it cost to protect a brand?

It’s not uncommon for a brand to hold multiple domains for defensive purposes. However, doing so results in significant costs — including registrar outside counsel and internal administrative costs. Layer on legal fees to monitor, file, and administer rights protection such as UDRP (Uniform Domain-Name Dispute-Resolution Policy) to recover infringing domain names, and the cost of brand protection is massive.

Then, consider the efficacy of defensive domain activity spend today — and in the future with thousands of TLDs to guard your brand against. It becomes unsustainable from a cost and efficacy point of view.

Brands who own a Brand TLD will educate audiences to trust websites using their Brand TLD. As this education permeates the market, the active use of a Brand TLDs will begin to reduce the expenditure required to protect your brand.

2) New Capabilities

When it comes to Brand TLDs, there are as many use cases as there are business problems. For brands choosing to make the investment, it’s important that they are designing and deploying use cases that specifically address their unique priorities and objectives.

To give you a better sense of how brands are benefiting from the variety of use cases, let’s check out three potential initiatives.

“customer.brand”

“customer.brand” is a customer-centric initiative that can help brands create advocacy-generating experiences.

Brands can leverage new Brand TLD technology to power customer engagement, motivate peer influence, and harness customer intelligence data. For example: An affinity brand like Nike could permit their best fans to use, under certain terms and conditions, a “customername.nike” web presence.

Here brands can harness user-generated content and capture customer data to better serve that customer. Brands could even reward customers with points accumulated by the traffic they generate through social influence.

“channel.brand”

“channel.brand” is a channel initiative to leverage Brand TLD technology to distribute consistent content experiences across their points of sale with the intent to lift channel performance.

For example: Insurance firms use brokers to sell and service customers. If each of those brokers had their own “brokername.amfam” domain, it’s likely that they would not only feel supported by the organization, but they’d also be able to encourage trust from their clients.

“marcom.brand”

“marcom.brand” is a use case for marketers to create simple, elegant, memorable campaign messages, and deliver engaging web experiences that fulfill the message and brand promise.

This is the simplest use case to implement — and the easiest to measure ROI for. To determine the success rate of a campaign on www.toyota.com/somethingIforgot vs. one using prius.toyota, you’d simply compare campaign KPIs such as response, engagement, and conversion rates.

Considering the Brand TLD is easy to communicate and remember, it presents an excellent opportunity for brands to see increased campaign performance.

(Note: Marcom is an all-encompassing abbreviation for “marketing communications.”)

5 Examples of Brands Getting Involved

In the first quarter of 2016, we saw a big jump in the number of brands deploying use cases for Brand TLDs. Most brands are undertaking simple test-and-learn initiatives, but several are more aggressive with full digital transformations.

Here are a few examples:

1) America Automobile Association: aaa.aaa

AAA launched a Brand TLD site to help website visitors find a club in their area.

2) Bloomberg: bba.bloomberg

Bloomberg is using bba.bloomberg to forward visitors to their login portal for Bloomberg Anywhere — a digital service to keep financial professionals current with the latest business news, data, and analytics.

3) BMW: next100.bmw

BMW designed a website using its Brand TLD to celebrate its 100th anniversary.

4) SEAT: ondinauto.seat

SEAT — a Spanish automobile manufacturer — has set aside nearly one hundred Brand TLD domains to represent its various car dealers. This serves as a great example of the “channel.brand” use case we mentioned above.

5) Canon: global.canon

Canon has begun redirecting traffic from their original domain canon.com to global.canon.

(For even more brand TLD examples, check out brandTLDs.news.)

Should Everyone Make the Switch?

A digital paradigm shift is underway with the expansion of the domain name space. And it’s important to remember that we are in the very early days of this. As the next round is processed, the domain name space will only continue to expand.

A Brand TLD serves as an effective way to secure a brand’s place in this increasingly complex digital ecosystem, where consumers demand authentic and trusted web properties to transact with businesses.

A Brand TLD is not just another domain like your current flagship URL. It is also not just another tool to build a website and engage with audiences. Brand TLDs provide a platform to increase digital trust and innovation at the root of the internet’s infrastructure.

But is a Brand TLD right for your business? Is it really worth the investment? Is it necessary for businesses in every industry? In short: It all depends. And it’s probably too soon to make a definitive determination.

Here’s what we do know: 41% of Brand TLDs were applied for by Fortune 500 companies — mostly financial services, retails, technology, and transportation. For a more detailed look at the current Brand TLD landscape, check out the following chart.

Image Credit: Neustar

Regardless of whether or not your brand falls into one of these verticals, it’s important that you’re (at the very least) aware of the changes going on. At Authentic Web, we recommend you take the following steps to help you begin thinking about the shift:

1. Dig in to understand the market activity and digital implications.
2. Set up a small and empowered working team.
3. Seek out advice from industry experts.
4. Learn from early use cases and ideate on your own.
5. Audit and grade your own domain name lifecycle change management processes.
6. Develop a plan to differentiate and lead in your market.

What do you think about Brand TLDs? How have you seen them used? Do you think it’s the right move? Share your thoughts in the comments below.