

Domains are inefficiently priced -- small domain owners are the problem - nerfhammer
http://semmyfun.blogspot.com/2010/08/domains-are-inefficiently-priced.html

======
DanielStraight
This is all well and good unless the distribution of domain name ownership is
that 1% of domain owners own 99% of registered names. If you want a domain
that happens to be owned by a small owner, I'll agree you could face much
bigger problems. If, however, there were only small domain owners (and if my
ratio above applies), then 99% of the time, you wouldn't face any problems at
all because 99% of the time, the domain simply wouldn't be registered yet.

Despite being wrong about the problem, the author's solution is not bad. For a
serious commercial endeavor, $100/year is insignificant. For a personal site,
it's a fortune. The author's solution does seem to solve this problem.

There are still problems though.

1\. The .com TLD is so prolific that using a different TLD is a problem even
for personal sites. The author's solution would've been great if it was
implemented from the start. Right now, it might be good at best. Even if you
just show your site to a few of your friends, some of them are likely to get
the TLD confused if it's not .com. If this was implemented from the start,
though, that wouldn't be a problem because everyone would know that personal
sites don't use .com.

2\. Domain squatters, the real problem, will still exist. They'll just be more
selective. If someone can get beer.com, they'll still do it if it's $100/year.
That's still likely to be a good investment. If you raise the price enough to
make that a bad investment, you've probably priced out a lot of serious
commercial sites that just don't have the money for an expensive domain name.

Perhaps a better solution from the beginning would have been to have a bunch
of cheap TLDs that anyone could use for anything at $1/year, and then .com
which would have varying prices depending on the value of the domain. True,
you can't predict with certainty what will be valuable, but you can predict
with reasonable certainty that any word in the top 1000 English words is
likely to be valuable. You can similarly predict that shorter names are likely
to be more valuable than longer ones.

Of course, we don't have the option of changing what was done, so that's
probably all moot.

~~~
notahacker
I'm not sure that domain registries attempting to extract maximum value from
.com would have made the market more efficient...

~~~
nanairo
Why not? You could also auction being the registry for .com domains: if it's
worth so much they will spend more money, which the ICANN can use to
subsidised as needed.

As an example look at the auctions for the mobile phone frequency licences:
that worked pretty well.

~~~
notahacker
The same problem with evaluating the value of domains exists; no effective
price signalling and temporal fluctuations in the value of a domain to any
individual.

Moreover, by capturing much of the value of domains currently realised by the
domain aftermarket, the registrars would remove much of the little amount of
signalling in the market that currently exists.

It's like suggesting that dysfunction in the labour market would be reduced if
wages were set by a really big organisation, like the government.

~~~
nanairo
But I didn't say ICANN would set the prices, I said it would auction them. Not
sure I understand how your point applies.

------
ataggart
The function of the registrars is as a mechanism for homesteading, much like
establishing initial private ownership of some newly discovered land. As such,
the price charged by the registrars should be largely irrelevant and held as
low as possible to not inadvertently set a price floor (this is after all a
commodity with effectively zero marginal supply cost).

Once some individual comes up with and homesteads a domain, it can be used by
them toward some ends, or traded/auctioned in the market whereby a price will
emerge (see Coase theorem). To be clear, there is no "right" price, just
whatever the market will bear, even if the market is constrained to a single
domain name. Externally applied "fixes" would only serve to distort the market
in unexpected and harmful ways. As Hayek noted, "The curious task of economics
is to demonstrate to men how little they really know about what they imagine
they can design."

If there is a problem here it is either that the transaction costs (including
non-monetary costs) of such exchanges are high (which provides an
entrepreneurial opportunity), or the value of the domain to its current owner
just happens to be higher than what others want to pay and those others are
upset. Not much can be done about the latter, short of coercion.

~~~
eru
Instead of selling domains, they could lease them, and auction off the new
lease once the old lease has expired.

Most auctions would probably not be contested, and you had the same situation
as before. But for the interesting domains, ICANN could thus capture the value
of the domain.

Neither this or the current solution (what you describe) is preferable from
the outside. It's just that different parties capture the values of the
domains. (And if I were to make the rules, you can bet that I would ensure
that I capture the value. Or at least some of it.)

~~~
vaksel
we do lease domains now. You don't actually own the domain...it can be taken
away at any time.

~~~
eru
Maybe. But ICANN isn't capturing the value, or is it?

------
jdietrich
Fine, except some of the big owners will not sell under almost any
circumstances. There is a domain which I am prepared to pay five figures for,
but the owner (one of the largest domain squatting firms) has a policy of not
entering into correspondence about the sale of their domains. Frustratingly,
the domain has virtually no commercial value to anyone but myself, but the
owner has obviously decided that it is not worth their time.

Personally, I think that the current domain system is a nonsense. In a system
with a finite number of short, pronounceable names, it seems manifestly unjust
that most names are not being put to good use. I'm of the opinion that ICANN
should set a blanket ban on squatting, and that failure to make good use of a
domain should be automatic grounds for revocation under the ADRP.

~~~
omarchowdhury
But how would you define what constitutes 'good use' of a domain?

~~~
jdietrich
Something more substantial than simply displaying automatically-generated
sponsored links.

~~~
colonelxc
But why does a domain need to host a webpage? I get that we mostly want snazzy
domains for webapps these days, but if I grab a domain, point it towards a
server that only serves SSH externally, what's wrong with that (Actually, I am
considering doing just that for a domain I have been eying).

Defining 'substantial' is difficult, especially if we start pulling lawyers
out to sue for the lost of virtual 'real estate.'

------
Nogwater
How about instead of increasing the cost, we decrease the value of squatting
on a domain? Browsers (via a plug-in or built-in mechanism) could show a
little warning page before loading the actual site if the site is known to be
a squat page (the way Google does with malware sites). If enough browsers had
this feature, it might cut the revenue generated by squatters to be not worth
it for the vast majority of domains.

~~~
benologist
It's a great idea, except Google funds 1/2 the squatted domains _and_
browsers.

------
nickpinkston
One answer is to use an analog to a land value tax. Call it a "domain value
tax". The idea is to have the most productive user of that domain (judged by
the one who has the most money) pay the efficient rate. This leads to perfect
efficiency, however it means your company's domain might be highly bid up by
someone else - not fun. We might not want ::perfect:: market efficiency here.

Shameless plug - My article on this:

[http://www.nickpinkston.com/2010/04/domain-value-fees-
cybers...](http://www.nickpinkston.com/2010/04/domain-value-fees-
cybersquatters-be-damned.html)

------
donaldc
Fortunately, there's an almost infinite number of domains, even within the
.com tld. It just requires a little more creativity than it used to to think
of a catchy one that hasn't been taken.

Now, if we were actually _running out_ of domain names, the way we're slowly
but surely running out of IPv4 addresses, then we'd have a serious problem.

------
bad_user

         Dot-com names should cost $1000 and there should be 
         another TLD that costs $1/year for all of our hobby 
         projects
    

Hobby my ass, just because you can afford $1000 and I cannot, that doesn't
make my project a hobby.

Livable land on earth is more limited than the number of decent domain names
(yeah, you can make a living without owning sex.com ... sexandbutter.com would
do just fine ;)).

And yet I don't see too much bitching about land-owners that don't want to
sell. You want to get that piece of property, then offer more money
(everything has a price).

Yes, I have one bitching domain name that I haven't used yet (owning it for
the last 2 years), but I will and when or how is none of your business.

Get off my lawn!

~~~
vaksel
technically it does.

if you can't afford $1,000 that means you aren't even making $1,000 a year. If
your project only makes you $83/mo...it's just a hobby.

~~~
bad_user
Technically you can make 1 million $ in revenue and not have $1000 in profits.

~~~
vaksel
yes...but it doesn't work the other way...you can't have $1,000 in revenue and
$1 million in profits.

~~~
bad_user
I don't see the relevance.

Spending $1000 a year for a domain is $1000 that gets cut from profits and
$990 more than I'm willing to spend on a domain that's on standby until I have
the time to work on my idea.

On the other hand I should have the first-mover advantage, because yes, I
thought about that name before somebody else did.

Properties in general are cheap for first-movers ... I can think of dozens of
places where I can buy land from uninhabited areas with a breath-taking
mountains panorama ... for small prices like $5-$20 per square meter.

Prices get high sooner or later due to infrastructure developments, or
increased demand, but thought luck, it's my property now.

And yes, for land you pay taxes ... but you're receiving services in return,
like water, electricity, public roads, hospitals, etc...

So you want that domain name so badly? Pay me a sum I cannot refuse.

Sure it will cost you more than $1000, but that's life for you, and you
shouldn't have a problem if your project is not a hobby :)

------
WiseWeasel
How about the cost per domain increases the more you own. For example, the
first one costs $7/yr, the second, $10.50, the third, $14, $17.50, etc. in a
gradual linear curve, (or maybe $7, $10.50, $15.75, $23.63, etc. for an
exponentially increasing curve) to discourage hoarding.

~~~
nanairo
It would be very difficult to check though: a bit too easy for people to find
loopholes or cheat somehow.

~~~
WiseWeasel
True, but at least the framework would be there, and it could gradually be
made more difficult to circumvent without significant effort, potentially
making a good dent in the problem.

------
ohashi
I think this is one of the most well reasoned pieces of the domain name issues
I've read in a long time. I don't quite agree with the conclusion as a real
solution. It's too late in my opinion. We can't start over and have such
dramatic pricing changes. In fact, I am appalled to see prices going up
(VeriSign increasing prices 7% annually for no reason in a contract that
wasn't competed for). Prices should be going down.

As far as negotiations and tracking down buyers... it varies. I've done domain
investing for a living for many years. Most people big or small are quite easy
to contact. Some big guys are a real pain to deal with (it's not worth their
time to sell even for a few grand). Some small guys are more than happy to
sell a name they no longer use. I cannot generalize from my experience which
type is better/worse/harder/easier/etc. It's as unique as the domain you want.

Finally, most of these people aren't squatters. Squatters are violating
someone's trademark, property owned by someone else. Using Beer.com and saying
someone is squatting on such a name is complete and utter bullshit. It's a
generic word, it's not being cybersquatter unless someone has a TM for beer on
its non-generic purpose and that is what they are using the domain for.
Thanks.

~~~
what
Snapping up domains names to sit on them and resell them at a SIGNIFICANTLY
higher price when someone finally wants them is commonly referred to as
squatting. It doesn't matter what the official definition is. People will use
words as they see fit.

~~~
ohashi
People will be corrected when they use words improperly. There is a legal
definition, and it's an important distinction.

------
terrellm
At the time of this posting, there are 12 references to "squatting". While it
may be arguing over semantics, it is an important distinction as there is a
difference between "squatting" and "investing".

An individual who saw the foresight and bought a few acres of land that later
became highly desirable for a subdivision is heralded as a real estate
investor while someone doing the same with domain names is lumped with the
shadier individuals in society.

 _According to the United States federal law known as the Anticybersquatting
Consumer Protection Act, is registering, trafficking in, or using a domain
name with bad faith intent to profit from the goodwill of a trademark
belonging to someone else._

Source: <http://en.wikipedia.org/wiki/Cybersquatting>

After seeing how good domain names could help me better market my software as
a startup on a tight budget, I became intrigued and am a part-time domain
investor (domainer).

~~~
JoachimSchipper
Uh, I don't know what it's like where you live, but where I am "real estate
investors" _are_ some of the shadier individuals in society...

------
bugsy
I've never squatted on a domain.

Is the idea here that each year every domain would be subject to auction to
the highest bidder? If so, that hardly seems fair that after having spent
thousands of hours promoting a domain and invested in it that a spammer can
come along and outbid me for my own domain.

If the idea is that this should only happen when you first buy, it's similarly
absurd. When you buy a domain there is only one person that wants it - you.
Otherwise the domain is "not available".

Also, no one made the domain. Why am I paying some third party for a domain
anyway? It's not like their labor manufactured the domain.

------
dstein
The problem really only exists for the .com TLD. What really needs to happen
is to deprecate .com entirely. ICANN should stop registering them, and all
existing .com's should be migrated, or re-registered in their country of
origin (.co.us, .co.ca etc). Each country can then decide on the restrictions
of their .co domains. I would prefer .co domains to be of officially
registered companies and trademarks. If you're not a business, then you don't
need a .co.* plain and simple.

~~~
bad_user
That's stupid simply because the Internet removes barriers and many companies
operate on a global scale.

~~~
dstein
It is trivial for a multinational corporation to register company.co.kr and
company.co.us. If they don't really want to run separate websites one can
redirect to the other.

~~~
bad_user
Why would the physical location of a company matter if that company provides
online services?

While trivial, it's not good marketing.

The only instance I see country TLDs as being actually useful is for localized
versions of said sites ... Google already does it, but it's not like it is
useful for an email address to end with "gmail.ru", quite the contrary.

A better suggestion would be to use custom TLDs based on some category your
website fits into ... like ".fm" for radio, or ".info" for hosting your
personal resume, or ".doc" for archives of documents, and so on.

Sure, people are very accustomed to .com domains, but who's to blame for that?

Also a brand is a brand ... say you have the luck of registering "google.nu"
... most likely Google can take it from you by force ;)

------
albahk
What happened with domains over the last 20 years (landrush) happened with
property hundreds of years ago. Governments basically gave it away to ex-
convicts (in Sydney, Australia for example) to own and do with as they please.
Over time, the land was bought and sold and now modern day Sydney sits on that
land. This will happen with domains over time. And, unlike land we can create
new tlds like .jobs .travel etc.

------
Xipe
Domains are archaic and waiting for a better solution, give me my semantic web
already.

------
vaksel
I think $10/mo is fine for domains. Actually I think it should be $20 a month.

The small time owners will have no problem paying that. Who doesn't have $20 a
month for their blog? Eat one less taco bell meal and you are good to go.

And it won't do much for the small time consumers who get 5-6 domains. It's
bad...but not by much. The only people such a price would hurt are the guys
with 2,000 domains who'll go from paying $20,000 a year while making $180K of
selling domains, to paying $480,000 a year, while still making the same $180K
a year(prices will increase, but not by much...can't very well ask $500,000
for strawberries.com)

This will free up a ton of short term domains from the guys who get exact
match domains hoping someone will buy one(whiteweddingdresses.com,
ipadsoftware.com, askhackernews.com, goodbookstoread.com). At $10/yr it
doesn't matter if someone buys...at $240 a year you can only afford to keep
the really good domains.

And this can actually happen. The registars don't control domains...ICANN
does. All they need to do is bump up the ICANN fee from 30 cents to 18 bucks
for the .com and bam instant market correction.

And with all the money ICANN will get, they can create a free domain
extension...i.e. something like .web. And the rest can be spent on improving
internet infrastructure world wide...laying fiber, so anywhere in the world
you can get 1gb/s.

ICANN is a non-profit...it should be doing more than just solving domain
disputes.

~~~
njharman
> Who doesn't have $20 a month for their blog?

Vast majority of people in the world. Everyone who is below middle class
income in the USA (which is a lot more than you probably realize).

The Internet is not just for rich people and it should certainly not just be
for making money.

~~~
vaksel
fine...first 3 domains at current prices...everything else $240/yr...or they
can just get a .net...or get a domain on their country's TLD

~~~
pier0
Their country's TLD?

I assume you are American, but when did exactly .com became the USA's TLD? .us
is your country's TLD

~~~
vaksel
1985...when it was administered by U.S. DoD

