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Shills, Insiders, & Front Runners – 5 Bidding Scandals

Joseph Peterson reviews domain industry auction bidding scandals to bring context to the NameJet issue that blew up last week.

scandalRecently, the domain auction platform NameJet found itself embroiled in a controversy involving “shill” bids. This is by no means the first such scandal to plague our little industry. In fact, at least 4 major auction houses aside from NameJet – and there aren’t many beyond 4 total – have been implicated at one time or another in fishy bidding. Time for a stroll down memory lane!

1. SnapNames – Infamously, SnapNames admitted in 2009 that one of its employees, under the user name “Halvarez”, had been bidding against customers for 4 years. The company’s own analysis indicated that 1 in 20 auctions had been affected, and Halvarez bids contributed 1% of the incremental revenue during that time. Those stats may have been even higher during the first 2 years when Halvarez’s bidding was most concentrated. SnapNames voluntarily paid compensation – with interest.

2. GoDaddy – A year before that story broke, GoDaddy and its then-VP Adam Dicker were embroiled in controversy and bad press surrounding his own insider bidding in their auctions, which he oversaw.  GoDaddy maintained at the time that Dicker did nothing improper, and perhaps he didn’t.  Then again, 7 years after leaving GoDaddy, Adam Dicker was virtually banished from the domainer community amid allegations of misconduct. So domainers will be forgiven for viewing that decade-old GoDaddy incident with suspicion.


Employee alias or celebrity domainer, corporate restitution or denial of culpability, what these 2 old scandals have in common is insider bidding. In both cases, an employee of the auction house would be at fault – not necessarily with the company’s knowledge. Indeed, the Halvarez behavior was contrary to SnapNames’s policy at the time. GoDaddy instituted a policy prohibiting employees from bidding against customers after the fact, 9 years ago, once complaints about Dicker surfaced. That policy remains in effect today.

The present NameJet scandal is unlike those 2 cases because it centers on customer misbehavior rather than employees. NameJet sellers were bidding in their own auctions, in violation of the TOS.  There’s no need to say “allegedly”, despite seller denials, because NameJet itself has officially confirmed this.

Self-bidding isn’t always shill bidding. That depends on the circumstances. It’s easy to imagine bids placed accidentally in bulk or through automation gone awry.  At NameJet, leftover backorders could result in a self-bid. We might even excuse trying to buy back a domain the bidder had lately sold, if we’re charitable (or gullible). Nobody will deny, however, that nefarious shill bidding on the part of sellers has been rampant for years. Really, it occurs at every single domain marketplace – auction house or not – wherever sellers can derive some advantage from fraud.

The NameJet scandal grabs attention for 2 reasons: (1) because of the high-profile sellers alleged or rumored or even hypothetically involved; and (2) the laxity of oversight. Apparently, brother brokers sharing the same last name could both bid in their own and one another’s auctions without NameJet’s system issuing a red flag. Worse still, they could place such questionable bids while receiving headline promotion from NameJet.

Yet this too is not unprecedented. We’ve seen seller shenanigans and marketplace inattention before…


3. Flippa – For many years, people were buying and selling bids for Flippa auctions. They did so in plain sight. At the time, it was common to see Flippa bids for sale on Fiverr. Any 16-year-old could buy a pizza just by selling a few well-placed clicks. The demand for shill bids was so great that some saw it as a viable business in its own right!  In one case I documented, bids were for sale on a website called FlippaBid.com, which wasn’t detected by Flippa despite brazenly infringing the marketplace’s own trademark. Even today, the web is littered with solicitations dating back to this 2011 – 2014 period:

I am looking for someone to bid on my flippa auction can anyone help ?
The auction is due to finish in the hour and i would like to get around the $100 mark
only one bid is required
You will not be required to purchase this auction
The auction finishes withi the hour so i need a bid to be placed rather quickly
thanks

Not exactly shy!

4. NetFleet – Unless you come from the land down under, you won’t have heard of this auction house, which is entirely focused on the .AU market. Nevertheless, it’s worth citing as an example of a company allegedly outbidding its customers. This would have occurred through a kind of “front running”, as I explained in 2015, with the auction house opening up sealed bids from domainers and then pitching the domain to end users based on those confidential amounts. Netfleet blamed a new employee for finding a legacy way of accessing user bids.


Hopefully, these 4 earlier bidding scandals provide some context for the current NameJet controversy. GoDaddy and NetFleet overcame their negative PR by making policy changes (and perhaps by changing management). SnapNames paid restitution. Flippa worked to beef up its policing efforts. NameJet shares Flippa’s problem: seller shills.

Clearly, any solution for NameJet requires detection and enforcement. Policy is toothless without monitoring. At the moment, creating multiple bidding accounts at NameJet is evidently quite simple – even if created consecutively with the same IP address. So it sounds like the company has done little to prevent abuse.

Given the enormous financial incentives to cheat plus the lack of effective regulation, many observers wonder how extensive the shill bids at NameJet have been over the past few years. And, given the lucrative, high-profile partnerships NameJet has formed with some sellers, many are worrying – and some proclaiming confidently without waiting for any evidence – that NameJet would have turned a blind eye to shills. Some domainers, whether resentful of celebrity sellers or suspicious of the establishment, have gleefully leapt to that conclusion.

Corporate conspiracies are infrequent, whereas seller shills are a dime a dozen. Mainly, that’s because customers outnumber staff. Also, employees have more to lose (by getting fired) than sellers do. Domainers, once banned from 1 marketplace, can simply go elsewhere or resume the same scam after putting on a false mustache. Companies might encourage employees to bid against customers, as the NetFleet case illustrates. Theoretically, an auction house might even program bots to place bids. But systematic fraud, once uncovered, is too obviously damning to be patched up; and for a publicly traded company this could prove catastrophic. Anything is possible, but we only need seller shills – not corporate collusion – to explain the facts so far.

Sadly, shill bids are part of domainer culture. When I first joined the forums years ago, I remember being asked by people left and right – people I’d only just met – to place sub-reserve bids in their Flippa auctions.

Shilling is so rife that we discuss it openly. In a recent live auction event, I told the person at my elbow that the auction we were both watching, which was just about to start, would stop 1 bid shy of its gigantic reserve price; and it did. Knowing the owner and the domain’s history, this was an easy prediction to make. Of course, that domain hasn’t been sold since.

Whether blatant or borderline, shill bidding is a daily occurrence in the domain industry. That’s not to say everybody does it. Most don’t. And it’s not to say the problem should go unaddressed. But it does mean we can’t sit back and rely on marketplaces to eliminate fraud. Participating in a largely unregulated domain market, as all of us do, requires keeping one’s eyes open.

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  1. Robert Monster says

    Good post, Joseph.

    Perhaps the time has come for an industry-wide framework for verified digital identity. At DigitalTown, we refer to this as Internet of People (IoP). The API for this was successfully used last month in a large scale Hackathon. The document can be found here:

    https://api-docs.digitaltown.com/

    The API has the added advantage of being a SmartWallet with which folks can transmit payments commission-free and receive payment via a global network of local banks. For forward-looking developers, there are some logical integrations. I imagine this will be a topic at NameSummit in NYC next month.

    • Joseph Peterson says

      Oddly enough, I hadn’t thought of that. I know DigitalTown is working on federated identity. But I was thinking of it in the context of general consumers outside the domain industry. Bidder verification would be an interesting application of the idea.

      Full disclosure: Rob is my employer at Epik. He and I have never discussed this article, and there was zero coordination or prior discussion regarding his comment here.

  2. R P says

    Great post, Joseph. Thank you for your insights. Andrew, thank you for having a blog platform that embraces balanced journalism.

  3. larry says

    Andrew,

    Excellent points.

    Another auction issue that I would like to add, is with people bidding and then walking away from the auction once they win. On larger auctions, deposits should be required. Therefore they buyer has incentive not to default.

    larry

  4. nik says

    you are forgetting dropcatch.com
    They do this all the time.
    Sadly, shill bids are part of domainer culture.

  5. John says

    I think Robert’s idea sounds extremely interesting to look into, especially the whole package there.

    Also, as I have wondered before: what about some reasonable government regulation? Is it time for some of that too?

    Additionally:

    How does Heritage Auctions do it? No doubt they deal with some very high bids including over the phone.

    How does Southeby’s do it? Look how Southeby’s has joined the 21st century and moved online:

    sothebys . com/en/online-auctions.html

    live . ebay . com/lvx/sothebys

    An organization like Southeby’s routinely has to deal with 7 and 8 figure bids. What are they doing that can be replicated? And as I have also suggested elsewhere, if Southeby’s took the plunge and stepped into IP and domain names, I believe that could be a an important game changer for the industry in terms of realizing domain values more in line with what they truly and reasonably are for everyone concerned.

    • Joseph Peterson says

      @John,

      Sotheby’s could be as important to the domain industry as Heritage Auctions has been. From what I recollect, HA is 1 of the top 3 auction houses along with Sotheby’s. They’re comparable.

      • John says

        I take the opposite view, Joseph. The big names are Sotheby’s and Christie’s, especially in terms of global and national prestige. Heritage Auctions is a relative upstart and a minnow by comparison, even if they excel in any particular category such as collectibles. Unless there are new figures which say otherwise, it also appears that both Sotheby’s and Christie’s dwarf Heritage in terms of revenue by a truly huge margin in the $ billions. It’s a bit like famous superstar athletes in the same sports league vs. more obscure and modestly salaried athletes.

        While I’m glad someone finally took the plunge in bringing domain names to these types of auction houses, which I had been advocating online since many years ago, I nonetheless consider the way Aron Meystedt and whoever else is involved to be lacking and a disappointment, leaving a real gap that can be filled by another player with greater resonance in the market’s mind. It’s pretty extremely rare that I ever express displeasure or the like about someone personally or a specific company and I would rather not, but I’ve reached a point where it seems best to do so. As far as I’m concerned, Meystedt tends to just push the standard mindless “party line” about “short, short, short” in a mindless and industry-harmful way, which I’ve been writing about in the blogs here and there for months. If you submit a domain, it is never good enough to be listed. So you are made to think your domains simply don’t measure up. Then when it comes time for a Heritage Auction of domains to finally occur, you find that quite of number of domains actually are listed which are absolute crappy garbage compared to the best ones you submitted, remarkably so. So then what are you to think is going on? Nepotism? Cronyism? Inconsistency? Who knows? God certainly knows. But one thing you also know is that some of the ones that do get listed couldn’t hold a candle to the best ones you submitted which were rejected.

        I have history in NYC. You could even say that I am from NYC. I had never even heard of Heritage Auctions before until fairly recently. But a name like Sotheby’s is like referring to the Rock of Gibralter or the Empire State Building. If Sotheby’s were to take the next step into the world of digital “assets” then I believe that could be far more consequential than what Heritage Auctions has done, and a true game changer even though they are technically playing in the same “sports league.” And I believe that would be so even if Sotheby’s were to go about it in the “wrong way” in terms of domain values as I would advocate.

  6. John M says

    Joseph as always a thoughtful post. What else can we expect from,as you point out, a virtually unregulated business? And this is from a guy,myself, that is against most regulation.

  7. Acro says

    You left out eBay, notorious for such activity. Also, questionable practices on forums, seeking to send domains to Sedo auctions by placing a starting bid.

    • Andrew Allemann says

      Joseph originally had something about pushing to domains at Sedo in the article and I took it out. Perhaps I don’t understand the issue, but I recall back in the day that there was a site called Push to Auction. I could list domains I’d be willing to risk in an auction at Sedo if someone would bid just $60. Is there something wrong with this?

      • Acro says

        I see no difference between that practice and soliciting bids e.g. on Flippa.

        Bottom line: advertising an existing auction is one thing, but incentivizing auctions isn’t.

        • Andrew Allemann says

          If I came to you and said “hey, i have the domain xyz.com that I’m willing to sell for as little as $60. If you make an offer of $60 for the domain at Sedo I’ll push it to auction. If no one else bids you get it for $60, but if other people bid then you’ll have to compete with them”

          What do you see wrong with that?

          • Joseph Peterson says

            Asking for bids at Sedo or Flippa could be legit – as long as the bidder anticipates a real possibility of winning the auction and buying the domain (without being compensated by the seller under the table).

  8. Dn Ebook says

    Most would find it hard to believe that Flippa had no knowledge of what was happening on their auction platform, quack quack ….it’s a duck

    • Joseph Peterson says

      In fairness, Flippa has always taken some action to curb shill bidding on their platform. That has been discussed fairly openly. The protection measures were inadequate, but they weren’t nonexistent. It looks like Flippa had more stringent safeguards 3 years ago than NameJet has today.

  9. Borked Perderder says

    Doesn’t Namejet require accounts to become verified to bid over 2,500, which requires photo id.
    If someone was able to create multiple accounts (which they did not demonstrate, they just said they had) those accounts would not be able to bid high dollar amounts unless they have a fake id for each account.

    Unless Namejet changed that?

  10. Shill Gate says

    Keep this recent ShillGate story alive by participating at ShillGate.com. Don’t let NameJet and others just wash it aside after the news stories subside.

  11. Robert McLean says

    Shill bidding is outright fraud, plain and simple, case closed. The resignation and complacency in the comments offered by those engaged in this post is sickening. Disgusting!

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