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Foxes in the Henhouse: Why Michael Castello is Concerned About the Domain Industry's Future

By Michael Castello with Ron Jackson

Editor's Introduction: Castello Cities Internet Network (CCIN) CEO, President and Co-Founder Michael Castello, has been actively involved in computer technology since 1986 and the Internet ever since the World Wide Web became publicly available in 1991. Since then he has become one of the most successful domain investor/developers in industry history. In 2006 we published what remains one of our most popular Cover Stories ever, a profile of Michael and his brother, fellow CCIN Co-Founder, David Castello (CCIN has developed many successful websites including PalmSprings.com, Nashville.com and Daycare.com to name just a few). In another Cover Story in 2014,  Michael gave us an exclusive inside look at how one of his biggest sales - Whisky.com at $3.1 million - was put together. 

This year, in January 2020, while putting our annual State of the Industry Cover Story together, I asked Michael for his thoughts on the prospects for the domain industry in the new year ahead. He has always been a visionary, so I was not surprised when he came back with a much bigger picture view of the environment we are currently operating in and the increasingly strong headwinds that will have to be overcome if the success the industry has had in the past is to be maintained. It was immediately obvious to us that the entirety of what he wrote should be shared, so we decided to publish an excerpt from it in the State of the Industry report (where space was more limited since it included commentary for nearly two dozen industry experts) then follow that up with this separate article devoted entirely to what Michael had on his mind. We are happy to share it with now, entirely in Michael's own words:

Michael Castello, CEO & President
Castello Cities Internet Network

While I feel I am a positive, optimistic person, I don’t really have a lot of positive things to say about the situation this industry is in -- much less any other striving industry that is struggling against repressive institutions and corporations that are now almost trillion dollar mega-titans of capitalism.

I’m not blaming those of us that make up the majority of this industry. It’s not our fault. I am laying the blame on those that believe their sacrosanct position of authority is above reproach. Simply put, most are gaming the system -- those who leverage their positions to form an alliance or cabal outside of their consecrated roles to ensure their survival at the expense of others and our industry.

How did these entities get to the point where there were no repercussions? I see those that are in positions of power leave their posts to gain lucrative positions with companies that they were trusted to protect us from. That is gaming the system. Profit in pursuit of happiness is a cornerstone of this country, but to sell or sacrifice an entrusted position for personal profit leaves us morally bankrupt and weakens the bonds that hold us together. Distrust ensues and attacks abound.

The sale of the .org registry last year, one of the legacy extensions, to a private equity firm is a good example. Many non-profit organizations built their charities over many years to engender trust within the .org sphere. How can ICANN, a “non-profit organization”, allow the .org universe to fall under private control with no true security for its protection into the future? What made the legacy extensions were the people. Now, these people have no rights to their virtual futures. This is akin to allowing the House of Representatives to fall under the control of a company like Amazon. What is next -- .net to Apple, .com to Google? Once that happens, our hope of individual freedoms in the virtual world will be all but gone.

The core of ICANN’s legitimacy and purpose lies in the legacy extensions of .com, .net, .org, .edu, .mil, .gov, and the country code domains (ccTLDs) that helped people create the original web. That should be its bedrock, its foundation. The growth of ICANN came by the commercialization of its new extensions which helped it expand, make money and become a top-down commercial entity. But that conflicts with its original mandate to protect its most basic users as a non-profit, bottom-up, consensus-driven multi-stakeholder governed organization. Now, it is neither governed nor non-profit, which begs the question-- does 

the Internet again require the America government as oversight until a new universal Bill of Rights is created by the international community which encompassing the realities of virtual tangible and intangibles?  The powerful have become too powerful, the multitudes are suffering.

It is now 2020, and its hell out there right now in cyberspace. I’ve been active in computing and on the internet since 1986. The Internet, which was once considered a “fad” by most companies in the 90’s, is now dominated by those same corporations who realized we possessed the same advantage of global distribution that allowed them previously to dominate for decades. What is common in many of these monopolies is their ability, with no oversight, to dominate an industry and the public. Companies, by design, are allowed eased taxation with shareholder expectations to grow and reap incredible profits year after year. The stock market it a testament to how well they are doing.

The Internet gave everyone the ability to distribute globally -- but in doing so, everyone became a threat to these brand companies. In the past, building a store like Sears anywhere would have been hampered by logistics. It would be cost-effective to put a large store in a large metropolitan area, but a location in a small town of a thousand people would not be feasible. From that restriction, small mom-and-pop shops etched out a niche for themselves by providing goods and services in those towns and villages. It’s what made a culture of Americana that was loved and revered as unique to every corner of our country. So how did they go about gaining that control again? They created their own platforms -- which they gave to us for free, but at a cost. In my opinion, that cost has been huge.

How are “you” doing with your small business, start-up, or new idea? It is fun starting something that you have great expectations for. I’ve been doing the same thing for a couple decades, but I realize that it is now almost impossible to run a new website and make a “living” from it year after year. The huge companies that are in control are now crushing our potential to succeed, much less survive. If they see a money stream in your vertical, they will claim it for themselves and leave you very little.

Image from Bigstock

During the Industrial Revolution more than two centuries ago, most Americans saw that Oil, Railroad, Steel, and Banking developed by Rockefeller, Vanderbilt, Carnegie, and Chase Morgan would create a more advanced country -- and it did. But at a certain point, they accumulated so much wealth and power that they became a detriment to the country and a government prone to corruption. That kind of wealth has its own gravity, which can undermine the integrity of our Constitution and the Bill of Rights, and the majority of people will suffer under it. History has once again repeated itself. But in that lies the solution and a government, which has the best interests of its people in mind, must act.

I’ll name them now: Apple, Google, AT&T, Amazon, and Facebook. In my opinion, what we have in 2020 is a “hostile takeover” of the Internet by corporate entities. They also manipulate the government, who is supposed to protect us and the small businesses that make up the middle-class. The middle-class is where the government gets most of its revenue. While the government views the immediate returns and growth in the stock market as positive, the rest of the country is economically suffering. These five tech companies are worth close to $4 trillion combined. What does that do to the economy, much less the middle-class? That $4 trillion would equate to an extra 800 new businesses in every state, and each would be worth $100 million. That is where the money is going and there is not a single knowledgeable effort in Congress to stop it. Our government sees the economic vitality of America in its corporate Stock Market, no longer in the middle-class. Not all Americans are in the stock market or have a 401k to benefit from it. If we think, “that’s their problem, not mine”, then the experiment called America will eventually come apart from its Union. It will be the same outcome in our industry if we do not work toward its survival.

Image from Bigstock

In no way do I want to diminish what many of you are trying to achieve in your success for the future. What I can do is give you a factual view of what is transpiring in small businesses and homes today.

I will do fine. I own a portfolio that was created back in the 90s for pennies, with the kind of single word .com domain names that I can easily sell. I make money from several businesses I’ve built on top of some of these great addresses, like Nashville.com and Daycare.com. Our selling Rate.com was a boon not only for the buyer’s rebranding from 

GuaranteedRate.com, but also the furthering of our industry to show how important a great domain name is to a company that needs it.

But all websites must acquiesce to what Google requires in order to be relevantly indexed on their search platform. Their yearly algorithmic changes can put many small businesses out of business. If you are not mobile-ready, don’t use Google Analytics, or don’t have HTTP/SSL, too bad. Everyone must abide by their rules or be punished on their rankings. That is not freedom -- it is submission.

I believe that most see, as I do, the great potential of the web. Our ability to grow as an industry will not get any better if these companies continue to control the flow of internet traffic. A great domain name with the distributional power of the internet should be a no-brainer for success. What these monopolies have done over the last 10 years is mask the internet, and thus make us a third-party to it. Domain names counter that logic and allow the freedom to connect peer-to-peer with direct navigation.

There is a lot to be done to the current status of these trillion-dollar companies before we have a chance to create our own virtual universe to prosper within. In the meantime, we must wait this period out and focus our efforts on the health and love of the domain industry, with hope that our leadership will push an effort to establish an Internet Bill of Rights that all countries can unite around. This will benefit all people with a balanced, equitable stake in the internet in which we thrive.


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