In the six years that we've been doing this, we get about one or two questions a year that go something like "Why do you charge $[X] for a domain name when I can get one from [one of our competitors] for $[ less than X ]?". And I'm sure there are more than this that we don't hear. Here's the scoop. There's a little bit of background here about domain name registrations in general. If background bores, you can skip to the second section...

The Domain Registration System
Domain names come in different "flavors" called top level domains (TLDs). .com is a TLD. so is .net, .org, etc. There are also Country Code TLDs called ccTLDs which are the two letter international abbreviation for their respective country: .us, .ca, .tv, etc. Each TLD and ccTLD is run by a Registry operator. The Registry is responsible for handing out domain names in their TLD, providing DNS resolution for the TLD, and various other functions.

Registries don't sell direct to the public but to Registrars. Registrars typically sell domain names in multiple TLDs. Registrars pay the Registry a fixed price for each domain name they register. For example, in the case of .com domains, the Registrar pays the Registry $6.00 per domain name year (one domain name for one year). Some Registrars sell direct to the public (GoDaddy, Network Solutions, Register.com, etc.) and some sell through resellers such as ISPs and web hosts (Tucows, eNom, etc.). Registrars provide WHOIS services for their domains, handle abuse reports, and provide the management tools to their customers.

Registrars compete with each other for domain registrations in the TLDs they service. For those that have resellers, this applies to the resellers also. Due to this competition, prices vary between Registrars (which includes resellers unless noted). Since the "product" the end user gets is the same (a domain name), regardless of the Registrar used the differentiation between Registrars is typically price, customer service, and ease of management. While the product is standard, these other differentiators vary.

Ideally, the price you pay for a domain name takes these factors into account. This isn't always the case since some Registrars use domain names as loss leaders for other products. Others take low margins or losses on domains since they sell advertising on parked domains or aggressively market their other, profitable services.

How We Price our Domain Names
We are a reseller of Tucows for domain names. We pay Tucows roughly $10.00 per domain name year (one domain name for one year) we register through them (they pay $6 so they need to make money too). Tucows provides all the systems and support for us and we provide this to our customers. We have time invested in integrating our system with Tucows and knowledge of the various TLDs' policies and registration requirements. Since time is money, we need to price our domains so we make money on them while balancing this with choosing a price our customers--and target market of potential customers--can afford.

For a .com domain name, we have a profit margin of about $9.00/year or roughly 47%. This covers our administrative overhead for reviewing domain name orders to prevent fraud, providing and updating a Knowledgebase of frequently asked questions, providing a domain management interface, and providing support for the domain name.

When we have a decent profit margin, it allows us to do all this to give our customers the information and help they need when they have any questions or problems with their domain name. It also allows us to do this without putting advertising on parked domain names or aggressively marketing other services to our customers who register domain names through us.

We realize that this isn't what every customer wants and that we lose customers due to our pricing not competing with low-cost or loss-leader Registars. However, we have many happy domain name customers that know they can count on us to answer any question they have quickly and get any issue they have taken care of quickly. That's what you pay for and really appreciate when you have a problem with your domain name. For most people, domain names are a critical part of their business and we are here to provide the services and support necessary at a price that we hope is reasonable, yet allows us to do this with a small profit.