Home / Blogs

The Cold-War Fight Against Domaining Continues

Frank Schilling

"First they ignore you, then they laugh at you, then they fight you, then you win!" --Gandhi

This quote above pretty much summarizes the evolution of the domain name monetization and development business. I have watched this business come of age for more than half a decade… In the beginning nobody cared… then when people started talking about how great it was, 'smart people' and the "legitimate web" laughed.

Then the trucks with money showed up.

I think it's safe to say the covetous latecomers (well, all but the dumbest and the meanest) have begrudgingly accepted that they missed the boat as it relates to the domain phenomenon. A significant double-digit percentage of global Internet traffic is now owned by domain holders with generic names. So the fight is on.

Why a fight? Well collective Internet companies and search tools are worth hundreds of billions… and they aren't *really* worth it. Google is 'worth' 160 billion+ and climbing alone. The heart of all these companies with frothy valuations is exactly the same as domain portfolios which actually have more consistent reliable traffic than even the best search appliance. That's a butterfly-in-the-tummy disruptive wild-card to companies and media concerns built on shaky overpriced foundations.

It seems the domain industry which brings some of the most potent Internet traffic on Earth has to keep apologizing for itself. Apparently it suffers from a "stigma"… Yes, we should all be cursed with the stigma of two to four times the conversions of Google. Apparently things of incredible substance have a "stigma" on Maddison Ave and Sandhill Rd.

Then there are ISP's who want a slice of the paid search pie, damming traffic upstream. There are forlorn technical people who missed the boat, IP attorneys who don't fully understand the space trying for a money angle, jilted business people who touched the space but missed the phenomenon, browsers who encoroach and steal with impunity while their manufacturers rail against cybersquatters taking traffic they could otherwise steal… The list goes on.

Consider just some of what I've seen lately:

1. Marilyn Cade, former chair of the ICANN business constituency - voted out of her position in favor of Yahoo IP counsel Mike Rodenbaugh. Marilyn returns to the ICANN meetings in Puerto Rico as an independent consultant and by several accounts comes out swinging against the 'domain monetization' business. She's entitled to her opinion, but at the meeting several folks are indignant that she mixes fact and fiction lumping good generic domain names and long-held registrations into the same presentation bucket with trademark kiting and other ills… Her blurring of the line between separate issues does a dis-service to the press and outsiders who think she actually knows what she's talking about. I have spoken about monetization in general with Marilyn and can testify she seemed to have little experience in this field… Whether Marilyn is actually cognizantly maligning a space or simply mis-speaking, the outcome and harm to outsiders who misunderstand the industry as a result, is the same.

2. John Levine posts about "squeegee domaining" on CircleID, again lumping good and bad domain registrations and registrants into the same pool. His negative sounding, lopsided post draws more than 1000 views and a rarely precedented 37 comments on this typically staid and placid Internet-architecture forum…

3. Fairwinds Group (a group who's 'winds' in this context appear to be anything but 'fair') Its principal Joshua Bourne tries to create a buck by forming the 'Coalition for Domain Name Abuse'.. by all accounts it's an empty shell 501(C)(6) with the presumed purpose of beating the bushes for sponsor money to fight against bad domaining practices. The fact that this group hasn't exactly 'set the world on fire' looking for new (public facing) members to join or for a target to fight is poignant enough. I highlight it as a buck maker because Bourne recently calls out the 'good' in the domain industry in this Red Herring piece. The reason I draw attention to it is the "fight the space" undercurrent behind it.

4. Citizenhawk launches to fight against trademark typos… I like that goal but the risk is that over-reaching will deliberately (or inadvertently) take "good typos" (brandable variants) along with the bad. Funny enough I knew people who work for this group when they worked at iREIT (a domain investor) and we were starting the Internet Commerce Association to foster registrants rights.. now these folks are operating from the other side and testing boundaries that risk over-reaching on registrants rights.. The hypocracy of that flip-flop is palpable to those who are in this business because they care about it, not just because they are trying to make a buck.

I think we all agree that there are good and bad spots in every industry. The domain industry's issues are sorting themselves out through ICANN, the courts and other resolution forums. But we have entered that stage when some of the world has chosen to fight the domain industry. If Mr. Gandhi is correct (and I firmly believe he is), then victory should be right around the corner ;)

By Frank Schilling, Founder
Follow CircleID on
SHARE THIS POST

If you are pressed for time ...

... this is for you. More and more professionals are choosing to publish critical posts on CircleID from all corners of the Internet industry. If you find it hard to keep up daily, consider subscribing to our weekly digest. We will provide you a convenient summary report once a week sent directly to your inbox. It's a quick and easy read.

I make a point of reading CircleID. There is no getting around the utility of knowing what thoughtful people are thinking and saying about our industry.

Vinton Cerf, Co-designer of the TCP/IP Protocols & the Architecture of the Internet

Share your comments

Re: The Cold-War Fight Against Domaining Continues Suresh Ramasubramanian  –  Jul 03, 2007 1:12 AM PST

You know when the domaining industry has problems?  It is when people like Levine, who have zero stake in it and couldnt care less whether it thrives or dies, are quite certain that it will eventually die.

Forget Gandhi there, go look for what happened to the tulip craze and the south sea bubble as examples instead.

Re: The Cold-War Fight Against Domaining Continues Frank Schilling  –  Jul 03, 2007 8:10 AM PST

Hi Suresh, I've heard you analogize the domain industry to the "south sea bubble" and "the tulip craze" several times.  I'm always eager to learn and would love for you to explain how you justify that comparison.

Tulips and South Seas stock where manias built on things people didn't need and were not backed by the underpinnings of cash-flow. I think Google's stock (which pays no dividends and is held up purely by the expectation of an ever greater return) is a better comparison to those two manias. Domain names on the other hand are the foundational elements of the Internet. Good ones are coveted by thousands of different parties fueling a thriving secondary market. They deliver free cash-flow via paid search advertising served to organic type-in traffic; which comes despite browser gaming, at a bare din-level when users type the names looking for the subject matter that the names describe.

This has been going on in exactly the same way since the first version of Netscape in 1993 when porn site operators bought and sold merchantable traffic. This form of paid-search has evolved to encompass non-adult subject matter and continues to thrive. Thousands of companies pay tens of thousands of staff salaries, all on the back of this real cash-flow. How is it that this entire ecosystem, the foundational elements of the net is suddenly going to implode after nearly 15 years? I think you misunderstand how the paid-search industry relating to domain names actually works.

Re: The Cold-War Fight Against Domaining Continues Keynes  –  Jul 16, 2007 7:33 AM PST

Indeed, I think he Tulip and South Sea analogies don't hold much water (bad pun, forgive me.) In fact, those "manias" were a reflection of false/perceived scarcity while generic, premium .com domains are unique and have a perfectly inelastic supply curve. Also, Frank makes a good point that there are economic fundamentals (namely, potential revenues) underlying these domain values, and that is what ultimately drives investment in domains.

Re: The Cold-War Fight Against Domaining Continues Matthew Elvey  –  Aug 11, 2007 2:17 PM PST

Sure seems like a Tulip craze to me - or worse:

I'm wondering if there are a lot of SHAM domain name sales going on.

I came across http://dnjournal.com/domainsales.htm this morning and looked at the websites hosted on the domains listed.

Looking at the top 5:

1) Cardiology.com - trafficclub.com
2) bald.com - doesn't even have valid nameservers.
3) supplies.com - nothing but ads for domains.
4) Chinese.net - parked at GoDaddy (surely using CashParking monetization)
5) Ringtones.net - the only one that approaches being a 'real' website (their privacy policy indicates they think they're in the business of purchasing lists of email addresses and cell phone numbers and sending them solicited commercial messages - so I can see some revenue potential; lets ignore the plan's ethics.)

The websites at the top 4 seem to have such little chance of bringing in enough cash to justify their price that I'm convinced they were mostly sham sales - i.e. they didn't really take place.  Anyone have proof they really took place (I'm not sure what form such proof would take! Tax records? There should be taxes, right?)

I was skeptical, so that's why I did (a few minutes of) research - and that's all it took to convince me.  Look: #2 ($400k) doesn't even have valid nameservers, and #3 ($324k) is just an ad for two .coms that don't even make much sense - DVDCAM and BLUCAM.  Who would pay that much money and then not do anything that could reasonably be expected to make that money back with the domains?  Maybe monetization doesn't really work, so they haven't bothered.

If there's funny business there, I'm not buying these claims of high traffic and high conversions either.

And as for Google's stock value, like nearly all stock, its price is supported by discounted expected future earnings.  Its substantial and rapidly growing current earnings (backed by audited financial records) mean that its support is substantial, result in its high value.

Any of these domainers public companies with audited financial records showing income specifically from traffic or specifically not from domain sales?

To post comments, please login or create an account.

Related

Topics

Cybersecurity

Sponsored byVerisign

DNS Security

Sponsored byAfilias

New TLDs

Sponsored byAfilias

Whois

Sponsored byWhoisXML API

Brand Protection

Sponsored byAppDetex

Domain Names

Sponsored byVerisign

IP Addressing

Sponsored byAvenue4 LLC

Cybercrime

Sponsored byThreat Intelligence Platform