Registrars will only be able to return ten percent of registered domains or fifty, whichever is greater, per month within the five day grace period for a full refund. A registrar purchasing 1,000 domains at $6 a piece, then, would only be allowed to return 100 of them in a month and would receive a maximum $600 refund.

Earlier this year, ICANN imposed a 20-cent transaction fee for returned domains to curb the practice of domain speculators registering mass numbers of domains and “tasting” them for four days to see if they would turn a profit from advertising clicks. If not, the domains were returned on day five for a full refund.

Gaming the system like this caused a large number of domains to be unavailable in perpetuity and deprived ICANN of registration fees. If ICANN is anything, it’s thorough, public, deliberate, and slow. Public debates/inquiries about the subject were held a year ago, first resulting in the transaction fee this summer, and now limits on registrar refunds.

 Registrars will be expected to be in compliance with the new policy by the end of March 2009, and are offered a special exemption process if they exceed the limits. ICANN will review the exemption applications and judge accordingly whether the registrar will be refunded beyond the 10 percent.
 

Domain buyers saw a big chunk of their revenue fade when Google declared an end to permitting its AdSense product to be placed on domains that had not been open for six days. A five-day add grace period (AGP) permitted domain buyers to hold the domain for five days, see if it could draw enough traffic to be profitable, and dump it for a full refund if it did not.

Other domainers “kite” their domains, dumping and re-registering the same ones over and over. Even without Google, plenty of ad opportunities exist to make the business profitable at volume.

Such volume may be the weak point that can be broken with a suitable application of force. In the case of Network Solutions, the big registrar hopes to persuade the Internet Corporation for Assigned Names and Numbers (ICANN) board of directors to keep a provision in its fiscal year 2009 budget to thwart domain tasting.

“This budget includes a provision to make the non-refundable 20 cent per-transaction ICANN fee applicable to domain names deleted during the AGP once the level of deletions exceeds 10 percent of a registrar

ICANN describes domain tasting as “the use of the Add Grace Period to test the profitability of a domain name registration. The AGP is a five-day period following the initial registration of a domain name when the registration may be deleted and a credit can be issued to a registrar.”

The Washington Post has written an article discussing ICANN’s most recent proposal to curb domain tasting and eliminate the practice. By no longer refunding the fee that ICANN imposes on each domain transaction ICANN believes this will eliminate the process of domain tasting, at least in large quantities.

This belief is based on the success of a similar surcharge put in place by the Public Interest Registry, which has a $0.05 charge per domain for registrars who return 90% or more of their registered domains after the 5 day grace period in a given month. Odds are this proposal will be discussed in an ICANN meeting later this month and if approved at some point later this summer could be implemented.

While this sounds like a very good solution, it leads to a number of different questions including will this change effect the rates registrars charge to consumers for domain names? Should a consumer make an error in registering a domain name what type of support will registrars supply? And of course why has it taken them this long to enforce their already exiting rules?

If you are curious about this topic earlier this month Andy Beal also covered how Network Solutions reacted, when their domain tasting practices were brought to light negatively.

Comments

Domainers will no longer be able to "taste" domains free of charge. A deletion fee waiver, which was instituted in 2005, will be withdrawn. ICANN said that since introducing the waiver, as much as 95.5% of names registered within the five-day Add-Grace Period (AGP) were deleted. For some registrars it was as much as 99.5%. Tens of millions of domains are registered and deleted each month.

ICANN concluded that reenacting the non-refundable transaction fee would effectively end the practice of abusing the AGP.

This solution was selected out of three proposed options, which are:

ICANN could revise its registrar-level transaction fee (the current rate is US$0.20, which is subject to raise as the contracted rate is US$0.25) to cover all new registrations and discontinue the exemption for "tasted" domains, (2) registries could impose a "restocking" fee for disproportionate domain deletions, or (3) ICANN could establish a new "policy" effectively deleting the add grace period policy in the registry agreements.

ICANN also specifically addressed the concern over NetworkSolutions’ recent controversial practice of automatically registering domains searched for on their site, raising the price, and then returning during the grace period. NetworkSolutions defended the practice as a way to protect customers from frontrunners, but critics have had trouble deciphering the difference.

ICANN had trouble with this, too. According to the minutes, though the Board decided that there was something (they didn’t really say what) fundamentally different about Network Solutions’ practice – i.e., something about it isn’t as questionable as the larger issue – comment was made that the practice had outcomes customers would not expect and would not want.

Short from condemning the practice, the Board asked Network Solutions if reinstituting the deletion fee would result in them discontinuing. Network Solutions said it would.

On the WebPro Blog, our own David Utter expresses his doubt that it will fully solve the problem of domain tasting:

"The problem with ICANN’s solution is it may be ineffective against well-financed domain tasters. A return fee may be the cost of doing business, one that simply becomes part of the accounting process without having an impact on the activity."

That grace period proved profitable for domainers who used Google’s AdSense for Domains program. Free domains plus ad revenue brought one domainer $3 million per month, according to DomainTools blogger Jay Westerdal.

Note that the $3 million came after Google took its cut. If Google truly ends the ability for domainers to drop AdSense onto tasted domains, the company wipes out a chunk of revenue for itself.

Westerdal cited a confidential informant on this, saying Google will stop monetizing domains less than five days old. With millions of domains in play, domainers would see their massive paydays evaporate.

It isn’t as much a case of “don’t be evil” for Google, as it is “let’s limit our legal liability.” Westerdal said lawsuits by Dell, BMW, and Yahoo against those domainers for trademark violations could end up adding Google’s name as a defendant.

Since Yahoo has been a plaintiff in these cases, Westerdal thinks it unlikely Yahoo will permit its advertising to be placed on tasted domains.

Andrew Goodman, commenting on his Traffick blog, said, “Who would have thought that the whole domain name system would have remained such a wild-west realm for so long?”

If rumors are true, there’s a new sheriff in town, it’s high noon, and Google’s got the fastest draw on the Internet.

]]> http://www.webpronews.com/rumor-google-ending-adsense-for-domain-tasting-2008-01/feed 9 http://www.webpronews.com/network-solutions-to-change-front-running-practice-2008-01 http://www.webpronews.com/network-solutions-to-change-front-running-practice-2008-01#comments Thu, 10 Jan 2008 17:12:12 +0000 Andy Beal http://www.webpronews.com/?p=43224 As we reported yesterday, Network Solutions has been in a lot of deep-water after many people discovered the company was guilty of "front-running"–the practice of registering a domain name after someone has checked on its availability.

That’s about a $28 price increase, depending on where one does his domaining. The four-day hold is based on ICANN’s five-day grace period, during which refunds are available if domainers change their mind.

NetSol says it instituted the practice to protect customers from "front-running," an opportunistic tactic that involves trolling the WHOIS registry for recently queried domains with the intention of buying those domains and hiking up the price.

During the aforementioned grace period, front-runners might also test the monetizability of a domain, based on PPC ads and/or traffic, a practice known as domain tasting. If unprofitable, domain tasters would release the domain within the grace period. Other times, they may keep a domain tied up in perpetuity, also by manipulating the grace period.

Critics of Network Solutions saw little difference. The company was registering queried domains, raising the price during the grace period, placing an advertisement on the domain page, and then releasing the domain back into the wild.

NetSol denied accusations that they were also front-running, domain kiting, or domain tasting, but were merely providing protection for customers. Assumedly, the nearly $30 price-hike was the fee for that protection.

But after enough heat, spokesperson Susan Wade says that NetSol is working on "improvements to our protection measure." This includes only registering domains searched for on the NetSol homepage, and not via the WHOIS lookup, also on the site. Instead of a promotional page on the domains, the company will only place an "under construction" notification, and the reserved domain names will not resolve.

Still, NetSol has done little to differentiate between what the company is doing and the practice of front-running. Technically, they sound pretty much the same.

ICANN has announced their intention to look into the practice of domain tasting and other ways domainers manipulate its grace period. But don’t expect them to do anything soon. They don’t seem to be in any real hurry.   
 

Critics call it "extortion," but Network Solutions calls it a service to protect customers from the practice of "front running." The extra charge is, assumedly, the protection fee — you know, just like the one the mob offers.

On his blog, Shashi Bellamkonda, who works for Network Solutions, defines "front running" this way:

“Front Running” occurs when a domain name is registered, typically by someone outside of the United States, just minutes or hours after someone else has conducted a domain name search at a registrar site or has performed a WHOIS query for the domain. The reason people “front run” domains is to conduct what is called “tasting” to see how much money they can make on a domain name through pay-per-click ads or by re-selling the domain in the aftermarket at a highly marked up price.

But this is different, he says.

Several angry bloggers have posted about it, including Domain Tools’ Jay Westerdal (listed here as one of the Internet’s youngest and richest entrepreneurs) and well-known search engine marketing manager Bill Hartzer, of MarketNet.

They, along with several others, tested and confirmed that when they conducted a WHOIS search on Network Solution’s site but didn’t register it, Network Solutions would register it immediately and offer it for sale for $34.99, nearly $30 above the going price, depending on where you buy.

Immediately, as illustrated in several comment threads, critics were searching for domains like domainkitingiswrong.com and various expletive phrases paired up with NetworkSolutions, all of which, at least temporarily are/were owned by the company afterwards.

Though critics are challenging the ethics of the practice, especially when it comes from one of the largest and oldest domain registrars around, and labeling it front running, extortion, domain kiting, and domain tasting, a spokesperson called it "a customer protection measure to protect customers from frontrunners."

The company line from Bellamkonda and from spokesperson Susan Wade is that what Network Solutions is doing is different from frontrunning or domain tasting in that they release the domain at the conclusion of ICANN’s grace period and do not monetize or domains.
 

Still, people are pretty upset with them. Hartzer believes that Network Solutions may reverse the new policy based on customer backlash, but the controversy could also have a more positive impact. "It’s bringing the domain tasting and kiting issue to the forefront," he said. "ICANN domain tasting has been around for a while and people have been taking advantage of it."

ICANN announced in August it would be launching an investigation into the practice of domain tasting and called for examples of abuses. 
 

Within that period, domain tasters will measure the popularity of the site to see if the potential revenue will surpass the yearly registration fee (approximately $6).

Six dollars seems like an innocuous amount in isolation, but when this is manipulated on larger scales, it can have big impacts. For example, a domainer can buy up 10,000 domains, slap AdSense ads on them and monitor their profitability for four days.

If 200 of those made-for-AdSense sites show a positive profitability, the domainer can return the other 9,800 and repeat the process. This can go on, obviously, indefinitely.

It may be safe to say that smaller, less inventive (read: less weasely) business owners don’t think in gaming terms. They have an idea for a business, a domain name they like, and then register the site without even realizing there is a grace period to begin with.

But it may have larger implications than just bulk domainers being clever enough to leverage a bureaucratic loophole. Manipulation like this can affect organic rankings in the search results, and most likely has a direct impact on the cost per click of paid advertisements.

And there’s where the smaller businesses (i.e., not so much the search engines) have a problem. 

ICANN seems to not like this practice, as it does tend to screw with their numbers (and revenues), but ICANN being the quasi-governmental entity that it is, it has to go through the proper channels before cracking down.

They put out the following notice over the weekend:

In view of the increase in domain tasting…the GNSO Council recently considered an Issues Report on Domain Tasting and resolved to form an ad hoc group for further fact-finding on the effects of this practice. The ad hoc group has prepared these questions to assist in gathering facts and opinions, while inviting both qualitative and quantitative input.

The fact-finding mission includes some interesting questions. The questionnaire asks: which industries benefit and which ones suffer; whether there is a security and stability issue associated; what are the reasons for the practice.

But more importantly to those in the domain game, the inquiry seeks guidance on just how ICANN should handle the situation. Suggested options are as follows:

A) eliminating the AGP so that domain registration fees are non-refundable between registry and registrar;

B) making the ICANN annual transaction fee (currently 0.20 USD per year) apply to names deleted during the AGP, or to a significant portion of them;

C) imposing registry ‘excess deletion fees’ charged to registrars for disproportionate deletes (for example in .org, PIR registry charges 0.05 USD per deleted domain if more than 90% of domains are deleted in a given time period).

This suggests that something will be done about domain tasting, and that earlier questions merely seek additional justifications. And that will leave a bad taste in the mouths of a few.

But that few will most likely be the ones making a tidy profit by gaming the system.

"If  ICANN did away with the five-day grace period on bulk buys only," suggests Susan Coppersmith, Director of Sales for iEntry, Inc., the publisher of WebProNews, "it would possibly help clean up organic search – could actually help the traditional small business owner be found a little easier.  I think it would also make the quality of the click better in paid search campaigns."