Entrepreneurs Profit From Free Web Names

Frederick Felman, chief marketing officer at MarkMonitor,a brand protection firm, poses for a portrait in the company's offices in San Francisco, Calif., Tuesday, Feb. 13, 2007. Entrepreneurs have been taking advantage of a five-day grace period to sample millions of domain names, keeping the relative few that might generate advertising revenues and dropping the rest before paying. Experts believe spammers and scam artists are also starting to use the grace period as a source of free, disposable Web addresses. Felman believes the system allows people with criminal or speculative intent to dominate. (AP Photo/Marcio Jose Sanchez) (Marcio Jose Sanchez - AP)

The loophole works this way:

Speculators write software to automatically register hundreds or thousands of names. Some are variants of trademarks or generic keywords that Internet users are likely to type _ or mistype. Others are names grabbed after their original owners fail to renew.

During the grace period, the entrepreneur puts up a Web page featuring keyword search ads and receives a commission on each ad clicked. Services like Google Inc.'s AdSense for Domains and Yahoo Inc.'s Domain Match help large domain name owners set them up, even as the search companies officially oppose abuses in tasting.

Addresses likely to generate more than the $6 annual cost of domain name are kept _ not a high threshold given how lucrative search advertising is these days.

The rest are thrown back into the pool on the fourth or fifth day, only to be grabbed by another group of domain name tasters.

"Everyone's trash is someone else's gold," said Jay Westerdal, president of Name Intelligence. "You'll see this with three or four companies that keep going through the trash of everybody else."

And because the process is automated _ the names are grabbed as soon as they are let go _ legitimate registrants barely have a chance, Westerdal said.

The department store chain Neiman Marcus Group Inc. even filed a federal lawsuit last year accusing the registration company Dotster Inc. of tasting hundreds of names meant to lure Internet users who mistype Web addresses. At one point, the lawsuit said, the misspelled NeimuMarcus.com featured ads for Target, Nordstrom and other rivals.

David Steele, an attorney representing the retailer, said Neiman Marcus could have placed ads on those sites as well, but "should Neiman Marcus have to pay ... for directing people back to their Web site?"

The two parties recently agreed to settle, though Steele said details won't be announced until at least this week (Dotster declined comment). He said his law firm, Christie, Parker & Hale LLP, also was preparing litigation against other tasters.

Operators of the ".org" database have tried to strike back, winning approval in November to charge a restocking fee.

But VeriSign Inc., which runs ".com" and ".net," has not publicly backed one. The oversight agency ICANN said it was still studying the extent of the problem.