The aftermarket is one of the resources we use to measure the value of domain names.  We recently decided to look into how the reported sales prices have trended across domains that have changed hands more than once over the past few years.  We found that roughly 30 total domain were sold more than once and were reported publicly.  Of those, only one domain name contained a “new TLD” (i.e., a TLD was introduced after the original group that included .COM, .NET, etc.): games.mobi.
 
Overall, we found that almost every .COM domain name experienced an increase in sale price from one sale to the next.  In contrast, games.mobi, originally purchased for $401,500 in 2007 according to Sedo.com, plummeted in value in the course of a year, selling for $44,000 in 2008, according to DN Journal.  Its aftermarket value dropped by a full 89 percent.  .MOBI domains first became available to the public in September 2006.  At that time, games.mobi was included in a list of premium names that then-registry mTLD had set aside for “equitable allocation,” meaning that it required the original registrant submit a request for proposal to obtain it (as opposed to being available on a first-come, first-served basis like most domains following the trademark “Sunrise Period”).  From the beginning, games.mobi was identified as a high-demand domain name, which makes its devaluation even more dramatic.
 
While it was only as complete as the public record of domain sales, this small study points out a few significant facts about the domain name space.  First of all, it shows that the value of .COM domain names has steadily appreciated over time; this is particularly true of keyword, category-defining domains.  It also shows that the public is not as concerned with the newer TLDs as it is with .COM, .NET, .ORG and others.  The fact that only one appeared in our list suggests that these names are not being bought and sold at the rate other TLD domain names are.  Generic domain names in TLDs like .MOBI get registered almost immediately by speculators, but seem to have very little worth in the aftermarket.
 
Once new gTLDs are released, there will inevitably be a land rush to register domain names in various extensions.  But what will those domains be worth further down the road?   

News about VeriSign’s new registry service, called "Domain Name Exchange," has been creating a stir in the Internet community. VeriSign, which is the operator of the .COM, .NET, and .NAME TLDs, has proposed a new service for domains in .NET that would essentially allow a registrant to return a domain name after an introductory period (1-3 months, as the Registry Request Service that VeriSign submitted to ICANN suggested). The registrar could allow another registrant to register the domain name. 

The announcement can be found here.

Giving registrants the option of exchanging a domain after 1-3 months could create a major opportunity for domain name tasting. According to reports, registrars will still require a registrant to financially commit up-front to a yearlong registration; however, such a registration fee may not create enough of a deterrent to keep tasters from exploiting this new license to return. 

McAfee, one of the leading manufacturers of anti-virus and security software, recently released a report titled “Mapping the Mal Web” that analyzes the relative risk of top-level domains (TLDs).  The TLD for Cameroon, .CM, ranked at the top of the world’s riskiest TLDs.  Alarmingly, .COM took second place on McAfee’s overall list.  According to the report, 32.2% of all .COM Web sites contain browser exploits like drive-by downloads of spyware, adware or malicious content; lead to phishing scams; or bombard users with excessive pop-ups.  Since .COM is the most popular TLD, 32.2% amounts to a total of 918,873 risky domains. 
 
In addition to overall risk, McAfee ranked TLDs by specific threat.  Romania’s TLD, .RO, had the highest portion of malicious downloads, while .INFO was ranked worst for spam, with 17.2% of its sites generating junk email.  On the other end of the scale, the governmental TLD .GOV is the safest generic TLD, while Japan’s .JP is the safest ccTLD. 

The popularity of .COM makes it an ideal target for bad actors because so many Internet users intuitively type in .COM at the end of domain names.  Since .CM is such a common typo of .COM, it is not surprising that it is the top choice among cybercriminals.  (We’ve written about threats posed by .CM before) [link to a past post].  According to the BBC, Hong Kong’s .HK ccTLD topped last year’s list of riskiest domains, but since has taken measures to become safer.  Specifically, the Hong Kong Internet Registration Corporation Ltd, which supervises domain registration for .hk Web sites, said that asking for proof of identity was one tactic that has led to a decline in suspicious applications.

Here’s a good article that provides another perspective on the potential popularity of IDN ccTLDs. IDG News Service reports that most Internet users in China are familiar with and used to Latin scripts—as a result, IDN ccTLDs may not have as much appeal as many may think.

After ICANN and the National Telecommunications and Information Administration (NTIA) signed the Affirmation of Commitments (AOC), Rep. Henry A. Waxman, Chairman of the House Energy and Commerce Committee, and Rep. Rick Boucher, Chairman of the Communications, Technology, and the Internet Subcommittee spoke out in support of the agreement.  Rep. Boucher praised the AOC’s ability to ensure accountability and transparency within ICANN. 
 
Back in June, Rep. Boucher’s committee held a hearing at which the then-CEO of ICANN, Paul Twomey, testified.  A pressing issue at that time was the amount of accountability ICANN had, not only to the government but to all of its shareholders.  There was a consensus among committee members that ICANN needed to be more transparent in its processes and more accountable to the general public.  Later this summer, in August, Rep. Boucher and Rep. Waxman, along with other members of the Energy and Commerce Committee, wrote a letter to Secretary Gary Locke of the DOC calling for an extension of the Joint Project Agreement (JPA) in some form, as well as permanent ties between ICANN and the U.S. government.
 
So it would appear that the mission has been accomplished.  ICANN and the U.S. government are now linked through the new AOC.  There’s just one problem – the AOC doesn’t provide the level of accountability that these Congressmen have called for, never mind the level ICANN needs as an organization.  The AOC creates a number of panels that will periodically review ICANN, and the U.S. government only holds a seat on one of them.  Yes, it is a positive thing that ICANN is still tied to the U.S. government through this agreement, but ICANN is no more accountable than it was under the JPA. 
 
In reality, the AOC simply does not include the accountability mechanisms that they had been pushing for. It is unlikely that this agreement will solve the problems that have existed within ICANN, and there is a chance that those problems will actually get worse.  ICANN cannot fall off Congress’s radar, because there is still work to be done. I hope the AOC is not just a way to check the ICANN issue off their list and check out of the matter without doing more of the important work that needs to be done.

Several outlets, such as the Economist and the Sydney Morning Herald are running articles on the upcoming expiration of the Joint Project Agreement (JPA) between ICANN and the U.S. Department of Commerce.  While we have discussed this issue many times before, the articles mention a new development: an agreement between the U.S. and ICANN called an “affirmation of commitments.”  Despite being a mere four pages in length, the document gives ICANN complete autonomy in managing its own activities, setting up oversight panels that include representatives of foreign governments to conduct regular reviews of ICANN’s work in four areas.  Those areas are competition among generic domain names; handling data on registrants; security of the network and transparency; and accountability and the public interest.  The agreement passes some of the authority the U.S. government has held over ICANN over to the broader Internet community, namely businesses, individual users and other governments.

The JPA is set to expire on September 30, and it is still unclear whether or not it will be renewed.  It will be interesting to see what plays out in the upcoming days, and what the “affirmation of commitments” document says.

The House Judiciary Committee’s Subcommittee on Courts and Competition Policy held a hearing yesterday on the potential rollout of new TLDs and how such a rollout would affect competition.  At start of the hearing, House Judiciary Committee Chairman Conyers made a very good point—this is not a hearing that Congress should have had to pull together. As Steve DelBianco (Executive Director at NetChoice and a witness at the hearing) pointed out, if ICANN was working properly, there would be no need for Congressional intervention. Unfortunately, ICANN is broken and needs to be fixed if there is to be hope for a safe, stable and flourishing Internet in the future.

Just how broken is ICANN? Check out CADNA’s Top Ten list of things wrong with the organization. The Coalition has gotten positive feedback on this evaluation thus far- what are your thoughts?  
 

Network World recently ran an article about how “cyber-criminals are plundering domain-name registrars around the world” while registrars such as Go Daddy fight a round-the-clock battle to fend them off.  

Cybersquatting is rampant in the domain name space, and the truth is that even if all registrars were conscientious about pursuing infringers, the fight against cybersquatting would still be a never-ending battle. To make things worse, there are registrars out there that do in fact ignore the domain name abuse that is occurring and some even collude with cybersquatters to get a cut of the deal. While these bad-actor registrars certainly enable or cause abuse in the domain name space, ultimately it’s the structure and regulation of the domain name space that is at fault—if the proper transparency, accountability and safeguards were in place, we would not be in quite the mess we’re in now.

The article touches on this fact—that domain name abuse exists as a result of the structure of the domain name space. ScanSafe researcher Mary Landesman points out that while the domain name system was not intentionally designed to allow for domain name abuse, its structure provides loopholes and opportunities for cybersquatters. She also rightly points out that effective reform is needed; although while she claims that reforming the domain name registration process “would strike at the heart of Internet crime,” the system needs to be reformed at a much more fundamental level. That fundamental level is ICANN. As the regulatory body of the Internet, ICANN needs to be reformed in such a way that makes the organization better able to respond to issues of safety and stability within the domain name space and less beholden to contracted parties that focus on policies that will help them generate revenue from domains.

It is no surprise that brand owners have registered countless domain names that they don’t need.  Over the past few years, ICANN approved and released TLDs such as .EU, .INFO, and others.  Since there was a lack of real data, brand owners did the only thing they could, which was to register names defensively because of the threat of what might happen.  When .ASIA was released, we saw the number of registrations from brand owners begin to drop – likely a result of being fed up with registrar/registry profit driven domain policies.

The problem is that these prior new TLDs have rightly caused brand owners to be suspect of new launches. After so many sunrise periods that hyped the need for defensive domain name registrations, now it's like the boy who cried wolf- many launches are largely ignored. However, every now and again an important TLD change occurs that does necessitate action by brand owners.  One example of that is .CM.

This landscape of the .CM TLD was just recently formed. When FairWinds published a “Perspectives” on .CM cybersquatting back in 2006, the Cameroonian government was running the .CM registry.  At that time, there were only 200 domain names registered to .CM and all other names ending in .CM resolved to a PPC site.  NETCOM.cm Sari took over control of the registry in 2009 and opened registration of domains in .CM. Trademark owners were allowed to apply for their corresponding domains during a one-month sunrise period between June 14 and July 15 of 2009. Sunrise periods allow those with valid trademarks to register their domain name for a hefty sum before all domains become available to the general public. As of August 1, 2009, .CM domains can be registered on a first come, first serve basis regardless of trademark rights.

Because .CM, the ccTLD for Cameroon, is a very common typo error of .COM, its recent launch of unrestricted domain names opened up a new front on the war against cybersquatters.  As with typosquatting of domain name roots (as in “comcasft.com” for “comcast.com”), this form of typosquatting also involves third parties registering domains containing brand names with the intent of profiting off of users’ typing errors. 

In light of this change, we conducted a study to examine the actual response to .CM’s change.  We drew on the data used for a forthcoming study on general typosquatting to examine this phenomenon.  We began with Quantcast’s list of the most highly trafficked domain names, and from that list, we selected the top 250 that ended in .COM and whose root contained more than six characters.  That initial number expanded to 255 in order to include possible hyphenated versions (i.e., wal-mart.com and walmart.com).  Along with these 255, we included typo variations that receive high volumes of traffic and then checked to see whether each of these domains had been registered in the .CM extension.  A total of 183 had been registered in .CM; 121 domains contained the target root and the remaining 62 were typo variations of those targets. 

Out of the 183 domains, an astounding 97 percent are owned by a third party—only 6 domain names are owned by the target company.

Of those owned by the target company, only 4 resolve to the target site, while one displays search results and the last does not resolve.  In total, 97 of the domains owned by a third party lead to pay-per-click sites, meaning cybersquatters are directly profiting off 55% of those domains. 

Another interesting tidbit was found in four domains that led to sites for competing brands.  Staples.cm resolves to OfficeDepot.com, Travelocity.cm resolves to Expedia.com, Walgreens.cm resolves to DrugStore.com and Walmart.cm resolves to eBay.com.  None of these four domains are owned by the competitor, but rather by third parties.  While cybersquatters are not profiting directly from these sites, they are still causing damage to the brands in question and potentially depriving them of sales. 

When ICANN approved new TLDs in the past and registries held sunrise periods for brand owners, many brands rushed out to buy domain names in TLDs like .PRO and .INFO only to realize later that they held very little value for their business.  Although .CM has opened to the public, the registration rates among brand owners remain low. This may be a result of brand owners being skeptical of the value of a .CM domain name. Some may be failing to realize how different this new TLD is—after all, it is common for Internet users to accidentally type .CM in place of .COM. Others may be distrustful of a new registry sunrise period given that ICANN’s policy of allowing registries to operate however they want has essentially resulted in brand domain names being held for ransom by the registry in the form of sunrise periods. In the case of .CM though, brand owners must learn that even if they have no intention of doing business in Cameroon, owning key names in that extension is critical because users are typing them into the browser bar accidently.

What I take from this situation is that while we are all growing incredibly frustrated with the name space and ICANN policies, we need to be diligent in our review of each change.  It is usually best to be conservative with launches, but there are cases – like .CM – where a more aggressive and targeted strategy is warranted. 

Google announced in a recent blog post that it has been working for several months on developing new architecture for its Web search that is designed to deliver faster, more accurate and more comprehensive results.  The post did not reveal when the company plans to release the new search engine, which it has dubbed “Caffeine.”  It will operate under the hood of the current search engine, and Google is offering users a chance to test it out and provide their feedback.

Soon after the announcement, David Coursey wrote an article for PC World warning businesses that Google’s new technology could affect how their companies rank in its search results.  Because all of Google’s search results will be different, companies may need to alter their search engine optimization (SEO) strategies to maintain their rankings.

High search rankings can be a valuable way to drive traffic and business to a Web site.  But as Coursey’s article shows, those rankings are subject to change as the dynamic Internet landscape changes.  For that reason, companies should not rely on SEO as their sole vehicle of Internet marketing.  A strong domain name strategy is also a necessary component, in part because effective domain names can help bolster search rankings.  Domain names also have the benefit of being more permanent than search rankings – once a company purchases a domain, it owns that domain for as long as it chooses to keep it.

Given the frequency of direct navigation, where Internet users type addresses directly into the browser bar, domain names are a critical component of any company’s overall Internet marketing strategy.  Many companies put a great deal of effort into cultivating search rankings, but it is important to remember that the brands experiencing the most success in online marketing combine SEO with a strong domain name portfolio.