Anyone who doesn’t know how dirty the domain name business is just doesn’t know the domain name business. People pay exorbitant sums to acquire domain names, put Google or Yahoo ads on the parked pages, and collect the advertising fees. They often buy and sell individual domains and portfolios with other domain squatters. But the real feeding frenzy is around deleting domains – the domain names that people let expire and that go back into general inventory.
The process for expired domains to get back into the system is complicated, but every day 20,000 or more previously owned domain names become available. Domain squatters know the list in advance, and spend time looking at Alexa/Compete rankings and lots of other data sources to try to figure out which ones are valuable. If they can just eek out $10 or so per year on a domain via ads, it’s profitable. And at scale, large amounts of money is made.
There are a variety of companies that grab as many of the domains every day that they can and then auction them off to the highest bidder. I once ran a Canadian-based company called Pool.com that invented the practice of auctioning expired domain names, and our company was making over $1 million in profit every month from these auctions – there’s lots of money in this business.
Today the largest company conducting these auctions is SnapNames, which was acquired by Oversee.net in 2007 for $25 million or more.
Today SnapNames admitted that one of its executives was shill bidding on auctions. 5% of auctions from 2005 – 2007 were affected, the company says, and a lesser number since then.
The employee was shill bidding on auctions to pump the price up. When he won, he’d arrange for a partial refund from the company.
SnapNames is saying they’ll reimburse the difference between what an auction should have closed at and what it actually closed at, plus interest.
This is a company that I know well – after leaving Pool.com I consulted briefly for them in 2004. It’s inexcusable that they let this happen, and didn’t catch it for years.
wow, I’ve not been involved in domains in a while but I heard stories about this, didn’t realise it was entirely legit.
Read this if you want a good rundown of the domain (scam) business:
http://tinycomb.com/2009/08/14/the-big-business-of-domain-buyingmonetization-fraud-exposed/
I didn’t realize it was entirely legit either; they used to call it fraud and criminally prosecute the perpetrators. And if the employee that was shill bidding on auctions actually did arrange for a partial refund from the company, that used to be considered conspiracy to commit fraud. Guess they changed the criminal laws – I wonder if they changed the civil laws that allows class action lawsuits that seek punitive damages in addition to interest-bearing refunds?
Guess not:
http://www.circleid.com/posts/snapnames_faces_lawsuit/
Such a shame that Nelson Brady felt that he had to do that.
Thanks for mentioning the real “dirt” here.
The blame should be on Nelson Brady, VP of Tech. He was, of course, involved in the back-end aspect of SnapNames.
He was hiding his tracks well enough for the company not to notice, but other SnapNames bidders have theorized about his scam for years.
This seems inappropriate reporting to slam many legitimate entrepreneurs, developers, designers, business owners, marketers who invest in domain names.
There are people who spam blog comments for search ranking. Does that make all SEO dirty?
There are people who hijack Twitter accounts and spam DMs. Does that make everyone messaging on Twitter dirty?
Of course some dumb-asses register TradeMarked names, squat typos and park unused domains. Thousands more invest wisely and ethically.
Well said.
—
Still a pain in the ass when someone already owns the name that would be perfect for the project you just thought up
That’s like saying its a pain in the ass you lost the running race because you forgot to enter and turn up at the start
MF you’ve done my work for me. does anyone know who owns the greatest strategic domain portfolio ever created? and what it would be worth?
Hmmm many names in that space; Kevin Ham, Frank Schilling, Rick Schwartz amongst dozens of other bigger (and even lower-key) investors.
Michael – ‘Im a little surprised that you feel it’s such a dirty business, especially since you were so intimately involved with it!
Yes, small elements of the domain business can be dirty sometimes. This story is a prime example of that. But it’s really unfair to use a story like this to paint the entire industry with such a broad brush!
Some of my favorite and most trustworthy friends and associates are vital and trusted players in this important multi-billion dollar business. And I trust them way more than the talking heads on Fox News, or the ‘financial experts’ on Wall Street or CNBC!
In other words – ‘One bad apple doesn’t spoil the whole bunch’!
So if you have any other examples that make you feel that way – I’d love to hear them from an insider like you. In the meantime, I’m going to press forward with my involvement in this great business that’s full of opportunities!
And I don’t even feel the least bit dirty!
well let’s start from the top. ICANN is a corrupt organization that seems to exist solely to make itself larger. Registries engage in trademark terrorism to get more sales. http://www.techcrunch.com/2008/12/03/tel-is-just-a-featureless-social-network-that-costs-10year/ The registrars that actually sell domain names engage in large scale buy and hold tactics to stop users from price shopping. http://www.techcrunch.com/2008/01/10/network-solutions-using-questionable-tactic-to-sell-more-domain-names/ Domain buyers engage in all sorts of click fraud schemes that screw advertisers and pump up revenue.
So, yes, I believe my statement is accurate.
in that, i agree with you. we need a clean domain system. of course, every squatter around here will disagree, as if their business offers any value to anyone.
Lol why does this not surpise me ICANN or ICANT as people who have delt with it call it.
The extra delay they put in to the .coop registration was one of teh major factors in down the company i worked for back in the day.
And i am sure anyone who also worked for Poptel will back me up.
Lets not forget about these smaller forums setup for just domain names, and how they modify posts and change around things to inflate and fake it all in the domain world.
Agree tinycomb above, read this for the rundown of the industry. It’s a huge scam:;
http://tinycomb.com/2009/08/14/the-big-business-of-domain-buyingmonetization-fraud-exposed/
I disagree. There is no domain industry. It’s the wild west of intellectual property. Calling it an industry is an insult to anything industrial. It’s like confusing Charlie Mensons’ cult with an organized religion. – It’s a bunch of sleazy services that are busy pumping baseless value into utterly useless domains. Long gone are the days where people pay a million bucks for one – especiallt if it’s something like iBuyUsedPhonez.us.
This is an industry of no value until it develops any connection with reality
In response to the comment about the days of high domain sales being long gone, let me just point you in the direction of candy.com which exchanged for around 3 million dollars in the last 6 months, and yp.com which exchanged for a similar figure.
There are plenty of asshole “domainers” who live to squat and are pretty ruthless about it, but there are also plenty of decent speculators who invest wisely in what they see as being popular in the future.
couldnt agree with you more! but then hey? I am one of the those who not only got the letter but lost the domain name later on when it came up for renewal through OVERSEE which a Korean entity has parked demanding 1,000 time what I payed snapnames to begin with!
Of course it’s a dirty business and if you’re in it you know it.
And if you’re in it – you shouldn’t really care.. i mean – what’s wrong with participating in shady business that is 100% legal?
i say add a 1400% tax to domain owners
Agreed. Making the price of a domain $100 or more would go a long way to cleaning up the internet.
Long live GeoCities
Just like charging one penny for an email would clean up spam and 44 cents (or whatever) for stamps would clean up junk mail (oh wait…)
and make it impossible for any poor college student with a great idea to make a website. Do you think Zukcerberg could’ve shelled out $100 for “TheFacebook.com” (the original name) while still in college?
come on – a exeter/harvard kid who couldn’t come up with 100 dollars? but i get your point. 10$ makes the volume play pretty easy.
the yearly fee is something that confuses the idea of domain “ownership” for me. or am i just renting? from whom?
This is exactly what happened to one of my domains. It was set to expire and immediately Snapnames took it. I didn’t even had a chance to buy it. It then went into auction. I did put in a bid and eventually got my hijacked domain.
“I didn’t even had a chance to buy it”? You mean like the typical 2 month for you reclaim your domain wasn’t enough? Not to mention all those renewal notices from your registrar way before the domain actually expire? You know domain name doesn’t get deleted the moment it expire… it actually takes a long time.
probably put in fake contact information, including a bad email address.
yeah well you aint livin in the real worlfd of snapnames pal? beat it.
So the 30+ days of renewal notices and 60 day grace period wasn’t enough? You’re obviously a disorganised retard if you can’t get your shit together in 3 months.
How did they “HiJack” you domain ?
You obviously did not pay the renewal fee so the registrar sent it off to auction.
Wise up you FOOL !
Yep that really annoys me when you go to a site and all it is is google ads. They should really delete those instantly.
google is a complicit here, with their adsense for domains program.
yep.
And lets not forget who is googles senior most representative in washington — the former head of ICANN.
Yep, and the fact that .com domains with “relevant keywords” seem to trump content.
It would be pretty funny if search engines weighted .net, .biz, .info domains with real content higher, just to balance out the .com factor.
Actually, Google, Bing, Yahoo do value content over TLD … we manage non .com TLD sites with quality content and it’s no problem to get them to rank at/above .com domains that have lesser content (or are simply parked at the usual parking services)….
The search engines do have domain parking services (and their templates) included in their ranking algos.
So you would rather type in a domain and go to a blank page ?
Actually No; people don’t pay exorbitant sums to acquire domains. It’s all 16 year old kids that ask for $5,000,000 for domains like iMichaelJacksonSongzTube.us and they tell all their friends that their net worth (a word they learned in late night infomercials) is $5,000,000 – as 16 year old would do.
They all heard about the one domain name that was sold in the year 2000 for a million dollars (was it business.com?) and decided to base an “industry” on it.
Now all these sites offer silly services like certified domain (whatever that means) and automated domain name valuation. And don’t forget newsletters and blogposts concerning the state of the “domain industry” that they made up.
There is no domain industry. It’s a scam for kids
So these sales did never happen?
http://www.dnjournal.com/ytd-sales-charts.htm
Oh silly me. All these time I thought whoever bought names listed on dnjournal.com/ytd-sales-charts.htm such as Toys.com for $5mil, or candy.com for $3 mil were companies that need a good name for their business. Didn’t know there are so many rich 16 year old kids out there. Thanks for your insight.
It’s easy for you to assume that all “Domainers” (as we call ourselves) squatters, and 16 year olds that don’t know what they’re doing.
That’s because there is a small number of people in our business that buy trademark names, squat on old website names, and apparently, bid up on auctions they are not authorized to bid on.
Because of these select few people, our entire industry is labeled as “dirty”. Sure, those few people are dirty. But the majority of domainers steer clear of trademark domain names, and simply focus on generic, brandable, and long-tail domain names.
The reason I responded to this post specifically is because I am a 16 year old domainer. I’ve been doing it for 3 years. I don’t deal with trademark domains. I don’t try to sell crappy domains for $5m dollars. For the most part, I don’t even try to sell my domains. I wait for a company to come along and purchase my domain name. Not because it’s their brand name, but because generic domains can be very valuable.
Want to keep blasting “domainers”? Do it at a domaining blog, where we can defend ourselves, not on an extremely biased post.
Want to blast me specifically? Do it at my blog! Just click me name. I’d be more than happy to hear from you.
You mean your blog, where you describe an idea you have where you can “trick” Google into sending page views your way? Where you admit the scheme might be illegal, and that it might “screw” people, in your own words?
I’m all for being entrepreneurial, and if you’re making money, more power to you. But I believe, sir, that you’re exactly the type of 16 year old the OP was referring to. There is no value added.
That’s the one.
If you read the post you’re referring to completely, you would see that I do not participate in what I was writing about, nor do I condone it. It was simply an idea, and it was later pointed out to me that people already do this, and have been doing this for ages. It’s known as “Cloaking” and its a black hat SEO method.
Again, in the post it is clearly stated that I don’t do it, nor do I suggest doing it. It was just something I thought of one day.
Even if I did use that method I wrote about, how would this possibly refer to me?
“It’s all 16 year old kids that ask for $5,000,000 for domains like iMichaelJacksonSongzTube.us and they tell all their friends that their net worth (a word they learned in late night infomercials) is $5,000,000 – as 16 year old would do.”
Regards,
Jake
Please do something, anything, that is more productive for society than your current occupation. The world is running out of cheap oil, we need more engineers, not non-value add profiteering.
You should look into zit popping, high school girl banging, Milwaukee’s Best consumption, and other activities 16 year olds should engage in instead of scamming people in an “industry” desperately in need of regulation.
@Yoav Perry, your post illustrates that you have at least a basic comprehension of the “internet”. Step 2, time to research the domain name aftermarket, and stop making yourself sound like a fool.
I can see why ignorant people like you are so quick to criticize the domain business.
Because you know absolutely nothing about it and have’nt bothered to do any research before you opened your big mouth.
Wise up or shut up, or just wake up and do some research !
They need to raise the price of domains. At $10/year it is too easy for squatters and so-called “domainers” to horde domains and park them at pages full of ads and spyware.
People in the domain name business should create value instead of just filling parking pages with google ads. Why not create a small app or service for having people coming more than once on a page? Parking pages just turn people off…
Great article though.
LP
Michael – You are a lawyer. Is Snapnames liable for the overcharging?
If they defrauded customers for $1, is the damage greater than $1?
I wonder if this can be a classaction lawsuit.
+1
So Mr Arrington you say
“domainers are scammers ”
“the so called industry is dirty”
And then you said that you used to run a company that was doing exactly that
So you are telling us that you used to run a company that was a fraud according to your standards
Since you don’t like domaining that much why did you ran pool in the first place ?
That’s typical Arrington.
on the other hand, “let him who is without sin cast the first stone”
lol. i left it after realizing how bad it was. It’s not like I said Hey! I’m going to be a drug dealer! Most of this stuff is hidden and very hard for non-insiders to figure out.
I view domains like real estate. Example: before Romania got inducted in the EU land was cheap. At the time I was lucky enough to have enough cash to buy some land and a few apartments. Once Romania was in the EU they instantly doubled or tripled in value. I view domains the same way. People buy something that has no value now, in hopes of increasing the value and selling it later on. What is wrong with that?
Of course people that try to use confuse people like going to pespi.com instead of pepsi.com are unethical and are actually breaking trademark law anyway. I see no reason to say the entire industry is dirty. Some people are dirty, and some people are just smart.
there’s many thing that’s wrong with that. when you squat on a piece of land, you cannot sell it to me. I can sue you and get you evicted.
the same should be happening with domains: you should not be able to sell it unless you own the relevant trademark.
you sure don’t know much about trademarks.
“when you squat on a piece of land”
Who’s squatting? I’m purchasing it from either a person, a company or the government. Same thing with the domains – I purchase them.
You are an idiot.
You’re clearly not very bright.
Michael, I know your time at Pool has colored your view of the domain world, but suggesting that buying domains, parking them, and selling them is dirty in itself is a characterization.
But besides my opinion, I’d like to point out that SnapNames is no longer the biggest player in this space. It’s NameJet, a company set up between Network Solutions and Demand Media. It sells off all of NetSol’s expiring domains. Since NetSol had a monopoly for so long, it has the best domains to sell.
you forget my time at GNR and RealNames. I’ve known the domain name biz since 1997. It’s dirty.
“after realizing how bad it was.” . . . curious what was going on different at pool that made you decide to leave the space. You were in the space since 1997 and just figured it all out at Pool ?
I think your dirty comments are warranted in this case and sure maybe on other issues but making such broad generalizations is irresponsible.
If you’ve been in the domain name biz since 1997 then there’s no excuse for you not to know the difference between a domain investor and a domain squatter.
You’ve been out of the industry for a long time Michael, and it shows in this article.
not long enough.
Nothing has changed! On the contrary, things got much worse these days! Major domain registrars such as Register.com and NetSol.com put names on auction skipping Redemption Period of the domains they like as they realize GoDaddy is stealing their pie and they have one last change to make money before they go out of business charging 5x GoDaddy and providing much worse service.
Good job, Mike! I would love if you shake this dirty business up (like you did with OfferPal)! You’ll be my hero forever, I promise!
I can’t believe this is happening in 21st century in America! I feel like it’s still the 18th century!
One example: if you don’t pay your phone bill, will your phone company steal the number from you and put it on auction so that your competitors can get get it and start receiving all your customers’ calls? Or will it give it to crooks, who’ll start blackmailing you so that you can buy it back from them?
THIS HAS TO STOP!
Buying and selling domains isn’t squatting. I wish TC would get avoid making such generalizations. It’s like saying all tech mags are regurgitated rss farms, which I would never say. Oh wait I just said it.
What does that make AllTop??
What is inexcusable Michael is that you ran such a dodgy business for years.
Pool.com has a really bad reputation for using customers information and activities for their own benefit. I didn’t know about your dark past.
well, i ran it for about 6 months. and we certainly never did anything at all, dodgy or not, with any customer information. frankly we were making way too much money selling domain names to even bother with anything else.
I think what network solutions did took some of my domain names that I was researching. I was new to the industry and wanted to find a good name, and I plugged a few in that I thought were good. Next thing i know they are taken, it really sucks. Takes away value from legitamate startups
I logged into my Snapnames account and the bidding history before 2007 are not there anymore.
I cannot even check which of my hundreds of auctions are affected.
They are covering it up. Michael, we need you to help us victims. Call them out on this coverup, and ask them to explain. We need you.
They’re not purely covering it up, we (SnapNames customers & partners) all got their email announcing the fiasco about the shill bidding which Mike used to announce the story.
As for restitution, we’ll have to all consult our legal counsel – or simply do as SN hopes: swallow our losses and pride.
Did anyone have a shill bid involving the name ‘poorman’?
I got done out of $20,000 on a Snapnames auction no thanks to poorman and my research shows a similar style of loss at the following auction:
http://www.namepros.com/domain-name-discussion/182874-bayblogs-com-live-auction-at-snapnames.html
The name HALVAREZ that is in your auction has been identified as the shill. I have encountered that user many times in auctions.
What they were mostly doing was identifying programatically (now known to be inside information) which domains had a “bid” on them, and then auto-bidding the minimum to participate in the runoff auction, which they would keep bidding up if the domain was worthy. What this mostly did was force domain auctions to go for the runoff minimum, not just your placeholder bid.
Poorman is a real bidder, you got lucky !
Check this out:
http://www.elliotsblog.com/deceitful-activity-uncovered-on-auctions-6352
I hate the domain snatchers and anyone that empowers them;)
If one of snapnames employee con us of our hard earn money, what about they OTHER company that offers this service (& i dojt mean Pool) are they going to look closely at the conduct of there employees? ………..sh*#*# T this makes me mad!
Makes a change from all the crooks in Banking and Government that are ripping everybody off on a daily basis, Domain Industry Dirty ?
Compared to what ??
Just take a look at the latest Denic scandal regarding the registration of one/two character .de domains.
It’s so obvious that domain registration became a fairly democratic and fair process because of the large amounts of money to be made.
Why do any of you give a sh*t about this? Someone buys a domain and puts ads on it – so what? And makes money. So what? Yes, the shill is wrong. So what? Because someone makes money domains should cost more than 10 bucks a year? What is wrong with you? Morons.
Jimmy is the most sensible guy here.
Exactly. 99.9% of you here are CLUELESS about generic and premium domain names. CLUELESS. It’s always easy to trash-talk something when you’re CLUELESS. My best guess is the ridiculous comments and attitudes here about the industry are essentially driven by the “lack of comprehension” and knowledge about the value and power of domain names. Not ALL “domain owners” are bad. EVERY industry has it’s rotten apples, obviously, that’s “reality”. And,…you’re point? Generic domain names are the KEY and CORE ingredient to online business. The business is complicated, to say the least. The research, time, dedication, etc., to “learn” the industry is INVALUABLE information and very, very, very few people actually understand it. There is no “eBook” or “Google-Search” to explain the metrics of value and strategy on a grand-scale. It takes YEARS of networking, research, and trial-and-error to truly appreciate the opportunities (plural) that exist, even today in 2009. To every “honest and open-minded” person reading my post, please, I HIGHLY, (very highly) suggest you IGNORE the non-sense and uneducated bullshit that you’ve read thus far. The “industry” is real. People are making 5, 6, 7, and 8 figure incomes from “domaining”, legally. It’s a very niche hobby/profession, but sincerely is “real”. WAKE UP PEOPLE. Seriously, I am embarrassed for many of you. MANY of you.
* Before the ignorance comes out, in the replies to my post, I am full-time, (legal), domain investor, consultant, broker, and just wasted 20 minutes of time here tonight.
Tips: Dnjournal.com, RicksBlog.com, SevenMile.com, TheDomains.com, DomainNews.com, DomainNameNews.com…etc.
WAKE UP!!!!!!!!!!!!!!!!!!!!!!!!!!!
NY
Nice post but you can’t wake up the dead
There are more people “shilling” products on eBay.
The question is: How do you discover if shill bidding is occurring? How do you know if an employee is involved?
I have just purchased a domain via auction, and the whole time I was wondering if I was being scammed.
There’s a huge difference between a Cybersquatter and a domain investor, most of you probably don’t even know that all these domain auction houses are partnered up with all the biggest registrars like Networksolutions.com, Register.com, Enom.com, GoDaddy.com etc etc who then get paid a percentage of what the domain sells for.
The registrars pass the domains to the auction houses to auction off to the highest bidder. Alot of domain investors spend a serious amount of hours 80 + a week and thousands of dollars buying these domains and then Google makes even more money by showing their ads on the parking pages, there’s nothing illegal about it if it is done right. Its called BUSINESS.
If anyone deserves a crappy dumb title then its ICANN who supposedly are a non profit organisation incharge of “the system”. They have chose to stand by for 10 years+ and let registrars do this or even let registrars just keep the names for themselves (warehousing), and I can assure you that many registrars syphon off the most valuable domains to their own accounts and then either collect PPC money or resell the domain.
Calling domain investors “snatchers, cybersquatters, Scammers, sleazy” etc just shows how ignorant you lot really are.
Sure this guy was a very bad dumb apple but on the whole the domain industry is probably cleaner than both the Banking or Governments ever will be – chew on that for a minute !! ITS 100 % TRUE
+1
concur. +2
+3
It doesn’t help clean things up when former industry leaders (eg the manager of Pool) uses the word “squatter” in such a caviler way.
It was a cheap shot that makes you sound like an old women. Like calling someone who smokes a joint a drug addict.
Exactly.
Michael — you’ve lost my respect. This post was completely ignorant. If you were so involved in the domain industry then you should understand how the industry really works and the value of generic domain names.
lol
mike, loved the “scamville” stuff, but this seems like a stretch. a few things worth noting.
first, the expiry business HAS changed a ton since the wild west days that you participated in at pool. the expiry business IS still tough for amateurs and is still a pro’s game BUT I think snapnames has manned up here as soon as they found out.
second, the aftermarket (of which expiry is just a small part) has become more and more efficient and IS now quite safe for real businesses to acquire real, quality domain names that assist every marketing dollar they spend rather than the “buy-a-vowel” choices that too many startups make and pay for later on.
next, using an example of one registrar engaging in a crappy tactic that was both universally reviled and, iirc, was investigated by both ICANN and the FTC, makes registrars “dirty” in the same way that one slimy “pay-per-post” blogger makes blogging dirty. not.
lastly, and most importantly, the domain name industry is mostly about registrars and registries distributing nearly 200 million domain names a year to small businesses and ordinary Internet users. the stuff around the edges is such a tiny % and is almost without exception the tough world of the pros making it harder on each other.
the primary market has always been quite clean and the secondary market is now orders of magnitude better than you would remember it oh so long ago. expiry is a tough business best left to the pros.
elliot, I’ve always respected your views, but i just don’t think an insider can really see the industry for what is is, and always will be.
I look forward to telling you more next time I see you.
with your background, your readership could use your help in giving them more clue wrt domains. most startups REALLY suffer with poor choices.
+1
Make a Guest post out of this P-L-E-A-S-E.
Michael Arrington, will you arrange this?
+1
yep, I would love to read the guest post on this. I love most of the guest posts on TCs as there is more depth on the topic, rather than hanging onto one loose incident.
+ 1
Yes please.
wow 5% of the auctions.. for years… hate to say that that sounds to me like SYSTEMATIC. No way one employee can go and manually place bids.. just not possible.. That sounds to me more like they had systems in place that did the bidding…. so the class action should really be looked at.