You’ve got a brilliant idea, you’re ready to launch a website, and then it hits you: you need to pay for a domain name. Twelve pounds, twenty dollars, whatever the currency. But why? Why are we paying for something that sounds like it should just exist online, freely available like fresh air?
It’s a fair question, and the answer reveals a hidden industry at the heart of the internet.
What You're Actually Buying
A domain name is the address people type into a web browser to reach your site. Think of it as your postcode on the internet. But behind every friendly address like yourbrand.com is a numerical IP address, the actual location of your site on the web.
The system that translates human-friendly names into machine-friendly numbers is called the Domain Name System, or DNS. It's what keeps the internet usable, and it’s a lot more complex than it looks. Maintaining that system takes infrastructure, coordination, and human oversight. And that’s part of where your money goes.
Who Gets Paid?
To understand why you pay for a domain name, you need to know who is involved in the process. There are three key players.
The Registry
The registry is the organisation that operates a top-level domain like .com, .org, or .net. For example, .com is run by a company called Verisign. They don’t sell domains to the public, but they do set the base wholesale price. Currently, Verisign charges registrars about $9.59 per year for each .com domain.
They are essentially the landlords of the internet. They maintain the central database of who owns what, ensure the DNS works correctly, and keep the whole operation secure and stable.
Verisign doesn’t just do this well. It does it profitably.
Verisign manages over 172 million domain names and made $897 million in net profit in 2023 on $1.49 billion in revenue. That’s a profit margin of around 60 percent. Not bad for a company you’ve probably never heard of.
So how did Verisign get such a valuable slice of the internet?
A brief, revealing history
In the early days of the internet, domain names were managed by a government-funded research group in California. They were free. But by the early 1990s, demand was booming and the system was struggling to cope.
In 1993, the National Science Foundation handed control of domain registration to a small private company in Virginia called Network Solutions. There was no competitive bidding process. One day the system was open and public. The next, a single firm had exclusive rights to manage .com, .net, and .org.
By 1995, Network Solutions started charging $100 for two-year registrations. It was controversial. A third of the money initially went to a government internet development fund, essentially a tax, with little transparency about how the money was used.
Still, the business was booming. And in 2000, Verisign bought Network Solutions for over $20 billion, keeping control of the .com registry. They later sold off the retail side but retained the backend infrastructure, which was the real money-maker.
Verisign still runs .com to this day under an exclusive contract with ICANN, the internet’s global domain authority. That contract has been quietly renewed over the years, and it has made Verisign one of the most profitable and quietly influential companies on the internet.
The Registrar
Registrars are the companies you and I actually interact with. These include names like GoDaddy, Namecheap, Google Domains, and WordPress.com. They are licensed by the registry to sell domain names to the public. They mark up the wholesale price and provide a user interface, customer support, and often a suite of extra services like email, hosting, and privacy protection.
Most registrars make only a small margin on the domain itself, usually between two and ten dollars. The real profits come from upselling additional services.
ICANN
Finally, there is ICANN, the Internet Corporation for Assigned Names and Numbers. It is a non-profit that oversees the entire domain name system globally. ICANN ensures that registries and registrars play by the rules and that the whole structure remains stable.
It receives a modest 18 cents per domain per year, which helps fund its operations, global coordination, and occasional diplomatic headaches.
What If Domains Were Free?
It’s a tempting idea. But it would cause chaos.
If anyone could register as many domains as they wanted for free, the system would be flooded with spam, scams, and squatters. People would grab thousands of valuable names just to resell them later. Without cost as a barrier, there would be no accountability and no incentive for good behaviour.
Also, someone has to maintain the infrastructure. The root servers, the DNS, the uptime guarantees — none of it runs on goodwill alone. Free domains would require governments or major tech firms to subsidise the system. Even then it would be a bureaucratic nightmare to manage fairly.
So Who’s Making the Money?
Here’s how your $12 might be split when you buy a .com domain:
| Who | Gets Paid | Estimated Profit |
|---|---|---|
| Verisign (Registry) | $9.59 | Approximately $6 to $7 |
| Registrar (e.g. Namecheap) | $2.41 | Approximately $0.50 to $1.50 |
| ICANN | $0.18 | None (non-profit) |
The biggest winner is clearly the registry, especially in Verisign’s case. With over 170 million domains under management, it enjoys a virtual monopoly and huge economies of scale. Registrars make some money on volume and services. ICANN simply keeps the system functioning.
The Bottom Line
Domain names are not free because the system behind them is vast, global, and must work flawlessly every second of every day.
There is real infrastructure involved. There is also scarcity. Only one person or business can own bestcoffeelondon.com at a time. And because people are willing to pay for these names, a market has formed. It is profitable, competitive in some places, and highly concentrated in others.
So the next time you pay £10 or $15 to register a domain, remember this. You are buying a tiny piece of digital real estate and contributing to a system that, for better or worse, keeps the internet running.
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