> they call themselves “domain investors” and believe that they’re a legitimate market force. But all they’re doing is stifling innovation
You can't get the domain name you want for the price you want to pay.
Boo-hoo.
I can't get tons of things for the price I want to pay.
That's life.
You've got no moral claim on a domain name that someone else already owns.
If you're use of that domain name is going to generate a ton of value, you'd find a way to get the money and buy the domain.
In fact, you don't do this. The market is working properly: you're not prepared to demonstrate with cold hard cash that you're the best use for the name, therefore you probably are NOT the best use for the domain.
* UPDATE *
Just noticed this:
> when multiple people register a backorder on the acquiring backorder service, there’s an auction held for a few days and the domain goes to the highest bidder. It’s capitalism at its not-so-finest.
What alternative do you propose? The person who really really wants it bad gets it?
Without saying whether it's a good solution or not, in the real world "properties" (as some people have taken to calling web sites) get taxed. Amongst other things, this encourages the property owners to "shit or get off the pot" in terms of utilizing the property: if you are not making anything off of it, you will actually lose money because of the taxes, so you're encouraged to sell it, or dedicate some time and effort to fix it up to a point where you can rent it out or otherwise gainfully employ it.
With domain names, there is a fixed yearly "tax" of something like $10.
There are a lot of things to dislike about property taxes on domain names, but it would be one way of encouraging people to either do something or let them go, which hopefully would encourage them to end up where they are most 'productively' employed.
> this encourages the property owners to "shit or get off the pot" in terms of utilizing the property:
And why is that good?
Imagine that someone has good reason to believe that item X will be worth $1,000 in three years, which means that in a 3% interest rate regime it has a NPV (Net Present Value) of $915.
Right now he's got an offer on the table for $800, but if he accepts that and the resource gets used up, he (and society) lose out on $115 of value.
Slap a 10% annual tax on the asset, and he WILL sell it, right now.
What about the value that someone else could created by using that property productively over those three years? And the likelihood that, three years from now, item X turns out not to be worth $1,000 at all?
Then that value has been destroyed in your scenario.
This is why property tax can be a good thing: set properly, it creates an incentive for conserving property for future productive uses when those seem likely enough, but also incentivizes people not to waste current possible productivity.
if you are not making anything off of it, you will actually lose money because of the taxes, so you're encouraged to sell it, or dedicate some time and effort to fix it up to a point where you can rent it out or otherwise gainfully employ it.
This sounds like an argument for ending property tax, not an argument for adding a "web property tax."
Property is a scarce resource. It's not nice if someone has a huge building downtown and just lets it rot, because that has negative externalities for other people in the area.
To me, encouraging property - especially the commercial sort - to go to its most productive use (or at least some productive use) makes sense. Whether property taxes are the most efficient mechanism is a pretty broad and complex debate; I was just suggesting one idea that may or may not work. Personally, I think I'd be against a web-domain tax, but it bears thinking about.
No, it's broken because valuation isn't based on anything concrete, and people who moved early essentially made money for free. When you and I disagree about valuation by a factor of 10 or 100, people "unfairly" hold on to domain names because they think there's a chance they might get an offer 100x larger, and you (as a reasonable buyer) get screwed.
The other problem is that, unlike land, domains aren't really "reusable". You can't rent them for a year, then give them up. Your whole brand is tied to them.
I've encountered a number of people/companies who own good domain names, who don't actually use them at all. One is waiting for an unrealistic multi-million dollar purchase, and refuses to part with it for the market price, which is around $30K, and for which he's gotten a number of offers through the years. He's convinced his domain is his ticket to winning the lottery someday, when Microsoft or Apple decides they'll name their product exactly what his domain is and decide it's worth $3 million. It's ridiculous.
The other is a company which has nothing to do with technology, which owns a "domain name portfolio" of names completely unrelated to their business, with the explicit purpose of holding on to them and not selling them for any price, at least for a decade. It took me weeks of research to even get in contact with them, because they view it as a purely financial decision, and don't want pesky Internet people bothering them about their domains.
This kind of thing doesn't happen with stocks or product pricing. The domain market system is fundamentally broken.
The market is not working properly: it's not, to use the term of art, clearing. Buyers look at what sellers (domain-squatters) are offering, say "well screw that for a game of toy soldiers!" and buy a substitute good (a green-field domain name). The sellers are at fault here: they're not willing to lower prices, and as a result, buyers don't go to them, but instead resort to substitute goods.
As other replies note, the market for domain names has some unique features - but I also think that it's important to note that you're wrong when you say that it's "working properly."
You can't get the domain name you want for the price you want to pay.
Boo-hoo.
I can't get tons of things for the price I want to pay.
That's life.
You've got no moral claim on a domain name that someone else already owns.
If you're use of that domain name is going to generate a ton of value, you'd find a way to get the money and buy the domain.
In fact, you don't do this. The market is working properly: you're not prepared to demonstrate with cold hard cash that you're the best use for the name, therefore you probably are NOT the best use for the domain.
* UPDATE *
Just noticed this:
> when multiple people register a backorder on the acquiring backorder service, there’s an auction held for a few days and the domain goes to the highest bidder. It’s capitalism at its not-so-finest.
What alternative do you propose? The person who really really wants it bad gets it?
Isn't that what's already happening?