End Domain Name Hoarding

When the price of something in high-demand is fixed at an artificially low price, hoarding is the natural result. The difference between the set price and the market price goes to speculators.

In most markets, the original sellers wise up and either raise prices or tax this noneconomic profit out of existence. The profit is noneconomic because the speculator has no risk, and they’re doing no real work to create the profit. It’s just a market anomaly.

Still, the speculative profits of hoarding are very attractive to otherwise-sane people, so long as they’re getting theirs. No one is getting hurt, the speculators claim. I’m just protecting myself, the hoarders moan.

In a sane world, of course, these are short-term phenomena. The people releasing goods at the artificial rate wise-up and find ways to raise prices or increase supply. Eventually, the market balances.

So far, this hasn’t happened in the area of domain names. Hoarding and speculation have captured the imagination of otherwise-sane individuals in politics, in sport, even in the church.

Clever ClickZ readers know all about this. Martin Lindstrom predicted last year things will never get better while Neil Cohen noted recently that 90 percent of the English language is now “owned,” often by speculators.

Ironically the registrars are encouraging this noneconomic activity, because their incentive is to increase the margins of speculators. So they are lowering prices and encouraging the purchase of unnecessary domains at the same low rates as the old names. (If you’re a dot-com you’re now routinely encouraged to buy dot-net, dot-org and dot etc. to “protect yourself.”)

Even the most commonsense steps, like having one domain per site, get enormous resistance when they’re proposed. When new top level domains open up, there’s a flood of these defensive or hoarding registrations. The inevitable result is that it’s harder and harder to name new businesses as more names come under the control of hoarders.

The hoarding has a pejorative name: cyber-squatting. Yet, the only action taken against squatters so far is to create a means by which people can, at great expense, get their own names back. No one cares that we’ve created what is, in effect, a private and rising tax on the creation of new Internet businesses.

My point today is, maybe we should care. I’ve tried to propose solutions, and the reaction from readers has been uniformly negative. So it’s up to you. Cyber-squatting and hoarding are making all Internet businesses into laughingstocks. It’s encouraging a backlash among people whose political support we’ll need to maintain.

I don’t care to hear this from people who are in the hoarding business. I don’t care about your justifications. I’ll simply state my flat opinion you should not be in this business, that this business is a market anomaly that should not exist, and let it go at that.

So how do we end cyber-hoarding? Let me offer one final incentive to your giving this question serious thought. If we don’t come up with some solutions, someone we neither like nor trust is bound to impose a solution we truly hate. Nature abhors a vacuum.