Is the Domain Auction Aftermarket Corrupt?

The graphic above is from Pool.com and has not been manipulated in any way. For a full-size view, click on the graphic. It's a great visual representation of the so-called life cycle of a domain, so I hope the folks over at Pool don't mind my posting it here.

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Having just participated in my first aftermarket auction, I read, with great interest, this Domain Tools Blog post regarding the launching of a new aftermarket domain auction site: NameJet, which looks to be even more powerful and monopolistic than its rival Snapnames, who, by the way, seems to be sinking fast (if you consider their current crop of featured domain names).

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I must admit, the current system of acquiring and auctioning of expired domains has a bit of a stench to it, which is why I have posted the Pool.com graphic, which shows what is supposed to happen, citing in particular the comment pointing to "Pending Deletion": "Domain is released. Domain name also known as a 'Pending Delete,' will be released to the public (my emphasis) 5 days after the Redemption Grace Period."

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Here is my understanding of ICANN's rule regarding the release of expiring domains: that all domains must actually expire, giving all domainers/registrars a chance to catch the dropping domain. Instead, what I have observed is a slick sleight-of-hand of shuffling of a domain from one temporary registrar to another.

Rather than belabor my point over at Jay's blog--Jay has been very patient so far--I thought it might be more appropriate to continue articulating my thoughts here and actually offer you a narrative offering an account of my own auction experience.

On September 23, I noticed that the domain LiteraryAgent.com was set to delete on September 27; I was definitely interested in acquiring the name, so I read several opinions on how best to catch the domain, knowing full well that I would not be paying reg price for it. After reading several accounts of how to acquire a deleting domain, I looked up the current registrar: Network Solutions, who, at that short time ago, used Snapnames as its drop catching agent. I also discovered that Snapnames owns the patent for some sophisticated technology for drop catching and was more likely to snag the domain. Fair enough, I thought.

I reasoned that if Snapnames had a lot of interested bidders, it would place more resources for catching the deleted name. I have no problem with that, for that is capitalism in action, and the U.S. was built on the premise that if you build a better product than your competitors, you are likely to prevail.

Trying to hedge my bets, on 9/23 I placed a back order/monitor with GoDaddy, knowing full well that was a long shot. Again, it was a $19.00 risk I was willing to take. On 9/25, I also placed a back order with Pool--no money risk there. (I couldn't figure out how to register for Club Drop--very strange and difficult site, but, in the end, it didn't matter.)

So I figured I had a good chance of at least participating in a auction at Snapnames or Pool, though it would be expensive, and if I got lucky, GoDaddy might get it for me and CHEAP!

Here's what actually happened:

On 9/27, on the day of supposed deletion, I logged into my Snapnames auction account, where a message "Acquiring name" (or maybe it was "acquiring domain") was showing in my "status" box. I thought, "That's an odd way of saying that you're trying to catch a deleting domain."

But later, after Snapnames had "acquired" the domain, I checked both Godaddy and Pool accounts, and THE DOMAIN HAD NEVER DROPPED OR DELETED AT ALL! Both accounts still (10/7) show the domain back order as being in active status. I know for a fact that Godaddy lets you know when a domain capture has failed because it states specifically "Capture Failed"--I had recently back ordered another domain.

Because GoDaddy continues to monitor the domain for me, here's the history of LiteraryAgent.com as of today (10/7/2007, items in red do not appear in my Godaddy account but are facts about the auction itself):

9/23/2007, 7:48 p.m.: New Monitor

[9/27/2007: Beginning of 3-day auction]

[9/30/2007: End of auction, final price, $6,758.00, showing the current domain owner as the winner]

10/1/2007, 8:13 a.m.: Type of change: Nameservers

Previous Data

NS1.PendingRenewalDeletion.com

NS2.PendingRenewalDeletion.com

[Where is the "deleted" message, hmmmm?]

Changed to

NS1.Fabulous.com

NS2.Fabulous.com

10/3/2007, 8:16 p.m.: Type of change: Nameservers

Previous Data:

NS1.Fabulous.com

NS2.Fabulous.com

Changed to

NS1.HitFarm.com

NS2.HitFarm.com

10/5/2007, 8:21 p.m.: Type of change: Nameservers

Previous Data:

NS1.HitFarm.com

NS2.HitFarm.com

Changed BACK to

NS1.Fabulous.com

NS2.Fabulous.com

What does this information reveal, even to a newbie?

1. Godaddy and Pool had absolutely no chance of catching this domain, not even a remote one. The domain was going to a Snapnames auction and nowhere else.
2. I threw $19.00 away, pure and simple. I would have had a better chance to win Powerball than to acquire this domain from Godaddy or Pool or anyone else, for that matter, that is, except Snapnames.
3. GoDaddy ought to halt all back orders for domains "deleting" from Network Solutions and any other registrar that is known to reserve deleting domains; otherwise, Godaddy is taking money from customers when they have absolutely no chance of offering an advertised service: snagging a domain from Network Solutions' auction agent, which now appears to be NameJet. (Actually, GoDaddy can't even catch their own deleting names, yet another story).
4. New domainers are simply out of luck in catching premium domains, unless they start out well-heeled and can pay domain agents the high prices. Of course, this would still hold true if the domains deleted, but at least one would be assured that market forces are driving the high prices, not corruption.

As far as I know, the winner of the auction is okay, probably someone like me who wanted the domain more than I did and was willing to pay for it, so my beef isn't with him at all. We (along with about 100 other bidders) simply participated in an auction system that appears to be rigged from the start.

I also have a suspicion that shill bidding may be going on, perhaps not for this particular domain, but some of the listed domains are no better than the ones in GoDaddy's fire sale, and yet their prices seem vastly inflated. Again, one cannot know this because transparency is not exactly a hallmark of these auctions.

My question: Where is ICANN in all of this? If they set up these rules, shouldn't they be enforcing them?

As a new domainer, I would like ICANN to address the following issues:

1. Enforce the deletion rule for ALL expiring domains.
2. Get rid of secret pre-order auctions and open up auctions to any verified bidder, those who register at the auction site and provide the necessary information needed so that fake, numpty bidders will be weeded out. Make real-time bidding info public (you could still allow users to use pseudonym bidding IDs).
3. Insist on auction transparency by explaining the process of how the auction company sets initial bid prices (although I have figured out that the more bidders who pre-order, the higher the opening bid).
4. Force registrars to form a coalition that will develop software that will be able to reasonably root out MAJOR TM domains and hold them for the TM company to redeem, perhaps at a reasonable fee (in addition to the reg fee). I don't believe for one minute that when the bids for a domain climb into the stratosphere that someone doesn't notice if it's a TM problem. For Pete's sake, the TM typo domain VictoriasScrect.com is currently for sale at Snapnames. When I hear, "It can't be done," I know it's a load of crap because, on the other hand, these same naysayers are bragging about the sophisticated technologies they are currently developing that will make them loads of dough.
5. For TM disputes that are less obvious (and, admittedly, they do exist), the auction house would stand behind its product and offer at least a partial refund to the buyer. Part of the cost of the domain could include domain insurance for 90 days to one year, like they do in the real estate industry.
6. Clamp down on known shill bidders. Ebay has developed some sophisticated software for rooting out shill bidders, and this industry ought to do the same.
7. Not allow registrars to hold back premium domains (such as .tv) and charge a yearly "rental" fee that far exceeds its real reg fee. See eNom's Jennifer.tv.
8. When buying a domain on the aftermarket, the buyer ought to be able to choose his/her registrar of choice, not be stuck with a registrar who charges inflated yearly reg fees. (Are you listening, Pool?). The transfer process ought to be explained fully on the FAQ page.
9. Registration and aftermarket information should be clear, like options for transferring domains to other registrars.
10. ICANN ought to insist that the reg fee offers the domainer the freedom to redirect a domain anywhere. Why should I pay Netsol an additional $12.00 yearly fee to redirect my domain to my site of choice?
11. The income from the default "construction" page should be shared with the domain holder.
12. Include steep financial penalties and sanctions (with teeth) for registrars and domainers who break the rules, and not look away when friends and cronies break the rules.

I love domaining and would like to see this field EARN a good reputation because, frankly, when I tell people what I do, they raise their eyebrows because they have heard the cybersquatting stories, etc., etc.

I also want to make clear that I, in any case, probably would not have been able to acquire this domain anyway because, quite simply, it went over my budget and probably would have even if everything had been above board.

Best,

Ms Domainer