GoDaddy: Exposed

[BocaVision]

http://domainnamewire.com/2008/12/03/standard-tactics-llc-how-godaddy-profits-from-expired-domains/

Standard Tactics, LLC: How GoDaddy Profits from Expired Domains
Wednesday, December 3rd, 2008

GoDaddy goes to great lengths to hide its expired domain warehousing operations.

Scottsdale, Arizona based The Go Daddy Group, which runs the world’s largest domain name registrar GoDaddy.com, is warehousing its customers’ expired domain names and profiting from them. The company has taken a number of steps to hide this practice from public view. This article covers the results of a Domain Name Wire investigation into GoDaddy’s domain warehousing activities.

Profiting from Expired Domain Names
When domain names expire, most large domain name registrars try to make money from them. Network Solutions and eNom auction expired domains at NameJet. Register.com auctions domains through Snapnames .

GoDaddy.com and other registrars that are part of The Go Daddy Group don’t use a partner to sell customers’ expired domain names. Instead it auctions them on the company’s own platform originally called The Domain Name Aftermarket (TDNAM). It’s a fairly transparent system. But when a valuable domain doesn’t sell, something not-so-transparent goes on in the background, as described in detail below.

It’s not unique that GoDaddy profits from expired domains. What’s unique are the steps GoDaddy takes to cover up its tracks, that it holds on to some domains that aren’t sold at auction, and its apparent hypocrisy between domains it owns and some of its activities such as combating online pharmacy fraud.

Go Daddy’s Domain Name Warehouse
I first discovered GoDaddy’s domain warehousing efforts in 2005. I noticed a typo domain name that didn’t sell at TDNAM and wasn’t released. It was subsequently monetized by GoDaddy using a domain parking page. At the same time I purchased several domains on TDNAM that had expired but hadn’t sold in the initial auction, much like the typo. Interestingly, I received notification from an email address at StandardTactics.com offering to transfer all of the domains I purchased into my account.

Standard Tactics, LLC, is a The Go Daddy Group subsidiary that takes ownership of valuable expired domains that don’t sell at TDNAM. It then monetizes the domain names using parked domain pages and lists the domains for resale on TDNAM.

The Formation and Structure
When GoDaddy launched TDNAM back in 2005, it finally started cashing in on its customers’ expiring domain names. By auctioning off the domains it was able to generate revenue even when its customers didn’t pay to renew their domains. But GoDaddy understood it could also make money by keeping some of the domain names that didn’t sell at auction for itself.

On August 16, 2005, GoDaddy formed a subsidiary called Standard Tactics, LLC in New Mexico. Before founding Standard Tactics, all of GoDaddy’s subsidiaries were incorporated in Arizona where the company is headquartered. There are a couple reasons GoDaddy may have chosen to form the company as a New Mexico limited liability company rather than an Arizona corporation. First, by creating the company in New Mexico it could distance itself from it. Second, by filing as a limited liability company instead of a corporation, it didn’t have to list directors of the corporation. It only had to list an organizer — Scottsdale, Arizona lawyer Robert J. Rosepink. Rosepink filed the papers in New Mexico and listed the company’s principal address outside the state at 7373 North Scottsdale Rd, Suite E-200 in Scottsdale. That’s the address for Rosepink’s law firm.

GoDaddy says Rosepink is outside counsel for the company.

He may have run in the same circles as GoDaddy CEO Bob Parsons in Scottsdale. Both Rosepink and Parsons donated to Jon Kyl’s campaign for U.S. senate.

Earlier this year, Rosepink was indicted on 102 counts by the Arizona Attorney General office for his part in a concert promotion investment scheme. Rosepink allegedly earned nearly $1 million in fees for recruiting investors in what The Arizona Republic labeled a Ponzi scheme.

Although GoDaddy did a good job distancing itself from Standard Tactics as a separate company (one source said Standard Tactics was commonly called “a client” of GoDaddy’s even inside the company), GoDaddy’s filing to go public in 2006 provides a definitive link between the two companies. It showed that Standard Tactics, LLC is indeed a subsidiary of GoDaddy. It’s distanced even further from the parent company as a subsidiary of a subsidiary. Special Domain Services, Inc., is a subsidiary of The Go Daddy Group. Standard Tactics, LLC is a wholly owned subsidiary of Special Domain Services, Inc. Special Domain Services, Inc. is also the parent company of GoDaddy’s Domains By Proxy, a whois privacy service that helps people shield their information from the whois database.

 

[DN BROKER]

is that all?

 

[guarddragon]

Let's see: GoDaddy has found ways to make money in the domain business.

OK. Should we object, especially if we get what we bargain for when we deal with GoDaddy?

 

[Blastoff]

It will be interesting to see if icann does anything.

 

[Jasonn]

Could be worse. Tucows just keeps the good name for themselves and doesn't let them drop.

 

[Blastoff]

guarddragon its pretty straight forward, it an unfair advantage.

 

[-Adam-]

Interesting read but I am with domainer and his statement.

 

[bidawinner]

As long as Pool and the like cant get their hands on the domains..fine by me

Domains have been held hostage the past 5 years or so by companys specializing in drops taking the individual drop catcher basically out of the picture anyways

You want a good domain you're paying someone..I kind of like the fact that the door is closing on "regulars" with their drop catching scripts

The whole system is screwed up for deleting domains.. funny to see those doing the screwing now getting screwed

 

[MicroGuy]

I'm not a huge fan of Godaddy but....

If Bob Parsons and his legal buds are doing this legally within the framework of US/state laws and ICANN guidelines then let them make their cheese. Free markets are designed to benefit the creative.

 

[sunken]

Interesting read, but I agree that if they are following ICANN rules, then there isn't much that they are truly hiding. Perhaps it's ICANN that needs to change it's rules to prevent this sort of practice to allow fairness to domainers as well as big companies.

 

[Dean]

What exactly is exposed? We sort of already knew it and most registrars do similar things. I think ICANN should make a rule to stop registrars renewing a domain for themselves or for their auctions when a client doesn't renew it. It should drop. But there is no rule like that now so the registrars can do it and I have nothing against them for doing it since they are just trying to make a buck like the rest of us.

 

[cobainer]

I have been through one such article as well over here

personally speaking, I don't see a big deal in it as a whole lot of registrars indulge in such practices...as d3n rightly mentioned, they're out there to make a quick buck just like the rest of us..as long as they're not stealing away active domain names.

 

[Dave_Z]

it an unfair advantage.

If one doesn't renew their apartment lease, can't its apartment owner make a
bit of money from it as they see fit without others complaining it's unfair?

Then again, don't some of us have an unfair advantage over others for a thing
or so?

 

[-REECE-]

Completely agree.

If a nice name expires and it doesn't go to a registrar warehousing them, it just ends up with Pool, Snap, or Namejet anyway, so exactly what difference does it make for most of us?

If one doesn't renew their apartment lease, can't its apartment owner make a
bit of money from it as they see fit without others complaining it's unfair?

Then again, don't some of us have an unfair advantage over others for a thing
or so?

 

[FreshAvails.com]

ICANN Registry Agreement for .com. Section 3.1, b, iv, A & B

(iv) Consensus Policies and the procedures by which they are developed shall be designed to produce, to the extent possible, a consensus of Internet stakeholders, including the operators of gTLDs. Consensus Policies shall relate to one or more of the following: (1) issues for which uniform or coordinated resolution is reasonably necessary to facilitate interoperability, Security and/or Stability of the Internet or DNS; (2) functional and performance specifications for the provision of Registry Services (as defined in Section 3.1(d)(iii) below); (3) Security and Stability of the registry database for the TLD; (4) registry policies reasonably necessary to implement Consensus Policies relating to registry operations or registrars; or (5) resolution of disputes regarding the registration of domain names (as opposed to the use of such domain names). Such categories of issues referred to in the preceding sentence shall include, without limitation:

(A) principles for allocation of registered names in the TLD (e.g., first-come, first-served, timely renewal, holding period after expiration);

(B) prohibitions on warehousing of or speculation in domain names by registries or registrars;

These are required for each registrar agreement. Base on this, they are in violation. Pretty Clear Cut I would think.
http://www.icann.org/en/tlds/agreements/verisign/registry-agmt-com-01mar06.htm

 

[floatingworld]

There are certain expectations from a registrar and being a poacher as well as a gamekeeper is not one of them. Auctioning off names immediately they drop? Well OK that's reasonable. Keeping the name for own trader usage? No, not reasonable. It makes GD look more creepy than it should be.

 

[DotWeekly]

I am SHOCKED by the majority of the comments so far that think this is "ok".

Warehousing domain names by a registrar is and will Kill off hundreds if not thousands of domainers... Tucows already simply keeps the good drops and has built a huge portfolio of premium generics and traffic domains. Now it's exposed that Godaddy is doing the same but just using a little different process but still has the same end result. Register.com, eNom.com have been known to do it as well...

The general public thinks "all the good ones are gone", well if Warehousing keeps going like it is, Domainers will be saying the very same thing, "all the good ones are gone, because the registrars just keep them"!!! and it's only going to get worse.

I agree ICANN needs to do something about it and when Domainers had their chance to voice to ICANN about warehousing, it was something like 19 people voiced about Warehousing (I was one). So the ones that didn't let ICANN know, it doesn't pay to blame ICANN here!

 

[ecigs.net]

The above author in the article in post #1 says, "when a valuable domain doesn’t sell..." at TDNAM GoDaddy warehouses it. Hmmm...I've purchased tons of domains at TDNAM for $4/$5 plus renewal fee.

My question is, "How valuable can a domain be if it doesn't sell for $5?

 

[gingeman]

disagree with what others have said. This practice means all registrars who do this (godaddy are far from the only ones) have a huge unfair advantage over everybody else in aquiring investment grade names. Effectively, they can take possession of any valuable name that is registered and expires on their platform. It will lead to a monopoly and I believe it is a practice which Icann should ensure does not take place. Whether or not they have found the right loopholes to make this legal, I think people underestimate the effect this sort of practice has on the industry.

Edit: have just seen after posting that at least yofie agrees with me!

 

[MicroGuy]

The above author in the article in post #1 says, "when a valuable domain doesn’t sell..." at TDNAM GoDaddy warehouses it. Hmmm...I've purchased tons of domains at TDNAM for $4/$5 plus renewal fee.

My question is, "How valuable can a domain be if it doesn't sell for $5?

As David stated, don't all unsold expired domains finally go to closeout where they can be purchased for $5 by anyone? Would be interested to here more about the entire process if that's not the case. :gl: