Why did losers not value the domain name as high as the winner?
Let me start by saying I’m not a big fan of the idea of community priority and similar mechanisms for determining which applicant gets a particular top level domain name.
But I’ve also been thinking lately about the auction process and its effect on the long term health of new top level domain names.
When an auction is used to resolve a new top level domain name contention set, the company with the highest perceived value of the domain name gets it.
That makes sense. But does it mean the other applicants were all wrong in their calculations of how much the TLD was worth?
Consider a five-way auction for .something. Presumably, every applicant ran calculations ahead of the auction to figure out how much it was worth. The auction ends with just one of them victorious, meaning that only one of the applicants calculated the value to be greater than the closing price.
Did the other four applicants make an error in their calculations? Or did the single firm that won make an error?
Out of the five, only one had projections high enough to justify the price. That’s a bit scarey for the future of the top level domain name at issue.
Yes, I understand a lot more goes into it. A TLD could be worth more to a company that has a direct connection to a related industry. Some applicants have greater efficiencies and channels to market. Some applicants have a lot more money to play with and can take greater risks.
At the same time, if I won a five-way race, I’d have reason to doubt my forecast.