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Vertical integration – bad news for domainers?

Kevin Murphy, November 10, 2010, 13:39:32 (UTC), Domain Registries

ICANN’s decision to allow domain name registrars to operate registries is a game changer on many fronts, but what impact could it have on domain investors?

For the first time, registrars will be able apply for and run new top-level domains, giving them unprecedented insight into registry-level data.

If they also act as registries, registrars will, for example, be able to see what non-existent domains in their TLD get the most type-in traffic.

They will also be able to see how much traffic expiring domains get, even if the registrant does not use the registrar’s own name servers.

As claimed by some participants in ICANN’s vertical integration working group, this data could be used to “harm” registrants; harms that could be especially noticeable to domainers.

There was a concern from some in the WG that combined registry-registrar entities (we’re going to need a name for these) could use registry data to, for example, identify and withhold high-value names, increasing prices to potential registrants.

The possibility of an increase in “domain tasting” and “front-running” – practices generally frowned upon nowadays – was also raised.

However, some registrars are already owned by companies that register large numbers of traffic domains for themselves, even without access to registry data.

Demand Media subsidiary eNom, the second-largest gTLD registrar, is a good example.

As DomainNameWire reported in August, the company already uses domain name lookups to decide what names to register for itself (though it told DNW it does not “front-run”), saying in SEC filings:

These queries and look-ups provide insight into what consumers may be seeking online and represent a proprietary and valuable source of relevant information for our platform’s title generation algorithms and the algorithms we use to acquire undeveloped websites for our portfolio.

Demand also said that it acquires eNom customers’ expiring domains if they are attractive enough:

Domain names not renewed by their prior registrants that meet certain of our criteria are acquired by us to augment our portfolio of undeveloped owned and operated websites.

Access to registry data could prove invaluable in refining this model, and eNom has, unsurprisingly. long indicated its desire to apply for and operate new TLDs.

But will registries be allowed to exploit this data to line their own pockets?

ICANN indicated today that it plans to introduce a code of conduct for registries, to prevent “misuse of data”, and will likely step up its compliance activities as a result.

What this code of conduct will look like remains to be seen, but I expect we’re looking at “Chinese wall” provisions similar to those self-imposed by VeriSign when it still owned Network Solutions.

It should be pointed out, of course, that standalone registries already have the ability to register domains to themselves, based on their own registry data, and I’m not aware of a great many incidents where this has been abused to the harm of registrants.

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Comments (7)

  1. Michele says:

    Oh come on Kevin now you’re just scare mongering

    No new TLD is going to have mass takeup. While there might be one or two exceptions, I doubt if any of them will break the 1 or 2 million name mark after the first renewal cycle.

    It’s not as if .com or .net is going to end up being run by a registrar

    And you do realise that Verisign already uses a lot of the data for various things already, don’t you?

    (and I won’t even get into how ISP’s resolvers are a much more valuable source of data .. .. or how tasting was killed off .. )

  2. Has anyone noticed what company has the contract to do Cell Phone Wire-Taps and GPS tracking in the USA for “law enforcement” agencies ?

    Has anyone ever ‘voiced concern’ (no pun intended) that it could be a competitive advantage to listen to the calls of competitors and track their executives ?

    Are cell-phone microphones activated without people’s knowledge to provide streaming audio from meetings ? Where is that streaming audio sent ?

  3. Dotmainer says:

    LOL
    “If they also act as registries, registrars will, for example, be able to see what non-existent domains in their TLD get the most type-in traffic.”

    This data is avaible from Verisign !

  4. Vertical Integration is the only way new TLDs can increase their value proposition and differentiating themselves.

    This is bad news for domainers but good news for the Internet. I hope we see less parked pages and click-fraud infested arbitrage.

    This is a move towards the right direction. At least now new TLDs are given the opportunity to make a difference that matters to their constituencies and go beyond providing just a domain name.

    Constantine Roussos
    .music

  5. Adam says:

    Constantine, what you aren’t realizing is that this “bad news for domainers” idea just means that there’s potential for the registry/registrar combos to just harvest all the decent domains that are available for domainers and others to register currently. It means the registry/registrar combo cuts out anyone and everyone. Call them the uber-domainer if you will. It’s not the right direction to give 1 entity the ability to control . bzzzt wrong answer.

    Michele is right though. This stuff is already happening behind the scenes with verisign passing out nuggets of info and the likelihood of any TLD really making a dent seems minimal here.

    The greater worry I see is , wouldn’t these new rules mean that verisign can now go back to being a registrar and also now dive in with that data to be the “uber-domainer” they always wanted to be?

  6. Dotmainer says:

    @Adam: Ever heard of Data Analyzer Tool ? … avaible at Dynadot … given from Verisign !

  7. Raj Alla says:

    I thought this is useful to see different prospect…

    Registry:
    1. This decision is good because, now the registry owners don’t need to depend on the registrar to put registrar marketing dollar, resources and place it in the top in their list to SELL more domains.
    Now new TLD owners can build their own registrar (build new or buy an existing one) and sell more domains, pump more resources and makerketing dollars to be successful…This will get us lot of innovation because registries can spend more money in registrars…..
    Q1: ISN’T THIS TRUE?

    Registrar :
    Small: No difference
    Big : They can build a successful new TLD by going thru their own channel like eNom. But they have threat from registries to enter in to this registrar business…
    Q2: is this true?

    Q3: If Enom applies for a TLD, do you guys think
    other small registrars or godaddy does not want to sell that TLD?

    Domainer: They do the same as current …buy more names and make more money.

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