Domain names are too cheap

I am not sure I’ve ever used the term “cyber” for anything, ever, but that’s the name given to those who squat on domain names. Here’s my story.

I am working on a startup and we are working to choose a name. We are lucky enough to have a friend who does naming professionally — that’s right — and she gave us a brainstormed list of 80+ possibilities. We picked our favorites and began polling our friends on their impressions.

The polling gave us a clear favorite. The domain name is owned but is a “parked” page — essentially a page of generic ads that presumably receives some trickle of traffic. We were encouraged — it’s not a real company with any investment in the brand, so certainly they would be willing to entertain an offer.

We sent an email to the owner — let’s call him “Barley Prestion” — and awaited a response. No luck. So we Googled around and found another couple of email addresses and tried those.

Phone numbers — we left a couple of messages. Then we resorted to sending a letter via snail mail, truly a last resort for someone like me. Several weeks later, nothing.

Who wouldn’t at least respond to say “what’s your offer?”, right? I was still clinging to the hope that the contact information was out of date, or the person was out of the country, or some such Occam’s explanation.

Finally, and desperately, we went to the address in Manhattan listed for this good fellow. We asked the doorman if Barley lived there, and he buzzed him on the intercom for us. Barley answered. After our polite introduction, he made it clear that he wasn’t interested in talking and goodbye.

So what gives? Turns out the guy owns around 400 domain names, according to our research. Perhaps he makes 10 cents a day on parked ads, each. So that’s a bit of money for nothing from his perspective, fine and good.

But even so, cash in hand for a single one of those domains would be better than a trickle of a few pennies a day.

Short story long, we found that our second and third and fourth choices gave the same response. None of them considered an offer from us; they simply didn’t want to talk.

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Here’s the problem: domain names are too cheap. The registrars do not sell them at market rates. Rather, they charge the same rate for any domain. (It’s like giving away carbon credits, oops.)

A flat price of $10 a year simply begs for speculation and hoarding of Barley’s sort.

Domain names (as sold by ICANN-accredited registrars) should be auctioned from the start. When a buyer notifies the registrar of an interest in a domain name, the registrar should automatically begin an auction for that domain name. Open the bidding for (say) 14 days and let anyone make a certified offer.

The initial value of domain names would then be based on buyers’ beliefs of their future value, instead of a uniform and dumb flat rate.

Thus the owners of the domains would be those who place the highest value on them. And instead of Barley owning 400 names which mean nothing to him, perhaps he would only own a handful.

Sure, there would still be squatters and speculators. But now they would be competing against each other, and “legitimate” buyers — those who would like to actually use a name — would have a fighting chance.

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I’ve thought about the mechanics of this a bit more: it should be ICANN that auctions the domain.

The bidders would be the registrars. In turn, the registrars open their own auctions to customers. The registrar would be forced to find the highest price it can offer to ICANN, while making money from their bidders. Competition would intensify among registrars, tightening margins.

Exceptions would be made for trademark holders, as already happens.

So what about the millions of names that have already been purchased at artificially low rates? Of course those purchases were legal, and must be respected.

I would say then that future renewals must be subjected to the auction process. Again, if a name falls under a trademark, it is protected, so established businesses can’t be victims of mischief. (You can’t go selling a product named Coca-Cola, and rightfully so.)

Thus, only non-trademarked names — the ones that are not related to legitimate brands — would come back into play.