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Verisign made domain aftermarket arguments in July

Last week’s blog post was not the first time Verisign called attention to domain investors.

Last week Verisign (NASDAQ: VRSN) shocked many of its biggest customers by saying that domain investors are a problem.

It turns out that this was not the first time Verisign raised arguments about the domain aftermarket. It drew attention to the U.S. Senate back in July while it was still negotiating with the U.S. government to renew the Cooperative Agreement.

Verisign made the argument in response to GoDaddy VP of Policy James Bladel’s testimony (pdf) in a U.S. Senate hearing on July 31.

In that hearing, Bladel urged the government to keep the status quo on the wholesale price that Verisign charges registrars. It also argued that the contract to operate .com should eventually be put out to competitive bid.

Verisign SVP Pat Kane sent a letter to the committee chairman, Senator Roger Wicker, and ranking member Brian Schatz pointing out that GoDaddy sells many domains in the aftermarket for thousands of times the wholesale price. It lists some domains for sale on GoDaddy’s Afternic system, including domains with the names of senators (owned by third parties).

Kane’s letter (pdf) was entered into the record toward the end of the hearing and I obtained it today from Senator Wicker’s office.

There’s a big difference between the July letter and last week’s blog post. The letter merely made an argument that the market sets the price for domains and it could be much higher than the wholesale price. The blog post escalated this by saying that domain investors are a problem.

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  1. Charles Christopher

    There is one and only one way to eliminate “domain investors” and that is for Verisign to become the domain investor.

    It does that through variable pricing.

    Which means they profit, not “domain investors”.

      • Charles Christopher

        There was a time when Registries needed Domain Investors, AKA Domainers, as their unpaid sales force.

        That time has past.

        If a domainer sells a domain for $10,000 then the domainer pockets the sale. If Versign sells the domain for $10,000 then Verisign pockets the fee.

        The buyer does not care, they pay $10,000 either way. Verisign has a fiduciary responsibility to its shareholders to maximize income, which means they want the $10,000.

        My reference standard on these matters is a smart hardworking single mother working 2 jobs to pay the bills. What opportunity does the internet provide her at any given moment to build an income and improve the quality of life for herself and kids? How might that be affected by any given change in our industry?

        Having all domains at the same LOW fee gives her a better opportunity at being able to afford an available domain she likes. Having a domainer hold the domain gives her a better chance at a discount, of even a gift, than I suspect Verisign is unlikely to ever offer her.

        Also, if she see prices changing, there is a risk element she might not be willing to accept and never try to build a website.

        At least now if you can reg a domain or obtain it from a domainer, the reg/renew cost is very small so its fairly easy to take the risk and take a chance.

        Its that reduction in risk taking and participation at the level of the individual that disturbs me the most. This is occurring in many ways in many areas, and I am very conspiratorial as to why it is happening, but that is for another discussion.

        From here I think the internet is going to continue to become more and more monolithic, like the TV and TV service I tossed out of my house ~12 years ago. And that is very sad.

        Maybe blockchain or some other type of root split will address this. We will see.

  2. John

    Watch this from about 1:33 to 5:50. This is what we are dealing with:

    “The Koch Brothers’ Biggest Secret”

    https : // youtu . be/6gk4ZSZ9HYU?t=92

    • John

      (I had included a longer statement with my usual charm and genuine persuasiveness, but it was blocked by Akismet.)

  3. judicious

    These arguments are illogical. Yes, the same thing mentioned in this article and that was said in front of the Senate, is the same underlying meaning on Verisign’s recent blog post attacking Domain Investors. Both locations are making the argument that aftermarkets can charge $1,000 or $1 million for a domain name, and therefore Verisign should be justified to raise the prices it charges on all of its 136 million domains.

    That does not mean every domain in the world is worth that. And it does not mean that the TAX that is imposed on the world by Verisign should be raised, just because an asset is for sale for money by its owner.

    This is akin to saying that tax rates should go up in the entire state of New York because there are houses for sale in the Hamptons for tens of millions of dollars. However, this is flawed logic. Pointing out the Hamptons does not mean that tax rates should go up for people in the less fortunate parts of New York. With domains, raising the rates on lower quality domains, brandable and made up domains does not make sense because there are really nice houses in the Hamptons. It does not make sense to raise rates on domainers, many of which struggle to make profits for themselves, many of which dream of making it, but don’t make a profit because Verisign is the tax-man / tax-collector for this extension.

    This also does not mean that Verisign, operating a monopoly to manage the .com domain extension, should get to increase its “take” because some of these assets are valuable. A large portion of these valuable domains were already in use by businesses worldwide before Verisign ever won the bid to manage .com domains. Domains were selling for millions of dollars PRIOR to Verisign ever managing the .com extension and having anything to do with a single .com domain! And most domain investors spend large sums of money to acquire their domains. Thus, Verisign’s logic is flawed.

    VeriSign is basically saying it should be able to increase prices it charges for .com domains because a small portion of domains in the secondary market are being sold or offered for sale for thousands of dollars. This is the argument Pat Kane made in his letter to the Senate.

    This is a very troubling tone Verisign is taking. They are bashing domain investors to try and make excuses for why they should run up their own profits even more. Verisign is bastardizing domain investors for their greedy bottom line. Yet they conveniently fail to mention the billions of dollars they already make for doing practically nothing, as posted out by many other people. Verisign is not doing anything special, and something TONS of other organizations can do equally as well, for a FAR LOWER cost. In many ways, with blockchain and other technologies, this is something that should be FREE TO THE WORLD, not cost $7.85, nor $4.00, nor even $2.00 per domain per year.

    As one such example, look at IP addresses. IP Addresses are a scarce resource. And IP addresses are managed without a “Verisign like tax” charging obscene amounts for doing nothing, bringing in billions of dollars per year to those responsible. And look at blockchain, it is a free, distributed technology that is a perfect match for managing a database of domain names. Obviously Verisign won’t push envelope because that would mean them embracing what needs to happen — the registry should be free to the world, not at the mercy of Verisign’s corporate greed and never-ending appetite for more and more profits.

    Verisign is really starting to show us who the real enemy is this year…

    • Anon

      Awesome, insightful comment!

      That said blockchain (with proof of work at least) is not free — it is highly inefficient and an energy hog that has knock-on effects to society at large (opportunity costs of the energy use and all the use of materials in the manufacturing of all the servers). Sure, it’s ‘free’ to users but not to society.

  4. C.S. Watch

    Verisign calculates that they’re speaking to dimwits who don’t understand this topic. Anyone can Google it: No domain investors = no safety online, and no internet economy.

    It’s not higher math.

    1) Do you want companies online to have a “real estate investment,” and some skin in the game, so the whole internet economy isn’t a fraud-and-run house of cards? 2) Do you want your kids clicking through to a burner phone in a dark parking lot, sending your home address to the dark web? Your best hope is that some investor bothered to register candycrash.com, so they’re clicking an affiliate link. 3) Do you want giants like Procter and Gamble to own not just the thousands of .coms they currently sit on, but millions? If individuals can’t afford to invest in this prime real estate, then megacorps (which would never let a name go to a startup) will utterly stifle small business.

    This is how the internet polices itself. At zero cost to taxpayers.

    Verisign is speaking to legislators like they’re morons. It’s offensive, and it’s not a long game.

  5. Steve

    Wow, what a crock of sh*t. Interesting to see how Pat Kane entirely shifted the narrative and deflected the issue to its registrar customers.

    Pat Kane argued because domains in the secondary market are being sold for thousands of dollars – in some cases for millions of dollars, that VeriSign, who is the trusted custodian of the .com name space, should be allowed to increase prices on its entire base of 136 million .com domain names.

    Huh?

    Pat Kane also makes the point because VeriSign is regulated in what it charges for .COM domain names, ICANN Accredited registrars should be regulated as well.

    However, Pat Kane fails to mention two important points:

    —- VeriSign is the only company in the world that offers .com domains – it is a monopoly and its contract to manage the .com registry has never been put out for competitive bid. Registrars have no option to do business with anybody else other than VeriSign, because .com domains are the global standard.

    —- There is VAST competition within the Registrar space. Because hundreds of ICANN accredited registrars exist throughout the world, there is intense competition. Most registrars only make a small markup on .com domain names. Many registrars markup .com domain names less than a dollar. Some registrars charge at cost pricing and do not make any markup. And some registrars offer .com domains below cost in an attempt to acquire customers.

    GoDaddy currently charges $11.99 for a .com registration or renewal. NameCheap.com charges $8.88. Name.com charges $8.99. NameSilo.com currently charges $6.99. Bottom line, because of so much competition, most registrars only charge a small markup on what is paid to VeriSign for a .com registration or renewal.

    Pat Kane’s examples of high priced domains are from the secondary market of domains. These are domains are already owned by someone else. They have already been registered and are not available. Most of these domains have been registered for many years and owned by different investors. They have been traded in the secondary market for many years. There are approximately 10 million .com domains offered in this secondary market and some of this inventory is extremely valuable.

    Pat Kane fails to mention GoDaddy charges $11.99 for .com domain name and the cost it must pay to Verisign is $7.85.

    The reason why GoDaddy does not charge more than $11.99 is because of all of the competition in the registrar space. If a consumer does not want to spend $11.99 for a domain name at GoDaddy– they simply go to another registrar to purchase their desired domain name for cheaper. Verisign on the other hand has ZERO competition, and no matter what VeriSign charges, customers are at the mercy of paying.

    Verisign is a monopoly and this is exactly why James Bladel recommended the contract be put out for a competitive bid and the NTIA preserve price caps.

  6. Steve

    The domain Candy.com sold for $3 million back in 2008 and the new owner built a booming candy business on the domain name.

    Pat Kane’s claim is that if Candy.com sold for $3 million in the secondary market – we, VeriSign, as the trusted custodian for the .com name space, should be allowed to charge whatever we want for domain registrations and renewals.

  7. Rubens Kuhl

    A registry is like a toll booth in a road. The question is whether the toll should depend on (a) nothing (b) the weight of the car or truck (c) the value of what’s being transported.

    • Charles Christopher

      >A registry is like a toll booth in a road.

      That assumes a choice, and the toll is paid for some benefit over the over available choices. The .COM registry is recognized as being different than the other registries, its more like water, electric, or natural gas to the home, its a need with a monopoly and there are no other choices that are reasonable. That is the mindset that has brought us to this point.

      However the children of today don’t have the domain industry’s .COM bias, unlike most of us old farts they are growing up with many options and they are using them.

      The dominance of .COM will gradually go away as the general population knows a domain is “just” an address, there is no longer anything particularly special about .COM. This will be the evolution of the next 10+ years.

      That also means all the computer barf domain registrations in .COM will not be renewed and the .COM reg count will drop dramatically. I claim this being one of the few fools who have actually eyeballed the COM/NET zone file from start to end, I have actually looked at it, what a concept. When it does drop only domainers will notice as those domains never brought much of value. Versign’s income will not go done, it will likely go up as price increases make up for the decreased reg count.

      And then at some point there will be “nothing special” about .COM anymore.

      The difference is the way we see things, our Plato’s Cave, versus how the next generations see things, their Plato’s Cave ….

  8. krish

    Little unrelated to topic. I see the below text amendment 35. Does it mean, coop agreement is also automatically renewed like COM contract?

    __________________________
    The current term of the Cooperative Agreement shall continue through
    November 30, 2024, and shall automatically renew for six-year terms, unless
    the Department provides Verisign with written notice of non-renewal within
    one hundred twenty days (120) prior to the end of the then current term
    (“Expiration Date”). Notwithstanding anything in the Cooperative
    Agreement to the contrary, the Department and Verisign agree that: (i) upon
    expiration or termination of the Cooperative Agreement, neither party shall
    have any further obligation to the other and nothing shall prevent Verisign
    from operating the .com TLD pursuant to an agreement with ICANN or its
    successor; and (ii) neither party may amend the Cooperative Agreement
    without the mutual written agreement of the other
    _____________________

  9. Richard Morris aka Bulloney

    Thanks for your post Andrew…i’d been so busy with my trip to DC this week, somehow this had gotten past me And It wasn’t too long ago Pat Kane and I connected on Linkedin☺

    Jeannies blog had sort of vindicated me from the wrath of domain investors on NamePros, but now that I see word of this has reached Capital Hill where I have many contacts via other industries, the vindication continues.

    I know a lot of your readers have been very concerned about my success or lack thereof doing domains my way, but they really needn’t worry. Actually, I’m beginning to worry about them. Oh, the irony☺

    Just as an fyi, i’m known for originating and registering “crappy” domains despite the fact I’ve started, named, bought and sold over 25 businesses since my first business while in college in 1970.

    Thanks again Andrew, and say high to nCredibleAustin for me.

    Bulloney☺

  10. Richard Morris aka Bulloney

    Wow, appears Verisign was reading my playbook. No wonder I draw so much attention from NamePros and beyond. How scalpers have gotten by undetected all these years is beyond me. Thank you Verisign for adding to both my credibility and my bottomline. Gobble! Gobble! Gobble!

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