We have been informed that due to a security problem at one of our competitors a list of their customer data including plaintext passwords is currently circulating on the web including relevant hacker forums.

Our Security and Compliance Team has found several of our own customers matching the publicly available list. Due to the seriousness of this matter combined with the possibility that you might be using the same login data/password at more than one parking company, we strongly suggest you to change your password at Sedo.

Sedo uses cryptographically unbreakable ciphertext for password checks and does not store your password in plaintext. This, and a variety of other security measures, ensures that your Sedo account is always safe from third parties.

We generally recommend to always use different login IDs for different sites and never hand out login IDs to any third party.

Should you have any further questions or needs, your dedicated account manager is looking forward to help.

Kind regards,

Your Sedo Security and Compliance Team

They are referring to NameDrive, which, as Domain Name Wire reported yesterday, had less than 1% of their client accounts hacked recently.

Many domainers use the same passwords at different sites, including registrars, parking companies, forums and email providers. If just one of these accounts gets hacked, all your other accounts are at risk if the password is the same! This is especially true if a site stores your passwords in plaintext. However, depending on the quality of a password, hackers might be able to recover it even if it is encrypted.

Sedo has had its share of security challenges in the past, so it is very nice to see that they are alerting their customers to this common risk.

Domain Registration Growth Continues

Despite all economic troubles, the number of registered domains kept growing during 2008. However, growth has slowed down quite a bit. Over the course of 2008, the growth rate of registered domains dropped from a 30% growth rate to a 15% growth rate. gTLD domains (like .com, .net, .org) went from over a 30% growth rate in 2006 to under a 10% growth rate in 2008. ccTLDs (country code domains) noticed a similar decline as their growth rate fell from 37% to a 26% growth rate. The majority of the newly registered ccTLDs can be attributed to specific TLDs like those for Russia and China.

Of course, it's important to emphasize that even a lower growth rate means that the number of registered domains is still on the rise! And much of the drop in gTLDs can probably be attributed to the introduction of new rules affecting the domain tasting industry.

The End of Domain Parking

Domain parking in the traditional sense is dying a slow but certain death. Earnings from parking revenue dropped significantly over the course of 2008; as both search engines and parking companies tried to maintain their profits during the economic downturn, domain owners found themselves at the short end of the stick. Alternative monetization solutions like mini-development or auto-development have sprung up for those who own dozens, hundreds or even thousands of domains and don't want to concern themselves with actual development.

The LLLL Craze Is Over

On November 2nd, 2007 the last available four letter dot com domain was registered. This was the start of what was going to be an unbelievable reseller bubble; many people argued whether this bubble would ever pop or not. In early 2008, some domainers started selling their lower quality LLLL .coms for $15 to $20 each. There were quite a few larger investors as well and they were hanging on to their domains in the hope of further price increases.

In the spring of 2008, things really picked up and at one point, the lowest quality LLLL .coms were fetching $35 to $45 per domain. Higher quality domains were regularly seeing end user sales.

Over the subsequent months, things slowed down. Lower quality LLLL .coms became very difficult to sell for more than $10 and we're almost back where we started. Still, it's only a question of time until things pick up again; it is possible that by 2010 or 2011 we'll see a second, more mature and sustainable price increase for LLLL domains.

LLL Domains Cool Down

At the start of 2008, low quality LLL .com domains regularly sold at $6,400 per domain. Within a few months, this minimum had increased to around $7,000 per domain. Then everything started to quiet down and the value of most LLL domains slowly decreased. At the end of 2008, low quality LLL .com domains were selling in the range of $4,500. That's still pretty good, but nothing like the predictions we heard from top domain experts in early 2008 that even the worst LLL domains would sell for more than $10,000 by the end of the year.

End User Sales Remain Strong

When the market was at its strongest in 2008, Fund.com sold for about ten million dollars in the most expensive reported domain sale of the year. DataRecovery.com also sold for a fair amount (over $1.6 million) in March, when the industry was at its peak. As if to demonstrate that the domain industry will tough out the hard economy, Kredit.de and Invest.com both sold for over a million dollars later on in the year when the economic crisis was already in full swing.

More recent transactions like FinancialAid.com selling for $480,000, SC.com for $300,000 and YP.com for a very nice $3,850,000 demonstrate that the domaining game will continue on even through harsh times.

2008 – A Year To Remember

It is likely that 2008 will go down in history as the year that the wholesale sector of the domaining industry hit an all time high and went on to drop very rapidly in the same year. At the same time, retail sales remained strong.

It is unknown what the future holds, but it seems that the worst is over and that the domainer-to-domainer market will slowly start to rebuild itself. The primary lesson for all domainers is that we should depend neither on other domainers, nor on parking companies for our monthly income.

The Components of a Seductive Bubble

A significant percentage of the domaining bubble was funded by the monetary expansion that started immediately after the dot com crash in the early 2000s but did not gain full speed until 2005. There was lots of easy money out there seeking investments; some companies in the domain industry obtained huge lines of credit to enlarge their domain portfolio, while individual domainers mortgaged their homes so they could acquire yet another valuable domain. Other domaining companies were even funded by venture capitalists who at the time thought that domains would be the next big thing.

Another part of the domaining bubble was built upon rapidly increasing enthusiasm on the reseller market. Many domainers believed that prices would only go up and that if they bought a certain domain today they would just have to wait a month or two before they could sell it at a significant profit. For several years in a row that assumption was true, and as word spread it attracted new domainers and reinforced the bubble.

Accepting Reality Means Attracting Profits

It is increasingly obvious that reality has set in. The easy money that characterized the last decade is gone. The get rich quick domainers who entered the market in 2006 and 2007 have either gotten rich or given up. And most domain prices have come down to an entirely reasonable level where it's good to be a buyer again.

A Unique Window of Opportunity

The best years in history to get into domaining would have been 1994 and 1995. Domains were virtually unknown and a few visionaries who refused to sell out early eventually made a killing. Another major opportunity opened up in 2001 and 2002. "Dot com" had become a dirty word and most people wanted nothing to do with Internet-related investments.

2008 and 2009 will be another two of those years where everyone believes the sky is falling while the visionaries of today are constructing the empires of tomorrow. Take this chance because the next window of opportunity might not come around until 2015/2016.

How To Start With Nothing

It's not easy to start with nothing. If you're low on cash and your friendly bank won't loan you other people's money so you can speculate in domains, you will have to start small, learn everything you can, observe those who are successful, then work hard and bootstrap your way up.

Start with a couple of domains, sell them at a profit and immediately reinvest your profits. Domain development is another option, but do not get sidetracked with this unless you decide it will be an essential part of your business strategy.

The opportunities are out there. A few years from now you can be the next domaining mogul, or you might be one of those people who will say, "If only I had been around in 2008. Things were different back then".

Will you take action or have you already given up?

By the end of June 2008, there were more than 168 million registered domains, which represents a growth of 22% over the preceding 12 month period.

In terms of registrations, .com remains the largest top level domain, followed by .de, .cn, .net, .uk and .org:

Other interesting facts:

• In the first quarter of 2008, 74% of expiring .com and .net domains were renewed by their owners, which is within the historical range of 74% to 77%.
• 68% of all .com and .net domains resolve to live websites consisting of more than one page, 22% are parked (this includes PPC domains, websites under construction and sites consisting of only one page) and the remaining 10% do not have a website of any kind.
• VeriSign processed peak loads of more than 48 billion daily DNS queries for .com and .net domains. Average numbers were not released for this year; in the fourth quarter of 2006 the average had been 25 billion queries per day, compared to 1 billion queries per day in 2000.

Of course, if you really go for it, the sky is the limit and you could become the next domain millionaire with his own blog, after just a few years of hard work. (Just kidding about the blog. )

All things put together, achieving success in domaining might be even easier today than it used to be thanks to the massive growth, increased liquidity and widespread recognition the market is experiencing.

Growth? Liquidity? Recognition? Aren't some domain bloggers musing about a perceived slowdown or even plateau the domain market is supposed to have reached after two recent domain auctions (at DomainFest and T.R.A.F.F.I.C.) produced "only" $10 million in sales?

Well, it's obviously true that some domain sellers are asking for way too much money to readily find a buyer. That's what happens when we're told over and over again by our industry leaders how valuable our domains are and that we shouldn't sell them for less than their real value.

However, look at how far we have come. Prices for the most premium domains have increased ten-fold over the past few years. And while there are natural consolidation periods, many new domainers have been entering the market. Some are already well-funded while others work their way up from LLLL domains to LLL domains to traffic domains and generics.

Actually, there seems to be something about February. Last year, there was talk of the domain market being due for an "asset repricing". Many domainers believed that the sky was falling. It never happened, even though PPC revenues have continued to slowly decline.

What did happen was an increase in sales volume as well as average prices. According to Ron Jackson of DNJournal, reported domain sales grew from $71 million in 2006 to $121 million in 2007 (a 70.42% increase). Q1/2008 is expected to finish at around $25 million – a jump of almost 20% over Q1/2007. Additionally, the Daily Domainer's analysis of 2007 sales data showed that the top 100 median sales price increased from $124,000 in 2006 to $197,500 in 2007, an upsurge of 59.27%.

Finally, last month the domain market as entered a new era of mainstream recognition with CNN's $750,000 purchase of iReport.com from Rick Schwartz.

So does the domaining industry of early 2008 experience growth, liquidity and recognition? Yes, it does. Is there a temporary stalemate between some buyers and some sellers? Absolutely. But if it costs you only $7 a year to hold an asset, many sellers figure that they can wait until they really do achieve the highest possible price for their domains.

Eventually, sellers will give in and lower their prices, or buyers will offer more. It almost always happens that way, so let's enjoy the ride and allow the free market to work things out.

The telecommunications industry is beginning to grumble about domain tasting, kiting and cybersquatting. This is significant because of the funds and lobbying power available to these companies. Sarah Deutsch, vice president and associate general counsel for Verizon, and Marilyn Cade, former AT&T lobbyist and currently a consultant on Internet and technology issues, say the United States Anti-Cybersquatting Consumer Protection Act (ACPA) is full of loopholes.

The ACPA was enacted in 1999 is also termed the “Truth in Domains Act” and addresses cybersquatting in its simplest form of grabbing a domain name identical or confusing similar to a trademark and trying to sell it to the trademark owner.

Since the Act came into force, ICANN’s Add Grace Period has become the bread and butter of many cybersquatters. The Add Grace Period was created with the best of intentions, to allow registrars to correct domain name entries within a set five day grace period. However, good intentions and good results can often be mutually exclusive.

Domain tasting consists of registering a domain name and returning the name to the registry before the grace period expires, thereby avoiding payment of registration fees. This allows a tasting of the marketability of a domain name. The registrant gets a five day window of actual traffic data for a given domain name. This tasting was further modified by some to constitute domain kiting, a term coined by Bob Parsons. Kiting effectively works the same as tasting with the added twist that the tasted name is automatically re-registered to reset the grace period clock. Throw in a wealth of inaccuracies in WHOIS data and the taster feels an even greater sense of security in this scheme.

While this sounds like a savvy business move to some domainers, others see this as taking advantage of the add grace period to violate the spirit of the United States ACPA and ICANN’s policies. What’s more, this is becoming big business. Sarah Deutsch notes:

These are not people in their basement.

Verizon in recent months brought cases against several tasting companies, including iREIT, a company funded by Perot Investment and Maveron, founded by the chairman of the Starbucks coffee chain, Howard Schultz. This report also indicates WIPO is aware of the new practices.

What is the impact of tasting and kiting on legitimate business, then? John Berryhill, a patent attorney practicing in Philadelphia says :

Measuring loss in advertising is a hard thing to do.

Instead of looking only at the domain name tasters, he recommended a look at what browser software vendors and search engine providers have implemented, a topic discussed here previously.

So, what can be done about this? Deutsch feels a US Congressional hearing is in order to analyze new trends and prepare for an update on the Anti-Cybersquatting Protection Act:

Greater power should be given to the FTC to prosecute deceptive acts. Some of the activities might even be criminal.

At the international level, Deutsch believes the UDRP could act as the framework for a multinational treaty to standardize the enforcement of cybersquatting in its various forms globally.

WIPO Deputy Director General Francis Gurry agrees that a treaty may be a realistic enforcement option but is cautious, “Nobody wants to over-regulate the Internet,” he said. At the same time, he was “not convinced” that there is a benefit to society from tasting practices, and so might be able to be considered for changes.

Should the add grace period be closed entirely? Berryhill says no, adding that…

It would certainly benefit the large search companies, since they would get the revenue from non-existent domain searches directly, instead of having to share the revenue with domain tasters.

So what is the answer? What if a nominal fee is charged for cancellation of a domain name during the Add Grace Period? That may reduce the number of sites being “tasted”, but would that simply reroute that ad revenue to browser and search engine companies?

Below is a summary of this week's top stories.

If we missed any noteworthy events, topics or opinions, the comments section is all yours.

• RegisterFly's Implosion Nears Its Bizarre End
  What's next? ICANN is authorized to transfer RegisterFly's domains to a new registrar "as soon as practical", according to an April 27, 2007 injunction (pdf file). So far, ICANN has received four applications from prospective registrars. Once the transfer is complete, RegisterFly will likely collapse. Cogit Group (Report), Frank Schilling and others have tried to buy the embattled registrar but were apparently rejected by Kevin Medina.
• Exodus: 8% of .EU Domains Drop
  Some of our readers believe this is a good sign (the exodus could have been much worse), others blame speculators and bureaucratic management for .EU's massive failure to win the hearts, minds and actual websites of Europeans.
• Skype Goes After Skype-Watch.com
  Skype enrages bloggers and domainers by going after one of its most ardent supporters.
• .mobi Breaks 500,000 Barrier
  dotMobi has come a long way and the registry team has proven to have excellent marketing and PR skills. But not everyone is convinced of .mobi's long-term viability.
• Cybersquatting Attracts Media Attention
  MarkMonitor, a company that specializes in brand protection, alerts brand owners that they are at risk of losing brand value, customer loyalty and revenue to cybersquatters, PPC fraudsters, domain kiters, phishers, and other criminals. The solution? Why, MarkMonitor of course. They offer comprehensive services that safeguard brands, reputation and revenue from brandjacking and other online risks.
• .TV is Turned On… Again.
  Demand Media relaunches .TV and sells $500,000 worth of premium domains within the first 24 hours. But, it turns out that the once-off purchase price is also the annual renewal fee, and even that is "subject to change".
• Microsoft + Yahoo = Pump & Dump?
  Friday morning, the New York Post reported in an exclusive story that Microsoft is in acquisition talks with Yahoo. Widespread euphoria and speculation initially sent Yahoo stock up more than 15%. That same afternoon, the Wall Street Journal reported that the talks are no longer active. Was it all an elaborate pump & dump scheme? As with all such stories based on anonymous sources, it's hard to know what to believe. If Microsoft wants to catch up with Google, acquiring Yahoo certainly makes a lot of sense. So does buying out domainers.

If you enjoy the Daily Domainer, consider subscribing to our free daily email newsletter for exclusive features such as domaining tips, a domain marketplace, analysis of domain sales stats, free domain appraisals, and lots more. Subscribe here.

“Dear (Client Name)

The Internet Corporation for Assigned Names and Numbers (ICANN®) recently agreed to reduce their Registrar Transaction Fee from $.25 to $.22. What does this mean for you?

Good news. You have been credited $.03/yr for each domain name you registered or renewed dating back to July 1, 2006* — $.03 has been placed into your Go Daddy® account with this customer number: (Account Number)

Your in-store credit will be applied to your purchases at GoDaddy.com® until it's gone or for up to 12 months, whichever comes sooner. If you have any questions, please contact a customer service representative at 480-505-8877.

As always, thank you for being a Go Daddy customer.

Sincerely,

Bob Parsons
CEO and Founder
GoDaddy.com

If you’ve received an email similar to this, a few thoughts probably crossed your mind. First and foremost, you probably thought, “Sweet! A refund!” Next, you thought, “I don’t remember hearing about a refund.” Last, you may have asked yourself, “Wait, why is this refund retroactive for almost a full year?”

The answer is quite simple: bureaucracy.

ICANN adopted their fiscal year 2006 Annual Budget on June 30, 2006. In this budget, the registration fee is 25 cents. The ICANN Board of Directors approved this budget. However, the registration fee schedule had yet to be approved by the registrars. Before the fee schedule was sent to the registrars for approval, ICANN changed the fee to 22 cents.

Notice of this fee reduction was sent to registrars on March 14, 2007. ICANN had yet to invoice any registrars for registrations from July 1, 2006 forward. Of course, registrars such as GoDaddy had been collecting registration fees based upon the published ICANN 2006 Annual Budget. So, now that the fees have been finalized at 22 cents, GoDaddy is crediting the 3 cent per domain difference back into customers accounts.

And that, in a nutshell is why GoDaddy customers are getting money back, 3 cents at a time. Don’t spend it all in one place.

Whether other registrars will follow suit is unclear. ICANN advised all registrars that did charge their customers 25 cents based on the ICANN's 2006 Annual Budget to check back with their (the registrars') own legal departments to see if they are legally obligated to pass on the refund to end users.

MarkMonitor is a privately held firm in the business of selling their service to companies holding trademarks, particularly trademarks associated with powerful and valuable brands. MarkMonitor has developed proprietary algorithms and software to search 134 million domain registry entries on a daily basis.

The report holds some interesting numbers. For example, if the 275,000 examples of cybersquatting are distributed evenly over the top 25 brands, this gives an average of 11,000 cybersquatting sites for each company to deal with. To put this in perspective, Microsoft, one of the top 25 brands in this report, has been successful in curtailing just over 1,000 cybersquatting sites in recent months and currently has four active cases in US courts as well as five active cases in the United Kingdom.

So what is happening to the other 10,000 Microsoft cybersquatting sites? Nothing. WIPO, the arbiter in claims of cybersquatting, reports an increase of 25% in caseload for 2006. Still, that increased caseload consists of 1,823 cybersquatting cases. That’s less than 17% of the sites cybersquatting on Microsoft’s name alone.

What does this mean to domainers? MarkMonitor is in the business of alerting companies to cybersquatting. Mainstream media is starting to pick up on this and is becoming interested in the implications on businesses. Will the increased spotlight result in increased pressure on cybersquatters or is the “mouse” significantly quicker than the “cat” in this case? Will cybersquatters continue to overwhelm companies with both quantity and ever more sophisticated domain tasting schemes or will someone step forward with a usable solution? And would such a solution include companies like Microsoft and Earthlink which themselves squat on millions of non-existent domains by redirecting error searches to PPC-monetized search pages?

The company, founded in 2000, was managed by John Naruszewicz and Kevin Medina. From the outside, things were going well for the business and personal partners. However, inside the private lives of the pair and the company they managed, things were headed south quickly.

In late 2005, ICANN began receiving complaints of fraud at the small registrar and eNom reseller. Customers told ICANN of unanswered support tickets, interminably long hold times for phone calls and overcharging three to four times for registrations and renewals. Customers audacious enough to have the charges reversed by their credit card companies often found that RegisterFly had denied access to their registered names.

In a strange circle of events, ICANN was forwarding complaints regarding RegisterFly to registrar eNom. In the eyes of ICANN, RegisterFly was a reseller of eNom services and thus all complaints against RegisterFly were complaints against eNom. On January 17, 2006 eNom was notified that ICANN was “receiving an unusually high number of complaints concerning RegisterFly.” RegisterFly then notified ICANN that it would be transferring its domains from eNom to RegisterFly’s own account. Complaints continued to pour into ICANN and ICANN issued a second statement to eNom warning that company of a potential breach of their accreditation agreement. The alleged breach was due to eNom’s failure to resolve allegations that RegisterFly was deliberately entering false data into customers’ WHOIS records. Still, the accreditation process for RegisterFly went on.

Months passed and ICANN continued to receive complaints of poor customer service and outright fraud at RegisterFly. In addition to the previous complaints, customers were now reporting the sudden disappearance of domain names which were not about to expire. Kevin Medina, then co-chair of RegisterFly told ICANN the complaints were merely “growing pains” at the registrar. Shortly thereafter, complaints grew graver as domain name theft allegations began to find their way to ICANN officials.

In December 2006 ICANN met with RegisterFly officials to deliver a letter outlining ICANN’s concerns over complaints of failure to renew domain names, billing inconsistencies and failure to pay ICANN invoices. RegisterFly was to respond to these concerns, in writing, within 30 days of this meeting.

January 2007 came and went. No letter from RegisterFly was received at ICANN, but the complaints certainly continued to come in. The bulk of the complaints were the same as they had been for the previous year. However, three groups also lodged complaints with ICANN. These were other ICANN registrars, ICANN board members and the US Department of Commerce.

It is no coincidence, then, that the implosion of the company began in earnest the very next month. Citing a long and well-documented history of unresolved customer complaints, eNom cut all ties to RegisterFly. Kevin Medina was fired from his post as CEO of RegisterFly amid allegations of misuse of company funds. In an attempt to force Medina to sell his half of RegisterFly, business partner and ex-boyfriend John Naruszewicz filed suit against Medina. Naruszewicz claims Medina used corporate funds for such personal luxuries as a $10,000-a-month South Beach penthouse, a $9,000 escort, $6,000 in liposuction services and even a $6,000 Chihuahua.

These alleged raids on the company’s wallet have resulted in bringing RegisterFly to the brink of bankruptcy. The lawsuit states that RegisterFly’s customer base has fallen from 200,000 to 125,000 customers because the company cannot afford to pay the registration fees when requested.

If it all were to end it here, this would be one of the strangest stories of excess and brazen disregard for customer service yet recorder. Of course, the adventure doesn’t end here.

After his firing, Medina set up a visually identical site at RegisterFly.net. This was effectively a phishing site. On March 8, 2007 Naruszewicz stated that the company had regained control of its website and account information and that the company would begin rectifying payment problems and unfairly expired domain names immediately. However, in a move that surprised even Medina's lawyers, Judge Sheridan of US District Court ordered that control of RegisterFly be returned to Medina.

Meanwhile, ICANN was proceeding towards removing RegisterFly’s accreditation. On Sunday, March 4, 2007 ICANN announced their intent to file suit against RegisterFly to cease and desist doing business as an ICANN accredited registrar. RegisterFly was able to delay this action by providing a minimum of customer account information to ICANN. On March 16, 2007 RegisterFly was notified they would lose ICANN accreditation on March 31, 2007. RegisterFly exercised their right to appeal and stalled ICANN’s temporary restraining order for 30 days.

The temporary restraining order against RegisterFly was granted to ICANN on April 16, 2007. This order required RegisterFly to hand over all data to ICANN and supply updates to this data every seven days. Failure to meet these terms resulted in an injunction on April 27, 2007. This injunction allows ICANN to begin transfer of registrations from RegisterFly to another accredited registrar as soon as practical. The ICANN release also requests statements of interest from qualified registrars to handle the transfer. These are due by today (April 30) so no transfer action will take place before that date.

The injunction against RegisterFly requires the following statement be posted immediately at RegisterFly’s website:

NOTICE TO CONSUMERS: THE INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS, THE NOT-FOR-PROFIT ENTITY THAT ADMINSTERS THE INTERNET’S DOMAIN NAME SYSTEM, HAS ISSUED A NOTICE OF TERMINATION OF THIS COMPANY’S ACCREDITATION TO SERVE AS AN INTERNET DOMAIN REGISTRAR. PLEASE SEE www.icann.org FOR FUTHER INFORMATION.

As of right now, RegisterFly has not posted this statement, is still claiming ICANN accreditation at its website and is still taking in funds for services one can reasonably assume will never be rendered.

So what comes next for RegisterFly’s customers? ICANN is working towards a mass transfer of registrations to another accredited registrar and a deal has been reached with several domain registries to prevent improperly expired domain names from being resold to new owners. A class action lawsuit has also been filed against RegisterFly to attempt to regain some of the payments lost. However, it is likely that many RegisterFly customers will never receive full reparations.

In the wake of this debacle, questions are flying in ICANN’s direction. How did a company with such an egregious complaint history become accredited in the first place? Why did it take so long for ICANN to take action against RegisterFly given the gross number of complaints lodged against them? As the implosion of RegisterFly nears its bizarre end, the answers to these questions will have far reaching effects on the world we do business in.