All Quiet on the Virtual Front: Why Domain Investors' Fear of the Feds is Irrational

By Thies Lindenthal
Thies Lindenthal

When a sniper ends the life of soldier Paul Bäumer in Remarque's "All Quiet on the Western Front," a laconic situation report from the frontlines recounts an unusually quiet day. In the grand scheme of things, nothing worth reporting has happened. Reading David Kravets' recent article in Wired brought this upsetting ending to mind. U.S. authorities taking down individual domains based on copyright infringement charges is the online equivalent of Remarque's allied snipers: picking off the occasional domain — for better or worse — has little effect on the overall situation.

The domain community, however, feels differently. Searching for "domain seizure" on Twitter brings up thousands of hits. A domain name website created some buzz by issuing a press release yesterday which "downgraded" its "rating" for the .COM and the .NET TLD from AAA to AA, due to these seizures posing "a threat to any .com domain and the Internet DNS in general."

Crunching real market data, I think these opinions are hyperbolic, and these fears are irrational. Domain registrations are stronger than ever (according to Verisign's Domain Name Industry Brief), and people are not reluctant to register new .COM and .NET domains. Data from the secondary domain market do not show any justification for this claim either.

Figures from Sedo.com, the largest domain marketplace worldwide, show neither a reduction in sales volume (which usually precedes a decline in market prices) nor in sales prices. On the contrary, February showed a very strong upward trend in the total number of transactions, as well as domain prices reaching close to an all-time high (IDNX.com).

If hard numbers still don't convince you, we should take a quick "Tour d 'Europe:"

There is no doubt that the advances of US authorities are problematic. In the U.S., they will certainly be perceived as attempts to censor the Internet. However, concluding that .COM and .NET domains are therefore "precarious" investments is borderline hysterical. Admittedly, if you want to run a file-sharing website with a lenient approach to traditional copyright issues, a domain that is in reach of U.S. authorities is probably not the best choice. Neither is a .CO.UK, a .DE, an .FR or an .ES. But we knew that already, didn't we? The perceived threat of the Feds stealing your domain is no viable threat at all.

All data shows that domain investors have not walked away from U.S.-governed registries as a result of the recent seizures. Uncle Sam will, most likely, continue to leave the world's domain investors alone. All but a handful of domains will manage to evade the cross-hairs, and .COM and .NET values will continue to survive and flourish.

Disclaimer: The seizing of domain names as a way to enforce copyright claims is more than dubious, and I — like many working in the world of domain names — am not supporting any ideas of government entities deciding which sites remain online and which ones don't. The reaction among the Internet community to the recent SOPA bill should be proof enough that this is the prevailing opinion online. However, claiming that this has an effect on the investment performance of .COM and .NET domains is far-fetched, if not absurd.

By Thies Lindenthal, Product Manager for Domain Pricing, Sedo.com

Related topics: Domain Names, Internet Governance, Law, New TLDs

Comments

Its correct that comparing to the whole Michael Marcovici  –  Apr 15, 2012 2:27 PM PDT

Its correct that comparing to the whole zone the seized domains seem very few, however this is first of all a question of principle and second I dont think it can be compared to the whole zone where 90% of names are worthless and 80% not connected or have no traffic. If compared to the names with thraffic and commercial value the 750 seized domains are much more. Also since authorities use privacy its impossible to determine the exact number of seized names at this point.