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Beware the new gTLD cuckoos

Let’s say that for some reason you’re a big fan of horses.
Ever since ICANN announced it was going to do new top-level domains, in 2008, you’ve been desperate to apply for .horse.
This TLD could not fail, you think to yourself. Everyone likes horses, right? You could have 500,000 registrations in year one, make yourself rich. Maybe buy yourself a new horse.
For the last three years you’ve attended every ICANN meeting, you’ve lobbied for the changes you want to see in the Applicant Guidebook, you’ve spent tens of thousands on hotels and airfare.
You’ve painstakingly built your “.horse” brand, raising money and throwing it into marketing and community building, creating demand among your fellow horse lovers.
The horse community knows about .horse, and they can’t wait for it.
Fast-forward to April 12, 2012.
ICANN has just published the list of first-round gTLD applicants. Your lovingly created .horse bid is in the system, ready for processing.
But wait, what’s that?
Somebody else – some douchebag businessman who doesn’t even like horses – has also applied for .horse, and his bank account is bigger than yours by a long way.
How’s that .horse idea looking now? Did you just spend three years building up somebody else’s brand? Do you think your community will care? Or notice? The other guy is called .horse too, remember.
This scenario is very likely to become a reality.
Probably not for .horse, but for many of the new gTLD applicants that we’ve become aware of over the last few years.
If you look at any high-profile application, .gay or .music for examples, we already see multiple applicants, one of which has usually done more to promote the TLD than the others.
Look at Sophia Bekele’s .africa application, which appears to be running into this problem already, despite all of her painstaking outreach.
There will probably be other applicants for these strings that we will know nothing about until April.
You don’t score any points in the Applicant Guidebook for having a loyal fan base, spending oodles of cash on marketing or simply being first to put out a press release.
If you find yourself in a contested string situation, the only way out under ICANN rules is an auction. The applicant with the deepest pockets wins.
Because I’m desperate to one day coin a term and have it stick, I’m going to call these usurpers “cuckoos”. Because, you know… that thing that cuckoos do with their young.
There’s a cuckoo business model, too.
While ICANN has only endorsed auctions as the method of settling contests over non-community strings, that’s there more as a deterrent than as a solution.
ICANN wants competing applicants to come to some kind of agreement between themselves before it reaches that stage and auctions are expected to be rather rare.
What we’re likely to see is a bunch of applicants withdrawing their applications after being paid off, in cash, equity, or some other consideration, by more serious rivals for the same string.
Nobody wants to risk spending millions in an auction if they can make the problem go away earlier with thousands.
Fortunately for the cuckoos, ICANN offers a substantial refund, $130,000, for applicants that drop out before their Initial Evaluation is completed.
This puts the ICANN fee for getting into pay-off talks with a “proper” applicant at a quite reasonable $55,000. If you can score a couple of points of equity in a new registry, it could be a bargain.
Of course, you’d have to hope that your rival does not call your bluff and try to force you to auction. If that happens, it would probably be wisest to admit defeat and cut your losses.
It’s high-risk, sure, but it’s potentially high reward too, and I’m certain it will happen, even if it doesn’t look like it’s happening.
It’s going to be a poker game, and no mistake.