The issue of new TLDs is not only limited to conversation within the domain industry or among brand owners; the questions, considerations and problems that insiders have been discussing for months has blown up into a massive discussion that includes major communities and popular public figures.
 
Many of you have probably heard about Al Gore throwing his support behind the development of a dot-ECO domain; according to BusinessWeek, the company applying for the TLD plans to donate more than 50% of its profits to environmental and climate change and hopes to attract companies that want to promote their environmental initiatives. While it seems to be an interesting idea for a TLD, this is an example of an extension that will force brand owners to registering names aggressively. Whether or not users will take to seeking content in dot-ECO, or whether or not a company really plans to develop a robust environmental initiative, brand owners will likely feel obligated to register domain names in the space—after all, who is going to want to risk being accused of not caring about the environment, especially these days? What car company or manufacturer will want to risk having a third party register CARCOMPANY.ECO and put up a diatribe against the company?
 
Another prominent global public figure has also decided to speak up about new TLDs. As the Register reports, Pope Benedict XVI recently weighed in on the possibility of dot-RELIGION domains, warning against TLDs such as “.catholic, .anglican, .orthodox, .hindu, .islam, .muslim, [and] .buddhist”. The Vatican points out that there would be “bitter disputes” that would force ICANN into “recognizing to a particular group or to a specific organization the legitimacy to represent a given religious tradition.”
 
It is clearly a divisive issue and both of these public figures raise realistic and relevant arguments.  It’s important to remember that, by opening up the domain name space, ICANN will in essence take on the responsibility of adjudicating who gets to own which TLDs and as a result, who gets to redefine the space. This is a huge task; is ICANN up to it?

I’m spending the remainder of my trip to Switzerland visiting some old and new friends with my colleague Katie Richards, who recently joined FairWinds full-time to head our operations in Europe. One of our last stops was in Geneva, where we got a great view of the impressive Jet d’Eau and the beautiful Lake Geneva (Lac Léman in French):

In our meetings, concerns about the enforceability of the domain name space constantly came up. People see infringement and scams growing at a rapid pace and find that the enforcement tools currently at their disposal are ineffective.

For those who believe that the UDRP provides adequate recourse for brand owners looking to reclaim domains, consider this: what if both the registrar and the registrant are in a country where the court systems are such that the odds are stacked against the Complainant? After all, it is not as if national courts are required to implement the UDRP according to a set rubric. Registrars are wise to this vulnerability of the UDRP and look to exploit it. A recent article in INTA Bulletin covered this very issue, quoting a speaker at an ICANN conference as saying:

[W]e have a very inventive registrar out of India that’s offering a service to domainers at the last traffic conference that says, look, I’m a registrar in India, I will incorporate you a registrant in India, and I will put all your domains in that registrant with our registrar, so that if anyone ever [files a] UDRP, even if they’re successful, the only court you can turn to or go to is the Indian court. And, by the way, I’ll even start that action for you, they claim, and I guarantee you it’ll take at least ten years to get through any Indian court. So you can continue to own and operate that domain for ten years, even if you lose a UDRP. (www.icann.org/en/meetings/lisbon/transcript-tutorial-expiring-25mar07.htm)

The UDRP was created by ICANN, so the organization must add it to the list of things that it is obligated to address—the UDRP belongs right alongside issues such as registrar abuse, compliance, and unreliable Whois databases.

In my opinion, ICANN has not established effective remedies to deal with online abuse and has failed to implement sufficient regulation that would help prevent it.

This inability to properly stabilize and govern the existing space makes the fact that ICANN is currently working to expand the space to include a potentially unlimited number of new TLDs that much more baffling. If you were about to build an addition to your home, but the original home was in such disrepair that it might crash at any moment, what would your priority be? Consider this analogy as it applies to ICANN’s “house plans” to build not one, but hundreds of new additions to the domain name space before correcting the existing issues. This certainly gives cause to reevaluate the choices available to the Internet community in terms of having their concerns addressed and their needs met.

The stability and security of the Internet continues to be part of an ongoing conversation between brand owners across the globe, and I’m glad I had the chance to once again check in on international perspectives of the domain name space. And now, it’s time for me to go back to DC. Goodbye to my friends in Switzerland in the country’s four official languages: German, French, Italian, and Romansch: auf wiedersehen, au revoir, arrivederci, and a revair!

Last time I was in Switzerland was in October, and now business brings me back to the country right in time for Basel’s Fasnacht carnival. The carnival, which starts on the Monday after Ash Wednesday (at 4:00am!) and lasts for three days, is quite a sight: 

Participants wear masks and costumes, parade through the streets of the city, play music and throw confetti. They also satirize events and people from the past year in pamphlets that are handed out and in pictures on lanterns that are displayed throughout the carnival.   
 
It’s not all fun and games here in Switzerland; I’ve had some serious conversations about the potential new TLD launch, and people are surprised by ICANN’s neglect to address substantive issues such as trademark protection, security and stability, and malicious conduct in the second draft of the Applicant Guidebook. They’re also disappointed that ICANN has not substantiated the need and consumer demand for this launch and feel as though ICANN is moving forward with something that is of little value to the Internet community and may actually prove to be harmful. 
 
Still, businesses are forced to consider what they will do if the launch does move forward. I have found that some people are dismissive of the idea of registering new TLDs, while others are taking a “wait and see approach” to the issue; if they see brands registering TLDs and consumers searching by extension, they’ll get on board. At the moment, though, most see little value to and expect minimal benefit from registering a new TLD. They also realize that new TLD pitches coming with promises of a "killer app,” such as a panacea for phishing, will likely under deliver.

Some international companies in Europe predict there will be fewer generic and brand TLDs in the first round of applications than was originally anticipated. That sounds reasonable—after all, who has the money to run registries in this economic environment? If brands don't do anything too aggressive, then maybe future entrants will be less enthusiastic and abandon or ice their plans to launch a TLD. Such a slow-down of the launch would be beneficial, since at least it would allow the chance for the domain name space to adapt to problems that will undoubtedly arise.

Since ICANN decided to proceed with the vast expansion of the domain name space, Internet users and those in the domain industry have been debating, speculating about policies and making predictions about what the Internet may look like in the years to come. Many of us are concerned about the new TLD launch, especially now that ICANN has released the second version of the Draft Applicant Guidebook which does not include concrete provisions to address trademark protection, security and stability of the space, and malicious conduct.

Despite all of the speculation about the changing face of the Internet, discussion about the “Fast Track” process for the release of IDN ccTLDs (internationalized country-code top level domain names), which are ccTLDs that are in characters other than those found in English script, is largely absent from the debate.  This new policy provides the opportunity for countries to request their country name in their local language as an IDN ccTLD. 

IDN TLDs may do more to change the Internet than any other new TLD because they have a better chance of being adopted by Internet users. After all, English is not the primary language for most of the world and ads already use IDNs to advertise:

IDN.IDN names could look as follows:

The IDN.IDN samples were found on http://www.icann.org/en/topics/idn/fast-track/

As more information on the release is finalized, the brand community should begin considering what IDN TLD registrations might be valuable to own.  We expect many countries to apply for their relevant IDN ccTLD during the new TLD release. While it is certain that we don’t need to register in all of them, offering consumers a means to interact with the brands they love in the language they are most comfortable with will certainly pay dividends.  A targeted and strategic approach that pairs what is most important to the business with what is most intuitive to consumers is a good place to start.

ICANN has opened up the public comment period on the mechanism to introduce a limited number of IDN ccTLDs to the Internet; check out the papers and let ICANN know what you think. 

WIPO recently published a valuation method document written by Kelvin King, founding partner of Valuation consulting, which states, “the role of intellectual property rights (IPRs) and intangible assets in business is insufficiently understood.” Domain names are not trademarks, but they are among those misunderstood, intangible assets that few people know how to value accurately.

There is no concrete formula for valuating a domain name. Every situation is unique and determining the price tag of a domain requires an understanding of the domain name market, the industry related to the domain and Internet user behavior. A lot, however, also depends on general perception of its value.

King writes that when it comes to valuating property rights, “the value to each [interested party] will depend upon their circumstances.” The same is true of domain names where domain owners and buyers actually set the price. In the absence of comparable data (such as the sort of data that help people assess the value of their home), the seller’s perceived value of the asset sets the floor price. If the floor is palatable to the market, the value perceived by the buyer then determines the purchase price.

What we do at FairWinds is gauge the interaction of all these concrete and more abstract or nebulous factors to determine the value range of the domain. When we help our clients weed through their portfolios and uncover domains that are no longer of strategic value, we often get asked to evaluate unbranded domains for potential sale. If it contains a brand name, the decision isn’t to keep or sell, it’s to keep or abandon. Domains that are not tied to an active brand name should follow a separate path: keep or sell.

Our approach is twofold. There is the quantitative component, which looks at the current value of the domain based on factors such as the amount of traffic that it receives regardless of whether there is an active Web site, the average value of a sale or advertising impression for the industry, and industry sale or advertising click-conversion rates. The difference is that some industries and business models sell products and services online, while others generate leads or simply deliver marketing impressions through their Web presence.

There is also the qualitative component, which looks at the potential value of the domain based on its ability to be developed into a leading online brand. Valuation criteria for a generic/keyword domain’s brandability include:

• Its ability to evoke Trust and project Consumer Confidence
• Its strength as a Brand
• Its Commercial usability
• Its ability to capture intuitive type-in Traffic
• Its Uniqueness and ability to Resist Dilution
• Its Simplicity (in other words, is it Recallable?)

 
By combining these two evaluations, we can assess how much a domain is worth.

There are some domains out there that will provide your company with little return on its investment and some are just too expensive to acquire, but by looking around one can see that there are some deals to be had. Understanding the potential benefit that a domain can provide your company can reveal which domains could be a sound investment and which can be passed on.
 

ICANN has opened up a public comment period for NeuStar’s request for a phased allocation process of single and two-character domains in dot-BIZ.

Why? Really, who concerns themselves with dot-BIZ sites? They’re simply not used. NeuStar, where is the demand for this?  Could it be nothing more than the “restocking” of the shelves that we see again and again in the domain name business whenever sales of domains slow down? 

I’ve been asked several times about Paul Stahura’s blog post in CircleID. Long story short, Paul Stahura of Demand Media claims his analysis proves that “there is no economic incentive for an applicant to obtain a TLD for the sole purpose of making money from defensive trademark registrations.” This reads as a rebuttal to concerns expressed by the intellectual property community regarding the potential launch of unlimited new TLDs.
 
I’ve taken a look at the post and the analysis appears to be based on some deeply flawed assumptions. The research does not reflect the reality of registration costs or domain name strategy, and as a result cannot be used to project what will happen in a newly expanded TLD space.

 
First of all, the “costs to brand owners” for each domain is calculated with the $8 registration fee that most wholesale-market registrants are charged. The fact is that brand owners are charged substantially higher prices for domain names during TLD sunrise periods. Some sunrise-period schemes in recent years have called for fees as high as $10,000 per domain. Registries know that trademark owners will have to choose between either paying up front for domains containing their mark or risk having a third party pay just $8 to purchase it later; they also know that faced with these two choices, brands are likely to pay the high prices to ensure the domains that are most important to their companies are secured in advance.
 
It seems that whenever the domain industry needs a revenue boost, domain industry insiders use the ICANN policy development process to spawn new TLDs and prey on trademark owners’ fear of infringement by giving them the option of pre-registering their brands at inflated prices. Brand owners feel blackmailed, and even when they do register hundreds and thousands of domains, there is no way they can secure every possible combination of their brand in the new domains.
 
Second, no one has said that brands are going to go out and register in all the new TLDs that are going to be launched, so checking to see how many of the same domains are registered across dot-COM, dot-NET, dot-ORG, dot-INFO, dot-BIZ, dot-US and dot-MOBI (which, quite frankly are not the most popular TLDs and almost completely leave out frequently used geographic TLDs) is not a test that will help predict behavior in a new TLD space. If brands register defensively, they will do so in the TLDs that make sense for their business model and will be forced to pay dearly for it.
 
Third, one should not only measure how many trademark owners are using the sunrise and how many of the same domain names are found across multiple TLDs, but what sort of content is found on these domains. For example, if the content is the same across all TLDs, or if domains don’t resolve, then it is a sign that the registration is part of the brand’s defensive strategy. If the content is different, then it is somehow part of the brand owner’s promotional strategy. Only by understanding these differences can one draw conclusions and make predictions about a brand’s current and future strategy. Paul’s research fails to take these differences into account.
 
Fourth, neither squatters nor brand owners would register hundreds of misspellings in extensions other than dot-COM. Misspellings are about user experience, and since users are programmed to type in dot-COM (for the most part), registering many typos in other extensions would be useless. Paul’s decision to analyze 263 domains containing the misspelling of “Verizon” across 7 TLDs really cannot produce relevant conclusions.
 
All of these faulty assumptions and faulty research lead to faulty conclusions. From his research, Paul deduces that we can expect about 7,000 sunrise registrations in TLDs. However, we know that 15,334 applications for domains names were received by the time the dot-ASIA sunrise concluded, and 245,000 domains were applied for in the dot-EU sunrise. Speaking on behalf of the brand community, while Paul’s time and interest is appreciated, the four major observations above disprove his argument that brand owners are not actively protecting their brands in the various contemporary TLDs and that an onslaught of new TLDs will not cost the global brand community a massive amount of unrecoverable resources.
 
To get a better idea of what can actually happen in the new TLD space, check out the CADNA analysis of likely new TLD scenarios. This report places the estimated “haul” for registrars and registries from the brand community at $1.6 billion.

According to the World Bank’s 2007 report, the top-ten world GDP rankings (in millions of dollars) are as follows. Note that I have put the extension most associated with the country alongside its GDP:

1 – United States: 13,811,200 (.COM*)
2 – Japan: 4,376,705 (.JP)
3 – Germany: 3,297,233 (.DE)
4 – China: 3,280,053 (.CN)
5 – United Kingdom: 2,727,806 (.CO.UK)
6 – France: 2,562,288 (.FR)
7 – Italy: 2,107,481 (.IT)
8 – Spain: 1,429,226 (.ES)
9 – Canada: 1,326,376 (.CA)
10 – Brazil: 1,314,170 (.COM.BR)
 
Brands usually prioritize domains according to the sort of metrics outlined above- it seems intuitive to be in the wealthiest markets. However, there are other things to factor into deciding where to stake out space on the Internet.
 
eMarketer recently released a report that ranks countries according to how much leisure time is spent online by that country’s Internet users. The following countries spend the most leisure time online (again, I have put the extension most associated with the country alongside it on the list):
  
1 – China (.CN)
2 – Korea (.KR)
3 – Japan (.JP)
4 – Italy (.IT)
5 – United States (.COM*)
6 – Spain (.ES)
7 – Australia (.COM.AU)
8 – Canada (.CA)
9 – France (.FR)
10 – United Kingdom (.CO.UK)
 
Let’s take a look at the similarities between the two lists: dot-COMs are both in the top ten, as are dot-CN, dot-KR, dot-CA, dot-FR, dot-IT, dot-JP and dot-ES. However, they occupy different spots on the list. Also, Australia made it into the top-ten leisure time list, but is not in the top ten world GDPs. The same is true for dot-CO.UK. On the other hand, Brazil and Germany have some of the highest GDPs, but not as many people spend their leisure time online in those countries as in others.
 
These sorts of considerations are part and parcel of the work that needs to be done to actively seek and meet customers where they are online. If a particular country is spending a significant amount of time online, then perhaps there is an untapped market there and perhaps certain extensions should be reprioritized according to new data.
 
*dot-COM was associated with the US because Americans have not taken to the dot-US extension.

In the domain name space, the rules coming out of ICANN are being set by a few constituencies at the expense of all online users. There is a perception that ICANN sets policies democratically and, to an extent, they do—ICANN’s constituencies often heavily impact policy. However, the kingdom of ICANN is disproportionately populated by representatives of the registrar and registry constituency, so policies tend to be decided in their favor. Members of this constituency walk a fine line so as not to lose credibility in the eyes of their customers, but we mustn’t forget they are in the business of generating fees from the registration of more domains.
 
As a result of these special interests at play in policy development, online trademark protection and enforcement costs are burying brand owners. These costs end up as a sort of “welfare” for registrars and registries.
 
With the current system such a mess, time and effort should be put towards correcting the space, yet instead it is being put towards expanding it. Policies continue to be pushed through without due diligence or the general support of the Internet community—last year’s decision to make new TLDs possible is a prime example of such a policy.
 
When the game itself is broken, you change the rules. We helped form CADNA to help change the game and create policy that will actually prevent and reduce online infringement.
 
Every once in a while, someone asks me how FairWinds’ and CADNA’s goals are compatible. The fact is that both FairWinds and CADNA look to impact the domain name space in a way that increases the safety and ease of navigation of the Internet. FairWinds was created to help its customers be more efficient and effective by understanding how customers use the Internet and look for brands online. By separating reality from exaggerated risk and speculative scenarios of the “bad things” that could happen, companies can be more focused and accomplish more with less. 

 
There are too few brand owners correctly leveraging the domain sphere of dot-COMs and limited ccTLDs that actually attract visitors or are likely to cause harm if owned by another party. FairWinds looks to change that by working with brands to optimize holdings and focus their resources on the most productive investments. CADNA and its efforts to clean up the space are entirely in line with these goals.
 
As far as FairWinds is concerned, new TLDs will just be additional noise in an already crowded space; they will simply make the space larger and more confusing, without adding any real value. We have plenty of work to do in terms of helping the world’s leading brands get more out of their Web strategy through an enlightened, less-is-more mentality. Any policy that will inevitably result in more online abuse will siphon our clients’ time and budget away from more important investments, and that is of great concern to FairWinds.

A little-known wave of massive-scale online infringement called affiliate fraud is gathering steam on the Internet. Affiliate fraud earns cybersquatters 50-100 times the fee per action of pay-per-click (PPC) sites and targets brand owners–all undetected.

Some brands offer affiliate programs, which allow Web site owners to post links and banners to that brand’s product or service on their site; in return, the owner of the site that is hosting the link receives a commission for every click-through that results in a purchase. These affiliate programs are meant to be mutually beneficial; brands get traffic funneled to their sites and their affiliates can earn a profit by providing that service.

Most Internet affiliate programs prohibit enrollees from using trademark-infringing domain names, yet many are doing just that.

Rather than using their unique affiliate identifiers to post links, cybersquatters are registering domains that contain a famous trademark or a typographical variation of one and redirect visitors to the very Web site that they expect to find. They then collect a commission once a sale is completed or once a visitor requests information. Some banks, for example, will pay Internet affiliates a commission as high as $30 each time a referred visitor submits a credit card application.

The best way to understand the practice of affiliate fraud is to actually see how it works.

One example is a typo of the large US cable operator “Comcast”—COMCASFT.COM—which redirects to a Comcast authorized retailer who pays commissions for referrals. When you enter COMCASFT.COM, you will see it eventually resolves to http://www.comcastadvantage.com/index.html?PID=cj:1735985. “cj: 1735985” identifies who should get paid the commission and—you guessed it—that person is the owner of COMCASFT.COM.

According to Comcast’s affiliate program terms, leads like this are worth as much as $35, which is many times more than the 50 cents or less that cybersquatters typically receive per click on the PPC sites that we’re all familiar with.

Unlike redirecting infringing domains to a PPC site loaded with ads, this scam delivers a more fluid online experience and a completely expected result to the end user; end users are less likely to recognize this as an infringement and many will simply assume that the legitimate company has done the redirecting. In-house counsel and brand protection companies of all kinds also typically fail to detect this use. As a result, this practice often flies under the radar of enforcement. That, along with the fact that it is a particularly lucrative endeavor, makes this practice extremely appealing to cybercriminals.