eToys stories most popular in February.

Toys, toys, toys. That’s a theme in the top stories on Domain Name Wire in February, as ranked by views.

1. Toys.com, Birthdays.com, Hobbies.com Sold at Auction – after getting a tip, Domain Name Wire uncovers the details behind a multi-million dollar domain name auction. If only the tip came in before the auction. In some ways it did, since Toys.com was reauctioned in the month.

2. GoDaddy.com Purchases Second Super Bowl Commercial – this article was actually published January 30, but got a life of its own the day after the Super Bowl as people looked for Super Bowl commercials. I think DNW beat all major news publications, including local Arizona press, to publishing this story.

3. Toys ‘R’ Us, Frank Schilling Among Bidders to Pay $1.35M or More for Toys.com – details of bidders for Toys.com Part II emerge, and there were some familiar faces.

4. Goldberger on Toys.com Team, eToys.com Buyer Remains Mystery – I started investigating the identities of two of the big winners in The Parent Company domain name auction. Although the eToys.com buyer remained a mystery, I had good reason to believe it was Toys ‘R’ Us.

5. Sedo Acquires RevenueDirect and Why It Makes Sense – some people were disappointed about the size of this acquisition (even though we don’t know how much it sold for), but the real story is that we’re entering another stage of acquisitions in the domain industry.

Reauction of Toys.com goes for $5.1M.

It’s not over yet (subject to court approval), but it looks like Toys ‘R’ Us will be purchasing the Toys.com domain name for $5.1M. The company outbid National A-1 Advertising in an auction that was live blogged on DirectNavigation.com. (DirectNavigation.com is written by Larry Fischer, who attended the teleconference auction in his role with Faculty Lounge Partners.)

The domain originally sold for $1.25M in an auction that Toys ‘R’ Us participated in. So it begs the question, why four times as much now?

Sources tell Domain Name Wire that there was some horse trading in the initial auction. Faculty Lounge Partners bought Toys.com and Toys ‘R’ Us bought eToys. We’ll see what kind of horse trading went on when we see the original auction’s transcript next month.

The eToys estate isn’t the only winner today. Faculty Lounge Partners will get a break-up fee of about $150,000 $37,500 plus legal fees. $37,500 is 3% of Faculty Lounge’s bid of $1.25M.

I bet eToys (The Parent Company) creditors will be wondering how the law firm Pachulski Stang Ziehl & Jones LLP blew the initial auction. [Update 2-28-09: It has come to my attention that the law firm may not be on the hook for the results. They were there to collect offers and run the auction, but a separate party was supposed to get buyers. I'll get more details and update this story.] If Toys.com sold for 4 times what it did in the original auction, were the other domains sold below value? All the law firm had to do was send a press release about the original auction and the results would have been drastically different.

Here’s a time line of the Toys.com saga:

February 5, 2009: Domain Name Wire first reports about the closely held auction for domains from The Parent Company, owner of eToys.

February 6, 2009: Based on tips from multiple sources, DNW suggests that the buyer of eToys.com and related properties is Toys ‘R’ Us, which attended the auction as “Eagle LLC”.

February 6, 2009: Domain Name Wire learns that at least one company that wasn’t at the original auction intends to challenge the Toys.com sale.

February 12, 2009: After receiving court approval, Toys ‘R’ Us announces it was the buyer of eToys.com.

February 18, 2009: DNW learns that Toys.com will be auctioned again and the previous auction winner, Faculty Lounge Partners, will be the stalking horse bidder.

February 26, 2009: All bidders complete asset purchase agreements, Toys ‘R’ Us, National A-1, and Frank Schilling among the bidders.

February 27, 2009: Toys.com sells for staggering $5.1M.

Guidelines for new registries doesn’t make sense; but therein lies a business opportunity.

If you want to apply for a new top level domain from ICANN, you need to provide lots of financial documentation about your ability to run the TLD. ICANN is mum on how much money you need on the balance sheet, but that’s not all. The new TLD guidebook states that your company must provide:

documentary evidence of ability to fund ongoing basic registry operations for registrants for a period of three to five years in the event of a registry failure or default until a successor operator can be designated.

Generally, the registry fails when it runs out of money. So how will you have enough money on hand to run operations for another 3-5 years? ICANN suggests the following (section 5.2.2):

This obligation can be met by securing a financial instrument such as a bond or letter of credit (i.e., evidence of ability to provide financial security guaranteed by a creditworthy financial institution); contracting with and funding a services provider to extend services; segregating funding; or other means.

Hmm. I don’t know many people who would provide a loan or a guarantee to cover your business for several years IF you fail. In fact, most would include a covenant that voids any line of credit in the event of failure.

So that leaves two options:

1. Segregate funding, i.e. keep a separate escrow account of 3-5 years baseline cash in case of failure.

2. Enter into a contractual agreement with another registry that it will take over operations in the event of your failure.

Both of these create a business opportunity: registry financial escrow services and registry failure insurance. Since some of the existing registries including VeriSign (NASDAQ: VRSN) and Afilias will probably serve as white lable registries, they may be able to sell an insurance policy as part of their agreement to attract new TLD operators.

But ICANN should rethink this loosely-defined guideline anyway. Why not just make part of the fees contributed toward a sort of FDIC insurance for registries? If they fail, the fund will be used to prop them up until a new registry is found.

I’ll be submitting this as a comment on the latest guidebook.

Auction ends today at 4 PM CST.

It ain’t over until the fat lady sings.

Aftermarket.com’s Domainer Mardi Gras auction is still going, and some of the domains that didn’t sell during the live auction last Saturday are getting bids. That includes Credenzas.com, at $13,500, and GolfSets.com at $4,500.

The extended auction also includes new domains that weren’t in the original auction and have no reserve. These include Engrossing.com, HealthyMenu.com, PhotoPapers.com, Music365.com, Operable.com, CozumelIsland.com, and BathMirrors.com. So far PhotoPapers.com has 8 bids and is at $800.

With the addition of Credenzas.com and GolfSets.com, Aftermarket.com is again proving it is the king of sell-through rate in live auctions. It typically doesn’t get any monster sales (Voodoo.com at $300,000 being an exception this time), but domains in the auction are more likely to sell than not. I’ve had a total of three domains selected for Aftermarket.com auctions, and each one has sold.

Bidding is open today until 4 PM CST at Aftermarket.com.

Joe Biden joins Ted Stevens in web hall of shame.

Vice President Joe Biden is having difficulty with this whole interweb thing.

When asked for the web address for a government web site, he looked to an aide and said he didn’t know what it was followed by “do you know the web site number?”.

He also pulled a Dick Cheney, referring to Recovery.gov as Recovery.com. During vice-presidential debates four years ago Cheney referred to FactCheck.org as FactCheck.com, sending millions of visitors to a domain name owned by Frank Schilling.

Even though conservative talk show host Rush Limbaugh made fun of Biden for the Recovery.gov slip up, Limbaugh himself referred to the web address as Recovery.org.

One thing is for sure: all of this web address confusion just ends up sending more traffic to .com domain names.

(See Joe Biden video below, which includes other politician domain name screw ups but not Cheney’s.)