By Howard Hoffman
PPCIncome.com

Archived Feb. 4, 2005

(Editor�s Note: Our current Cover Story features Gordon Martin of DropWizard.com who is a strong opponent of Verisign�s proposed Wait List Service (WLS). To offer a balanced view of this issue, we have invited a noted proponent of WLS, Howard Hoffman of PPCIncome.com, to present a case in favor of the new system.)

I would like to start by presenting some of the premises my reasoning is based on.  See if these are consistent with your thinking, whether or not you currently support WLS. 

Howard Hoffman
PPCIncome.com

1.  Unregistered domains (at least those of the generic top level domains, such as .com and .net) are a public resource available for registration by anyone who wants to pay the fee. 

2.  The right to register names is not unlimited, as trademark rights should not be infringed.

3.  The process of registering domain names should be straightforward, transparent, and available to everyone with access to the Internet on an equal basis.

I will assume that readers have already familiarized themselves with the basic principles of the proposed WLS, so I won�t rehash those here. Instead let�s review the current system for acquiring expiring domain names to see why a change is needed.

At the time of this writing, valuable domain names that transition from registered to unregistered ("expiring domains") status are registered within fractions of a second, primarily by the registrars for various expiring names services, including Snapnames, NameWinner, Pool, eNom Drop Club, DropWizard, GoDaddy, and others.

In addition to these public services, there are registrars active in acquiring expiring domains for private individual accounts, especially for two major powers in the domain names business, Buy Domains (BD) and Ultimate Search (Ult).  Buy Domains principally purchases domain names for resale.  Ultimate Search principally purchases domain names for the traffic they produce.

At one time many individuals were competing for expiring domains during the daily drop time. However it now has come down to having close proximity to the registry and significant "bandwidth". This pretty well limits the game for truly valuable expiring domains to the registrars who have special registry connections.

SnapNames and GoDaddy are fixed price services, where a seeker of an expiring domain pays a fee for the privilege of being the unique party to acquire a specific domain if the service (through one of its registrars) successfully acquires the domain. The WLS is modeled after the Snapnames service, and in fact Snapnames will provide the technology used to implement WLS.  The principal difference between the current Snapback product and WLS subscriptions is that a Snapback only provides the holder with a chance at obtaining a name if it actually expires.  On the other hand, a WLS subscription will offer the holder a 100% guarantee of securing a specific domain, IF it is deleted.

All of the other mentioned services are auction-based services.  Namewinner, for example, conducts an auction in which the high bidder gets the sought after domain IF Namewinner is successful in acquiring the domain. If the winning bid is say, $3,000 then that is the amount the successful bidder must pay.  Pool.com has a slightly different auction model.  At Pool, customers pay $60 if Pool is successful in securing the domain they want AND the seeker is the only party at Pool who ordered the domain prior to the drop.  However, for names acquired by Pool that had multiple interested parties placing orders, Pool conducts a 72-hour auction involving only those who were willing to pay at least $60 before the drop.

What has shifted significantly lately (long after WLS was first proposed by Verisign and accepted in principle by ICANN), is that more and more of the better names are being won by the auction based services.  Where a typical domain seeker might have paid less than $70 in the past for a chance at snaring a good name, today the cost has skyrocketed many times beyond that. Take mirror.net for example. This domain was acquired by Pool.com and went to the high bidder for $1,550.  The bidding system at Pool involves proxy bidding so the successful bidder had actually bid a maximum bid of $5,001. If another party had really wanted this domain, they would have had to pay at least $5,002!

We know that the wholesale cost for all .com and .net domains is only $6, so who got the added $1,544 in profit on the registration of mirror.net?  It was split between Pool and the affiliated registrar that caught the domain on their behalf.  So, in a situation where just one year earlier a good (but not great) domain like mirror.net might have been secured for $70 through SnapNames, this name went for $1,550 in the summer of 2003.

This leads to my #1 argument in favor of WLS:  Without WLS, most of the value of the better expiring domain names will end up as profit to the Expiring Domain services and their affiliated registrars. This trend is already happening and most people in the expiring domain business are well aware of that fact.

This is in direct conflict with Domain Basic Principle #1 stated at the beginning of this article. 

Since there are numerous services like Pool and Namewinner, the average person would have no way of knowing an optimal overall strategy for acquiring a specific expiring domain. The existing system also is in conflict with Domain Basic Principle #3.  The current system is not straightforward, nor is it transparent (who knows what really goes on at Namewinner or Pool?), nor is it equally available to everyone. One has to do a lot of research to even learn of the existence of these different services. There is no central place for an interested party to quickly learn what they need to do to have a chance a securing a domain that may expire.

However, the fact that the current system violates the Domain Basic Principles does not mean that WLS automatically would be consistent with the Principles.  So, let's take a look at WLS in that light.

WLS would be equally available to everyone.  It is true that in the rollout of WLS there is the possibility that someone with a lot of funds could purchase WLS subscriptions on most of the valuable domains.  However, of the millions of .com and .net domains registered, there are approximately 1 million that are sufficiently valuable that someone would be likely to purchase a WLS subscription on them. Is there really a single party out there willing to suddenly spend $40 million in one moment of time on the rollout of WLS?

Just as not all domains are registered at one instant of time when a new Top Level Domain (TLD) is offered, it is likely that intelligent parties will try to place WLS subscriptions primarily on domains with a reasonable chance of actually expiring during the term of the subscription.

Clearly, domains like sex.com and cars.com (highly valuable generic commercial .coms) will have a WLS placed on them without regard to the expiration date.  Someone will want the WLS even if the name is 5 years from expiration, and highly unlikely to ever expire.  Those names are unlikely to drop ever, so they really do not matter.

However, names like mirror.net or even mirror.com might drop in the future.  It is likely that someone who has a strong desire to own mirror.net would be willing to pay for a WLS subscription even if the name is 2 or 3 years from expiration.  However, it is unlikely that a domain name speculator with any success in the business would spend their WLS funds on a good, but not great, domain that is 2 or 3 years from expiration.

This is one of the best aspects of WLS:  It really gives an opportunity to ordinary people, those not associated with the domain business, to acquire a name that they really want at a reasonable cost.  For example, the owner of DavesDeli.net would really like to own DavesDeli.com.  Even though the name is 15 months from expiration, Dave decides it is worth $40 to him to make sure that if the name ever becomes available, that he will be the one person to get it. 

Dave renews the WLS subscription after the first year.  Then, if the name expires, Dave gets the name.  If a name like DavesDeli.com expires without WLS, a speculator might pick it up.  From a speculator, Dave might have to spend a thousand dollars or more to acquire the domain.  With WLS, Dave, who is patient, has the opportunity to get the name if the owner of DavesDeli.com goes out of business, changes his business name, or decides that having a website is not important to his business.

Another reason that some domain speculators favor WLS is the belief that "WLS will level the playing field".  They say this with particular reference to Buy Domains, Ultimate Search, and some of the other big players in the expiring domain business with private registry connections.  Will WLS level the playing field?

The answer is both "no" and "yes".  WLS, or almost any reasonable system for distributing prized expiring domains, is not going to enable a novice speculator with limited time and resources to compete with the major players for most names.  The major players can invest in custom software and more WLS subscriptions.  In that respect, WLS will not level the playing field.  However, when an individual does their research and determines that a particular domain is likely to drop, they will now be able to buy a WLS subscription just as easily as anyone else.  They can buy the WLS subscription as early as they feel it makes sense to do so.  In that respect, WLS does level the playing field. 

As it is now, BuyDomains.com can beat just about anyone to a domain that they want because, in addition to subscribing to the major drop services like Snapnames, Namewinner and Pool, BuyDomains has registrars that work specifically for them in acquiring the best names.  Furthermore, BuyDomains will outbid most other players for names on Namewinner or Pool.

Some people oppose WLS because they do not like Verisign (owner of Network Solutions, Inc, the original monopoly registrar of .com, .net and .org domains).  On the other hand, almost everyone serious about domains is willing to register .com and .net domains.  Of course, each .com or .net registration results in income to Verisign, who has a logical monopoly on the .com and .net registry. 

This is a logical monopoly because only one party can take responsibility for managing the registry itself.  The same situation will prevail with WLS. You will be able to purchase a subscription from whichever registrar you want (not all registrars will participate in WLS initially, but all will eventually if WLS succeeds).  However, under the registrar layer, there will be Verisign. They will earn income on every WLS subscription, just as they now earn income on every .com or .net registration.

This article is meant as a counter-argument to many who are opposed to WLS rather than a pro-WLS argument. I suggest that you forget about antipathy towards Verisign and ask yourself the following basic question:

Will WLS distribute expiring domains in a more equitable, more transparent, manner than the current system?  I believe that the answer is yes and that is why I support WLS.

If you would like to comment on Howard Hoffman�s article, write [email protected]. Letters may be included in the Your EMail section.

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