GTLD Auctions
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.
ICANN Auctions
ICANN supports private auctions but offers its own model as a last resort. All gTLDs auctioned off under ICANN's auction model will see their proceeds going to ICANN as "excess funds" that go well past covering original costs. Those funds will be redistributed at a later date, in ways that are yet to be determined.[1]
Private Auctions
Numerous companies have surfaced to offer private auction models, including Sedo, Cramton Associates, and Right Of The Dot. All of their proposed models determine that winner will pay the amount of the second-highest bid, and money will be split either equally or proportionally between the losers, so that all applicants will receive a percentage of their initial investment back.[2] All applicants must agree to participate in a private auction model in order for it to proceed; otherwise, the contention set will be managed via ICANN's auction system.
During ICANN 45 in Toronto, auction expert Peter Cramton outlined a private gTLD auction model as an alternate solution to the ICANN auctions. He has proposed 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.[3] This model is also preferred by Right Of The Dot, who also proposed "sealed bid" and "live auction" models. In a sealed bid model, applicants securely send money via a courier and packages are stored in a safe place until they are opened at the auction session.[2]
Cramton's original model proposed to run auctions during the first quarter of 2013, before ICANN announced the results of their Initial Evaluation, which would beneficially allowing losing bidder to receive a 70% of their ICANN application fee. Nonetheless, such a model would cause difficulties if winning applicants later discovered their applications were rejected, and because other applicants would have withdrawn, the gTLD would be left without an owner.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.[3]
Proponents of the private auction model argue that it cheaper and quicker than the ICANN model, which should be used as a last resort.
Donuts co-founder Jon Nevett says that Donuts will handle as many of its contention sets as possible via this method, 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."[3]
Applicants also have to decide on when they wish to enter into private auctions. Those who withdraw their applications before ICANN posts its Initial Evalution 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.[2]
- ↑ ICANN, Make a Difference, Slate.com. Published 27 November 2012. Retrieved 6 December 2012.
- ↑ 2.0 2.1 2.2 New gTLD applicants ponder private auctions, WorldIPreview.com. Published 14 November 2012. Retrieved 6 December 2012.
- ↑ 3.0 3.1 3.2 Here's how Donuts wants to resolve its 158 new gTLD contention fights. Domain Incite. Published 2012 October 23. Retrieved 2012 November 13.