GTLD Auctions: Difference between revisions
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In the case where multiple entities apply for a single ICANN [[new gTLD]], two main models -- '''ICANN Auctions''' and '''Private Auctions''' -- will be used to determine the winner of each contention set. Exceptions are made in the case of geographic and community-based applicants, who receive preferential treatment over other applicants. | In the case where multiple entities apply for a single ICANN [[new gTLD]], two main models -- '''ICANN Auctions''' and '''Private Auctions''' -- will be used to determine the winner of each contention set. Exceptions are made in the case of geographic and community-based applicants, who receive preferential treatment over other applicants. | ||
In August 2008, ICANN published a document | In August 2008, ICANN published a document making the economic case for using auctions to determine the winner of new gTLDs, citing allocative efficiency. In particular:<ref name="economic">[http://archive.icann.org/en/topics/economic-case-auctions-08aug08-en.pdf Economic Case for Auctions in New gTLDs], ICANN.org. Published 8 August 2008. Retrieved 6 December 2012.</ref> | ||
#Applicants whose true intentions or abilities are to serve many users would be able to justify higher bids than applicants who will serve few users; | # Applicants whose true intentions or abilities are to serve many users would be able to justify higher bids than applicants who will serve few users; | ||
# Applicants capable of providing high-quality service at low cost would be able to justify higher bids than low-quality, high-cost applicants; | # Applicants capable of providing high-quality service at low cost would be able to justify higher bids than low-quality, high-cost applicants; | ||
# Applicants who intend to develop the gTLD immediately would be able to justify higher bids than applicants whose purpose is to hold the gTLD, unused, for speculative purposes. | # Applicants who intend to develop the gTLD immediately would be able to justify higher bids than applicants whose purpose is to hold the gTLD, unused, for speculative purposes. | ||
ICANN notes in the document that | ICANN notes in the document that although "auctions are not perfectly aligned with ICANN's objectives, alternative allocation mechanisms such as comparative evaluations and lotteries inherently have much more severe limitations and defects."<ref name="economic"></ref> | ||
==ICANN Auctions== | ==ICANN Auctions== | ||
ICANN condones private auctions as it | ICANN condones private auctions, as it has encouraged applicants to resolve contention themselves, presumably through buy-outs, partnerships, and auctions. ICANN offers its own auction model as a last resort. All proceeds from gTLDs auctioned off under ICANN's auction model will go to ICANN as "excess funds" that will be redistributed at a later date, in ways that are yet to be determined.<ref>[http://www.slate.com/articles/technology/future_tense/2012/11/icann_s_gtld_auction_proceeds_should_be_used_to_bring_mesh_technologies.html ICANN, Make a Difference], Slate.com. Published 27 November 2012. Retrieved 6 December 2012.</ref> | ||
The first ICANN auction of last resort was concluded on 4 June 2014 for the string [[.信息]] which had two applicants. The winning price was $600,000 US Dollars. ICANN used their authorized auction services provider [[Power Auctions, LLC]] to carry out the auctions.<ref>[https://newgtlds.icann.org/en/announcements-and-media/announcement-3-04jun14-en Announcement 4 June 2014] ''ICANN.org''; Retrieved 5 June 2014</ref> | |||
ICANN auctions are scheduled on a monthly basis through 2015. The auctions are scheduled in batches (view schedule [https://newgtlds.icann.org/en/applicants/auctions/schedule-29may14-en.pdf here]). Applicants may submit a request to postpone ICANN auctions so that they can have additional time to resolve contention sets privately.<ref>[https://newgtlds.icann.org/en/applicants/auctions#resources Auction Resources] ''ICANN.org''; Retrieved 5 June 2014</ref> | |||
==Private Auctions== | |||
Applicants must decide which private auction model to choose. Numerous companies have surfaced to offer private auction models, including [[Innovative Auctions]], [[Right of the Dot]], and [[Sedo]]. All offer variations on implementation and services but also share commonalities in their proposed models. The winner will pay the amount of the second-highest bid, split either equally or proportionally between the losing applicants.<ref name="worldipreview">[http://www.worldipreview.com/newsstory.asp?ID=46 New gTLD applicants ponder private auctions], WorldIPreview.com. Published 14 November 2012. Retrieved 6 December 2012.</ref> All applicants for a contention set must agree to participate in order for a private auction to proceed; otherwise, the contention set will be managed via ICANN's Last Resort Auction. Applicants interested in private auctions must also decide _when_ they wish to participate. Those who withdraw their applications before ICANN posts its Initial Evaluation results will receive a 70% refund of their $185,000 application fee; those who wait until after the IE stage will only receive a 35% refund.<ref name="worldipreview"></ref> | |||
Applicants also | |||
Benefits of the private auction model include the following:<ref name="circleid">[http://www.circleid.com/posts/20121203_gtld_contention_set_auctions_private_auction_alternatives/ gTLD Contention Set Auctions: Private Auction Alternatives], CircleID.com. Published 3 December 2012. Retrieved 6 December 2012.</ref> | Benefits of the private auction model include the following:<ref name="circleid">[http://www.circleid.com/posts/20121203_gtld_contention_set_auctions_private_auction_alternatives/ gTLD Contention Set Auctions: Private Auction Alternatives], CircleID.com. Published 3 December 2012. Retrieved 6 December 2012.</ref> | ||
* Elimination of ICANN Process Delays: Resolving contentions externally allows for more efficient application processing. | * Elimination of ICANN Process Delays: Resolving contentions externally allows for more efficient application processing. | ||
* Recovery of Funds: Non-winning bids receive a portion of the winning bid. | * Recovery of Funds: Non-winning bids receive a portion of the winning bid. | ||
* Partial Application Fee: Those who not win their TLD may be eligible to receive a partial refund from ICANN, in addition to payouts from the winning bids. | * Partial Application Fee: Those who do not win their TLD may be eligible to receive a partial refund from ICANN, in addition to payouts from the winning bids. | ||
Drawbacks of the private auction model include the following:<ref name="circleid"></ref> | Drawbacks of the private auction model include the following:<ref name="circleid"></ref> | ||
* Jurisdiction: Enforcement of agreements across jurisdictions could be challenging, particularly if a participant fails to make good on its agreement. | * Jurisdiction: Enforcement of agreements across jurisdictions could be challenging, particularly if a participant fails to make good on its agreement. | ||
* Funding: According to a CircleID article: "In the case where applicants have numerous strings in contention, a portion of the winning bid will be paid to non-winning applicants that can be used in subsequent auctions in which the winning bidder will be participating in. For example, if Company X is the winning bid for Auction A against Company Y and later, Company X and Company Y are in Auction B, Company Y now has additional funds received from Company X to use in Auction B." | * Funding: According to a CircleID article: "In the case where applicants have numerous strings in contention, a portion of the winning bid will be paid to non-winning applicants that can be used in subsequent auctions in which the winning bidder will be participating in. For example, if Company X is the winning bid for Auction A against Company Y and later, Company X and Company Y are in Auction B, Company Y now has additional funds received from Company X to use in Auction B." | ||
* Participation: All parties within a contention set must agree | * Participation: All parties within a contention set must agree to participate. | ||
* Failure: If a bid is entered early and the winning bidder fails to pass ICANN's evaluation process, the string could go unclaimed. | * Failure: If a bid is entered early and the winning bidder fails to pass ICANN's evaluation process, the string could go unclaimed. | ||
[[Donuts]] | [[Donuts]] Co-founder [[Jon Nevett]] says that Donuts will handle as many of its contention sets as possible via private auction, as auctions will be cheaper and faster for applicants than ICANN's original method. "The cost of losing an ICANN auction is greater than the cost of losing a private auction," Nevett said. "If you lose an ICANN auction you get nothing, zero, you lose your asset... [but with private auctions] it doesn't hurt as much to lose, so the theory is the second-place guys won't stretch as much."<ref name="domainincite"></ref> | ||
CEO of Top Level Domain Holdings [[Antony Van Couvering]] has come out in support of private auctions over ICANN auctions, as well. In a article written on June 3, 2013, he discussed the benefits and drawback of each model. ICANN auctions would only deplete applicants' funds, he argues, which could be used for marketing, research, and technology.<ref>[http://www.circleid.com/posts/20130603_icann_auctions_or_private_auctions/ icann or private auctions] Published 3 Jun 13 Retrieved 4 Jun 13</ref> | |||
===Innovative Auctions=== | |||
[[Innovative Auctions]] (IAL) is offering gTLD auction services to applicants in contention in ICANN's New gTLD Program. Their [[Applicant Auction]] was designed by Dr. [[Peter Cramton]], a leading expert on auction design and strategy. | |||
IAL is the first group to have resolved gTLD contention sets via private auction and has resolved more than any other private auction. The first Applicant Auction was held in June 2013, and to date, Innovative Auctions has resolved contention for more than 25 gTLDs. For the first 14 strings, the total sales price was $18.66 million <ref name="Applicant Auction">[[http://www.applicantauction.com/blog/]]</ref>. The results of the subsequent auctions have not been disclosed. | |||
[[Innovative Auctions]]' model is preferred by many applicants, including the largest [[TLD]] applicant, [[Donuts]].<ref>[http://domainincite.com/10828-heres-how-donuts-wants-to-resolve-its-158-new-gtld-contention-fights Here's How Donuts Wants To Resolve its 158 Contention Fights, DomainIncite.com]Published 23 Oct 2012, Retrieved 8 Jan 2013</ref> [[Raymond King]], applicant for 10 TLDs with [[Top Level Design]] expressed his favor for Private Auctions in general, and Innovative Auctions specifically, in an [http://www.circleid.com/posts/20130102_private_vs_icann_auction_of_last_resort/ opinion piece on CircleID]. The Applicant Auction was featured in a recent article [http://www.newyorker.com/online/blogs/elements/2013/08/web-domains-great-internet-land-grab.html in The New Yorker]. | |||
During [[ICANN 45]] in Toronto, auction expert Dr. Cramton outlined an "ascending clock" model, where a price is increased by the auctioneer at each stage; bidders and sellers can then either drop out or bid on the increased amount.<ref name="domainincite">[http://domainincite.com/10828-heres-how-donuts-wants-to-resolve-its-158-new-gtld-contention-fights Here's how Donuts wants to resolve its 158 new gTLD contention fights]. Domain Incite. Published 2012 October 23. Retrieved 2012 November 13.</ref> ICANN has identified the same style of auction for its own Auction of Last Resort.<ref>[http://www.cramton.umd.edu/aa/cramton-applicant-auction-in-brief.pdf Applicant Auction in Brief, Cramton.umd.edu]Published 21 Nov 2012, retrieved Jan 7 2013</ref> At his presentation following the ICANN Draw in December 2012, Dr. Cramton also also addressed a sequential first-price sealed bid, noting that the ascending clock model is still preferred given that it involves: better price discovery, better deposit management, reduced tendency to overbid, and is more consistent with the ICANN Auction of Last Resort.<ref name="Cramton Draw Proposal">[http://www.cramton.umd.edu/aa/cramton-applicant-auction-conference-slides.pdf Cramton Applicant Auction Conference Slides, Cramton.umd.edu]Retrieved Jan 7 2013]</ref> | |||
Cramton has defended IAL's decision to exclusively offer one style of auction, as opposed to [[Right of the Dot]]'s three options, by writing on [[CircleID]], "Choosing an auction design is not a matter of taste, or of favoring one bidder over another. There is a whole field in economics concerned with determining what the best auction is for a particular situation. Thousands of scientific papers have been written on the subject and much has been learned from decades of study." He goes on to note that using an independent system and auction provider, uniform across auctions, takes away the need to negotiate the auction style between the parties and creates a more predictable playing field.<ref name="CircleID Faq">[http://www.circleid.com/posts/20130107_rationale_for_tld_applicant_auctions_to_resolve_string_contentions/ Rationale for TLD Applicant Auctions to Resolve Strings, CircleId.com]Published 8 Jan 2013, Retrieved 8 Jan 2013</ref> | |||
Cramton's original model proposed to run auctions during the first quarter of 2013, before ICANN announced the results of their Initial Evaluation. Such a model would allow losing bidders to receive 70% back from their ICANN application fee, but would pose difficulties if winning applicants later discovered their applications were rejected as other applicants would have withdrawn already, and the new gTLD would be left without an owner. The former model also lumped all TLDs that an individual applicant had applied for in one package. Criticisms stating that such a model would benefit larger companies led to a change, so that auctions will now proceed on a TLD-by-TLD basis, with all auctions being simultaneously resolved at the same time.<ref name="domainincite"></ref> | |||
===Right of the Dot=== | |||
[[Right of the Dot]] suggests three models, though it stresses that it is a flexible consultancy with experience to work out unique remediation processes as well. The three auction models are an ascending clock model, a sealed bid, and a live auction. An ascending clock model, is they type to be used by [[ICANN]] in its last resort auctions and the only model offered by competitive provider [[Innovative Auctions]]. Right of the Dot recommends the sealed bid auction, which sees each applicant submitting a sealed bid, the highest bidder wins and pays the amount of the second highest bid. It also recommends that the proceeds are not distributed evenly but proportionate with the bid made by each loser.<ref name="CircleID Article">[http://www.circleid.com/posts/20130122_contention_is_best_settled_by_those_who_know_the_players_industry/ Contention is Best Settle By Those Who Know the Players Industry, CircleID.com] Published Jan 22, Retrieved Jan 24</ref> Live auctions are held in real time as bidders shout out or submit electronic bids. One of Right of the Dot's overall goals is to offer applicants "flexibility", and cater to the "desires of the participants".<ref name="CircleID Comments">[http://www.circleid.com/posts/20130102_private_vs_icann_auction_of_last_resort/ Comments by Mike Berkens, Private vs. ICANN Auction of Last Resort, CircleID.com]Posted jan 2 2013, Retrieved Jan 7 2013</ref> In comments on a [http://www.circleid.com/posts/20130102_private_vs_icann_auction_of_last_resort/ CircleID Post] by [[New gTLD Program|new gTLD applicant]] [[Raymond King]], Mike Berkens of Right of the Dot claims that their main opponent, [[Innovative Auctions]] (formerly Cramton Associates), is restrictive, writing: "the other auction solution is offered only during highly restricted time frames, and in a highly restricted manner, which we think was designed in mind with the those with largest number of applications." He goes on to say: "We believe that other auction solutions are overly complex and overbearing [which] we believe is more subject to game playing and over paying by winning bidders. We think each auction should stand on its own; each participant should know what their fees will be based on their own auction(s) not be based off auctions they are not participating in; and most importantly should be held at the time and in the manner in which the applicants to each string desire." Their flexibility is extended to the point that Right of the Dot offers to design unique auctions if requested by the applicants.<ref name="ROTD About">[http://rightofthedot.com/gtld-contention/ gTLD Contention RightOfTheDot.com]Retrieved 7 Jan 2013</ref> | |||
Further options that the team will facilitate include giving the proceeds of the auction to a third party charity.<ref name="CircleID Article"></ref> | |||
Right of the Dot has partnered with [[Escrow.com]] to facilitate their auctions. The auction fees begin at 4% and depend on the auction model selected.<ref name="ROTD About"></ref> | |||
The company is led by [[Monte Cahn]] and [[Mike Berkens]], two very well-known [[domainer]]s and industry veterans. They note that they have 17 years of domain auction knowledge and experience and have conducted tens of thousands of auctions. They emphasize their industry knowledge and personal connections are a unique asset that they bring to bear, and believe it will empower them to bring more applicants to the table compared to non-industry service providers.<ref name="CircleID Comments"></ref> Right Of The Dot has received an Auction Business License for Contention Resolution Services by the State of Florida Department of Business and Professional Regulation for the exact purpose of: New TLD Contention Resolution and Consulting Services including Private Auction Services for competing applicants, Internet Domain Name Auctions, Sales, Brokerage, and Management Services.<ref name="ROTD About"></ref> [[Right of the Dot]] is not only offering auction services, but an entire full-service gTLD consultancy, from positioning the domain pre-launch to guiding it through managed and unique launch programs, identifying premium names for auction, later traffic and domain monetization, and beyond. They have secured a number of high-profile partners, such as [[Architelos]], to assist them in their work.<ref>[http://rightofthedot.com/about/ About, RightOfTheDot.com]Retrieved 7 Jan 2013</ref> To date, Right of the Dot has not held any private auction events. | |||
===Sedo=== | |||
In October 2012, the well-known industry aftermarket [[Sedo]] announced its availability for a variety of new gTLD services, including contention auctions. Further services include: Premium domain list identification and pricing; Sunrise, Landrush, and Premium auctions; Distribution via SedoMLS network, the world's largest domain distribution network; and premium domain brokerage and pre-brokerage, connecting domains with prominent buyers.<ref>[http://www.businesswire.com/news/home/20121010005233/en/Sedo-Unveils-Full-Suite-Services-Launch-Promote Sedo Unveils Full Suite Services Launch Promote, BusinessWire.com]Published 10 Oct 2012, Retrieved 7 Jan 2013</ref> | |||
Sedo is an international player, with prominent offices in Europe and North America; multilingual; and the world's largest domain marketplace.<ref>[http://www.sedo.com/us/sedo/gtld/ gTLD, Sedo.com]Retrieved 7 Jan 2013</ref> Recent success stories include major consultations with the launch of the open [[ccTLD]] [[.co]] as a [[gTLD]].<ref>[http://sedo.com/fileadmin/documents/pressdownload/CO_Market_Report.pdf Co Market Report.pdf, Sedo.com]Retrieved 7 Jan 2013</ref> | |||
There does not appear to be any direct information on the types of auctions preferred by Sedo available at this time, January 2013. | |||
==Legality of Private Auctions== | |||
In March 2013, the [[ICANN]] community and its new gTLD applicants and their representatives responded to news that prominent portfolio new TLD applicant, [[Uniregistry]], had learned from the U.S. Department of Justice that Private gTLD Auctions would be potentially illegal and could be prosecuted as "bid-rigging." The practice in question is illegal in various countries and largely related to government contracts, when bidders for multiple contracts may collude to each submit one high-ball bid for different jobs, thereby guaranteeing that they will each receive the project where they were able to submit the lower bid. The practice inflates the price paid for work obtained via bidding processes. The ICANN process is notably different in the fact that ICANN has expressly noted that it prefers not to receive funds via auction and prefers applicants to reach agreements among themselves. However, it is not up to ICANN whether or not charges are pressed, and the Department of Justice (DOJ) apparently has declined to issue a business review of various private gTLD contention resolution mechanisms. [[ Uniregistry]] has concluded that because the DOJ declined to issue a business review, that, "no private party, including ICANN, has the authority to grant to any other party exemptions to, or immunity from, the antitrust laws. The decision means that the Department of Justice reserves its right to prosecute and/or seek civil penalties from persons or companies that participate in anti-competitive schemes in violation of applicable antitrust laws." | |||
The announcement from Uniregistry was decried by prominent supporters of private auctions, such as [[Michael Berkens]] of the auction services provider [[Right of the Dot]], while other community members, such as [[Antony Van Couvering]] of [[Minds + Machines]], corroborated Uniregistry's statements (until later reversing course and supporting private auctions).<ref>[http://domainincite.com/12308-breaking-doj-says-new-gtld-private-auctions-might-be-illegal Breaking DOJ says New gTLD Private Auctions Might be Illegal, DomainIncite.com] Published 19 March 2013, Retrieved 29 March 2013</ref> It has been noted that Uniregistry has never supported private auctions, and it has arguably come to the conclusion that it stands a better chance of winning contention sets against other large portfolio applicants, such as [[Donuts]] and [[Top Level Domain Holdings Ltd.]], if those applicants are not allowed to receive funds through lost auctions. On June 3rd, 2013 Van Couvering wrote an article in CircleID in which he changed positions to support private auctions. He argues that private auctions will provide more money for companies to create "healthy, vigorous registries."<ref>[http://www.circleid.com/posts/20130603_icann_auctions_or_private_auctions/ icann or private auctions] Published 3 Jun 13 Retrieved 4 Jun 13</ref> | |||
Commentators have noted that the DOJ could just as easily prosecute the ICANN Auctions of Last resort, though ICANN would have significant funds obtained via these auctions and the application process to defend itself via legal proceedings.<ref>[http://domainincite.com/12316-did-uniregistry-over-sell-the-auction-antitrust-risk Did Uniregistry Over Sell the Auction Antirust Risk, DomainIncite.com]Published 20 March 2013, Retrieved 29 march 2013</ref> | |||
==References== | ==References== | ||
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