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Auctioning second-hand domains gives rise to another Internet

SHARE Auctioning second-hand domains gives rise to another Internet

The Internet address www.flu.com is for sale, and its sellers think it is worth $1.4 million.

The address does not lead to a World Wide Web site, and it never has. Its estimated value seems to arise mostly because such an easy-to-remember destination is available for sale at all.

Because flu.com and virtually all of the other catchy Web addresses ending in ".com" have already been claimed, the value of such unused names has risen sharply. Into this speculative field have come a growing number of companies that have built businesses just by helping owners resell the names they no longer want or need.

"The whole market is shifting; it's now all about the secondary market," said Jeff Tinsley, chief executive of GreatDomains.com, a Los Angeles company that is one of the largest resellers of names. "All the best names are bought up."

Original domain name registrations once all cost $35 a year. That lasted, for the most part, until this year, when Network Solutions Inc., which had a monopoly on registrations, lost its government contract. Now, more than 50 companies compete to register addresses, new and old, and the rivalry has driven prices as low as $8.

But for the best generic and catchy domain names, prices are soaring. Early this year, several domain names sold for astronomical amounts — business.com for $7.5 million, loans.com for $3 million and beauty.com for $1 million.

The appraisers of flu.com evidently considered those sales when setting their asking price June 28. Since 1995, the address has belonged to Procter & Gamble Inc., which registered hundreds of similar generic names like beautiful.com and scent.com. After five years, the company has realized that it does not need so many generic domain names. So it decided to sell them, using GreatDomains.com to supervise the transactions.

"When we acquired these names, we acted to procure anything that was potentially useful for Procter & Gamble," explained Terri Carrick, a spokeswoman for the company, which is keeping domains for its brand-name products, like Crest.com and Pringles.com. Now, though, company officials realize that these unneeded names can be worth money.

GreatDomains has more than 1 million domain names for resale on its site. The other leading reseller, Afternic.com, based in New York, has just more than 250,000. Most sales are for "com" domain names, but "net" and "org" names are also available, and some companies are auctioning names with two-letter country codes, like .tv for the tiny nation of Tuvalu.

Last month, Network Solutions, the one-time monopoly, launched its own forum for reselling domain names. The company says it will not charge either buyers or sellers a handling fee or a commission. It hopes instead that the traffic the forum brings to the site will generate customers for its other services, like domain-name appraisals and Internet starter kits that include Web site design and e-mail.

"Two years ago, registering a name was plenty," said Christopher Clough, a vice president of communications for Network Solutions. "It was enough to fulfill demand. It was fresh, novel and important. But that was two years ago. Today, it is literally not enough, because there is a very interesting dynamic happening in the market."

That dynamic is the rise of resellers like GreatDomains.com and Afternic.com, which both charge a commission. At GreatDomains, where 25 domain names have asking prices of more than $1 million, that could mean substantial fees once the company takes 7 percent to 10 percent from sellers. Afternic charges 5 percent to buyers.

GreatDomains says its average auction brings in $10,000; Afternic says its average is closer to $3,000.

Like any other arena, the domain-name broker industry includes companies of varying size. Many smaller companies have auctioned domain names for years. YahooAuction, owned by Yahoo, and eBay have together listed between 10,000 to 15,000 domain names. Other sites carry hundreds or a few thousand names, like domain4auction.com, hitdomain.com, listadomain.com, dngcom.com and domainmart.com, (where Register.com, a New York company, also plans to add auctions to its site.

Tinsley, of GreatDomains.com, said he thinks his company has built enough of a reputation to withstand new competition.

"We're in the fortunate position to be the clear leader in the secondary market," he said. "We've figured out what it takes to get the names sold."

Procter & Gamble, meanwhile, is in no hurry to sell flu.com. The company says it has had several inquiries, but predicted the auction could take three to six months.

"We're waiting for the right customer," Carrick said, meaning one who could pay $1.4 million. "We've had these names appraised. The listing price is reflective of the estimated value. It's like finding valuable artwork in the attic of a 163-year-old house."

Archive articles:

July 10, 2000: Beyond dot-com: Net group grapples with new names

July 5, 2000: ‘Netizens’ can elect directors who supervise Internet

On the Web:

The Internet Corporation for Assigned Names and Numbers (ICANN)

List of companies accredited to assign domain names