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‘I have a domain name to sell you’ is a terrible business proposition

Your internet real estate isn't valuable anymore. (Reuters) Internet real estate isn't as valuable anymore. (Reuters)

Over the past few weeks, Wonkblog has been corresponding with an Internet entrepreneur, who shall remain nameless. His proposition: to monetize our daily "Best Sentences" posts with a whole Web site full of them.

"What I have had in mind is an Aggregation Hub analogous to, but with an alternative presentation based on Best Sentences," writes the pitchman (excessive capitalization in the original). "Users could nominate and promote entries, create and share Favorites with Membership. Trending Content might be featured. Entries could be categorized."

He says he's an "Ideas Man," not a Business Man. So he's willing to sell us his two addresses, and, for $30,000. And who knows, the concept might work. But it's a terrible sales strategy, for reasons that tell us a lot about an Internet economy that's about to change in fundamental ways.

Since the Internet was born, individuals and businesses have been bedeviled by cybersquatters -- opportunists who buy up hundreds, even thousands, of URLs at rock-bottom prices and then sell them to the highest bidder, or extort protection money from people who fear the domain names will be used to besmirch their own names. They even generate revenue while they're "parked," since a random unused .com will generate some accidental traffic, which can be monetized through Google ads (www.Death.comis a good example of how this usually works).

Over time, those parked domains have grown more valuable, as the universe of available ".com" names has shrunk. Now, if you want a specific URL, you'll probably have to buy it secondhand on one of the many marketplaces that have sprung up to trade in domain names.

There is some flexibility in the system. It immediately occurred to us that if we wanted to execute the Best Sentences idea without paying $30,000 for a URL, we could register, or, using the top level domain for Spain. But if our interlocutor had really wanted to protect his idea, it wouldn't have been too hard to buy up most of the available addresses, since there are only a couple dozen generic top level domains and a few hundred geographic ones.

But, starting very soon, that's going to become almost impossible. The Internet Corporation for Assigned Names and Numbers, which administers the infrastructure of the Internet, is working to dramatically increase the number of available domain names. Over the past two years, ICANN allowed anyone to apply to run as many top level domains as they wanted, and received nearly 2,000 applications. Many of those applications came from large companies, like Citigroup and L'Oreal, that want to protect their own brands. But many more were from investor-backed startups, like Donuts, which figure they can recoup the investment by selling domain names to the masses.

Having thousands of potential top level domains available brings the unique value of any one domain name down to almost nothing: We could register, BestSentences.web, BestSentences.home, on and on. The coming expansion even destroys the revenue potential of "parking" domains before they're resold, since fewer people will randomly type in .com addresses.

That means the end of cybersquatting as we know it.

"It's a huge risk for a speculator," says Kathy Neilsen of Sedo, a domain name marketplace. "If you're not averse to risk, and they want to invest in property, that's their right to do that."

Ideas are still valuable, of course. If the guy trying to sell us wanted to build the site himself, he might make a tidy profit. When ICANN eliminates scarcity, though, he won't be able to charge anybody else for that undeveloped, formerly valuable piece of Internet real estate.

Correction: This post initially implied that Verizon had applied for a new top level domain. It has not. 

Lydia DePillis is a reporter focusing on labor, business, and housing. She previously worked at The New Republic and the Washington City Paper. She's from Seattle.



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