[ga] WLS

[Ron Wiener <Ron@Snapnames.com>]

Dear Colleagues,

There have been many good points made on this discussion thread which most
of us would agree with.  For example:

Elliot Noss, Tucows:

"At the same time we must keep our eye on the fact that the role of
registrars and registry is, most purely, to efficiently administer the
allocation and provisioning of domain names. This means that the best
approach is the one that puts names into the hands of those who would put
them to the most use. Names in the hands of those who most desire them will
lead to a fuller utilization of the Internet, more value for users and more
revenue for registrars and registries." 

Joyce Lin, 007 Names:
 
"As long as speculators are the major force behind the market, I'm pretty
pessimistic about finding a good solution that will benefit the consumers." 


There are many different business models employed by the speculator
community.  Not only are most of these models innovative and valid (with the
obvious exception of illegal cybersquatting), they have been major drivers
of the domain name economy for at least the past two and half years.  None
of us who operate domain name related businesses could honestly state that
speculators haven't been a large driver, if not the largest, of our
companies' own economies.  Not all of us, however, apparently feel that this
means that the first and highest priority of registrars, registries and
ICANN is serving mainstream users. 

We believe it is possible to serve all constituents fairly and for
registrars and registries to have healthy, sustainable, scalable business
models in which everyone can mine their own niche, and in which it is not
necessary to violate contractual rules or create unfair, preferential access
for certain groups just in order to get ahead of the competition.  BTW,
while most of the conversation on this board wrt competition has been
focused on registrar-registrar competition, the real crux of the debate
amongst speculators - between those for and those against WLS - is the
competition between speculators to grab names - and the total lack of
ability for mainstream users to compete at all.  


Freedom of Choice

To quote Peter Girard, Afternic/Register.com:

 "The 'Status Quo Proposal' suggested by George Kirikos may be intended
humorously, but it must be pointed out that this is not an option. The
system will change. Allowing dozens of companies to competitively game the
registry's delete system does not constitute consumer choice and
competition. It only forces the consumer to subscribe to innumerable
'attempts' to snatch a name, all but one (and usually all) of which must
fail to provide a trace of value." 

Dotsplash's quote (from registrant POV):
 
"Now as an end users, instead of 
1. setup technology & chasing the name myself, or
2. paying to koreans/chinese groups to pick the name for me or 
3. paying to unpaid-dept of registrar or 
4. watching auction of dotster/parava whole day or 
5. payning monthly fee in thousand dollars to registrar or
6. paying snapnames fix price (which is not bad) but no gurantee or 
7. paying thousands of dollars to get into elite group of some registrars or
etc etc etc (it's current mess and you all know that but I've seen very
closely and used myself many of them)".

"While 99% of the website owners (individual, corporates etc) will love to
go for WLS and like to make snapnames 100% effective which saves them from
current mess & nightmare of picking a name if it's already registered. why
is it mess ? Because we (genuine users i.e. registrants) are at the mercy of
registrars and their friends. but that's not the system was meant for." 


Some detractors of the WLS proposal have branded it as an eliminator of
"freedom of choice."  Let's examine this closely, for while it is not a
perfect solution for all, it does provide greater choice for a greater
number - precisely because it alone serves all types of customers rather
than only the speculator.
 
Oblige me if you will in a simulation exercise.  Let's presume that a
business person, "Jill," has a need for a domain name, to launch a new
product brand for her company.  She searches endlessly for a good brand name
idea that has a matching, available domain name but is unable to find one as
98% of her searches return "sorry, this name is taken."  She has noticed
that some of the names she investigated were not in use and, in fact, are
near or past their expiration dates, and would like to be next in line to
get one of those names.

Of course what she doesn't know is that any good name that deletes is gone
in a millisecond.  (If she was one of the lucky ones to use a registrar that
is a SnapNames partner then she might have purchased a SnapBack
subscription, but her odds of 70% efficacy would leave her with a 30% chance
of disappointment.  Lower, if it's a "hot" name with high speculative value.
Let's assume for this simulation that she uses a registrar and does not
offer this option.)

George Kirikos has mentioned some of the other registrars offering "choice"
in the secondary market.  There are actually in excess of 25, I believe,
(Chuck, can you tell us how many are using the bulk pools?), but let's start
with these from George's list: Dotster, NicGenie (Parava), IARegistry,
AWRegistry, Signature Domains, INWW, OnlineNic, AddressCreation, AllDomains,
Eastcom and Paycenter.

Let's just pretend that the local newspaper had an article listing these
registrars who offer the specialized service of grabbing deleted domain
names, or that a search engine scan could produce such a list.  We're just
pretending, for we all know that that mainstream customers HAVE NO CLUE that
most of these "choices" exist.  

Let's go with Jill now, as she examines each provider and tries to get in
line for a name that is going to expire in 30 days... [caveat, some of this
is based on the most recent information we had and may not be 100% up to
date]
 
1.	Dotster

Jill finds the NameWinner link and figures out how the system works after
only 30 minutes of study.  She reads the Rule Book and opens an account.
She finds the name she wants and tries to place a bid for the name, but
learns that NameWinner can't take an order for a name that isn't yet
expired, much to her disappointment.

Let's pretend the name is expired...
Jill puts down her bid for $25 on the name she wants and prepares to watch
the name for what turns out to be about 50 days.  As the purge date
approaches, other bids start to fly in.  Jill has to constantly check in
between meetings and re-bid because she has searched so hard for this one
name she really, really wants it.  Unable to monitor the board at the end of
the auction because of her kid's soccer game, she's outbid by $25, seconds
before the cut-off time, and the name goes to someone else for a price of
$250.
	
2. NicGenie.com (by Parava) 

Pretty much the same experience as above.

3. eNom "Drop Club" 

No mention of a "Drop Club" service anywhere on the site, but presume that
Jill meets a speculator on a chat board who tells her what number to call to
find out about the special service.  He cautions her, though, that she'll
need $5,000 to join the club. After considering this option, Jill decides
she really only needs a couple of names, and this is awfully expensive, so
she goes on to the next choice...

4. IARegistry 

Once again, nothing on the web site says anything about how to get next in
line for a deleting domain name.  She contacts her friend on the chat room
again and learns that to use this service she'll have to pay a club entry
fee in order to get access to "dedicated SRS connections," whatever that
means (Jill's company is in the gourmet food business and they don't have
any technical people around to help her with this lingo).  She'll also need
some high-end computer equipment and an experienced programmer, plus a T-1
connection wouldn't hurt because her DSL line just wouldn't be fast enough
to compete with all the other domain hunters out there.  If she quits her
job and learns how to do all this, and invest heavily in the project, she'll
have a chance, but no guarantee, of getting many deleting names - though
perhaps not one of the few she specifically wants.

5. AWRegistry 

Again, no mention of expired name capture services anywhere.  Jill begins to
wonder if this list of helpful sites is really all that helpful.

6. Signature Domains 

Nothing on the Signature Domains web site, either.

7. INWW

No mention anywhere.

8. OnlineNic

Nothing here about getting next in line for an expiring domain name.

9. AddressCreation

Jill has a business meeting to get to and doesn't have time to try and
understand this any longer.  But, she REALLY wants that name.  Try
another....

10. AllDomains

Can't find anything there.

11. Eastcom.com

Site was down when she tried it.  Probably would have been the same story,
though.

12. PayCenter.com 

Nothing there.  She tries paycenter.net just in case, and is taken to
onlinenic.com, in Chinese.  Jill doesn't read Chinese.

Frustrated, she contacts her buddy on the chat room again.  He chuckles and
says "oh, innocent one.  Expiring domain names aren't for mainstream folk.
You gotta be a professional speculator to get any of 'em.  Didn't you know?"

-	simulation over.

OK, so back to the business at hand.  The mainstream user has no PRACTICAL
freedom of choice today (other than SnapNames, which is the only provider
that targets mainstream users and has no hidden sites or side programs for
speculators-only access.)  The WLS would allow ALL registrars who want to
offer such a service without inventing a whole new business model - adding
to "the mess" - to boost their revenues and gain new customers.  Customers
who want the names for use and will likely buy other value-added services.

The two quotes above from Joyce and Elliot bring us back to what should be
the starting and ending point for anything ICANN affects: "Is it good for
the registrants?"  While the industry needs to be healthy in order to
promote stability of the internet, there have been a number of registrars
who have put their own business gains AHEAD of the needs of registrants who
actually want to use domain names.  

This is even economically imprudent, as anyone who studies the financial
models of companies in this industry (as we do monthly at State of the
Domain) could attest.  The simple fact is that no one is holding a gun to
the heads of registrars forcing them to deep discount their wares.
Registrars have chosen only for themselves whether to price their domain
names at $6.50 or $35.  The most profitable companies charge the highest
prices.  Those chasing the highest volumes are charging the lowest prices,
in general, and are the least profitable.  The top-tier players earn
revenues of $50 to $77 per registration through the sale of additional
services (e.g. web certificates, hosting), while the volume-oriented players
tend to lack any demand for these upsell items.  Some have resorted to
selling their bandwidth to restricted club members, as one example, to make
up some of the difference.  All these business models are valid to the
extent they are legal, but it is just pure fiction to say that registrars
will automatically be forced to take any product and mark it up only $1, no
matter the market demand or nature of the product.  

When Registrars Innovate

I respectfully disagree with George's comment that VeriSign Registry
shouldn't be ALLOWED to innovate - that only Registrars should be allowed to
innovate - as it is generally anti-commercial.  There are a lot of very
creative, innovative engineers in the registrar community, and a tireless
stream of newfangled pinging methods emerges from them every day to prove
it.  

So many method improvements, and so many new entrants each month, that
competition has gotten beyond fierce.  The growth in SRS queries continues
to climb monthly, and many are forced to use unkosher techniques, like
sneaking short ping packets through the standard connection pools in such a
way as to evade VGRS radar (something SnapNames and our array partners
refuse to do, despite the widespread practice).  Within months, as
competitors realize others are getting away with this and it's a necessary
evil to maintain efficacy, the standard pools will get bogged down again.
Even the bulk pool has gotten so clogged with traffic that VGRS recently cut
the connections on all of us from 50 to 40.

Where does it all lead?  Theoretically to 96 registrars playing, each with
1.041% efficacy, slaughtering each other.  Some pool their connections to
get 5% to 10% efficacy.  VGRS invests the federal budget in hardware to keep
up.  CUSTOMERS - the END USERS - have an increasingly frustrating
experience.  Rather than "freedom of choice," what it has led to so far is
the same speculators using multiple services at the same time to go after
the same list of names, causing an interminable upward spiral in SRS
queries.  Like an overfished sea, in the grab fest to capture more good
names than the next guy, pretty soon all the fisherman find it too costly to
catch too few fish each day.

Abuses of the grace period and delete mechanism continue, as competitors dig
for as much unfair advantage as they can get.  Witness
http://www.lextext.com/icann/january2002.html#01092002d - the latest example
of disregard for IP rights and ICANN contracts all rolled into one.  I
suppose this, too, is an example of "registrar innovation" but I suspect
some would have a problem with this sort of innovation.

The WLS proposal was not perfect coming out of the chute.  Because of the
disparate competitors, business models and constituencies, no proposal from
any group will ever completely satisfy everyone.  They objective has to be
to satisfy the maximum number of constituents, accepting that some small
number will not be satisfied.  

The registrars have an ideal opportunity now to work together on providing
reasoned feedback to VGRS and assure a new product offering for themselves
that will solve much of "the mess", boost their earnings and satisfy the
customers' needs all at once.  I'm frankly not certain that they can
actually do this as a unified group, because the group itself includes
competitors to the WLS model, and so how can it ever reach consensus?  Alas,
the "drafting committee" charged with posting the constituency's response to
the WLS includes some of the fiercest competitors in the secondary market,
which concerns us - a less than balanced and not fully inclusive position
statement is a probable result.  A second concern is that opposing interests
will continue preventing the registrars themselves from coming up with a
better solution.

Yet there are many registrars who stated they would vote FOR the WLS if
certain changes were made.  I suggest that those who desire to see the WLS
evolve into something they could offer to their customers should express
their opinions openly, and that the others whose current business models
compete with WLS give them a fair opportunity to do so.  As Spock said "The
needs of the many are greater than the needs of the few, or the one."  There
are millions of customers to be served and there are 96 operational
registrars and a few hundred major professional speculators.  Let's remember
that.

As regards pricing, that is for VGRS to negotiate; we're just the lowly
technology provider.  A Marketing 101 rule of thumb is that it's always
easier to lower prices than to raise them, and given the fact that this is a
trial program, and there is ample evidence of market support for a $69 to
$99 retail price point, and the fact that "all the good names are gone" and
thus the value of this service increases as the names become more scarce, my
personal view on this is that registrars should start at the highest
conceivable retail price, not the lowest.  Regardless of where the wholesale
and retail prices end up, I'm confident that VeriSign and the registrars are
going to be able to sense the market forces and move pricing to where
maximum revenue is generated.

One final word, as I'm sure there are some who completely disagree with
everything I've expressed here.  Even the most violent criticisms have been
levied by people who are active SnapNames customers, or, in some cases,
actual existing partners or resellers.  This is because "choice" under the
Status Quo means having to visit and hedge your bets on every existing site
available.  While I think that there are many new innovative services that
could be offered by registrars without the registry's involvement, it is
clear that every other scenario that has been dreamed up so far does not
guarantee 100% efficacy for the consumer, and results only in escalating
bandwidth problems and shrinking margins for the industry participants.
This is a logical service to offer at the registry level, and that is why
SnapNames chose to license its Parallel Registry(tm) technology to VGRS for
this purpose - it is the ONLY way to ensure that the needs of the many are
served equally to the needs of the few.  In this context I also refer to the
needs of the many registrars - as in potentially all of them - at least
having the means of getting their piece of the secondary market.  Anything
short of the WLS proposal excludes late-to-the-game or less sophisticated
registrars from participating effectively in the secondary market, and most
certainly excludes the largest and most lucrative customer base of all, the
mainstream users of domain names.

Thanks for listening.

- Ron


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