Domain Industry Derailed by Scandal. An Inexcusable CRIME spills on Everyone.

Morning Folks!!

Okay, this is a barn burner of a post. As usual, I will say things others won't. Others can't. That is why they are so much smarter than me. Grab a cup of coffee and have a seat. The events of this week has and will affect your futures. Each time I go to post this, new news breaks.

The Sad Day in the Domain Industry continues. I think it takes time for all the ramifications to settle in. The entire industry needs to be paying attention and listening to the tales of woe. I see and hear anger growing not subsiding while the company tries to paint a happy face on this breech of trust.

First I got aphone call about the scandal. I knew it was big and had huge ramifications the moment I heard about it. One sentence was all it took. I knew it would takes hours and days to figure out. Next I receive an email in which the Snapnames Exec messed up andposted something not meant to be posted:

'Below the double line is the customer communication for use in proactive disclosure on industry message boards. A statement needs to be published on each of the boards copied in the attached e-mail from this morning. Disclosure time is 9:30 a.m. PT, concurrent with all other disclosures.

Please monitor the boards going forward and let me know what the feedback is like. If you need help on this, Corinne is available.
My understanding is you will primarily speak for the company in these forums. To that end, let’s coordinate closely on what’s being said and how to reply.
Let me know if you have questions from here. Thanks.'

Larry Fischerwrote some of his thoughts. 'I commend Oversee for dealing with the issue, however their reputation is tarnished.' I can’t imagine
what it must be like to know you may have overpaid by tens of thousands or hundreds of thousands, even millions. He could have put his kid through college a dozen times on his losses alone. Now multiply that. Franky,Kevin, iReit, just go right down the line. Each with losses that affected their businesses and lives. They could afford it you say? Ok, but how about the ones that can't? Much more of them and they are pretty pissed. Besides when you get scammed, it does not matter how much you have or don't have.

The entire sales history of the industry
has been skewered and voided because of how many times this happened. 50,000 is
an incredible number and until everything is transparent, we would have to
assume it is much more. The calls for publishing those back auctions has a lot
of merit and I think that is a must as a first step. The fact that it even ever came off screams the wrong message and we all know it! Update: According to 'Rob' with Oversee support, the info is coming back online)

This scandal affected the entire futures of domainers that
participated. Their destiny changed forever because maybe they did not have the
$$$ to buy that next domain. That is the unknown and invisible damage that
trumps all others.

This is just one of those things that as you read more and
more blogs and comments on those blogs, that this is laced with unintended
consequences far beyond the first look.
Lawsuits, class actions suits, and arrests. Yes, I think there will
eventually be arrests. And to that end, maybe even give Nelson immunity so we can hear the entire unedited saga and how far reaching this is.
I don't know that anyone wants to see him in jail, however I can't speak for those that might and either way,I am sure everyone wants the full details. Full and unvarnished. Problem with that? They can't. The liability of the truth and all the details would be devastating imo. Nelson the fall guy? Could be. We have yet to hear any comments from him. Was a deal made to protect others to keep from being charged with a criminal act? Fact is, I don't know. What I do know is it is the #1 question folks are asking.

In an unrelatedpost a couple weeks back, I talk about how
much business a company can lose before it collapses.

Morning folks!!

This is for businesses 3-5
years or older.

During a recession if you
can manage to “Flat line” no growth……
You are doing GREAT!

During a recession if you can manage to just lose
10% year over year.....You are doing GREAT!

During a recession if you can manage to just lose
15% year over year.....You are doing Pretty Good!

During a recession if you can manage to just lose
20% year over year.....You are doing about average!

During a recession if you lose 25% year over
year.....You are under great stress!

During a recession if you lose 30% year over
year.....You are under great stress and scrambling to stay alive and pay the

During a recession if you lose 35%-40% year over
year.....You are GREAT TROUBLE!

During a recession if you lose 50% year over
year.....You are probably out of business

It is all
about numbers. So a poll was done yesterday on

If I plug in the results of that poll and if I use my table
as a baseline, you can readily see the peril.

At the time of this writing with over 227 votes, 34% say
they will not do business with them again. 17% say that they just don’t know. So I take 50% of the latter number to
give me another 8.5%. Total 42.5% of customers lost on this one episode.

You would also have to factor in 2009 business. So if
business were good, it would offset that number. If business took a hit in 2009
during the recession, you can add that to the above number.

That does not count any other fallout that may or may not
happen throughout their empire. They may recover, it may get worse depending on the news to come and if we see missteps where they take data offline that was there before to try and further cover up things. Cover up? Well yes. They did take their time in going public. Yes, they are making folks sign a waiver for a “Credit”. Yes they did remove the historical data. Yes we are watching damage contol of something that is not controllable.

My numbers do not factor in the size of the domainers
they lose. So when you just deal with the numbers and the lawsuits that are sure to come, I don't see them surviving. That is what the numbers say without knowing squat. Without knowing who. But their competitors should not be too gleeful, they too will pay a price. They too will be suspected. They too will have to answer some tough questions and do more investigating.

One question I notice popping up is whether domains are safe at
Moniker? I believe they are. I still have my domains there. I have no plans to
move them. Larry Fischer also addressed this.

It has really taken me a few days to get my head around this
and I am still far from figuring out all the ramifications as I am sure many of you are. I don’t quite understand why
Nelson is not be charged with this criminally unless there would be a lot more
to come out. That is why I believe Nelson would be “Deep Throat” should that
come to be and I expect this will be beyond the control of Oversee once
domainers figure out the full impact of what was done to them, their businesses
and their futures. I say that because we live in a business where we are
dealing with “Unique opportunities in time”. So you also add into that equation
a limited pocketbook. So for guys
spending small dollars or big dollars, it affected their NEXT purchase. So if
you had $10,000 less or $100,000 less to work with, all those domains you could
have bought, were not. No biggie? Are you kidding?? Multiply by your lifetime earnings and how
much bigger your income could be today. Somebody will make that case. Many may
make that case. SnapNames won’t survive that. I expect they have no better than a 1 in 3 chance to survive collapse and/or bankruptcy. When I started this post I figured just a 1 in 4 chance of them going under at all. 48 hours later, the bleeding is getting worse. After hearing about the class action I discuss below, I think it just went much lower. I think now the question becomes how much damage does it do to Oversee? I think Snapnames will fold. It is to the point that I don't know how they survive. The damages exceed the value of the company.

Now please, these are my personal opinions based on all the
pitfalls and perils I see. I started working on this post on Thursday night. I let it sit and edit all day Friday and all morning today. This is a snake pit of problems and it will affect
more than just SnapNames. There is major fallout coming here. For example, all
reported sales involving “
Halvarez” auctions need to be recalculated and we should get a REAL number of the total fraud that was committed. I feel and see anger building. No company can control the anger. They may be able to control some, but not all. How does anyone defend the indefensible without just painting a happy face?

Well that Happy Face just got 1000x harder to put on. The latest is the Class Action Website reported on by Adam Strong who had the funniest comment so far. 'Too bad Edelson doesn’t have an affiliate program'. This is game changer. There is blood in the water and everyone knows it. Do they go after just Snapnames who may or may not be in business in the days ahead or do they go right for Oversee?

Ever pick up a large rock that is melded into the dirt and
when you don’t expect it, you dislodge it and thousands of ants come out and other things with lots of legs? That
is what I see here. A weaker company would have already collapsed.

Shill bidding is one of the single oldest and worst problems in this
industry. From the days of the infestation of the old Afternic to nearly a
decade later. Only difference is the size, scope, magnitude and organized
manner. Isolated? I doubt it. Will
it end? Probably not but this will stem the tide. Will more come to light? Not a doubt in my mind. Do other
companies do it? If discovered will they collapse instantly? Should they collapse? Sure. Why not. Somebody will always come to pick up the pieces. What makes this such a big story other than all the obvious things is that we are talking about an officer of the company. An executive. Not some low level schmuck.

Like others, it is still sinking in. Great damage has been
done to more than just a company. An entire industry painted by a broad brush and that makes me angry. As you have read in
TechCrunch, this has been hoisted and blamed on ALL domainers and the entire industry. Domainers getting blamed for what domainers had no control over. That is where I fall off the deep end. That is where my anger grows. A great trust has been broken. It is a sad event. I think what the
question is becoming: Should it and could it have been prevented? What was the
largest deal that Halvarez bid in? Total dollars involved? The questions are
just starting and the answers will tell the future. This industry is based on
one word. TRUST! We have seen TRUST broken on a small level. We have NEVER seen
it broken to this magnitide before we even find out the entire story and entire history. Thousands of domainers
each with their own story and own anger to deal with. Sorry, but this is bigger than just a company inside an industry even if it is the biggest in the space. Bigger because it is the biggest company in the space. This is akin to the
Black Socks scandal in baseball. It affected the entire game. Unfortunate as it is, this affects the entire industry in ways you would probably rather me not articulate. Some will excuse and some will minimize but make no mistake of thefallout that has yet to happen. Like nothing we have seen to date. Already thesecond TechCrunch article has been released in just 3 days and expect more to come from even bigger media.

What we have seen so far is the part of the story that would be allowed out in an effort to cover everyone's ass. So you can either worry about helping to cover their asses or start to start covering your own. Each company and each domainer has a responsibility to be good stewards of the industry. How we handle this may determine our destiny. Lord, I hope this is just a bad dream.

Rick Schwartz

UPDATE: For further Play by Play updates, has been on top of this and also one of the largest victims to come forward so far with actual numbers of over 12,000 auctions that may have been affected. Plus a poll is there that suggests the bleeding is much worse than what I indicated above in an earlier poll I used. So anger is still growing and I don't think anybody knows where this train will end up. I feel bad for so many folks that are affected due to no fault of their own. Lawsuits are already flying and more are coming. This is a mess beyond anything that any one of us could have imagined just a few days ago.