There has been a proliferation of top-level domains since the commercial internet began. Most businesses still find “.com” is the most valuable. But ICANN, the organization responsible for operating the internet domain name system, has been adding new top-level domains regularly under the belief that businesses and individuals want more domains.

What are top-level domains?

A top-level domain is the suffix of an Internet address. The most common top-level domains are “.com,” “.org,” and “.net.” The text to the left of a top-level domain is called a second-level domain.

Top-level domains are managed by the non-profit organization ICANN.

What is the new top-level domain policy?

Approved in June 2011, the new top-level domain policy allows governments, non-profit organizations, for-profit organizations and even individuals to submit applications for customized top-level domains.

In other words, a business may apply for its own top-level domain rather than having to use the “.com” top-level domain. For example, Nikon can apply for a “.nikon” top-level domain. If granted, this new top-level domain would allow the company to change its Internet address from “www.nikon.com” to “www.nikon.”

What is the purpose of operating a top-level domain?

The operator of a top-level domain can customize the features and structure of its top-level domain, as well as its second-level domains if desired. The second-level domains may be operated internally, or may be sold at a profit to third parties.

How do you apply for a top-level domain?

Applying for a top-level domain requires a non-refundable fee of $185,000. In addition, applicants must complete a lengthy application form.

An ICANN panel will consider all applications for top-level domains. The panel will award points in several categories, including the financial and technical capability of the applicant, as well as how the applicant plans to use the new domain.

Community-based applications (such as an applicant that is a city rather than a brand or company) will have priority evaluation in the process. Only one organization or business will be granted the rights to a top-level domain; as such, in the event of a tie in points, an auction will determine the operator of the domain.

ICANN will only approve 1,000 new domains per year. Applications for top-level domains will be accepted from January 12, 2012 through April 12, 2012.

Why might my business want to operate a top-level domain?

By operating a top-level domain, your business could develop new marketing tools, strengthen networks, and seize more control of your business’ brand. And, as with traditional real estate where the right location is paramount, the right Internet address could bring more money into your business.

Further, ICANN foresees potential for new revenue streams for the operators of top-level domains who choose to sell second-level web addresses. In the same manner as a landlord controls his or her property, the operator of a top-level domain is responsible for setting the business model and policy for how the top-level domain will be used. The more valuable the top-level domain, the more money the operator of that top-level domain could bring in through the sale of second-level domains.

For example, an entrepreneur might seek to create the top-level domain “.shoe” to facilitate the sale of footwear. This may not be of interest to a company like Nike that has no problem drawing visitors to its website, or that might want a top-level domain of its own. But to a smaller shoe company like Rocky Boots, which often goes unnoticed in Google searches, a shoe-specific website could provide invaluable exposure and a boost in sales—not unlike a small business having its product sold in a department store where more potential customers could find the product. The operator of “.shoe” could then sell second-level domains to interested businesses, creating a one-stop-shop for shoes as well as a profitable revenue stream.

Will impostors be able to steal my business’ name?

Your business should not have to worry about its name being stolen by an impostor. ICANN wants trademarks to be protected, not undermined. The application process is expensive in order to discourage impostors from applying for top-level domains, and ICANN will heavily vet and safeguard the application process itself to weed out impostors.

Even so, there are mechanisms to allow your business to object to applications for domain names. After the list of all domain name applications has been published on ICANN’s website, there will be a period of time for third parties to file formal objections using pre-established Dispute Resolution Procedures.

Is a top-level domain best for my business?

Top-level domains are probably not ideal for your business right now.

The management and expense of top-level domains is not a responsibility most businesses want or need because they already have sufficient control of their “.com” websites and can customize branding, marketing and security features. Similarly, most businesses have sufficient ability to organize their websites by brand or product despite not operating the top-level domain itself.

The cost of managing “.com” websites is flexible and tends to be directly proportional to what a business might want from its Web site. Conversely, the expense of applying for and maintaining a top-level domain is neither flexible nor inexpensive.

In addition to the $185,000 application fee, those granted a top-level domain must pay $25,000 a year to maintain operation of the domain. Additionally, the expense of operating a domain name can range anywhere from $15,000 to millions of dollars, depending upon the hardware, software, technical support and administrative personnel needed to support the business. That is why the ICANN panel considers an applicant’s financial and technical capability: operating a top-level domain is complex and expensive.

Some larger businesses, however, have the structural resources to serve as the operator of a top-level domain. The benefit of having additional control over a brand and its presence on the Internet may outweigh the cost for such businesses.

For example, a larger business may choose to restrict the use of second-level domains for internal use, enabling the business to register its brands as second-level domains, and to offer authorized distributors access to its top-level domain. Similarly, larger businesses are uniquely positioned to attract second-level domain users, and to profit from the potential revenue stream that would result.

Regardless, there are risks for businesses leaving “.com” behind, since it is unknown whether consumers will follow a business from its old website to its new one. For example, consumers did not flock to “.biz” addresses when they were developed several years ago. And, although larger businesses are better equipped to communicate a new website address to consumers through marketing campaigns an e-mail alerts, changing addresses without having reason to believe that customers would follow is a risk that many business may be unwilling to make.

Indeed, even the largest of businesses are taking a wait-and-see approach to top-level domains. “I see this as nice to have, but it’s not something we’re going to get cracking on tomorrow morning,” Shiv Singh, the head of digital for PepsiCo Beverages America, told The Wall Street Journal on June 21. “I am keen to see how other brands adopt it, because this will only succeed if it has critical mass adoption among companies.” Singh added that he worries about the cost to PepsiCo and wonders whether new addresses will be adopted by consumers.