Having working in the domain name industry myself for a couple of years, I've always been intrigued by the fact that there's such a big business formed around something as trivial as a bunch of letters and numbers used to ‘translate' IP addresses. And when there's a big business in something, you just know there will be a grey area as well where ethics are left at the door sometimes.
Andrew Allemann over at Domain Name Wire has been doing an excellent job researching the hoops The Go Daddy Group jumps through to keep its shady tactics outside of the public view, resulting in this great blog post. Turns out The Go Daddy Group, which runs the world's largest domain name registrar GoDaddy.com as well as some other domain name related companies, is apparently warehousing its customers' expired domain names and directly profiting from them.
Warehousing and auctioning off expired domain names is not necessarily against ICANN (the governing body over domain name registration) regulations and actually quite a common practice among larger registrars, but the story only gets interesting when you take a look at what goes on behind the transparent part of it. When a valuable expired domain doesn't sell through an auction on The Domain Name Aftermarket (aka TDNAM, GoDaddy's auction platform), The Go Daddy Group changes the ownership of the domain to one of its lesser known subsidiaries, Standard Tactics LLC, using Domains By Proxy's whois privacy service to hide its identity. Next thing you know, that company will start monetizing the domain names using parked domain pages filled with ads and list the domains for resale on TDNAM.
On August 16, 2005, GoDaddy formed a subsidiary called Standard Tactics, LLC in New Mexico. Before founding Standard Tactics, all of GoDaddy's subsidiaries were incorporated in Arizona where the company is headquartered. There are a couple reasons GoDaddy may have chosen to form the company as a New Mexico limited liability company rather than an Arizona corporation. First, by creating the company in New Mexico it could distance itself from it. Second, by filing as a limited liability company instead of a corporation, it didn't have to list directors of the corporation.
In fact, Standard Tactics LLC is a subsidiary of Special Domain Services Inc, which is a subsidiary of GoDaddy Inc, which is a subsidiary of The Go Daddy Group. See a pattern here? The only reason why we even know this is because the information got out when GoDaddy attempted to file for an IPO in 2006 (it eventually withdrew the filing).
So why is Go Daddy going through such lengths to keep the public from knowing about its aftermarket operations, when it's not even against ICANN regulations? Paragraph 3.7.9 of the agreement between ICANN and Registrars says:
“Registrars shall abide by any ICANN adopted specifications or policies prohibiting or restricting warehousing of or speculation in domain names by registrars.”
Only problem is ICANN hasn't yet adopted specifications or policies prohibiting or restricting warehousing, leaving registrars in a unique position to impact domain name pricing top-down by introducing competitive bidding or auctions for expired domain names.
It's really no wonder GoDaddy is trying to cover its tracks and hide these practices, but thanks to Andrew the word is now out.