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Donuts loses five of the first six new gTLD auctions

Kevin Murphy, June 13, 2013, 09:23:07 (UTC), Domain Services

The full results of the first six new gTLD auctions are now known. Donuts lost five of them, raising millions of dollars in the process.

Here are the winners of last week’s auctions, which were managed by Innovative Auctions:

Five of the six were a two-way battles between Donuts, which has applied for 307 gTLDs, and one other applicant. Each of the losing applicants has now withdrawn its application with ICANN.

The exception is .club, a three-way fight that included Merchant Law Group. Neither losing application has been withdrawn with ICANN yet, but the result it well-known.

Innovative revealed last week that the round raised $9.01 million in total. The winning bids for each auction were not disclosed.

Given that Donuts managed to lose five out of the six, it’s a fairly safe assumption that most of that money will have gone into its war chest, which can be used in future auctions.

Of the five applications it has now withdrawn, only .red had already passed its Initial Evaluation, so the company will have also clawed back a $130,000 ICANN refund on each of the other four.

The auctions mean that we now know with a high degree of certainty which companies are going to be running these six gTLDs.

Most of them have not yet passed IE, but with the success rate so high to date I wouldn’t expect to see any failures. None of them are subject to objections or direct GAC Advice.

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Comments (14)

  1. Danny says:

    It is interesting, but that was expected, thanks for the article, cheers!

  2. zack says:

    it’s interesting that the winner of .red wouldn’t have taken over the Donuts application, given the priority number. This is not disallowed by ICANN and presumably it wouldn’t have to go through a full evaluation since the winning company is already in the program.

  3. Donuts Inc. says:

    Donuts won the bidding for .PHOTOGRAPHY. According to the auction agreement terms, we’ll be the sole remaining applicant for that TLD. Final bids are confidential.

    Some are speculating that we or other bidders are intentionally losing auctions merely to collect from winning bidders. Speaking for Donuts, our strategy is to acquire gTLDs. We were very active in the auctions — we placed bids totaling more than $8 million over the course of this round.

    Each TLD, however, has its own unique circumstances. We’re resourced to win all auctions, private or ICANN, but at the same time have made careful judgments about values of contested strings. We’ll avoid getting carried away and bidding beyond reasonable valuation assessments.

    For the record, we’re still standing behind the applicant auction as the best means of resolving contention. They are a fair and efficient method to solve competition for resources.

  4. Avri Doria says:

    I am glad to read that it is working out as expected. Always relatively happy when my friends do well.

    I still think it is the wrong way to go in the global public interest. Though I understand the imperatives many businesses live under, I see such an opportunity lost to fund some real capacity building in developing economies.

    My view still runs to the notion that auctions that don’t serve the global public interest are a poor option:

    http://avri.doria.org/post/52245688637/private-auctions-the-latest-game-for-getting-rich-off

    • Ray Marshall says:

      To your point Avri, the losers in the private auctions are effectively selling public spectrum that never belonged to them in the first place simply by having submitted an application. If the auctions were handled by ICANN, at least the money could be put to use for the benefit of the public.

  5. Paul Stahura says:

    The community already granted .org to PIR which has already made close to a billion dollars and continues to make more than $70M *per year*, every year, for the non-profit ISOC exactly for such purposes, Avri. ICANN wisely decided for resources to stay within the applicant community so that they can better innovate and compete with each other and the legacy operators which is where the real public benefits are generated – through innovation and competition.

  6. As a .club applicant I made the decision to enter a private auction for the following reasons:

    1. It was a well thought out efficient method developed by Cramton. Trust me I tested everything.

    2. Under a loss scenario, I would be rewarded for the substantial time and financial investment made over the last 18 months.

    3. Under a win scenario, I am happy to know that the funds I paid will be used by other entrepreneurs to continue to support the development of the new gTLD industry.

    I believe under an ICANN auction scenario there will simply be too many losers. Under a private auction scenario everyone is either compensated for their efforts or get the chance to launch a name.

    Colin

  7. Ray Marshall says:

    In general, when an asset is put up for auction, the losers don’t get a penny of the proceeds. Why? Because they never had title to the asset. When you look at the tax code, you tend to come across the term “consideration”. What consideration are the losers giving in exchange for the proceeds of the private auctions? Clearly, they are not handing over title to the generic domain names. Since the private auctions involve the winners obtaining title of the generic domain names from ICANN, it stands to reason that the proceeds from such auctions should go to ICANN and not to the losers.

    • zack says:

      if you use that argument then as an auction loser I am just getting a “gift” or non-taxable cash from other contenders to walk away from the potential to secure the rights to manage a TLD. Cool, then whatever I get via a private auction should have no tax consequences to me, right?

      Yea, good luck with that..I don’t think the IRS is going to see it that way.

      • Ray Marshall says:

        The illusion of giving title to the winners for something that is coming from ICANN is probably of no concern to the IRS so long as it gets its cut. Feel free to ask the IRS if that’s keeping you up at night.

        • zack says:

          Not keeping me up. I actually understand the IRS rules, was just pointing out that your argument doesn’t stand up.

          • Ray Marshall says:

            Zack, you don’t understand my argument since you are talking about taxes. If you believe the emporer has clothes, then who am I to stop you from buying and wearing a pair of non-sense.

    • zack says:

      Fair point…I guess not many of us ordinary folk understand your analogies

  8. Ray Marshall says:

    Perhaps you should think before attacking one’s perspective!

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