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Vertical integration – bad news for domainers?

Kevin Murphy, November 10, 2010, 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.

VeriSign plans domain tasting service

VeriSign plans to offer a service that would allow domain names to be registered for as short a period as a month, possibly creating a system of legitimised domain tasting.

The company has asked ICANN (pdf) if it can launch a Domain Name Exchange service, whereby registrars could cash in unused names, transferring the remaining time on the registration to a new domain.

The service, according to VeriSign’s filing, is designed for registrars that offer domain registration as part of bundled hosting packages paid for on a monthly subscription basis.

Currently, those registrars have to register the domain for a full year with VeriSign, even if the customer stops paying for it after a month or two, the company said.

Under Domain Name Exchange, registrars would (continue reading)