35 million names registered in April. 32 million were part of a kiting scheme.

[BobParsons.com]

Out of 35 million names — 32 million were part of a kiting scheme.
During the month of April 2006, a little more than 35 million domain names were registered. Of these names, 32.7 million were used – most again and again – but never permanently registered. These 32.7 million names were part of a scheme – a growing abuse of the domain system — one I wrote about in my last blog article. It’s an outrageous practice. I used to call it the add/drop scheme. After thinking about it, I think the name “add/drop” sanitizes the practice too much, so I’ve decided to call it something closer to what is actually taking place. The name I’ve decided upon is “domain kiting.”

Why I call it domain kiting.
Here's why I chose to call it domain kiting. All of us are familiar with the illegal practice of check kiting. Quite simply check kiting involves taking advantage of timing and the banking system to generate cash that simply isn't there. In many ways that is what domain kiting does. Domain kiting takes advantage of timing and the domain name system in an abusive and improper way to generate cash.

In a nutshell, here's how domain kiting works.
Domain kiting registrars put up mini-Web sites — loaded with search engine links — for domains names for which they never pay. When people land on these Web sites and click on the links, money is made. It's easy to spot one of these registrars as the number of total registrations they make often far exceed the number of permanent registrations — or names for which they actually pay. This is why during the month of April 2006, out of 35 million registrations, only a little more than 2 million were permanent or actually purchased. The vast majority of the rest were part of the domain kiting scheme.

Now let's drill down a little further into domain kiting 101.
A registrar who participates in this scheme – Go Daddy and its affiliates do not participate in this scheme – makes a large deposit – sometimes a huge deposit – at a registry. Then the registrar registers as many domain names as the deposit will allow. For example, if the registrar makes a $600,000 deposit at VeriSign Registry, they could register 100,000 .COM domain names as .COM names cost $6.00 per year.

It's all about catching Internet traffic.
For each domain name registered, the domain kiting registrar puts up a simple Web site filled with search engine links and hopes users land on that page and click on the links. Anytime an Internet user lands on one of their mini-Web sites and clicks on one of the links, money is made.

Domain kiting registrars abuse the 5 day refund period to work their scheme.
After a domain name is registered, a registrar has five days to cancel a domain name registration – i.e. drop the name – and get their money back. Domain kiting registrars abuse this rule and cancel the lion’s share of the names they register just before the five day period expires – so they get their money back. But then something unexpected happens. After names are cancelled or dropped, the domain kiting registrar goes out and immediately registers the same names again. The domain kiting registrar will then put the same simple Web site back up for each domain name, wait another five days and then cancel all the names again — just in time to get a full refund. And for most names caught up in the domain kiting scheme, this process will repeat itself over and over and over.

Domain kiting registrars rarely pay for the names they use.
By not actually paying for the names they are using, domain kiting registrars are able to generate profits, even if their mini-Web sites only generate 50 cents or more per year. And if they find, over time, that certain names never generate any revenue they stop registering them altogether. It’s only the names that have value – to you as an Internet user – they register over and over and keep off the market – names for which they of course never pay.

Domain kiting registrars only purchase the names that prove to be real money makers.
There are those cases when, if a domain name proves to be especially profitable, domain kiting registrars will actually step up and register the name. They’re not stupid. They won’t take a chance on losing a name that generates much more than the annual cost of a registration. However, this is clearly the exception.

Meet Domain Doorman — a Dotster affiliate.
Consider the case of a little know registrar with a Miami, Florida address known as Domain Doorman LLC – but most certainly affiliated with better known registrar Dotster.com. Domain Doorman LLC registered more than 11.5 million domain names in April 2006, but only permanently registered — or paid for — 68.4 thousand of those. This same discrepancy occurred in March as well. Doorman registered 4.8 million names, but only permanently registered — or paid for — 40.4 thousand. This becomes even more interesting when you look at Doorman’s Web site and find it’s not even easy to be a customer. It certainly makes one wonder what they are doing. Hmmmm.

And then there's DirectNIC.
Then there’s DirectNIC. DirectNIC registered more than 8.4 million domain names in April 2006, but only permanently registered — or paid for — 51.4 thousand of those. The trend was the same in March, when DirectNIC registered 7.6 million names and only permanently registered — or paid for — 52.5 thousand. Whatever could DirectNIC be doing? Why are they dropping and re-registering all those names – again – and again – and again? And why doesn’t ICANN care?

But wait, there's more — many more.
And the list of registrars, that register many more domain names than they actually purchase, goes on and on.

ICANN fiddles while the Domain system burns.
I will point out that at this time, unlike check kiting — there is nothing illegal about domain kiting. Of course, domain kiting should be illegal. ICANN is perfectly happy with the practice. In spite of many complaints they have done nothing to put an end to it.

ICANN's favorite comment.
Since my last blog article a number of people have contacted ICANN and quite predictably, but sadly, ICANN has had no comment.

Domain kiting is out of control and must be stopped.
This domain kiting practice needs to be stopped. It benefits only those few organizations that are pillaging the domain name system. It takes millions of good names off the system, and makes them unavailable for the purposes for which those names were originally intended. It places an unnecessary burden on every registry.

A letter to ICANN I sent in 2004.
I wrote a letter bringing this matter to ICANN's and VeriSign's attention as early as October 8, 2004. So both ICANN and VeriSign have known about this practice for quite sometime — but have looked the other way.

A letter sent by the .ORG registry.
While VeriSign has been suspiciously quiet on this whole issue — why is that VeriSign? — the Public Interest Registry, the registry that manages .ORG recently wrote ICANN complaining about the practice.

C'mon Dr. Twomey — make Cambridge proud — put an end to this nonsense.
I am once again calling upon ICANN and its President and CEO, Dr. Paul Twomey, to step up and put an end to domain kiting and the pillaging of our domain name system. C'mon Dr. Twomey. Come through for us. Just this once. Please!

http://www.bobparsons.com/DomainKiting.html

 

[RJ]

"Domain kiting" as Bob calls it is also known as "Domain tasting"

Ref: http://www.icannwiki.org/Domain_tasting

 

[acronym007]

Bob is great for the business. There is always someone who finds a way to abuse any system or process, other than the way it was originally intended. He noted the same problems with .eu registrations. This world is never going to be a perfect place but this type of manipulation should be stopped because it does nothing for the industry, it hurts us to have practices like these in place. Thanks Bob for pointing out that which is unknown to most of us. Cheers.

 

[reg.log]

Nice reading. Hope it helps to sort out the things.
Thanx for sharing.

 

[RogueWriter]

Good read.

 

[yandig]

Why does this eerily remind me of the steroid scandal in baseball? Let's hope that 'kiting' doesn't end up having a similar impact on domaining.

 

[mis_chiff]

Very interesting read...definetly explains a few things
thanks for sharing

 

[Smith]

Bob is in his own world I think.

 

[NameClerk]

Bob is in his own world I think.

If he is, I'm in there with him.

In my opinion, he's right on the money.

 

[Long-EZ]

The $0.50 - $1.00 Solution

As has been said before, to put a lid on this just make $0.50 - $1.00 non-refundable when a domain is registered. That way if a mistake is made it can be corrected with only a small charge.

 

[Smith]

If he is, I'm in there with him.

In my opinion, he's right on the money.

Ok, well think about things for a moment.

Using Bob's numbers for Dotster in example, and guesstimating a few things.

If they split up the buys into full 5 day segments they would have registered about 1,920,000 names every 5 days.

To finance this they would require a float in the area of $12,500,000

In the end they kept 68,400 names.

So their total cost would be roughly $444,600 assuming $6.50 a name.

Now, I know that another company in the tasting business was keeping any name that received a single hit when they were testing it. To register 68k names I have to assume Dotster is on a similar plan.

That means two things.

1. Any name that received a visit was registered.

2. Any clicks that generated revenue are rightfully paid to the owner of the domain.

Another thing to consider is the fact that to run a float of $12,500,000 costs money. $12,500,000 minus $444,600 = $12,055,400

Interest generated in a month with a conservative investment return of 2.5% in a GIC on the $12,055,400 works out to $271,246.50

I am confident in saying that there is no way that they made that in clicks on the names they let expire.

I think my math is correct, so if there are any mistakes I'll say sorry up front.

As has been said before, to put a lid on this just make $0.50 - $1.00 non-refundable when a domain is registered. That way if a mistake is made it can be corrected with only a small charge.

There is a very large amount of credit card fraud involved with domain registrations. With margins very low as is even a $0.25 charge would penalize registrars quite significantly.

This is possibly one of the reasons Bob Parsons is fighting testing, maybe he suspects that ICANN will put in this sort of fee for deletes?

 

[NameClerk]

I can't speak to the accuracy of your numbers or whether or not they make a nice profit by doing this, but trust me, they're doing it.

I see it happen every day on domains I monitor. The names are picked up, dropped 5 days later, picked up again, dropped again, etc, etc.

They wouldn't do it if it wasn't profitable.

 

[donlee]

do away with the whole canceling domains policy, i mean if you reg it, you keep it, that is the policy i would use. You think domain kiting is only a registrar problem its a domainer problem also. Domainers find a "gem" and reg it and then promote the hell out of it for a day and decide it was no the 'gem' they thought it was so there they go back to the registrar for their refund. Or i guess a 12 hour time period might be alright where you can get your refund

 

[sEp]

I reckon Bob needs to work on improving GoDaddy's support than going round writing articles.

 

[Devil_Dog]

do away with the whole canceling domains policy, i mean if you reg it, you keep it, that is the policy i would use. You think domain kiting is only a registrar problem its a domainer problem also. Domainers find a "gem" and reg it and then promote the hell out of it for a day and decide it was no the 'gem' they thought it was so there they go back to the registrar for their refund. Or i guess a 12 hour time period might be alright where you can get your refund

Exactly, it's not like domains cost thousands to reg a piece. If you reg a name, mess up on it's spelling or decide you don't want it, suck it up and take the $x.xx loss and deal with it for a year. Stop the domain refunds and this problem will nearly end itself.

 

[donlee]

exactly, as embarrassing as this may sound i regged a domain 4 times once before i got the correct spelling. and i kept every one of them

 

[DropLister]

You can also here about domain tasting in my interview with Jay Westerdal on Radio Namepros

 

[wvccboy]

Why would people even do it? It costs a lot...

 

[binaryman]

Would'nt a simple solution be to implement a rule that once a domain is registered there follows a 5 day "inactive window" period before the domain is actually activated.That 5 day period would be the same period where you can still get a refund of course. But as soon as the domain is activated after those 5 days no more refunds can be applied for.

 

[Smith]

I can't speak to the accuracy of your numbers or whether or not they make a nice profit by doing this, but trust me, they're doing it.

I see it happen every day on domains I monitor. The names are picked up, dropped 5 days later, picked up again, dropped again, etc, etc.

They wouldn't do it if it wasn't profitable.

Of course they do it, and of course they find it profitable based on their business plan and acceptable ROI.

In Bob Parsons's blog, he is saying that the companies doing this are registering names, making money from the traffic on the names in the 5 day trial, then subsequently deleting them for the full credit back, essentially generating free money. If this was what was actually happening, why would they not continuously register, drop, re-register, drop, re-register etc?

They are looking for names that generate traffic or revenue.

If they find a domain that has any traffic or generates any clicks they register it.

.

do away with the whole canceling domains policy, i mean if you reg it, you keep it, that is the policy i would use. You think domain kiting is only a registrar problem its a domainer problem also. Domainers find a "gem" and reg it and then promote the hell out of it for a day and decide it was no the 'gem' they thought it was so there they go back to the registrar for their refund. Or i guess a 12 hour time period might be alright where you can get your refund

I'm pretty sure that the 5 day period was never intended for registrants, it was intended for registrars.

Some fraudulent purchase attempts do go through initially. These purchases are only discovered to be fraudulent on further examination of the account at the registrar and verification of the credit card by phone etc.

So say a person who has a compromised credit card number makes a purchase of 10 domain names, the order goes through because the card hasn't been deactivated yet or the credit card processing company does not flag the number for whatever reason and allows the purchase. When the registrar reviews the purchase and discovers that the purchase was made on a compromised credit card number they will immediately credit the purchase back to the card in order to avoid a chargeback and the associated costs, they also delete the domain names so that they don't have to pay $65 for the domains that were registered fraudulently. If there was no system for returns the registrar would be forced to pay for the domains out of their own funds.

If there was something put into place where there were no deletes allowed, you could pretty well guarantee that the cost of domains would increase everywhere in order for registrars to protect themselves. Alternatively, systems of pre-qualifying buyers would have to be put into place. Neither are very good options in my opinion.