Let's discuss Andrew Rosener's idea of owners bidding in auctions

[equity78]

To give the idea it's own thread let's discuss the idea put forth by Andrew Rosener of @MediaOptions that owners would be allowed to bid on their own domain names at auction.

Andrew never stated to do it secretly or against an existing platform's TOS.

I don't see what Andrew sees, let's say I have a 4L.com Rayy.com, there are a bunch of backorders at $69 and the name is at $300 with Andrew in the lead.

I think $300 sucks, so I bid Andrew up, he counters back and this goes on in traditional bidding war style to $1,800. For this hypothetical no one else jumped in so it's just me the owner vs Andrew. I obviously have an advantage, I try to get Andrew to go to $1900 so I bid $1850 he has to go to $1900 to take the lead. He doesn't he says too much for that name I'll pass. I will the auction at NameJet. I pay them $1,850 and they send me back 90% of the $1,850.

I was certainly in an advantageous position compared to Andrew, without me, the owner, he wins at $300. No other person bid, only the person with a vested interest, the owner bid.

I have proposed a few exotic type auction ideas here at Namepros over the years, some have been allowed, some haven't. One I proposed that @Eric Lyon thought was interesting but decided against (I had no problem with that). Was an owner clawback option, where the owner does not participate in the auction but if it closes say at $500, the owner could say I want to callback my name and pay the winning bidder say 10 or 20%.

In that example the market would be fair, everyone bidding upfront would know that the owner had the option to clawback the name. It would be better than a reserve auction because there would be some monetary gain for participating and being top bidder as opposed to bidding all day on GoDaddy, not meeting reserve and the high bidder has nothing to show for their effort.

Just my opinion, what is your opinion?

 

[Nikul Sanghvi]

I like Andrew's desire to build a free-market auction that aims to find a 'fair' price. The challenge is that allowing the seller to bid multiple times in an open auction could distort the true objective of the auction (equilibrium), which is to find the highest bidder who is not the seller (to facilitate exchange), and to simultaneously obtain the optimum price that the highest bidder is willing to pay.

I’ve often thought about an alternative auction format for domains. I’d like to see something like the setup below, a first-price sealed bid auction:

- Sealed bids over a three or five day period.
- Only one bid entry per verified bidder.
- Seller is allowed one bid too, this is effectively the reserve. The seller can choose to bid $1.
- Independent system collates bids (stored in encrypted format until point of release, not viewable by anyone. SmartContracts might be a good fit for this.)
- On release, all bids are revealed. Bidder names are also shown alongside the bids.

- The highest bid above the sellers bid will win at first-price (the price of the bid, not second price).
- If two or more bids are identical, and above the sellers bid (reserve), then auction enters secondary round lasting another one or two days for those bidders only, on the same mechanics mentioned above. During the secondary round, bids have to be higher than the previous winning bid submitted by multiple parties.

- If there are successful bids above the sellers bid price, the sellers bid price (reserve) is not revealed.
- If all bids fall below the sellers bid price, individual bids are not revealed at the end. Everybody who participated in the auction, along with the seller, is displayed the Mean bid (all bids values, apart from sellers bid, divided by the number of bids). This acts as an indirect market appraisal for all parties.

A commission fee system can be used to encourage selling, rather than purely using the auction for appraisals. For example, the auction fee can be 10% of the sellers bid (the reserve), plus 2.5% of the final sale price (in the event of a sale).

Pros:
+ No bidding wars (from buyers perspective)
+ Transparent and fair - each bidder must calculate the economic value of owning the domain to themselves
+ True market price using First Price instead of Second Price
+ No seller manipulation (could be further minimised by not allowing re-auction of the same domain by the same seller for another X months)
+ Sealed bids during bid-submission period. Even lowball offers stand a chance if owners reserve is very low
+ Seller doesn’t have multiple opportunities to ‘pump’ the auction whilst it is running
+ There are no ‘time-pressures’ such as countdown timers or real time visible bids (eBay).

Cons:
- No bidding wars (from sellers perspective) - although I’m pretty sure I’ve read research on game theory suggesting that this method yields on average the same as Dutch and English auction methods.
- From the sellers perspective again, the absence of visible auction pressure / bid-density means the auction looks less appealing/desirable to potential new entrants. Although this could be mitigated by showing the number of unique ‘bids placed’ during the bid-submission period.

Sorry for the lengthy post

 

[xn--v4h.com]

Drew, as I see it the flaw is that 'there is' a reserve in a no-reserve auction - the costs of that domain which only the owner can know. So as it wouldn't make sense for a dn owner to keep bidding past that known cost (would a owner bid, and pay, up to $20k on a name they have $10k into it?), the only reason for a dn owner to bid on a no-reserve auction would be to try to get it up to that 'known' no-reserve. So what am I and others missing that everyone has a 'fair equal chance' to buy an asset, that they may have gotten cheaper if the dn owner hadn't been bidding on and raising the price?

You might get the domain cheaper but thats not the fair market value . It's possible the person who would be willing to pay the highest price for an asset is the current owner of that asset .

 

[Internet.Domains]

The courts have already decided this....Bidding on your own property is, considered "setting a reserve" for an auction. Therefore it is fraudulent to "set a reserve" by bidding on your own NON RESERVE auction....This is very simple folks, don't over complicate this or spin it into some "raw free market capitalism" tirade.....Best

 

[Crysis]

"The seller is NOT permitted to bid at a “without reserve” auction, announced or not, unless it is a “forced sale” meaning a sale that is conducted without the consent of the owner (for example, a seller COULD bid on his own car that had been repossessed because the sale of the car is being forced upon the seller without their consent). Otherwise, the seller, nor anyone on the seller’s behalf can bid at a “without reserve” auction as this would constitute a withdrawal of the property."

Source:
https://mikebrandlyauctioneer.wordpress.com/2009/11/15/different-types-of-auctions/

 

[zurc.net]

Plain and simple, if you don't want to run a reserve auction, either have the domain start at a price you are comfortable with, or just run a reserve auction.

Allowing sellers to bid on their own auctions bring in way too many insecurities for buyers and the auction platform as a whole (if they are not directly involved in the shilling themselves).

 

[richface]

Only in this industry can we debate if it is right to bid on your own names. There are truly no moral standards in this industry is dog eat dog. The fact that there some support around this is a clear sign of how ridiculous and mind boggling it sounds. If you like bidding on your on names setup a private auction alone and bid against yourself sounds silly right? guess you need a prey. The intention of bidding on your own names to achieve a higher price is not shill bidding? well it is a criminal offense here in the UK open or not there is only one exception forced bankruptcy and granted an opportunity to reacquire an asset . If this is the kind of thinking among top industry pros then I wish us all luck.

 

[Internet.Domains]

This subject is begging for a poll.....

 

[zurc.net]

This subject is begging for a poll.....

Only if we can see who is voting on what... I want to know who I am dealing with.

 

[Nikul Sanghvi]

This subject is begging for a poll.....

https://twitter.com/thedomains/status/887415789845872641

 

[Nikul Sanghvi]

Reserve, or no reserve - neither prevents shill bids entering the auction on the current NJ format. Until the auction method is changed, these issues will continue to plague the industry. Rogue sellers who shill will just mask IPs with VPNs and randomise bidding tactics.

Im not agreeing that sellers should be bidding on open-ascending (English) auctions as @MediaOptions suggests, but on a first price sealed bid format, the sellers single bid becomes the reserve. Shilling is also much less advantageous/useful to the seller if the commission fee structure is based on a percentage of their own bid.

 

[xn--v4h.com]

Even if you disallow it, how can it be enforced 100%? It can't, as the current NJ situation illustrates. So let's have it all out in the open and so everyone would bid accordingly. If you don't want to participate, then that's up to you, but at least the platform isn't promising anything it can't deliver on.

 

[xn--v4h.com]

Reserve, or no reserve - neither prevents shill bids entering the auction on the current NJ format. Until the auction method is changed, these issues will continue to plague the industry. Rogue sellers who shill will just mask IPs with VPNs and randomise bidding tactics.

Im not agreeing that sellers should be bidding on open-ascending (English) auctions as @MediaOptions suggests, but on a first price sealed bid format, the sellers single bid becomes the reserve. Shilling is also much less advantageous/useful to the seller if the commission fee structure is based on a percentage of their own bid.

Saw your post after I posted mine, seems like we are similar in concept.

 

[JB Lions]

Even if you disallow it, how can it be enforced 100%? It can't, as the current NJ situation illustrates. So let's have it all out in the open and so everyone would bid accordingly. If you don't want to participate, then that's up to you, but at least the platform isn't promising anything it can't deliver on.

It's shill bidding, there is no way around it. It would be a dead ass auction platform for anybody actually dumb enough to try it. And even dumber for those actually bidding in those kind of auctions. See the 91% poll linked to above.

The NJ situation illustrates there are problems with shill bidding, that's everywhere. At least here it helps to have usernames to make those connections easier, unlike say a place like GD, where it's some numbers. I have no idea who I'm bidding against there. Places like NJ or Snapnames, I recognize most of the bidders.

 

[ProvenPro]

Auctions are not active negotiations between buyers and sellers. The seller sets the parameters and the final sales price is determined by the buyers in the open market. Having sellers involved in the bidding process allows these sellers to potentially create an artificial market. If there is a concern over the risk of a loss, use a reserve auction. If you as a seller need to be more involved than just setting a reserve, an auction is not for you.

 

[xn--v4h.com]

It's shill bidding, there is no way around it. It would be a dead ass auction platform for anybody actually dumb enough to try it. And even dumber for those actually bidding in those kind of auctions. See the 91% poll linked to above.

The NJ situation illustrates there are problems with shill bidding, that's everywhere. At least here it helps to have usernames to make those connections easier, unlike say a place like GD, where it's some numbers. I have no idea who I'm bidding against there. Places like NJ or Snapnames, I recognize most of the bidders.

Let's define what "shill" is first, because you're using a different definition than mine:
Definition of shill
a : one who acts as a decoy (as for a pitchman or gambler)
b : one who makes a sales pitch or serves as a promoter

 

[JB Lions]

I'm using the definition found everywhere - https://www.google.com/search?q=define:shill+biddig&ie=utf-8&oe=utf-8#q=define:shill+bidding

You are bidding up an item you already own to drive the price up.

It's amazing seeing people trying to find ways to justify this. Seriously, why do you think that poll is 91% against? Why do you think it's against the TOS? https://twitter.com/thedomains/status/887415789845872641

 

[xn--v4h.com]

I'm using the definition found everywhere - https://www.google.com/search?q=define:shill+biddig&ie=utf-8&oe=utf-8#q=define:shill+bidding

You are bidding up an item you already own to drive the price up.

It's amazing seeing people trying to find ways to justify this. Seriously, why do you think that poll is 91% against? https://twitter.com/thedomains/status/887415789845872641

Sorry I can think on my own. I don't need no poll to tell me what's right and wrong. When the owner is bidding next to me isn't a shill. He's a competitor and I wouldn't be happy because I want the lowest price but if he wants the item more than I, then he can have it back. That's called the market. In the stock market, if your ask price is higher than the highest bidder, you still own the stock.

 

[JB Lions]

Sorry I can think on my own. I don't need no poll to tell me what's right and wrong. When the owner is bidding next to me isn't a shill. He's a competitor and I wouldn't be happy because I want the lowest price but if he wants the item more than I, then he can have it back. That's called the market. In the stock market, if your ask price is higher than the highest bidder, you still own the stock.

It's called shill bidding. They're not a competitor, they're the owner. That would make you a sucker. I would imagine in situations like that, they would be laughing their ass off. You can think for your own, just understand then you're in the 9%. And if you actually knowingly participate in an auction where you knew the owner was bidding too, that's just stupid.

 

[hawkeye]

As I noted elsewhere, when a dn owner puts their domain in a no-reserve auction 'there is' a reserve - the costs of that domain which only the owner can know. So as it wouldn't make sense for a dn owner to keepbidding past that known cost (would a owner bid, and pay, up to $20k on a name they have $10k into it?), the only reason for a dn owner to bid on a no-reserve auction would be to try to get it up to that 'known' no-reserve.

 

[JB Lions]

As I noted elsewhere, when a dn owner puts their domain in a no-reserve auction 'there is' a reserve - the costs of that domain which only the owner can know. So as it wouldn't make sense for a dn owner to keepbidding past that known cost (would a owner bid, and pay, up to $20k on a name they have $10k into it?), the only reason for a dn owner to bid on a no-reserve auction would be to try to get it up to that 'known' no-reserve.

Not following the bolded. Why not, if they just get the money right back, minus the fees. The fees are the chance they take in hopes somebody else buys it.

 

[hawkeye]

hmmm...Don't know how it got bolded.

Yes they'd get their money back, but by continuing to bid past their known costs, they are hence knowingly just bidding the domain up just to get a higher price expectation, not bidding for want of the domain (the excuse to justify bidding), with nothing to lose except the commission fee.

 

[Coldtrigger]

Is @MediaOptions motivation for owners to bid (with clarity) just to pull his own shill bidding practices up to an industry acceptable level? Were his posts in the other thread simply mis-timed or actually very well timed?

I'm not saying Andrew is or has been a shill bidder, I'm just wondering.

 

[Keith]

I don't like the idea. Set a reserve or take a chance. The thought is similar to live auction houses calling ghost bids in the audience in an attempt to get real bids. It's a poor way to operate imo.

 

[offthehandle]

Preztel Logic. Taking a straight forward concept of an auction, and twisting it like a carnival barker or tout, to get more money. I would never knowingly play thIs cat and mouse game and bid openly on a domain name previously or currently owned by a guy who who really knows the market.

You choose your opponents and battles. It makes no sense unless you have presold the domain or have a solid sale prospect. Even when I have bought things for 2 cents on the dollar, I still may have to sit on it for 5+ years. Thats no problem because it is all in the buying. Most idiots who go out of speculative businesses like domaining, whatever the business is t-shirts to turbine blades.... those who pay too much, or do so after buying too much inventory and cannot generate cash flow they cannot sell find themselves stuck, unable to borrow cash, etc.
That is a bad business practice often made. Sales forecasts are
bulls-hit. If you pay some high amount that isnt speculative, you sure better be able to resell it.

What is being proposed is selling the hard-to-sell, junk domains, or "seconds" on an auction to support the cash flow of the operation. While waiting and holding onto those valuable ones for end users.

Besides that, you are dealing with an experienced pro. Unless you have experience and money to spend like he does, you are playing in the wrong league. He knows what he can sell to end users, and he knows what does not sell or will never sell. He isnt doing any favors by selling you a name he does not want to sell to an end user. Thats business. He wants to recover his investment on a bad buy that to him is illiquid for whatever reason.

But, if you have more information or equal to his and know a market niche he does not want to pursue then it might make sense.

This is called cost recovery. High Grading, thats the term, to cherry pick your inventory. What I did was liquidate it at cheap prices, not try and inflate its value.

Ethically this is a slippery slope, imho. Its better to set a reserve or sit on it.

I think the pro's should stick to buying at auction wholesale and sell to end users. Period. Selling at auction to domainers is to me simply a guise to getting rid of unwanted inventory.

I have seen strange unsellable things unrelated to a plant closure, suddenly appear. What would happen is that other dealers stuck with unsellable crap would consign it in the auction along side the real inventory stuff being sold at auction when the company went bankrupt.

I bought 2000 gold connectors one time that way. Stuck obtusely in with other things in an auction. Nobody else would bid but myself and this guy about 20 years older than me. Only one other guy knew their value. He came up after I won the lot and invited me to visit his operation. He shocked me when I saw he had 50 employees and 20,000 sf of racks of MIL connectors. Each of these connectors I bought cost $25 retail. I bought all for $500. or something close to that. I made a killing. But I had a larger customer list than he did. He would have had to sit on them like the rest of his inventory. Smart guy. Honorable. Arrogant too.

 

[LarryDomain]

I for one will never bid against the owner of the property unless ofcourse it was a forced sale. And all auction sites out there agree with this as it's in all their policy that you can not bid on your own auctions.