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Dotster: We Halted Domain “Tasting” in November

Dotster, the domain-name registrar, said in recent court documents that it stopped the controversial practice of domain “tasting” in November, six months after a federal lawsuit by Neiman Marcus accused the company of massive cyber-squatting. The case has been settled, and details may emerge soon.

Court documents reveal details of how Dotster began tasting, stopped it, and then resumed it. To “taste” a name is to register it for a maximum of five days and evaluate how much traffic it gets and how much revenue it generates from paid-search ads. If the name generates more revenue than the annual cost to register it, the taster keeps it. Tasting exploits a rule that allows registrars to return to VeriSign within a five-day grace period any .com or .net name that was registered for a customer by mistake, and recoup the $6 wholesale price paid to the registry.

Dotster CEO Clint Page said in a court filing that the company has built a “significant” portfolio of domain names of its own. ICANN-accredited registrars are not barred from speculating in large numbers of domains under ICANN rules, though some in the domain market consider the activity a conflict of interest because their principal reason for existence is to serve customers wanting to register names.

Page said Dotster began tasting names for itself on a limited basis in December 2004, then stopped in early 2005 after the “applicable registry” — apparently VeriSign — disallowed registrars to do tasting. Dotster resumed tasting in June 2005, he said, “when the registry again permitted this practice.” Page said Dotster used automated systems to taste names that had not previously been registered, but that “had been typed into Web browsers on multiple occasions.” This indicates it had access to its own data, or obtained other data, on the surfing activities of Internet users. To earn revenue off its domains, Dotster served up pay-per-click ads sold by Google, which works closely with the domain industry.

“Dotster adopted a screening system in an attempt to ensure that the domains identified by its automatic process did not include third-party trademarks or clear misspellings of any such trademarks,” he said. It not only used computer programs to “scrub” names, but also had employees review names that it wanted to retain before the five-day tasting period expired. However, Dotster failed in its screening efforts. “Because of the volume of names and the time in which the employees had to complete their review, the process was not as effective as it should have been,” Page said.

Neiman Marcus accused the company of registering hundreds of domains infringing on its trademarks, as well as other large companies’ marks. The names included nemimarcus.com, neimanmarisu.com, neumanmarcos.com, and newmenmarcus.com.

Page said Neiman Marcus has “tried to create the impression that (Dotster’s) names all consist of typo-variants of trademarks,” but “this is not the case.” For instance, he said, Dotster owns generic addresses such as headlice.com, babyfun.com, laboratoryexperts.com, lowestpriceclothing.com and nailpolishfacts.com. (Update: A reader points out that Dotster no longer owns headlice.com, according to the Whois. Also, it appears the ownership of lowestpriceclothing.com may have changed hands.)

Dotster continued tasting even after the lawsuit, but put a stop to it in November and has no plans to resume the practice, Page said.

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$4 Million in Domains Sold in Sin City

A live auction of Internet addresses at the Traffic West industry trade show in Las Vegas yielded more than $4 million in sales. Families.com fetched $650,000 (please see comments below, however), the biggest deal of the event, which was run by Moniker.com. Following is a list of the 10 largest sales, but you can see an entire list compiled by Richard Lau, who was there.

1. Families.com, $650,000

2. Greeting.com, $350,000

3. Blogster.com, $275,000

4. ET.com, $225,000

5. Settlement.com, $200,000

6. OL.com, $150,000

7. PX.com, $120,000

8. HomeForeclosures.com, $90,000

9. RealEstate.mobi, $85,000

10. Mozambique.com, $82,500

Nye Lands Big Investment, Talks With Domain-Name Legend

Frank Schilling, one of the world’s most successful domain investors, has a must-read Q&A with Tim Nye, founder of Geosign, on his blog. Geosign is a new media company that just announced it has raised $160 million in private equity from American Capital. Guelph, Ontario-based Geosign has been selectively buying generic domains from smaller investors to enhance its list of content sites, which include DietNation.com and ThinkFashion.com.

In the Q&A, Nye opines on the frequent disconnect between domain investors and private-equity investors:

The challenge for the typical domainer is that the investors want to invest in companies and not portfolios. A large PE firm is not going to give 100M to a guy who works in his basement in his underwear no matter how clean their portfolio is. I also don’t think they really get the underlying brand value. It’s definitely getting better, but it’s still not a mature investing community. Multiples are understood, but the typos and adult, and trademark issues are scaring people a little.

Domain Registrations Hit 120 Million

The number of domain names registered world-wide reached 120 million in the fourth quarter, up 32 percent from a year earlier, according to the latest report on the domain industry by VeriSign, which manages the database of .com and .net addresses.

The boost in registrations is indicative of the healthy Web economy and the recent boom in online advertising and domain resales. Many domain investors continue to point their addresses to so-called parked pages showing lists of pay-per-click ads related to the address. VeriSign says 23 percent of all domains in the .com and .net extensions are parked. It defines a parked page as a one-page site that’s either “under construction” or lists PPC ads.

Country-code domains, such as .cn for China, experienced strong growth, reflecting increased commercial use of the Web world-wide, as well as speculative investments in those domain extensions.

Addresses in the .com and .net extensions account for more than half of all domains.

VeriSign gets much of its data from Zooknic, run by University of Kentucky geographer Matthew Zook. For the full, six-page industry brief from VeriSign, click here.

Tandberg.com Cracks Top 15 of All-Time Domain Sales

I finally got around to checking DNJournal.com’s list of the top domain sales of 2007, now already two months old. Tandberg.com is the biggest publicly reported sale of the year, fetching $1.5 million in a private deal. The buyer and seller apparently are both Norwegian companies. According to my running list of the biggest reported domain sales in history, Tandberg.com ties Cameras.com, which sold at the live auction at the Traffic East domain conference last October, for 11th all time. Keep in mind that most domain sales are not publicly disclosed for reasons of privacy or competition. The sources for my list are DNJournal.com, which closely tracks the domain market, and published reports in newspapers and books. Here it is:

Name, Price
diamond.com, $7,500,000
business.com, $7,500,000
korea.com, $5,000,000
altavista.com, $3,350,000
vodka.com, $3,000,000
loans.com, $3,000,000
wine.com, $3,000,000
creditcards.com, $2,750,000
autos.com, $2,200,000
express.com, $2,000,000
cameras.com, $1,500,000
tandberg.com, $1,500,000
men.com, $1,300,000
bingo.com, $1,100,000
wallstreet.com, $1,030,000
fish.com, $1,020,000
if.com, $1,000,000
beauty.cc, $1,000,000
linux.com, $1,000,000
websites.com, $975,000

Who Owns eBayInc.com?

A tipster points out to me that it’s not eBay Inc., the San Jose-based online auction company, one of the most brilliant businesses ever created on the information superhighway. Instead, it’s Houston-based Internet REIT. The giant domain speculator, backed by private-equity investors such as Maveron LLC, which was co-founded by Starbucks Chairman Howard Schultz, has owned the domain name for at least 10 months, according to DomainTools.com. It’s among thousands of domains Internet REIT has acquired that are variations of famous trademarks. A visit to eBayInc.com shows that the domain is parked with advertising broker Oversee.net. Among the marketers whose ads appear on the site is none other than eBay itself.

iREIT Loads Up on “Typos” of Disney, Misspells Dyslexia

Internet REIT, the domain-name giant backed by large private-equity players, has stopped displaying ads on more than 200 domains that are “typos” of major brands following two news reports over the weekend on this blog. But it is still running pay-per-click ads on many other sites that are typographical variations of large American companies. Among them: The Walt Disney Co. A list of more than 60 iREIT-owned Disney-related domains is posted below.

The Houston-based company owns and runs ads on scores of typos of generic words, too, in addition to those that raise potential legal risks. One of its generic typos happens to be dislexsia.com, a misspelling of dyslexia, the learning disorder. Ironically, one of iREIT’s founders, Marc Ostrofsky, a domain-industry legend who sits on the company’s board, has battled dyslexia, according to this 1999 article in the Houston Business Journal (see clarification below).

iREIT’s financial backers include Maveron, co-founded by Starbucks Chairman Howard Schultz and former investment banker Dan Levitan. In an article last year in the Puget Sound Business Journal, Levitan, a member of iREIT’s board, expressed his enthusiasm for the domain market, saying: “Step one in the development of this industry was the realization of the value of the traffic and the aggregation of names and portfolios.” The second step: Creating “a relevance, so instead of just landing on these pages, there’s some compelling reason to stay and perhaps come back.” I’m seeking an interview with Levitan and Schultz to see if they’ll discuss iREIT’s ownership of thousands of typos of major brands, including Starbucks.

iREIT CEO Bob Martin and President and Chief Operating Officer Craig Snyder told me in a joint interview over the weekend that the company still has a lot of work to do to figure out how to effectively identify and remove “legally sensitive” domains. The company has owned many of its typos for months. Said Martin: “We are confident that in a short time we’ll have a good handle on these issues. I’ll never say we’re going to be 100 percent perfect.” In a January email interview, Martin said: “We take a very strict policy against holding vice or potentially legally sensitive assets in our portfolio.”

Here are some of the Disney-related domains it has purchased:

DISNEYKIDSCHANNEL.COM
DISNEYLAND-ORLANDO.COM
DISNEYLANDC.COM
DISNEYLANDDAYSINN.COM
DISNEYLANDJOB.COM
DISNEYLANDTHEAMPARK.COM
DISNEYLANDTOKYO.COM
DISNEYLANG.COM
DISNEYLANT.COM
DISNEYLATIDO.COM
DISNEYLATINNNO.COM
DISNEYLATINOJUEGOS.COM
DISNEYLATINOO.COM
DISNEYLINE.COM
DISNEYMANIA4.COM
DISNEYMANIA6.COM
DISNEYMANIAFOUR.COM
DISNEYMOBLEPHONE.COM
DISNEYMOVIECAR.COM
DISNEYMULAN.COM
DISNEYON.COM
DISNEYONBRAODWAY.COM
DISNEYORLANDORESORTS.COM
DISNEYP.COM
DISNEYPARTIES.COM
DISNEYPIXARMOVIES.COM
DISNEYPLAYTIME.COM
DISNEYPLYHOUSE.COM
DISNEYPRESCHOOLGAMES.COM
DISNEYPRINCESES.COM
DISNEYPRINCESSGAMES.COM
DISNEYPRINCESSS.COM
DISNEYPRINESS.COM
DISNEYPRINSESSEN.COM
DISNEYSPRINCESS.COM
DISNEYSTINKERBELL.COM
DISNEYSTOOR.COM
DISNEYSTRORE.COM
DISNEYSUMMERGAMES.COM
DISNEYTHANNEL.COM
DISNEYTHEMEPARK.COM
DISNEYTORE.COM
DISNEYVIDEOGAME.COM
DISNEYW.COM
DISNEYWORLDGAMES.COM
DISNEYWORLDINFLORIDA.COM
DISNIECHANNL.COM
DISNIECHANNLE.COM
DISNIEYCHANALE.COM
DISNIYGAMES.COM
DISNNECHANNEL.COM
DISNNEYCHANELGAMES.COM
DISNNEYSTORE.COM
DISNNYCANEL.COM
DISNRYCHANNL.COM
DISNSEYGAMES.COM
DISNYAND.COM
DISNYCANLEL.COM
DISNYCHAENL.COM
DISNYCHANEEL.COM
DISNYCHANLEL.COM
DISNYCHANNELGO.COM
DISNYCHEANEL.COM
DISNYCHEANL.COM
DISNYEME.COM
DISNYPRINCESS.COM

Clarification: This entry originally said Marc Ostrofsky has battled dyslexia. Ostrofsky had dyslexia only while a young boy.