Surge in new domain registrars

ICANN is seeing a spike in newly accredited domain name registrars.
Since the start of the year, the organization has approved 16 new companies, compared to only about 40 in the whole of 2010.
About half a dozen of the new registrars appear to belong to domain investor Andrew Reberry of TurnCommerce, which owns domains such as Glossary.com, Bulldozers.com and Fluff.com.
Many of the others were accredited yesterday and have very generic registrar names, such as Host Name Services Inc, International Registration Services Inc and Online Name Services Inc.
There are no web sites associated with this latest batch yet, but I’d be surprised if many turn out to have sought accreditation with customer-facing domain services in mind.
This is pure speculation, but I wonder if any of this may be related to ICANN’s recent decision to loosen the restrictions on cross-ownership between registrars and registries.
If and when ICANN opens up its new top-level domains program to applications, which could happen as soon as August, potential registries will also be allowed to own registrars.
Could the market for flipping accredited companies return? It’s happened before, but it may not be the most efficient or economical way of achieving accreditation nowadays.
The uptick in newly approved registrars may of course just be an anomaly.

Network Solutions will sell .xxx domains

Network Solutions has become the first big-name registrar to show that it will support the proposed .xxx top-level domain.
This page has recently appeared on the NSI site, accessible from the company’s home page through the link “.xxx Coming Soon”.
NSI appears confident that ICANN will approve the TLD soon:

.XXX will be launching shortly and Network Solutions is working with ICM Registry to provide informational services for our customers that wish to take advantage of the launch and register domain names.

The TLD is currently being tied up by ICANN’s Governmental Advisory Committee, but many believe it’s likely to be a shoo-in at the San Francisco meeting in March or sooner.

eNom named “worst” for badware

Demand Media-owned eNom has been fingered as the worst company when it comes to hosting “badware”, according to the latest quarterly report from HostExploit.
The report puts eNom at number three in its overall league table of hosts involved (albeit generally unwittingly) in supporting malicious activity online, up from seven in the third quarter.
HostExploit conducts meta-research, looking at a number of factors (such as phishing and spam) normalizing and weighting data provided by a wide variety of sources.
eNom’s position on the list is based almost entirely on its ranking under the “badware” metric, which uses data supplied by StopBadware.org members Google, Sunbelt Software and Team Cymru.
Broken down by category, eNom scored 944 out of 1,000 in the fourth quarter, using HostExploit’s scoring system for badware. The network ranked second scored only 594.
What is badware? The report says:

Badware fundamentally disregards how users might choose to employ their own computer. Examples of such software include spyware, malware, rogues, and deceptive adware. It commonly appears in the form of free screensavers that surreptitiously generate advertisements, malicious web browser toolbars that take browsers to unexpected web pages and keylogger programs that transmit personal data to malicious third parties.

Other major domain name companies also rank in the top 50 worst hosts; 1&1, Oversee.net and Go Daddy occupy positions #35, #36 and #37. Google is at #28.
The HostExploit report appears to have been funded by the Nominet Trust.

Go Daddy files UDRP on “Mad Dog” host

Go Daddy has filed a UDRP complaint against a web hosting company that uses a similar brand to sell domain names, maddogwebhosting.com.
The domain appears to have been used by a small-time hosting reseller for about two years. Its mailing address is a flat in south London.
But Go Daddy subsidiary Mad Dog Domains, which also sells hosting, has been around for longer and appears to have a trademark on its brand.
It’s not really an open-and-shut case by UDRP standards, given that Mad Dog Web Hosting appears to be a legitimate site, but I suspect Go Daddy has a reasonably good chance of prevailing.
We’ll have to wait for the ruling to be made and published by WIPO to find out the full details.

Go Daddy passes 45 million domains milestone

Go Daddy now has 45 million domain names under management.
That’s the word from Scottsdale tonight. The news comes less than a year after the registrar announced its 40 millionth domain name registration.
According to the company, it “is registering, renewing or transferring a domain name every eight-tenths of a second” and is now “larger than eight of its closest competitors combined”.
Obviously, this is great news for Go Daddy.
It also means that the company is in a very dominant position in the market, which may attract more attention in future.

Go Daddy offers Whois privacy for .co domains

.CO Internet has started allowing registrars to offer Whois privacy services for .co domains, according to Go Daddy.
In a blog post, Go Daddy’s “RachelH”, wrote:

When the Internet Corporation for Assigned Names and Numbers (ICANN) and .CO Internet S.A.S. drafted the .co policy earlier this year, they decided to hold off on private registration to prevent wrongful use of the new ccTLD — especially during the landrush. Now that .co has carved its place among popular TLDs, you can add private registration to your .co domain names.

Unless I’m mistaken, ICANN had no involvement in the creation of .co’s policies, but I don’t think that’s relevant to the news that .co domains can now be made private.
During its first several months, .CO Internet has been quite careful about appearing respectable, which is why its domains are relatively expensive, why its trademark protections were fairly stringent at launch, and why it has created new domain takedown policies.
It may be a sign that the company feels confident that its brand is fairly well-established now that it has decided to allow Whois privacy, which is quite often associated with cybersquatting (at least in some parts of the domain name community).
It could of course also be a sign that it wants to give its registrars some love – by my estimates a private registration would likely double their gross margin on a .co registration.

Whistleblower alleged shenanigans at DirectNIC

A former employee of a company allegedly affiliated with domain name registrar DirectNIC claimed the company operated a fraudulent domain arbitrage scheme using Yahoo ads and Parked.com.
Mark Deshong filed a whistleblower lawsuit in August. It was settled in October, but its claims are quite interesting, and don’t appear to have been reported on elsewhere.
Until April this year, Deshong worked for a company called Keypath LLC, a domain registration and monetization company based in Tampa, Florida.
According to his lawsuit (pdf), Keypath is owned by the same bunch of people (notably Sigmund Solares and Michael Gardner) who run DirectNIC and Parked.com, as well as entities including Intercosmos Media Group and The Producers Inc.
Deshong said he was fired after blowing the whistle on a “fraudulent” scheme to bilk money out of Yahoo Search Marketing using the old practice of domain arbitrage.
The suit claimed Keypath bought ads on YSM to bring traffic to sites such as cameras.com that, in turn, displayed nothing but contextual ads generated automatically by YSM.
The company would pay Yahoo small amounts for the traffic it received, but would be paid larger amounts for the traffic it sent elsewhere.
That’s domain arbitrage in a nutshell. It was commonplace among domainers back in 2007 and earlier, and Keypath was far from the only company engaged in the practice.
Yahoo tried to put a stop to arbitrage on its ad network in February 2008, as Domain Name Wire reported at the time, but the lawsuit alleged that Keypath carried on regardless, using bogus identities.
This is when the “fraudulent” behavior is alleged to have commenced.
The suit claimed Keypath “created fictitious, unregistered DBA [Doing Business As] company names” in order to obtain up to 1,000 credit cards from Regions Bank.
The complaint, in an eyebrow-raising paragraph, goes on to list almost 100 of these alleged DBA companies’ names.
Each one of these companies would get a Gmail or Hotmail email address and a Skype phone number for the city where the “fictitious” company was supposedly based, the complaint alleged.
A proxy server would be obtained in each of these cities, which Keypath would use to access YSM and order ads pointing to parked pages, under the guise of one of the DBAs, the suit alleged.
The scheme covered about 50,000 domains and made about $375,000 during January 2010, according to the complaint.
The lawsuit was filed under Florida’s whistleblower act, so while it alleged multiple illegal acts (such as bank fraud and wire fraud) on Keypath’s part, it only attempted to prove wrongful termination.
Deshong basically claimed that he was canned after telling his superiors he could no longer carry out duties he believed to be illegal – he didn’t want to go to jail.
In its response (pdf) to the complaint, Keypath denied essentially all of Deshong’s claims.
It also denied that the company has ties to DirectNIC, Michael Gardner, Sigmund Solares, Intercosmos, Parked.com or The Producers.
(Probably a disingenuous claim. Florida company records show they’re all currently or recently linked to businesses located at 5505 West Gray Street in Tampa, Parked.com’s main US office. Keypath’s web site shows the same address).

Keypath also accused Deshong of a shakedown, attempting to “extort an unreasonable severance package”, and said that he had “improperly retained” a company laptop after he was fired.
The suit was settled out of court (pdf) on October 25th for an undisclosed sum.
The lawsuit is only tangentially related to the cybersquatting lawsuit Verizon filed against DirectNIC earlier this year. That case appears to be currently tied up in a pre-trial discovery/jurisdictional nightmare.

Register.com settles Baidu domain hijacking lawsuit

Register.com has apologised to Chinese portal company Baidu for allowing its domain, baidu.com, to be hijacked by the Iranian Cyber Army hacker group.
The two companies have announced that the lawsuit, which alleged gross negligence among other things, has now been settled. Terms were not disclosed.
If Baidu’s complaint was to be believed, the hackers took over baidu.com with a trivial social engineering attack that relied upon a Register.com tech support employee being asleep at the wheel.
The company is one of China’s largest internet firms, employing over 6,000 people and turning over well over $600 million a year. But for the period of the hijack, visitors to baidu.com instead just saw the hackers’ defacement message instead.
The registrar had argued in court that its terms and conditions released it from liability, but the judge didn’t buy it.
Register.com, which was acquired by Web.com for $135 million in June, said yesterday:

After an internal investigation, we found that the breach occurred because Register’s security protocols had been compromised. We have worked with United States law enforcement officials and Baidu to address the issue. We sincerely apologize to Baidu for the disruption that occurred to its services as a result of this incident.

Baidu said it accepted the apology. And the check, I imagine.

Three registrars face the ICANN chop

ICANN has told three registrars they are in breach of their registrar contracts and will lose their accreditation next month unless they rectify the problems.
These registrars, all of which appear to have negligible numbers of gTLD domains under management, are affected:
Mister Name will be shut down if it does not pay its ICANN fees and escrow its Whois data.
Open System Ltd is accused of not having a functioning Whois service.
Best Bulk Domains Inc also doesn’t have a functioning Whois, ICANN said. It also has not been paying its dues and hasn’t maintained accurate contact information for itself.
All three have dates in mid-December to clean up their acts or lose their right to sell gTLD domains.
You can find ICANN’s compliance letters here.

Another reason why Go Daddy might not become a registry

Domain name registries and registrars will soon be able to own each other, but there are plenty of good reasons why many of them, including the largest, may not.
George Kirikos and Mike Berkens are asking very interesting questions today, based on earlier investigative reporting by DomainNameWire, about whether Go Daddy would or should be barred from owning a registry on cybersquatting grounds.
But that’s not the only reason why Go Daddy may have problems applying for a new top-level domain.
I reported back in March, when only my mother was reading this blog, that Go Daddy may have gotten too big to be allowed into the registry market.
If you think Go Daddy wants to apply to ICANN to manage a new TLD registry or two, ask yourself: why did Go Daddy spend most of the year opposing vertical integration?
I have no inside knowledge into this, but I have a theory.
In 2008, CRA International produced an economic study for ICANN that, broadly speaking, recommended the relaxation of the rules separating registries and registrars.
In December that year, less than two years ago, Go Daddy filed its very much pro-VI comments on the study:

Go Daddy has and continues to be an advocate for eliminating the existing limits on registry/registrar cross-ownership.
…
The arguments that have been presented in favor of maintaining the status quo simply do not hold water. Current and past examples of cross-ownership already serve as test cases that demonstrate cross-ownership can and does work, and it can be successfully monitored.

Over the course of the next 12 months, the company’s official position on VI mellowed, and by this year it had made a 180-degree turn on the issue.
Its comments to the VI working group, filed in April 2010, say:

Go Daddy’s position on the vertical integration (VI) issue has changed over time. When VI discussions first began our position was very much to the left (if left is full, unqualified VI), but it has moved steadily to the right (if right is maintaining the so-called status quo). At this point, we are nearly fully on the right.

The company cited concerns about security, stability and consumer protection as the reasons for its shift. While I’ve no doubt that’s part of the story, I doubt it paints a full picture.
The decision may also have something to do with another economic study, produced for ICANN in February this year, this time by economics experts Steven Salop and Joshua Wright. It was published in March.
This study, crucially I think, suggested that where cross-ownership was to take place and the larger of the two companies had market power, that the deal should be referred to government competition regulators. Salop & Wright said:

We recommend that ICANN choose a market share threshold in the 40-60% range (the market share measured would be that of the acquiring company). The lower end is the market share at which U.S. competition authorities begin to be concerned about market power.

Guess which is the only registrar that falls into this market share window?
In January this year, Go Daddy put out a press release, when it registered its 40 millionth domain, which claimed:

Go Daddy now holds a near 50 percent market share of all active new domains registered in the world and is more than three times the size of its closest competitor.

Correlation does not equal causation, of course, so there’s no reason the second economic study and Go Daddy’s policy U-turn are necessarily linked, but I’d be surprised if the market power issue did not play a role.
The newly published Applicant Guidebook appears to have taken on board a key Salop & Wright recommendation, one that may be relevant:

ICANN-accredited registrars are eligible to apply for a gTLD… ICANN reserves the right to refer any application to the appropriate competition authority relative to any cross-ownership issues.

It seems to me that Go Daddy may be one of the few companies such a provision applies to. The company may find it has a harder time applying to become a registry than its competitors.
In the interests of sanity, I should point of that the AGB has been out for less than 48 hours, and that anything written about its possible consequences at this point is pure speculation.