RE: [ga] ICANN Board can intervene to stop domain tasting for 1 year

["Dominik Filipp" <dominik.filipp@xxxxxxxx>]

George,

your math is basically correct, but there are several other factors
worth noticing. Keep in mind that successful tasters have already built
up a rich portfolio of extremely valuable names constantly bringing
remarkable PPC revenue and make a fortune on auctions. That is,
successful tasters have already collected a big pocket out of which they
can cover speculation costs under the 'new tasting model' counting $0.20
fee in. No doubt it is a complication for tasters and it will require
redefinition of tasting activity but it still can be kept alive.
Although it decreases the overall number of tasted names the practice
can be refined to stay workable. I can imagine that the average cost
$26.42 per successfully tasted domain/year can be considered acceptable
for rich tasters at least for a certain period, say 1 year, during which
the new model can be refined, calibrated and eventually tuned up. They
simply can afford it regardless of possible temporary financial loss.

The characteristics of the new possibly viable tasting model considering
the $0.20 re-registration fee could be:

1. Refinement of the domain selection model based on improving domain
appraisal methods. The overall number of tasted domains has to be
decreased but many domains can be found profitable for PPC or auction
purposes. Remember, that tasters have gained a rich experience of
financial history and profitability of many, many domains inspected so
far. No one else can compare with their ability to evaluate the market
power of domains.

2. Due to the mentioned above, various domain search techniques have to
be improved. The list of pending delete domains delivered in advance, an
extended form of aggressive spy lookups to be developed, the whois
lookup lists massively ordered and delivered from registries... upon
which the smart appraisal methods will be eventually applied to get a
result list of domains suitable for tasting.

3. All names successfully sold on auctions or names bringing revenue out
of PPC advertising will then contribute to a 'risk budget' supporting
the tasting of such selected new domains. Once the positive ballance is
achieved, the tasting will survive.

The number of tasted names under the new condition ($0.20 fee) will be
decreased, that is for sure. But it is not eliminated as a phenomenon.
After a while, some tasting registrars can make the tasting methods
effective enough to become successful in grabbing many valuable names.
No one knows how many.

As for the PIR's provision, even if applying the re-registration fee for
.ORG domains might (have) lead to the elimination of the tasting effort
for those domains, .COMs is a whole different thing. The importance of
.COM and .ORG domains is simply uncomparable.

Dominik
 

-----Original Message-----
From: George Kirikos [mailto:gkirikos@xxxxxxxxx] 
Sent: Friday, January 11, 2008 7:04 PM
To: Roberto Gaetano; Dominik Filipp; ga@xxxxxxxxxxxxxx; 'ICANN Domain
name tasting'
Cc: twomey@xxxxxxxxx
Subject: RE: [ga] ICANN Board can intervene to stop domain tasting for 1
year

Hello,

--- Roberto Gaetano <roberto@xxxxxxxxx> wrote:
> Dominik Filipp wrote:
> I fully agree. $0.20 re-registration fee is an insufficient solution.
> I am
> always feeling some sort of domain speculation in mind when listening 
> to such proposals. If I cannot order a pizza and then cancel the order

> just paying $0.20 fine, why should have I an extra privilege regarding

> domain names?
> 
> Agree.

The economics of pizzas and domain names are entirely different. A pizza
has labour, material and delivery costs that are far above 20 cents. A
domain name is an electronic record in a database where the marginal
costs are close to zero for the registry operator, far below 20 cents.

A 20 cent fee would make any speculation totally uneconomic for domain
names. This is borne out by the fact that on the order of 99%+ of tasted
domains get deleted during the AGP.

Suppose that one tastes 1 million names. If 99% are deleted, and 1% are
kept:

A] Tasting is free:
Cost to taster is 10,000 * $6.62 + 990,000 * $0 = $66,200 (in first
year).

B] Non-refundable 20 cent fee:
Cost to taster is 10,000 * $6.62 + 990,000 * $0.20 = $264,200

The cost to the taster has increased by 300%. On a per successful name
basis, the average cost is now $26.42.

The numbers are even more horrible to the taster if the ratio is 99.7%
(i.e. 1 in 300 profitable names), etc.

The risk/reward is also entirely different. Under "A", there is
essentially zero risk to the taster, because suppose that less than 1%
of the names were profitable, then their costs scale linearly with the
number of good names they discover. Under "B", if in a scan of 1 million
names they find a tiny amount of good names, they're still on the hook
for a minimum of $200,000. Now the payoff is entirely non-linear, and
the risk/reward ratio is terrible.

PIR has essentially eliminated tasting in .org with their non-refundable
fee. The same would happen in .com/net should ICANN move forward. It's
simple economics, which the automated tasters understand, but it seems
some folks don't.

Sincerely,

George Kirikos
http://www.kirikos.com/