I think that a large number of people buying domains can't get their first choice name because some "parked domain monetization" operation (cyber-squatter) owns it and is making money running ads on the page. The trick is to sign up for millions of domain names; set up pages and run ads on them; after 1 day delete domains that have no traffic; after 3 days delete names that have some traffic; after 5 days delete pages with marginal traffic; keep the 1% of pages that have enough traffic to be worth keeping the domain. Because of the refund policy, the 99% of pages deleted before the 5 day grace period are refunded in full and the "monetizer" gets to keep the ad revenue generated over those 5 days. (This is called "domain tasting".) See the DNForum page for more information on how this business works. Interestingly, I think Google AdSense probably has boosted the viability of this business. I wonder what percentage of Google's posted $2bn (or so) / yr "traffic acquisition costs" goes to this business. According to Ram Mohan from Afilias, 3 of the big 5 registrars say that they make over $5m-$8m / year from parked domain monetization pages. This means that these people are making more than that from these pages and Google and other ad servers even more.

I wonder if there is any way to close this loophole that effectively enables a no-risk business. I think these monetization businesses are a net-negative value to the community and seems like a loophole exploit. On the other hand, refunds are a legitimate service for legitimate registrants. It is VERY difficult to tell the difference between a legitimate and illegitimate registrant.

In the jungle of such pages, the Kevin Kelly page stands out as my favorite example of responsible domain name use.

UPDATE: WSJ November 17, 2005: "Revenue from text ads on these sites will total $400 million to $600 million world-wide this year and may reach $1 billion by 2007, according to Susquehanna Financial Group analysts Marianne Wolk and Roxane Previty, who track the online ad industry."

UPDATE: Google has an AdSense page targeting domain name parking businesses. I wonder if these Google folks will talk to us? They should know the size and shape of the "professional registrant" community better than anyone else and it appears they are "taking to them" directly from the looks of this page.

24 Comments

Not to be rude, but is it really your business to stop domain holders making money in this way? If someone had the foresight to make a fortune by using lesser used domain names to send paying customers to advertisers then good for them.

If you have your sights on a domain that a cybersquatter owns there are already methods for domain and trademark resolution that will take the name from them. In your example of domain tasting it appears that domains that do not generate revenue are returned to the pool.

In our case, we were trying to create a set of names for news sites ending in --today.com. One of the domains was offered to us at $650,000, and some other domains were held by the type of domain parkers you mention and were impossible to even get a contact with the owners. In the end we decided that our business should not be held hostage by our desire to have a perfect set of names so we are now in the process of renaming all of our sites to a name we already own. I am not resentful of the situation -- it made us more creative. Google, flickr, Technorati are all great examples of names that have dealt with this limitation.

One of the problems is that the domain registrars also profit from these kinds of sites. The problem probably goes away if registrars put in limits on cancellation--for example, for every cancellation, you cannot register a new domain name for 5 days. But no registrar would do that because it would hurt their revenues. So it might work if you encourage a sliding pricing scale. So maybe charge $5/domain for up to 5 domains but if you register 100 they grow in price to $10 each.

As the advertising wars heat up between Google, Yahoo and Microsoft, there's some possibility that one of those giants could help. For example, Yahoo could put in their toolbar a mechanism that catches one of these spam sites and automatically redirect you to the legitimate site. If someone wanted to be evil, they could use their index to know catch spam sites that only use competitors ads (i.e. Yahoo toolbar catches only spam sites using Adwords but not ones using Overture).

I don't really understand the rationale for allowing refunds. Just make the sale of the domain name final. The domain name's lifetime (initial registration period) would often be limited to one year anyway, so we're not talking about a lifetime commitment or huge monetary disbursements...

If you shop around, you can register a domain in popular TLDs for less than $10, i.e. a price comparable to some newsstand magazines. Even in a country obsessed with merchandise returns like the USA, people don't really expect to be able to return a magazine they've browsed for a few days...

"Services" like the automated — temporary, subject to cancellation and refund by ICANN — re-registration of expired domains by some registrars, in the hope that an (absent-minded ?) registrant will renew the domain and thus generate further revenue for the registrar, are also something which IMHO we could do without. People should be careful about keeping their domain registrations and payments up to date, and domain name shoppers would probably welcome the increased predictability of domain expiry and availability dates.

What if ICANN limited the number of domain names per IP address? While a single squatter can easily present himself as ten million registrants, they can't host up 10 million / X IP addresses (where X is the limit mentioned above) without paying through their nose or hijacking IP ranges illegally. It's easy enough to police as well since domain names have to be in DNS servers.

Re cost of these cybersquatters, it creates unnecessary load on DNS servers, a cost for which they are not paying.

Mark: "foresight to make a fortune by using lesser used domain names"? No, this business is about using automated software for professionals to make millions of bids a day on expiring domain names and for people in a secondary market to buy from those "lucky winners" the domain names with residual traffic so they can run ads that have arguable value to the viewer.

Anon: Yes, one of my concerns is that registrars are involved, sometimes indirectly in benefiting from this and it seems conflicted to me.

MV: Good point. I'm trying to look into the true value to normal registrants of this refund policy.

Don: The problem is that "they" are very tricky. Most of them have a great deal of money and move IP address around, host their DNS on other networks and 3rd parties and use a great number of shadow companies to purchase these domains. However, it would be interesting to see if you could somehow throttle the number of request.

I think there is an argument by some that this is actually a "service" protecting users from 404's and for providing value to people who are searching for content. One argument is that if a domain has real value, the person wanting the domain should be able to afford this on the secondary market. I'm a bit skeptical about the value of this, especially in the context of consumer generated content. I will raise this at some point in meetings today and see if I can get some more information or an official response.

I've started interviewing a number of people who are directly or indirectly involved in this business. Some are suggesting that this, what I will now call the "professional registrant", community could becoming another supporting organization and participant in "the process". I guess what I would like to know more about is, 1) what is the size of this "community", 2) what is the positive and negative impact on the ability for the "amateur registrant" to receive quality service, 3) what is the stress that professional registrants cause on the system if any, 4) should there be a limitation in the ability for registrars to participate in the professional registrant business just as there are limitations in registries to participate directly in the registrar business. I will ask more questions about this today and try to post something a bit more educated later.

1. This is a significantly large community encompassing very large operators and very small mom and pop firms and "work at home operators" (tens of thousands of individuals and companies) most of whom you will never see or meet (i.e. that girl you see sitting at the starbucks always working on wifi)
2. Amateur registrants have the same opportunities as professionals limited only by the amount of money to spend and their individual desire to enter the space.
3. Professional registrants fuel a significant percentage of ALL registrar and expiring domain company operating revenues. They cause no "stress" on the existing system, rather they fuel a healthy market-place and have shaped the name-space via the cashflow they invest.
4. Professional registrants are essentially small media companies controlling hundreds, thousands or millions of person visits and hundreds of millions of dollars in cashflow. Should AOL be allowed to own their own registrar? They do, and their registrar is the registrant of all their domain names (i.e. love.com, aol.com). They, like many professional holders of names view the "registrar" as a tool, security measure and management interface that enhances their vertically integrated enterprise.

In today's economic environment of more than 500 icann accredited registrars, one ICANN accredited registrar provides 'no' tactical advantage to the professional domainer rather it is a tool or security measure for facilitating better management of names.

Please note that there is a BIG difference between cybersquating and domain traffic monetization. Cybersquating is the illegal act of registering a domain name that infringes a trademark, whereas the registration and traffic monetization of a generic phrase, i.e. PersonalLoans.com (no affiliation), is totally legal and not cybersquatting in any way, shape or form. For you to refer to people who monetize generic phrase domain names as cybersquatters may be the actionable offense of defamation. And if I'm not mistaken such legal domain name monetization accounts for almost all of the revenue being generated by the industry.

Nevertheless you may be correct that the "refund rule" gives certain people an unfair advantage and should be abolished.

I don't see what the "problem" is. There's an opportunity for making money, and they're grabbing it.

If you want to attack a useful problem, here's a more interesting problem (also harder): blogs emit RSS streams, and there's apparently SEO spammer that use RSS to generate "hot", "relevant" content. They then put up pages with the RSS generated content, and with google adwords, and they get high relevancy in the SE that way for current topics that people care about. From there to hearing the cash register ring is a short short route.


Well, the only problem I see is that you're not monetizing your domains enough!

Why? You're providing these guys with a free option. The cost of that option should either be a non-refundable fee for the option to return the domain, or you should just sell the domain outright without the option to return it. They can always sell it later if it does have any value.

But regarding the business model of these guys, I think you should consider the broader perspective. They are actually providing a great (and costly) service to the economy by searching out the money-generating site names. They are basically doing an experimental appraisal of domain name values. You don't know how much money can be generated merely from the domain name until these guys buy them and try it out. Many people don't have the resources to do this, and the market is better off knowing the value of these domains...

Furthermore, they're generating value by giving at least some consumers something they want, whereas before, they'd just get a 404. If 5/1000 people find something they're looking for instead of finding a blank page, that's a benefit and a slightly more efficient economy.

Having to pay for the domain at an increased value because someone else found a way to make some money from it is simply a proper trade, since the new buyer already knows he can get a certain amount of traffic on the site for free.

The only problem comes where the domain parking guy attempts to register and exploit domains which gain some or all of their value from another company's goodwill; in otherwords, from another company's trademark or reputation. This is where anti-cybersquatting law comes in, so we do have solutions for that.

In sum, I don't think the business model is a problem, but you should not give people a free option if you don't want them to get something for nothing.


Sorry, Trevor. I don't believe it's all upside. You're not accounting for the negatives.

When I come across one of those sites, usually from a typo or a search engine, I am forced to waste valuable time figuring out that what I'm looking at is junk. And if I do try to use the link farm, most of what they show me is worse junk. I'd be much better off using a search engine.

Even worse from my perspective is how these sites block more productive uses of the names. When I'm fishing for for places to put projects, I often find that people are squatting on the names that would make the most sense. If I could find a way to buy the name at a reasonable price, I'd almost be ok with the squatting. But all I find is more link farm.

And these things are a problem for search engines and data mining as well. One client of mine, shopping.com, put together a database of reviews so shoppers could easily see what people are saying about products they want to buy. The vast number of link farms was a hinderance to that project. I imagine the link farms and squatters affect anybody out on the long tail: when I'm paging through search results I stop when I get to a junk entry or two; that may mean I miss your perfectly good blog post.

My guess is that those people are, net, highly parasitic, and I'd love to see they system changed to reduce gaming. I'd happily pay $50 per year for my domains if that helped keep the leeches out. Or perhaps $100 to register initially and renewals priced as they are now? That wouldn't bother anybody with a real project much, but it would make bottom-feeding much less economical.

First of all you are confusing two separate industries.

Domain "tasting" as you phrase it involves a very, very SMALL number of registrants. By no means are these any more "professional" than many other registrants that don't do this. I do believe overall the process is somewhat unfair however I applaude their initiative in creating an advantage however unanticipated by the regulators

Monetization of so called parked pages is a vehicle that many registrants use to help pay the costs pending some future development plans. For some that represents their entire business model. It allows them to take domains that have very small amounts of traffic and monetize them as a profitable group rather than an unprofitable single site. If I can only make $50 a year from a domain I can't survive. But if I can find 1000 domains that bring in $50 a year I can make $50k. Thus I have a business and a cash flow base to develop sites from.

Now I understood your original question to be about the verisign/ICANN agreement and you didn't understand why people opposed it.

1/ raising the cost of domains will cause 10's of thousands of sites to become unprofitable even under the above model. All these will delete and versign will inherit the traffic and revenue as it appears your new agreement does not rule out a new "sitefinder" service. This will put millions in their pockets from increased rev from renewals and monetization of traffic, Cost to the domain community by the time the wholesale price hits it peak will be some $160,000.000.00 a year.

2/ All this will be done at no cost to them. They don't have to pay for a domain to gain the traffic. I DO

3/ $200 million in contractural obligations that Verisign had to do R&D on the internet structure as part of it's previous contract have disappeared in the new contract. This alone puts millions of dollars right back in their pockets.

4/ I know of three large companies that are interested in the .com contract. Tucows has publicly stated they would charge $4 for a renewal, Yahoo has stated a $2 price tag. I know a large public company that is talking substantially less than $2. Yet you are going to allow Verisign to INCREASE their already profligate pricing structure by an amount greatly exceeding the cost of inflation that will result in a almost $10 wholesale price by the time they are finished.

All of this is being done comletely on the backs of the domain registrant community. Our pockets are being picked for literally 100's of millions of dollars to satisfy verisign.

If my calculations are wrong someone please feel free to point out where, But between savings on R&D and increased fees along with sitefinder and other "Services" Verisign will scoop somewhere between $300,000,000.00 to $500,000,000.00 or more. All this is being done to settle a lawsuit that they probably have little legal standing in and certainly didn't deprive them of almost 1/2 A BILLION DOLLARS!!!!!

Gordon
DropWizard.com

I will get to this entire thread when I have about 3 weeks to catch up on my reading but I don't see it as any of ICANN's or anyone else's business if people want to use the system in this fashion. I have 200+ domains that I've collected over the years that I pay a yearly registration fee on and what I want to do with them is my own damn business. If ICANN want's to do some good then make up for the years of ass fucking that we've gotten at the hands of Verisign/NetworkSolutions thanks to the blind eye turned by ICANN and all the future ass fuckings I'm sure are yet to come. This has been an established income source of mine for over 7 years and if it's somehow weaseled away from me for bullshit reasons I'm going to be the first one at the front door with the flame thrower and gas can at the next ICANN meeting. Hands off!

Sorry I wasn't clear. There's no reason for Verisign to get the extra money that an anti-parasite fee would generate. It could happily be used to support the internet directly. A lot of Internet research gets done on government grants; direct grants from ICANN would mean the Internet pays more of its own way.

And yes, Jason and Gordon, I'm sure that the people leeching in this system are using it to feed their families and think of themselves as good people. But I've heard that line from every spammer I have ever talked to. That you are currently making a living from some accident of the system does not entitle you to continue doing so.

For a great example, go read the autobiography of the Yellow Kid, a famous Depression-era scam artist. Much of what he did wasn't technically illegal then, although it sure is now. Before or after the laws changed, what he did was wrong. Why? Because it is of negative value to society as a whole.

Explain to me exactly William how legally paying for a domain and putting whatever content I want on it is spamming? Emphasis on legally paying for a domain. Where is the line drawn? If I register hotbisluts.com and put my home bakery's website on it does that not entitle me to use of the domain because the content doesn't match the implied meaning from the URL? There is a reason we have trademark laws and domain arbitration. If someone has a legal right to use a domain then they can get it back. If it's just a nice to have well then tough fucking titty. It's nicer for ME to have it. First come first served.

"That you are currently making a living from some accident of the system does not entitle you to continue doing so"

Where's the accident? It IS the system. You purchase the right to use a domain and you use it. If it's not for illegal purposes like child pornography or ID theft then back off my porch very slowly because you don't have a leg to stand on.

I'm with you Jason. I suspect William and his ilk get angry about the guy who invented the "cats' eye" reflectors in the road....because he thought of it first! The type of LEGITIMATE marketing described and practised by Jason and thousands of others is a low-cost and LEGAL route into starting up a business that would otherwise not be available to many, many people. Maybe that is what bugs the whiners!?

Again, those are the same arguments I see from the spammers. It's legal, the system allows it, it's legitimate marketing, people who object are jealous, etc. I grant that it is the current system, but it's an accident of the current system, not the intended behavior.

What you and they miss is that spamming, typo-squatting, parked domain monetization, and the like are all negative-sum interactions. Sure, you make money. And maybe the people who buy ads make money. But net it's a drain on the system, wasting user time and making it harder for positive-sum projects to get going.

As with the spammers, you have no particular right to keep making money off of quirks of the existing system. Not that won't keep you from leaping on your high horse every time somebody suggests an improvement that might hurt your pocketbook.

>>And yes, Jason and Gordon, I'm sure that the people >>leeching in this system are using it to feed their >>families and think of themselves as good people.

Although I didn't say anything about feeding family it's nice to know you can live life without doing that William Unfortunately my kids whine a whole lot when they're starving.

You seem to view the internet as some lofty social do gooder system. The fact is it's a commercial MEDIA venue.

Radio sells advertising!
TV sells advertising!
Cablevision sells advertising!
Phone companies (yellow pages) sell advertising!
Movies sell advertising!

>>>not the intended behavior.


What makes the internet any different?? We sell advertising to survive and pay the bills. It's not an accident it IS the real world.

Mass-registrants reduce the value of the internet as a whole by reducing average memorability of names. That is a problem for users and for businesses who depend on the overall health of the internet.

For individual developers, the lack of good names makes it harder to create successful applications, and that reduces the health of the economy.

At the same time, mass registrants create no value. They are pure parasites. Whether they make money is nobody's business. Whether less money is made overall so that this group of parasites can skim a portion of the money lost is lots of people's business.

So William and Lucas. To summarize your positions:

Late to the party. The hot chick is taken. The successful guy should stand aside because your purpose is higher!

You only have to look at the real estate market to understand what drives the domain business. In fact the speculation drives the market and makes it healthy and resilient. The fact that people are using the net in ways you didn't conceive of doesn't make it wrong it only means you picked the wrong game plan.

Let's see what dictionary.com has to say:

.com
abbr.
commercial organization (in Internet addresses).
******************************************************
com·mer·cial ( P ) Pronunciation Key (k-mûrshl)
adj.

Engaged in commerce:
Of, relating to, or being goods, often unrefined, produced and distributed in large quantities for use by industry.

    Having profit as a chief aim:

***Sponsored by an advertiser or supported by advertising:
n.
***A paid advertisement on television or radio.

That pretty much seems to cover it.

Gordon:

The profitability of your work is based on externalities. See http://tinyurl.com/cpwv9 for an explanation of what an externality is, which I am confident you need.


Lucas has it exactly right.

I agree, Gordon, that accidental uses are not necessarily bad. However, with any unexpected use of a system, you need to evaluate the net effect and, when required, tune the system. Spammers are squawking just like you do about people fixing the holes they take advantage of in the email infrastructure. Perhaps you could form a lobby with them?

The externalities that you refer to only affect a limited few ( as I said late to the party ). Not society in general as say pollution does. The average person could give a sh*t who owns the domain as long as they obtain the relevant information they wanted when they surfed there.

And to try and draw a parallel of us with spammers or parasites does you a great disservice. Perhaps I should compare you social do gooders to drug addicts.....con artists.... freeloaders. Please Mr. Society. Rearrange things so I can have a chance at something I had no initiative to pursue in the first place.

So lets see. Hypothetically:

Sex.com makes 2 mill a year
Ass.com makes 500,000 a year
Pictures.com makes 500,000 a year
Camera.com makes 250,000 a year
Computers.com makes 750,000 a year

All are available right now. Which of you noble gentlemen will only register one of them and forego the other 4.

Be honest now :-)

And I have a list of 1000's after those 5.......

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