This article was originally published in Edition 4 of Behind the Dot: State of the .au Domain report in August 2015.

July 2015 marked a milestone month for the .au domain space as we passed 3 million domain names under management, an achievement that places us within the top 10 of all country codes globally by volume.

While it’s important to acknowledge the hard work across the industry that got us to this position, we must also address the critical question of competition in an increasingly crowded market: Where will the next 3 million .au domain namescome from?

The problem

The harsh reality is that .au, as with many country code domains, is facing major challenges.

The 2015 .au Survey suggests Australian domain holding levels are in decline (21% of the population, of which 61% are under one of the .au second levels). No matter how you spin it, the introduction of new Top-Level Domains has created increased competition. We’re also seeing considerable encroachment from search engines as the default tool for navigation.

It’s important to note there are strong indicators that demand for the next 3 million domains will increase. Australian Bureau of Statistics data released in June 2015 shows more than half of all Australian businesses still don’t have an online presence, with just under 20% of medium-sized Australian businesses invisible on the web.

If all of these businesses registered one .au domain name today, it would account for an additional 1 million domain name creates.

We know that .au domain holding is concentrated under com. au, with stagnant growth in the other second-level names. For me this is a clear indicator that the current policy framework fails to meet the needs of individuals.

The com.au is a commercial zone; therefore Australians seeking to establish their digital presence must choose the id.au domain name. With only 13,143 id.au domain names under management, individuals are likely turning to other options to get online – forgoing their connection to an Australian online identity.

Interestingly, in 2014 there were 13,331 id.au domain names under management which represents a drop of 188 domains over the year, but the 2015 .au Survey results indicated an increase for personal use domain names from 9% in 2014 to 12% in 2015.

While there’s a lot to love about .au, it’s time to acknowledge the facts: we need to innovate and reposition for growth.

Time for change

Next year, .au will turn 30 years old. In terms of the product lifecycle, the namespace saw its strongest performance during the growth years of 2002 to 2010. Prompted by market forces, growth is now beginning to plateau in the mature stage of the .au lifecycle, so we need to reposition the .au product by stripping away some existing attributes and adding surprising new ones. Only then will we shift backwards through maturity and into the growth phase again.

History of innovation

The most effective way to reboot a product in decline is to look to innovation to refresh the offering. The great news is we have a rich history of innovation in the .au landscape.

In 2000, .au Domain Administration (auDA) was appointed to administer the namespace and introduce a new policy regime to stimulate .au domain registrations. This led to the auction of 3,000 previously reserved generic domain names in 2001, which was warmly embraced by the market.

In 2002, auDA liberalised the retail market and introduced a competitive model with Registrars, which resulted in strong growth and competition. Then in 2006, auDA updated the policy framework to allow for domain name monetisation with a change to the rule that stated registrations needed to be closely and substantially connected to the registrant.

Again in 2008, auDA changed its longstanding policy and allowed changes in how .au domains were held, which spurred the creation of a .au aftermarket which again stimulated strong growth.

It’s now 2015 and the namespace is again ripe for innovation.

The path to the next 3 million domains

It’s clear that in order to achieve the next 3 million .au domains, the namespace needs to innovate and match our competitors in the marketplace.

The current auDA 2015 Names Policy Panel* is investigating whether policy changes should be implemented to allow second-level direct registration of domain names under .au (eg: www.name.au instead of www.name.com.au). Other mature market country codes such as the United Kingdom’s .uk and New Zealand’s .nz have recently changed their rules allowing direct registrations under the Top-Level Domain.

For .au to remain relevant, we need to innovate and match other products in the market. The introduction of shorter, new Top-Level Domains and the policy reforms of other country codes may mean the second-level structure of .au no longer demonstrates good market fit. This is exactly what the auDA Names Policy is considering, following the public consultation period (Further feedback from the community will be sought during future rounds of consultation).

With the increase in choice and variety of new Top-Level Domain options available to consumers, registrants have access to simple and easy to remember domain names. The .au extension heralds to the rest of the online world a connection to Australia. How many people outside of industry truly understand what the com, net, org or id means in com.au, net.au, org.au and id.au? The Australian domain name industry must cater to all customers and not just industry – we are not the customer!

Direct registrations under the .au Top-Level is exactly the type of innovation that .au requires to reinvigorate the namespace and position it for growth. Given .au only has one unique selling proposition – that it’s a signifier for Australian content online – we need to future-proof this position.

Opening .au to direct registrations will augment the well-earned position the namespace holds as Australia’s trusted home online. Importantly it will ensure .au maintains market relevance and the fewer keystrokes needed in a mobile-oriented web is certainly one driver for evolution.

Achieving 3 million domains is great, but it is not the finishing line and we now need to acknowledge the future challenges we face in the market. It is vital that we protect this national asset and honour the investment made in the namespace with every domain name sale to date.

*Disclosure: I’m a panel member of the auDA 2015 Names Policy Panel.  AusRegistry submitted a position paper to the panel for consideration.