ICANN Moves Toward gTLD Auctions, While Applicants Look to Outdo Opponents
The first ICANN auctions for new generic top-level domain names subject to contended applications could be in early March, said ICANN Senior Manager-gTLD Program Russ Weinstein Monday at the organization’s meeting audiocast from Buenos Aires. Preliminary auction rules were released Nov. 1, and the bidder agreement is due in December, he said. ICANN expects to start early next year notifying applicants of its intent to auction, he said. ICANN auctions are “expected to be the method of last resort” for resolving string contentions, and applicants should resolve their contentions among themselves, he said. While private auctions seem to be the most favored mechanism, some applicants are using ICANN’s model as an intimidation strategy, and all applicants seeking auctions are strategizing to outdo their opponents, Adrian Kinderis, CEO of registry development company ARI Registry Services, told us.
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Weinstein laid out the current thinking on auction process and timeline, and Larry Ausubel, from auction provider Power Auctions, described at the meeting the mechanism for the ascending clock auction format to be used. There are still some issues on which ICANN wants community feedback, including whether bidders should be scheduled for no more than five contention sets in a single auction event, Weinstein said.
Despite claims that private auctions won’t be very popular due to ICANN Governmental Advisory Committee advice and other concerns (WID June 4 p1), Kinderis told us such auctions seem to be the favored method of resolving contention sets because they allow a distribution of money among the losing applicants. Under the ICANN model, the losers walk away with nothing “and ICANN keeps the cash,” he said. He spoke in his personal capacity, not as interim board chairman of the Domain Name Association (WID Oct 29 p1), which has no position on the issue. That only ICANN gains from an ICANN auction presents an incentive for pursuing private auction resolutions, Kinderis said. Some applicants are using ICANN’s “winner takes all” model “as a strategy of intimidation to display confidence in their ability to win their contention set,” he said.
Several private auctions have taken place. Innovative Auctions, in collaboration with Cramton Associates, has done three so far for 18 gTLDs, said Peter Cramton. Those auctions have been “highly successful” and “we will be conducting more in the future,” he said. Cramton is seeing “quite a bit of interest” in private auctions, he said.
"Timing is one of the main issues for the participants,” Cramton told us. That’s because ICANN has pushed back its last-resort auction to start in March and continue for more than a year, said Sheel Mohnot, auction project director at Cramton Associates. Many strings have objections, GAC advice or community evaluation to contend with, and so you could lose the string even after winning the auction, he said.
Donuts has taken part in several private auctions, said Mason Cole, vice president, communications and industry relations. It won .photography, .media, .marketing, .guide, .construction, .expert, .lawyer, .fish and .discount, he said. Donuts would take part in an ICANN auction of last resort, but is generally “not looking for direct deals with competing applicants,” he told us.
"It’s a mixed bag really,” as some applicants embrace private auctions as a quicker and cheaper alternative to ICANN auctions, said Sedo General Counsel Jeremiah Johnston. Legal doubts remained for some applicants in the running for a significant numbers of TLDs, and without all applicants participating in a private auction, a contention set would remain and an ICANN auction may become inevitable, he told us. In the end, every applicant “seems intent on resolving any pending contentions through private deals versus relying on an auction administrated by ICANN where the winning bids are paid to ICANN instead of the losers,” he said.
Whether applicants choose a private auction or ICANN’s model, “they all have a strategy to outplay the competition,” said Kinderis. “We know there is a significant degree of game theory being played by all parties” around the auctions, he said. Most are understandably playing their cards close to their chests, he said. It appears that some applicants are losing private auctions strategically to “raise cash in the war-chest for competing in other auctions for more favorable” new gTLDs, he said.
U.K.-based Top Level Domain Holdings made nearly $5 million by losing auctions for the .lawyer and .website gTLDs, Kinderis said. TLDH said Oct. 25 it realized $4.81 million from the auctions, which included proceeds from the two private auctions, net commissions payable to the auctioneer and ICANN refunds on the two gTLD applications. Earlier this year, the first private auctions -- for .club, .college, .luxury, .photography, .red and .vote --collectively netted over $9 million, or an average price of $1.5 million per gTLD, Kinderis said. “We know that some of the [domain name] portfolio holders have raised significant funds” for their contention war-chests, Kinderis said. “It will be interesting to see how this all unfolds.”