Zak Muscovitch Gives BEST Argument EVER for the Legitimacy & Practice of Buying and Selling Domain Names

Morning Folks!!

After Verisign dissed ALL Domain Name Investors and Speculators by their blog post there was a strong response and sometimes emotional response by the domain bloggers and many others including yours truly. Domainers are angry and offended about that. Rightfully so!

Now the dust has settled and Zak Muscovitch (General Council for the Internet Commerce Association) has made a terrific response to and about Verisign on CircleID with an article published this week.

Zak's defense of buying and selling domains is as good as it gets! I will read it over and over as it is filled with PROOF that we we all do is BONA FIDE, LEGITIMATE and happening throughout history. Anyone that says anything else can STUFF IT! Nothing to feel guilty about! Nothing to even defend. We are doing something as old as capitalism is and 1000 years before that!

Rick Schwartz

Now from Zak Muscovitch:

"Domain Investors and Registrars Operate in a Competitive Marketplace

In its aforementioned blog post, Verisign made some unfortunate suggestions that domain name investors and registrars who participate in the domain name aftermarket may be considered "scalpers", and that domain investors' businesses are "questionable". The domain name aftermarket, to the contrary, is entirely lawful, highly competitive, and any profits earned are the result of successful investment in a free and open marketplace.

1. Investment Lawfully Exists in Every Marketplace

Whether in land, a catalogue of Beatles songs,[18] or domain names, investing in assets is a natural by-product of a free and open market. Domain registrants use and risk their own money to lawfully purchase generic and descriptive domain names on a first-come, first-served basis and from prior owners, and they have every right to continue to do so. Domain name investors range from an at-home mom making a casual investment in a handful of names, to a top branding agency that offers for sale thousands of domain names that were registered as a by-product of brainstorming new name candidates for clients,[19] to professional domain name investors who spend substantial money and efforts on building a portfolio and marketing it to the public. Domain names are also sold by companies large and small who originally registered the domain names for future development, defensively, or because having a valuable .com domain name is helpful for their business. Such business activities involving domain names are entirely legal, expected, and natural. There is nothing "questionable" about it. As one commentator recently put it, a domain name investor is engaging in no more "questionable" business activity than a Verisign shareholder who purchases stock in the hopes of reselling it for more than they bought it for and for whatever the market will bear.

Domain name investors risk their own capital to register or purchase a domain name with no guarantee that they will ever see a return on that investment. Domain investors compete with thousands of other market participants around the globe, seeking out desirable domains, and bidding against each other at auctions where the price is set by the market through the combined actions of thousands of participants. Many domain name investors lose money on their acquisitions, as they find that they have overpaid to acquire domain names that others do not regard as an attractive investment or which others do not want.

Investing in valuable generic and descriptive domain names is comparable to investing in vacant real estate. Both investments are made on the basis of an expectation that there will be an appreciation in value upon resale. A businessperson who wishes to open a storefront on 5th Avenue in New York City would expect that land to be already owned. Similarly, it should not come as any surprise that a valuable domain name already has a registered owner, whether it be a professional domain name investor or another kind of business, and that the owner is prepared to sell it at a market-determined price.

2. Professional Domain Investors Control an Estimated 10% of .com Domains

The best estimates are that the holdings of professional domain name investors represent approximately 10% of all registered .com domain names. The other estimated 90% of .com domain names are held by individuals, small businesses, and in the portfolios of large corporations. Those estimated 90% of domain name registrants may never interact with the domain investment community, and may never purchase an aftermarket domain name, but 100% of .com domain name registrants may soon be subject to higher registration and renewal fees from Verisign. As such, if Verisign were permitted to raise the fees for .com domain names, most of the burden would fall on the vast majority of .com registrants who are not domain name investors. It is not enough to excuse a fee increase by saying, "well, it's only a dollar or two more" that registrants are being charged, when that dollar or two more, across the entire class of .com registrants, adds up to billions of dollars in excessive fees.

3. Domain Name Investors Offer a Valuable Service by Providing Liquidity to an Illiquid Market

Domain names are notoriously illiquid investments. The holding period of domain names held by domain name investors can stretch into decades. Yet if an individual or a company wishes to immediately sell a domain name, it is the investor who steps up to provide a ready market and liquidity. If, for instance, a retiring couple who used a valuable generic domain name for their business and now wished to sell it since it was no longer needed has trouble finding an interested end-user buyer, domain name investors will often step in, bid against each other for the right to acquire the domain name, and thereby create a liquid market enabling the couple to quickly convert their domain name into cash. When Yahoo! wished to sell its contests.com domain name, it was put up for auction at a domain investor conference where the winning bidder paid $380,000.[20] Domain name investors allow domain name owners to readily obtain cash for domain names that they no longer need, or may otherwise wish to sell.

4. Domain Name Pricing and Availability Would be Little Different Even in the Imagined Absence of Domain Name Investors

Domain name investors do not set the market value of aftermarket domain names nor do they determine which domain names are desirable — the operation of a competitive marketplace does. Prices and desirability are dictated by the market. If the asking price is set too high, a buyer can choose from a variety of similar domain names available at a range of prices.[21] If a domain name is desirable, it would have been registered long ago even in the absence of domain name investment.

Verisign proposes an unrealistic scenario in which, in the imagined absence of domain name investment, valuable domain names such as Ice.com (bought for $3,500,000) or Super.com (bought for $1,200,000)[22] could be obtained at a standard registration cost of around $10 each. Even if professional domain name investors vanished, high-quality domain names would not be sitting unregistered and the owners of these domain names would seek the market value for them.

For instance, Procter & Gamble was one of the companies in the early days of the Internet with the foresight to register valuable generic dot-com domains, such as the kind favored by domain investors. When they went to sell some of their domain names, such as flu.com, beautiful.com and thirst.com, P&G;was surprised by the high value of those domains in the secondary market. P&G;did not offer those domains for sale at its cost, nor did anyone expect them to.[23] Similarly now that electrical engineer Marcelo Siero has decided to sell the domain name ee.com, which he registered 24 years ago, he is seeking a market price in the millions of dollars,[24] and who would fault him for that?

Twenty years into the evolution of the commercial Internet, and after over 100 million .com domain name registrations, there are almost no domain names of general value sitting unregistered. The net impact on .com domain name availability due to the presence of domain name investors is that domain name investors have registered millions of lower-quality, less desirable domain names that otherwise might have gone unregistered.[25]

5. Verisign Encourages Domain Investing and Has Benefited Greatly From It

Verisign, throughout its history, has encouraged people to invest in domain names and has been a primary sponsor at conferences focused on domain name investing. Verisign had good reason to do so, as domain name investors send tens of millions of dollars to Verisign annually from registering millions of domains that no one else has shown much interest in. The business most benefiting from these registrations is Verisign itself, which receives $7.85 per domain name per year while taking no risk, whereas the domain name investor often loses money on his or her investment.[26]

6. Verisign Sells Domains at Premium Prices

During the "land rush" for the Japanese[27] and Korean[28] versions of its .com domain names, Verisign unilaterally set initial prices on certain keyword domains at over $10,000 each.[29] For instance, Verisign set a premium price on the Japanese version of <blog.com>, which is ブログ.コム. This domain is currently available for first-time registration at a price of $15,000 from Name.com.[30] Our understanding is that while a portion of this price represents a retail mark-up charged by Name.com, the base price set by Verisign was over $10,000. Verisign's criticism of speculators for offering premium domain names at market prices, when Verisign engages in comparable sales, therefore appears to be extremely contradictory."

[18] "McCartney told Jackson about how he had been purchasing other artists' catalogues (such as Buddy Holly's) as a business investment.", see: http://mentalfloss.com/article/85007/how-michael-jackson-bought-publishing-rights-beatles-catalogue

[19] See http://justtheword.com/

[20] https://domainnamewire.com/2009/06/17/yahoo-sells-contestscom-for-380000/

[21] "Finding the right URL can be daunting, but with a little time and effort you can absolutely find a domain that works for your brand — and your wallet!", see https://catchwordbranding.com/catchthis/naming-tips/your-websites-url-an-expensive-com-domain-name-or-these-creative-alternatives/

[22] Source DNJournal.com

[23] See https://www.nytimes.com/2000/06/28/technology/procter-gamble-plans-to-sell-domain-names.html

[24] https://globenewswire.com/news-release/2018/03/07/1417995/0/en/EE-com-Domain-Name-Announced-for-Sale-by-VIPBrokerage-com-DomainAssets-com.html

[25] "While buying up a ton of domains seems like a great way to make some extra money, the real world results show that it is very hard to make that process profitable."; see: https://moz.com/blog/is-buying-domain-names-profitable

[26] https://morganlinton.com/hand-registering-domains-today-is-a-fools-game/

[27] https://blog.verisign.com/domain-names/launch-of-verisigns-first-idn-new-gtld-コム/

[28] https://blog.verisign.com/domain-names/verisign-launches-new-gtlds-for-the-korean-market-닷컴-and-닷넷/

[29] https://domainnamewire.com/2016/06/15/domainers-say-verisign-bungled-first-idn-launch/#comment-2239419

[30] https://www.name.com/domain/search/xn--qckyd1c.xn--tckwe


By Zak Muscovitch, General Counsel, Internet Commerce Association



20 thoughts on “Zak Muscovitch Gives BEST Argument EVER for the Legitimacy & Practice of Buying and Selling Domain Names

  1. CJ

    Nice article! Listening to the devil….I mean Verisign would not be the smartest thing for anyone to do except their execs and shareholders. Clearly they are all about themselves. I say they should drop the wholesale price because managing a database cannot be that expensive!

    Reply
    1. judicious

      ding ding ding. that is exactly right. costs are going down. newer technolgies exist. (cloud computing, international datacenters, open source software, blockchain technology, more registries exist) instead of decreasing prices to provide a fair value at reasonable pricing, verisign is just racking prices up, lobbying behind closed doors and doing backwards deals with any shoddy person or organization it can convince of its corrupt ways. there is nothing honest or ethical about this monopoly.

      Reply
  2. Michael Anthony Castello

    In the early 90’s when domain names were free, “only” a non-profit could register a .org, “only” a network could register a .net and “only” a four year university could register .edu.

    When Verisign/NetSol made the decision to retroactively have registrants pay $100 for two years did they then allowed anyone to register a .com, .net or .org with no restrictions. In my opinion, they were the ones that abused and profited from the DNS.

    Reply
  3. St Elmo

    The same ICA thing that happened to be part of the voice against a .com price increase? Let’s face it, they are just reacting to the Verisign blog post where it/they was/were mentioned in.

    Whilst the points made are valid, this is coming from the wrong source.

    If a very specific type of buyer fights a bakery on a tiny price hike of bread and claims to do so on behalf of consumers and does not represent his position honestly (being a reseller with higher margins) and then gets called out for misrepresentation, then it’s the fault of that specific buyer/entity when other similar buyers are also labelled similarly by the bakery and/or as having double standards.

    Then after being called out, wants to act like an angel and *supposedly* “defend” all similar buyers by arguing points which contradicts his initial outrage of a price increase of bread. Even if the points argued subsequently are valid, it’s all meaningless because it’s coming from the same source.

    This ICA is a joke. Can we get real here- this whole thing came from cheapskates pretending to represent a much wider group of people who actually may never have had a problem at all with a mere 7% increase for .com domains (after no increases for years and years).

    If an arsonist sets a building on fire and then tries to get rid of fire- is he a hero? The building is completely fucked, but hey, the arsonist is a hero.
    If it was a firefighter that attempts to douse the flames, then yes, he could be considered a real hero.

    Reply
    1. Rick Schwartz

      What I posted has very little to do with ICA or Verisign. This has to do with taking a portion, the silver lining, that came out of all this nonsense.

      Zak’s argument is brilliant. That’s the point. That’s my only focus. I could care less about the ICA. I could care less about Verisign.

      I care about having ammunition to fight back charges that are likely to come more frequently in the future then even in the past.

      I don’t care about the price increases I don’t care about any of the nonsense to be honest with you. I only care about protecting the legitimacy of what we all do so that anyone with any common sense whatsoever understand it fully and totally. What Zak wrote helps to do that in a very professional and dignified manner.

      I don’t care about the price increases. I don’t care about any of the nonsense to be honest with you. I only care about protecting the legitimacy of what we all do so anyone with any common sense whatsoever understands it fully and totally. What Zak wrote helps to do that in a very professional and dignified manner.

      He makes a very very strong case. It would be hard to penetrate the case he’s made. Hard to penetrate without looking totally foolish that is. So for those jealous people that want our assets this helps. For those that accuse us of being cybersquatters this helps. For the value of domains this helps.

      Reply
      1. St Elmo

        I completely agree with everything that you’ve said, and understand where you are coming from.

        Reply
    2. gojerry

      — Then after being called out, wants
      — to act like an angel and *supposedly*
      — “defend” all similar buyers by arguing
      — points which contradicts his initial
      — outrage of a price increase

      You seem to be missing the point. As Andrew Allemann pointed out last week, this is not the first time this expression is being made by Verisign. It is clear the tides have turned lately, profits are not enough for Veri so it is now starting to vilify domainers. Verisign SVP Pat Kane sent a public letter to Senator Roger Wicker stating the same thing back in July. It is a top story on Domain Name Wire right now. The stars are aligning. Domainers should be waking up to the fact Verisign thinks of them as scum, “scalpers” as they put it, and is pitching that idea to senators and the US Govt, maybe even ICANN? This is very serious. I agree Rick’s post was not about that, but about how good Zac’s response was at pointing out the legitimacy of domainers. But it all surrounds this very core issue to all of us. It is very scary and troublesome that Verisign now wants to eliminate domainers and take domainers hard worked profits for themselves. And sounds like they are making this pitch in order to allow them to raise rates.

      I have lots of domains that Rick calls Pigeon Shit. And while Rick might not own these, I do, and rates raising even 2% hurt me. I hold many domains for future projects, not even for resale, and these are sunken costs every year until I decide to develop and use. Just like the 90% of non-domainers that own domains. Look at Alexa top 1 million domains. Domains that rank 1 million get very little traffic and are not very professional. The 10th millionth most trafficked domain is a joke. That means from 10 million through 130+ million, these domains are barely used. Yet only 10% of domains are owned by domain investors as has been suggested. This is much bigger and broader than domain name investing.

      — people who actually may never have had a
      — problem at all with a mere 7% increase for
      — .com domains

      You say “may”. Fine, then take a poll of everyone who owns a .com domain if they want a price increase or not. This is a public resource and should be operated as such. Don’t blindly force price hikes upon me. Give domain owners a voice, which right now there is zero voice representing end users. Only lobbying against domainers in order to increase prices of domains – for Verisign’s benefit. It would only be fair to put a public poll to every person of “interest”, which is anyone who owns a .com domain. And if price increases are needed, allow Verisign to make it’s pitch as to why. It is how elections and voting happens, and changes to law happen. The PEOPLE have a say. And if they all believe Verisign is in dire need to increase prices based on its arguments that it does not have enough money to run a stable extension, or something has changed – then allow the people to VOTE for a price increase. Don’t do this behind closed doors where there is no say from the people, but only from one small group of people whom were lobbied and convinced of bull.s.. that only Verisign swayed them of.

      This situation is totally unfair. And extremely, totally corrupt. I for one thank the ICA, DomainNameWire, TheDomains, Rick Schwartz, NamePros and others for pointing these issues out. If we did not have these (sorry to say) somewhat small blogs catering to the domain industry, this might have gone unnoticed until it is ultimately too late. I think it stinks of corruption to the utmost degree. Thank you Zac for what you have done and opened my eyes to!

      Reply
  4. Jose

    After reading your post, I only think of writing a script of the story of Verisign, which in the end would be an Executive Summary so that you can see that this business is one of the most profitable in the world.

    Happy day.
    Jose.

    Reply
  5. gojerry

    ah yes, and they should be rewarded with absurd increases in profits because they need it, and have the right to “scalp” the world? this only takes hard earned money from me and gives it to verisign. for what? to what reason? because domainers are scalpers according to them? verisign sickens me to the bottom of my stomach. just appalling.

    Reply
  6. Staff

    “2. Professional Domain Investors Control an Estimated 10% of .com Domains”

    Control? 10% ?

    VS knows exactly how much % and whois.

    Check the data & source, to make sure it includes all the domain names and full + part time investors that you need for your next petition to be granted.

    > 10% believe they have “control” over the .com domain names. That says a lot.

    Rather than getting into a dialogue and helping “other” domain investors understand what are the pros and cons of filing a petition, ICA’s board attempt to manage the “others” non members and market & protect the 10% pro investors members only interest.

    You won’t be able to do much good for “others” non members if you don’t run the full policy and priority debate. You just asked for the help when you’re in need and in a form of public relations.

    This > the ability to participate in ICA policy and priority decisions cost you min $600 USD

    (P.S. Don’t take it personally. Constructive criticism is not an insult.)

    Regards

    Reply
  7. Don

    What a great article. I would say best of the year and most important.

    (Putting price into perspective)
    Most family’s health insurance went up over 100% over past 6 years. We are talking about 80-100k. Gas goes from 3 to $4 and no one really says much even though you pay an extra 2 or 3k a year and you get nothing back. But if domains go up in price by a few bucks over 6 years the world ends. Health insurance and gas are monopolies also. Sometimes you just can’t do much about it.

    If anyone is felling bad about the price increase – go buy one of those funny odd ball extensions that charge more than 1k-5k for renewals each year or the other horrible ones that charge $50 o $100 to register. It will make you fell better about .com prices. Or just prepay for 10 years and lock in all your good names.

    Reply
  8. Tyger Gilbert

    I concluded 20 years ago that Verisign was a bunch of crooks when they refused to release an expired 6-letter .com domain I wanted. It’s still unregistered, unavailable, and doesn’t even have a parking page on it. It’s still kept by one of their subsidiaries. Nothing about it should keep it from being publicly available. No valid reason for this behavior. They don’t deserve any price increase. They don’t deserve the current price they get. It’s no surprise to me they would try to give domainers a bad name.

    Reply
  9. John

    Great work.

    Now we need Zak to support penalty for RDNH.

    Not on a losing “loser pays” theory, but on an “abuse and defrauding of process” reality.

    Reply
  10. Mohamed Ahmaid

    “a domain name investor is engaging in no more “questionable” business activity than a Verisign shareholder who purchases stock in the hopes of reselling it for more than they bought it for and for whatever the market will bear”

    In Arabic culture we have saying :
    Camel does not see the curve in his neck.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.