Domain Auction Update and Aaron Kornblum
Domain Auction Update and Aaron Kornblum
03/14/2007 - Monte Cahn
Monte talks to Aaron Kornblum and Michael White. Aaron E. Kornblum, Senior Attorney, leads Microsoft’s enforcement programs against spam, phishing, and cyber squatting. Aaron leads a dedicated team of investigators, paralegals, and outside counsel, and works closely with industry and corporate partners as well as government enforcement agencies to protect consumers from unwanted spam and to stop online fraud. Michael White is the Vice President of Business Development for Moniker and oversees the development and processes for several revenue generating business lines, including Marketplace and the Live and Silent Auction events.
[Commercials]
Monte: Hello, everyone. Welcome to Domain Masters. And what an exciting week we’re having. Hopefully most of you listened to or were listening to our live domain auction, live from Las Vegas at the TRAFFIC Conference. We kicked some major ass over there, sold over $4.3 million worth of domain names in the live event in about 3 ½ hours; the silent auction closing day is today and we’re already up to $850,000 worth of domain names in the silent auction being sold. We’re just knocking them dead. And we still have about, oh, four or five hours of closings to do, so my gut tells me that we’re going to be over a million dollars, which will be a new record for the silent auction for sure. And we might surpass the old record from the TRAFFIC East conference in terms of total domains sold and total dollars sold. So we’re going to talk a little bit about the domain auction in a little bit. I have a very interesting and exciting guest on tonight, Aaron Kornblum, who’s actually the lead counsel for Microsoft and I’m sure many of you have been listening and hearing about Microsoft’s enforcement’s efforts on . . . against spam, phishing and cyber-squatting; he leads that effort and since there’s a lot of domain names out there that are involved in some of those transactions, we’ thought we’d get the, uh, hear from the horse’s mouth directly and find out what Microsoft is doing, why they’re taking a serious effort towards what they’re doing and some of the things you guys can do as domainers to make yourself not in jeopardy and others who may have questions and you know, different variations of Microsoft names and different things that are going on that we can talk about and that Aaron can explain what they’re company’s position is on. So we’re going to be on with him first and then we’re going to a live and silent auction follow up and find out where we are to date. We’re going to have Mike White, our super senior, uh, uh, senior vice president of business dev for us and he also runs our auction platform and he’s going to come on and talk about the successes of both the silent and live auction and what we’ve experienced so far and really hit it hard. So we’re going to take a couple commercial breaks, pay some bills and then be back on with Aaron Kornblum and then on with Mike White from Moniker.com. Stay tuned.
[Commercials]
Monte: Hello, everyone, welcome back to Domain Masters. I’m Monte Cahn, you’re host. As I mentioned, we have a very special guest on, Aaron Kornblum. Aaron is the senior attorney that leads Microsoft’s enforcement program efforts against spam, phishing and cyber-squatting. Aaron leads a dedicated team of investigators, paralegals and outside counsel that work closely with the industry and corporate partners, as well as the government enforcement agencies to protect consumers from unwanted spam and to stop online fraud. Prior to joining Microsoft, Aaron served as active duty in the Air Force and he was a trial prosecutor and defense counsel with numerous court martial cases and administrative actions. Aaron, welcome to Domain Masters.
Aaron: Thank you, Monte; it’s a pleasure to be with you.
Monte: Yeah, I’m glad we finally got you on board. I know we’ve tried for several weeks. Uhm, why don’t you give us a little bit of background besides what I’ve just read on how you actually got hooked up with Microsoft and you know, you’re first experience in what’s going on, on the Web today.
Aaron: Absolutely. So, my background is both in the civil and criminal areas of law, starting first in the Air Force, as you mentioned, as a military prosecutor and focusing on criminal law in that respect. So bringing cases in court martial cases as a military judge advocate and then also serving as a defense counsel, so defending airmen who were accused of crimes while they served in the military. After finishing in the service, I jumped out and moved to the Seattle area and came back to join a firm in Seattle and focus on civil litigation, where I represented a number of different organizations and companies and focused my practice on complex civil litigation. So, a variety of different types of law, including financial institutions, anti-piracy, in particular; a little bankruptcy and some other topics, but a pretty diverse practice. And when the opportunity arose to join Microsoft’s legal team, it was a terrific opportunity to leverage experience from both of those fields, both from the prosecutorial and criminal side, as well as the civil, as disposition within the company, as you mentioned, focuses on online safety in a variety of different areas, including spam, including phising and fraud more generally and so bringing both of those to the forefront is a great challenge and keeping me busy, as you also mentioned.
Monte: Yeah, definitely. So, Microsoft is one the, I guess, more aggressive companies who is trying to combat, you know, all three areas of spam, phishing and cyber-squatting. Uhm, what’s behind the effort? I mean, obviously, because Microsoft has online applications now and I guess the new versions of the Microsoft desktop applications are now downloadable through the Web – I assume that has something to do with the extraordinary effort there is to protect Web users from receiving, you know, fraudulent Microsoft advertisements and spam and phishing stuff – is that correct?
Aaron: This is an extraordinarily exciting time, to be involved in the Internet. And in just so many ways, it is exciting and growing and dynamic every day. It is a place now to do business; it’s a place for personal communication and those ways in which we do those things is changing everyday. And so taking advantage of that new medium of the Internet in exciting and dynamic ways is something that we’re very focused on as a company and that we’d like to see other’s do as well. So, Microsoft has a very broad and vested interest in the success of the greater Internet, that is, as a marketplace, as a medium to communicate by telephone Voice Over IP, by surfing and browsing using browsers and visiting websites, for instant messaging and other types of services, which we’re moving into so. So, that does lead us to importantly protecting our consumers, ensuring that they’re able to use this new medium, that they’re not . . . that the medium’s not polluted; that they’re customer experience is not negatively impacted by these online threats like phishing, like spam that will carry malicious code. These are things that we are focusing more closely on and as we as a company move more into online services, and as you mentioned, delivering online software to customers directly rather than putting it into the box, those websites and those domain names and those online portals become increasingly important as well.
Monte: Definitely, definitely. I see what the drive is behind that. So how many names has Microsoft, from a cyber-squatting aspect, now – we’ll talk about all three areas – how many names has Microsoft been able to reclaim since this initiative took place.
Aaron: Well, we’ve been looking at domain names for several years now as an important asset, and that began, of course, with our corporate domain portfolio and the domain names that we use and operate every day. And that really expanded as we looked more at phishing and doing defensive work around phishing and proactively purchasing domain names as part of our anti-phishing strategy. And I’m happy to talk about that. Cyber-squatting initiative which became more aggressive last August has yielded eleven hundred domain names and specifically since the filing of our first Federal lawsuits targeting cyber-squatters. So more than a thousand domain names and we expect that number will continue to increase as we push this effort forward.
Monte: And, in regarding those reclaiming of domain names, what are . . . is Microsoft positioned just to go ahead and start filing suits? Or are you looking to work with potential cyber-squatters to at least give them an opportunity to give the names back or you know, what’s the . . . is there a compromise here? Is there, you know, a case where, you know, where maybe they didn’t think there was something going on that was wrong? Give us the approach that’s being used here and how you guys are treating that.
Aaron: Absolutely; and this is an important question and one that I know is talked about frequently on programs like these or the message boards, which we do frequent to learn what’s going on in the industry and the space and just a fantastically growing industry. There’s a lot of positive momentum behind it. We . . . every case is different, so when we approach a particular individual or organization that’s potentially in possession of infringing domain names, we take a very close look at all of the facts of the case. That is, we look at the person or the organization that’s involved in, to our understanding and investigation, in the cyber-squatting. We look at the names that are involved. Are we talking about a large number of names? Are we talking about systematic registration or automatic registration? And, ultimately, it’s going to yield some sort of approach, a strategic approach that we’re going to take. Every case is different. In some cases, we may reach out to the domain holder and seek merely the return of the domain names themselves. And I do want to point out we have received into our accounts a number of voluntarily pushed domain names that we’ve added to our corporate portfolio and we welcome that. We don’t look at those as potential targeting opportunities when that happens; and frankly, you know, when we look at all of those factors, that cuts very positively in the way of the person, the registrant of the domain they’re sending our way. But every case is different, and for those that we find that are particularly egregious so we find a particular person or approach to the registrations that indicate a clear and systematic or more aggressive targeting of Microsoft’s domain names, we’re going to take a harder look at that. We’re also going to see how the page is being used by the registrant or how the pages are being operated and all of that factors into that equation.
Monte: And, some of the techniques that Microsoft uses to find all these domain names? What are some of the methodologies or methods that you’re using, internally and externally, to see if somebody’s registered a name or somebody’s had a name for quite some time or how they’re using it? Is it all a manual process? Do you have some kind of automated systems? What’s going on in the back end?
Aaron: It’s a variety of processes. One of them is one that we publicize fairly broadly. In fact, we encourage and make available to everyone to take a look at is a tool developed by a researcher at Microsoft named Ye Men Wang, that’s called the Stryeer URL Tracer (and that’s Stryeer – S-T-R-Y-E-E-R) and it’s available for free download and Ye Men’s website at Microsoft Research. This is a tool which simply will permit investigation and research of all the potential variants by entering a brand name or other domain name into the tool and it will compute and calculate the potential variants and assist with that initial research. So, that’s one of the most powerful tools that we have and we do use that. And we also do make that available, as I said, to everyone who wants to take a look at that tool, including other brand holders. And that’s a large part of what we’re trying to achieve with our programs, is to educate other brand holders and other companies that may operate in the domain space, to alert them that their domain name is a valuable property and that it can be susceptible to infringement just as any type of intellectual property in the brick and mortar world can potentially be infringed as well. We also do use what we call human research and just looking at a variety of different sites. We also listen to our customers. As with spam and other types of online challenges, they don’t hesitate to let us know when they see something that’s giving them a challenge or giving them pause. So we’ll also receive information or leads on potential targets through our customers.
Monte: Interesting. And what about the other two aspects of enforcement, which is spam and phishing? How are you handling that internally?
Aaron: Well, we have a global team of former prosecutors like me; also former federal investigators, FBI, other federal agencies who have come in-house who are focusing on enforcement. As a technology company, we obviously have large numbers of people working on technology solutions. We focus on consumer education. But our team is unique in that it does have the luxury, if you will, of spending full time on enforcement in bringing cyber criminals to justice. So, speaking more about phishing and criminals specifically, we work quite a bit with law enforcement, with FBI and National Cyber Forensics and Training Alliance, which is a public-private partnership in Pittsburgh, to really focus on the criminal activities and [inaudible] little bit different from the cyber squatting we’re talking about. On the spam side, we also work quite a bit with government, but then, we’re also quite active with civil lawsuits as well, bringing private civil actions against those who are sending illegal email or conducting illegal email marketing. And, as I’ve spoken quite a bit on spam (I won’t go into too much detail here), it’s a continuing effort to focus on illegal email because it continues to impact our customers as [inaudible] . . .
Monte: Interesting. Now, regarding some of the . . . I guess there was some kind of announcement that had to do with some cases that settled in the U.S. just recently – can you talk a little bit about those cases?
Aaron: Sure. Well, we’re talking about the kick off of our more aggressive program last August where we filed three lawsuits in August of 2006. They were filed in federal courts – one law suite each in Salt Lake City, Los Angeles and in Seattle. And the announcement today covers several different areas but one of the areas it covers includes the settlements of two of those lawsuits – the Salt Lake City action and the Los Angeles action against the defendants that we named in those lawsuits. Those have been settled out of court. The third action, which was filed in Seattle, was a little bit different. Rather than bringing it against named defendants, who’s information we had through registration information (publicly available WhoIS data), the defendants in that case were unknown to us (that is, their identities were unknown to us) because all of the domains we were looking at were in fact WhoIS privacy shielded. And so, the lawsuit that we filed in Seattle was known as a “John Doe” lawsuit, which is a technique that we use frequently in spam and in phishing cases as well, which is used in situations where you don’t know who you’re dealing with, who the true identity of the defendant is on the day that you’re filing your lawsuit. So, by filing the John Doe lawsuit, importantly, it gave Microsoft subpoena power (that is, the right to issue court orders to third parties) to turn over customer information. And that’s what we did to unmask the identities of those 217 domain name owners. We did pursue them and settle with the vast majority of the domain owners that we identified. But three of those individuals we elected to pursue further in the court and so we amended our John Doe action this week to name those three individuals by name and we’ll now pursue them in that federal lawsuit.
Monte: I see. And then, the settlement strategy is that as simple as just turning over domain names, or is it ca . . . ah, compensation, some kind of financial damage? Or is it a combination of both? Or does it vary?
Aaron: It does vary. And I want to emphasize again that each case is different, in that we take into account in full the circumstances not only of the registrants, but also of the scope of what their actions entail. So, each case, did, however, involve a stipulated permanent injunction, meaning that the defendant in each case agreed not to engage in that type of infringing conduct going forward and a monetary payment, in some cases, to Microsoft.
Monte: And . . .
Aaron: And there also was a turnover of the domain names involved, yes.
Monte: Right, right. Okay. Now, you’re also amending the ones that, I guess, that . . . you have some that are continuing . . . What do you do about International situations and how do you handle an International effort to go against spam, phishing and cyber-squatting, when there’s so many various rules and jurisdictions in different countries and protection of domain owners. I hear in India, for example, it takes five years to even go through the appeal process. What do you do about those types of situations?
Aaron: Well, International cases do present unique challenges, particularly when you’re talking about the Internet and enforcement cases. Every country’s going to have different applicable law and the actions that a brand owner or infringed brand or company can bring vary, depending upon the laws of that country. Perhaps fraud and phishing are the areas that we had the most universal success worldwide; and it’s because most countries do have, most nations do have in place some sort of legal prohibition against fraud or fraudulent conduct or activities. Spam, less so, because you’re seeing some nations taking steps to enact legislation specifically targeting illegal email behaviour. And with domain names, it really falls more frequently under the realm of trademark law. And again, that also varies from country to country and jurisdictions, each jurisdiction, each country, can have very different rules and procedures. So, it’s very important to have good legal guidance in all of these situations, no matter which side of the fence you’re on. And it’s something that I frequently point and highlight when I speak to domainers, when I speak to email marketers and I mentioned it at the Affiliate Summit in Las Vegas in January, is that its so important that if you do run afoul of either a private company or perhaps an enforcement agency from a government in any of these contacts, that you do have good, legal information at your side. And that can come in different forms but frequently and most commonly, that’s going to be an attorney who’s licensed to practice in that particular place, because the laws do, as I just pointed out, change from place to place. And to be upfront with that agency or company that contacts you. Because, again, that’s another factor that’s going to weigh on how that agency or private brand holder may elect to proceed.
Monte: Right, right. Now, if you’re a domain owner . . . well, I guess I have two questions. What’s Microsoft’s position on the registration of names that have not been trademarked but have been used for other purposes or ideas? Like, for example, like, I guess, the whole Zoon release of, you know, the Zoon music player but before that name even came into existence, a number of people had a lot of those domain names already registered. I guess Microsoft has in some ways, not connected some of its branding strategy and its online efforts to some of the product releases so that they are actually protecting their domain names online. And you and I spoke about that briefly at the Affiliate Summit. What are some of the things now that Microsoft is doing so that whenever there’s a new product or service that’s coming out that they’re going out and securing the brand and identity online? And what happens if somebody else owns that brand and identity after a decision has been made internally that that is the best brand name for their particular product or service?
Aaron: A couple questions in there, I’ll try my best to move through them. It is a challenge for brand holders, particularly larger ones, to truly understand the power of domain names. I think this is a topic which is frequently discussed in the domain name community and to a good extent their own point. That is, that the marketing folks, the IT folks, the perhaps if there is a domain portfolio management group, the trademark group, the legal group within a particular company may not be talking to each other as a new product or services is coming down the pipe and being prepared for release. And as you pointed out, and talked a little bit about Zoon and how that domain name, when the name of the domain, the name of the product came out, there was a surge in registrations. And this also ties into the applicable law as well: the law of trademarks in the United States and when a trademark is able to bring action. So, every case is different; we’re looking at Zoon domains right now. We are trying (as you asked about the internal processes) we’re trying to connect those dots more strongly so that as new products and services are coming, we are thinking more about domain names ahead of the curve and doing, perhaps, defensive registrations and doing it in a smart way. So, it is a challenging area. I think, taking a step back from Microsoft and looking at the broader area, I think that there’s a good deal of education with a lot of different brands out there, nationally, within the United States as well as Internationally, to recognize the importance, and again, the inherent value of domain names as a place, as a landing point for customers and potential customers to visit that company.
Monte: Yeah, definitely. Uhm, and then on the side of, you know, what happens if . . .what happens if you guys ever go and negotiate a purchase of a domain name that’s really important and strategic to the brand that might be more generic in nature? You know, for example, the word “Windows;” obviously, “windows” is a generic name that means, you know, the window of a house or a building or whatever, but also of a famous Microsoft software program – those types of names that are used generically across the Internet with various meanings, how do you handle those situations? Do you go out and try to negotiate with a potential owner and actually buy those? Or, what are some of the things that are worked out from that standpoint?
Aaron: Yeah, every case is different; and different product groups within the company will have different strategy, will take different approaches to those types of questions. Some might see that the domain name is registered and decide to take a different approach or shift, perhaps, to a different way of marketing or presenting the brand online. Others may try and acquire. So it’s all sorts of different strategies are in place at Microsoft; and I think you’d find that true at other brand holders as well, as they introduce new products and services.
Monte: Yeah, I agree. I agree. Uhm, tell us a little bit more about what you’d recommend to domain owners who are in this particular situation where they may have a name that crosses the line or is in the gray area. Should they be afraid? You know, be fearful for their life if they’re going to get a lawsuit? Is there a way that it can be proactive if the alarm bells are going off right now because of the show, where they may be able to be proactive and you know, avoid something like that? Give us an idea of what you’re recommendations are, you know, from your standpoint and your position on what those that are listening can do if they have any of those names that cross the line?
Aaron: Sure; well, I can’t give legal advice out over the show but I can say that, you know, this is really, I believe, is an area of great concern within the online ad space and the domaining community. And I think rightfully so. I think that this type of conduct (I’m talking about cyber-squatting conduct) can bring a very bad name to the growth of the domain name space and the monetization that is occurring through domain names. And so it is very important, I think, to take a hard look and to make it an objective look, an objective review of your domain name portfolio and to see if you do have names that cross that line. I can speak for Microsoft and say that if you’d like to contact us at TMPOL@Microsoft.com, that we’d be happy to take a look at a domain name and if you’d like to offer to give it to the company, we will look at those. And as I said, that cuts very favorably in our eyes. It does save us the cost and expense of perhaps [inaudible] UDRP or perhaps a more formal legal action. But each company, each brand is going to approach that differently. I can’t tell you or can’t say that the different company might take a different approach if there’s a name that they become aware of and that’s being squatted or being potentially infringed upon, they’ll take a different tact. But we are . . . we’re interested in two things through the work that we’re doing: we’re interested in protecting our consumers and helping them so that when they type in a Web address, they shouldn’t have to worry that they’re going to be . . . if they’re off by one keystroke, that they can end up some place that’s completely different than where they intended to go; and then we’re also looking to police our brand online and ensure that our mark is protected. And as a trademark holder, that’s part of our legal obligation under law is to police that mark, both in the brick and mortar world and online. So, those concerns are the two that are topmost in our mind and so having, again, someone who’s experienced in this area of the law, perhaps that to assist in that process might be very useful.
Monte: Uhm, now what about some of the reverse things that are going on? For instance, the browser 404 reader [inaudible] that Microsoft IE application does. Is there any concerns from a legal standpoint that perhaps Microsoft crosses the line and you know, basically takes advantage of some trademarks on the other side of that? Like the reverse PPC look up pages on 404 pages. So, obviously, you know about redirecting traffic using Microsoft misspells and monetizing that on the other side. But the 404 redirects that the IE browser does also re-directs traffic to famous, more famous websites and famous links as well. What’s you’re position on that?
Aaron: Sure. And I ‘m aware of the conversation that’s going on publicly about this topic as well; and that only holds true if the Windows live search engine is selected as the default search engine in the browser. And any default can be set and in fact through OEMs and other sources, there are going to be other search engines which may be selected as the default. And then those search engines will be potentially serving up a paid ad. So, its not the case that Windows live search or IE7 are focusing that traffic to Microsoft’s ad center. I think that this area of law is going to see quite a bit of change and examination by the courts in the next couple of years. I know there are cases already pending involving keywords, more generally in the paid search and online ad sense . . . ad context. And so I think you’re going to see more decisions that impact how these words can be used; how one mark holder can potentially or can or can not potentially use other brand holders’ marks in the advertising context. So, a story that’s going to be continuing to be written.
Monte: So, let me ask you just a hypothetical question. It’s probably a real question but I’ll ask you in a hypothetical sense. Let’s say a customer owns the domain name Windows.com, and they do have it steered towards a PPC landing page. The PPC provider, you know, a Google-Yahoo! domain sponsor, what have you, redirects that traffic to a Windows software application and also competitive software to Windows. Who’s liable? Who’s responsible? What’s Microsoft’s position on that?
Aaron: Well, we’ll start with the domain name. Windows is not a name or mark that Microsoft might absolutely pursue; as I said, every case is different. And so, we’re going to look to see how the name is being used and in what context and what context of other names. It’s not the instance that every time we see the word “windows,” or every time we see the word “vista” or “x-box,” we’re going to be pursuing that as an enforcement case. I do not have an unlimited budget of unlimited size, so we do try to focus on the larger infringing cases or the evidence of the most significant infringement. So, we’re going to take a look at each case differently and I’m not going to comment on a particular hypothetical other than to say that.
Monte: Okay; well, I mean, let’s say it was something that . . . let’s say it was . . . lets say it had two different meanings but it was steering traffic . . . lets say someone was buying keywords in a competitive . . . uh, to a competitive program of Microsoft and it was Windows.com or Xbox and it wasn’t intended that competitive was supposed to show up in a PPC provider. Does Microsoft feel that the end, the people providing the ad, the publisher (which would be the domainer) or the advertising conduit, which would be Google or Yahoo! could be responsible in a scenario like that?
Aaron: I’m not going to comment on a hypothetical like that, Monte. Other than to say, that, keep in mind Microsoft has very broad interests in this space, including Microsoft Ad Center, it’s own online ad network which currently is serving up ads just on network, ah, in network on Microsoft live search results and other MSN live properties. But the plan to roll out contextual advertising is something that we’re looking at, as well as the fact that we’re now a registrar. Microsoft became a registrar in November of last year and so we’re also exploring options in that field as well. So, we’re certainly approaching the space wearing a variety of different hats and as we do our enforcement work, we are, as I mentioned earlier, building bridges within the company to talk more closely with those different areas of the company. So . . .
Monte: Okay. Alright, fair enough. What kind of changes do you think need to take place within the domain industry from the standpoint of where we are today and where we need to go?
Aaron: Well, tasting is an issue which concerns us greatly, and it’s one of the reasons why, as part of our announcement today, we announced that we have brought a legal action against Maltuzi LLC in federal court in San Francisco, in large part because that’s how Maltuzi was infringing Microsoft’s intellectual property that our complaint is alleging. The high volume registration and dropping of names and the constant search for names without any financial impact to the registrant is something that we’re contemplating as something that we might want to encourage legislative change or change on procedural rules. And we’re watching very closely the new drop rule [inaudible] and charge that was just implemented by ICANN on one of the top level domains. So, I think that that’s one area. Another area is this . . . is the growth of infringement. We’re looking at how brand owners might be able to more effectively police or to identify infringing situations online. We think that the tool that Ye Man Wang developed, the Styeer URL Tracer is a great first step. But how we might further expand and empower brand holders, other companies, to look at this . . . to look at the space more positively to help remove this chaff and focus on the wheat.
Monte: Uhm, okay. Now, you mentioned tasting. So, so, Microsoft’s position is that tasting is bad. Or is more like kiting is bad and not tasting, so, uhm, you know, there’s a big difference between tasting and kiting; you know, kiting is the registration and the registration of the same name over and over again, without having to pay for it. Tasting is like test driving a car, whether, you know, its trying out the domain name for 3 or 4 or 5 days to see whether its something that meets their company or the individual’s particular needs and then lets it go in case it doesn’t. And those can be for a variety of reasons. Obviously, one can be monetization, one can be, you know, branding, brand strategy and all kinds of other things. Is this a global statement that Microsoft has a concern about tasting in general? Or is it the practice of kiting and the tasting of, you know, trademark related names and then letting them go and trying to take advantage of them over some short period of time and then letting them go?
Aaron: Well, I do understand and agree with your definition there separating the two, and kiting would, in my mind, be more of a fraud situation where you have perhaps two or more parties actively engaged in some sort of fraudulent endeavor or conspiracy. The tasting, the concern we have there is that it’s the high volume, automatic registration of names and evaluation of names without a financial impact which is leading to the opportunity and perhaps more encouragement to infringement. And that’s what we’re really concerned with is the infringements on our intellectual property. As I said, we have a variety of interests and certainly it’s not the registration of domain names, pe se, that causes any pause. But it’s more of the infringement and perhaps the intentional blindness or willful blindness to the automatic registrations of infringing names, which is still forbidden under law. So, that’s the concern and that’s why we’re looking at that area more closely.
Monte: Got it, got it. Now, just switching gears a little bit before we wind up – tell us a little bit about the Microsoft portfolio of domain names. How many names are in the portfolio?
Aaron: About 20,000 domain names; and that’s growing as we acquire names through a variety of means, some from acquisitions, some from new registrations and through the recoveries and cyber-squatting enforcement with what we’re doing now.
Monte: And, are there regular registrations? New registrations going on within Microsoft on a daily basis? On a weekly basis? Or, you know, various reasons and what kind of reasons would that be?
Aaron: There are; we’re registering domains all the time. I can’t give specifics there, in part because it does . . . it’s a moving number. But, the portfolio is growing and as I said, new registrations are a component of that and that’s in part because we are developing new products and services with new opportunities to communicate and interact with our customers online.
Monte: And, as a . . . speaking as, you know, an attorney going after people to register names, from a brand protection standpoint, what advice can you give some of the domainers . . . some of the listeners today that have protection on their mind, protecting their brand and identity, enforcing their brand – what would you say to those people to help them be better and stronger at their brand protection for their companies and their, you know, online brand?
Aaron: Well, I suspect, Monte, the people listening to your show know more than perhaps anyone else on earth about what they need to do to protect their brand. That is, they understand the infrastructure; they understand how that infrastructure works; how domain names can be obtained; registered; disposed of; auctioned; all of the different possibilities that could potentially come into play in the domain name space. So identifying what you’re top brands are and then moving to protect them, I think is probably well within the grasp of everyone listening. I think the challenge lies, perhaps, with more well established brands, larger or smaller, and in businesses of all sizes, which are not at all familiar with this ecosystem, and understand how this works. That is, understand the basic mechanics to get under the hood and not realize that (sticking with the car analogy) that someone else may be driving their car. And that’s what infringement is all about, is that there’s some confusion as to who is responsible for presenting that brand or that product in public. And so, keeping a close eye on your brand; using a tool like the one available from Ye Man’s or watching all new registrations that might involve your brand, which is something Microsoft does on a daily basis across the top level domains. I think it’s absolutely essential in order to help protect your brand online. Other things that you can do . . . technical things that you can do to prevent spoofing – you can look at verification technologies, like Sender ID, or DKIN (also known as Domain Key). Sender ID is offered by Microsoft; DKIN by Cisco. These are the two leading authentication technologies to prevent someone from spoofing your brand or spoofing your domain and email. You can look at partnering with other groups in your industry to look at ways to collaboratively defend your brand; and consumer eduction. At the end of the day, you are potentially interacting with people, human beings, who are trying to reach you and your products and your brands. And so, helping them and educating them around these issues and topics, I think, at the end of the day, will be beneficial as well.
Monte: And what kind of best practices can you use to avoid being . . . you know, the best practices to avoid being spammed? And what kind of tips can you share from the spam side?
Aaron: Well, many different techniques. In the spam setting, as I mentioned, we’ve brought a number civil actions (more than a hundred lawsuits now) against spammers around the world, seeking money damages, injunctions and the ceasing of their illegal emailing operations. We receive a lot of illegal email at Microsoft; we use that for investigative purposes. We have MSN Hotmail Traffic House that we operate specifically for the purpose of studying illegal email that comes off the raw Internet. And I think just common sense and Internet etiquette – it goes a long way. If you receive illegal email, not replying to it; not opening it, if possible; deleting it right away so that it can’t poll, if there is a Web beacon installed, any code from a remote site that shows that you’ve opened the mail successfully, that’s made it safely to your IP address; not signing up for email lists for sketch-looking products or services or contests, so that you don’t get added to a black-hatted email marketer. But I think that there’s a growing separation now between email marketers and those that are respectful and compliant with state and federal laws around illegal email, and those that don’t really care at all and use malicious code like bot-nets and other zombie computers to deliver their mail. And, so we’re encouraged that there’s a growing number of email marketers that have moved to the right side of the fence and are no longer using illegal means to send that mail.
Monte: Great, great. Now, just one last question, because I know that you’ve been starting to go to some of the domains related conferences and starting to see what’s going on in our industry – what are some of the things that really excite you the most about what’s going on these days? Because it has evolved and changed and as you’ve seen, domains have very quickly become very valuable assets, not only for a brand like Microsoft but for domainers who are building portfolios and earning money and helping to drive advertising traffic (in a legitimate way, that is), uhm, and really turning it into a real powerful business. I’m sure you’re familiar with the statistics that PPC, you know, direct navigation, are responsible for 15% of all the revenue generated by Yahoo! and Google now. Uhm, what are you seeing from your standpoint and from the company’s standpoint?
Aaron: Well, I don’t think there’s any question that the amount of money flowing into online advertising is going to continue to increase. I think if there’s one constant that we would sign off on it would be that. That more business, more personal communications, more interaction is occurring online than ever before; and for a variety of financial and practical and business reasons, that is going to be a continuing trend going forward. Whether you’re talking about financial institutions, banking or brokerage houses, to interact with people buying and selling stocks; governments – doing more e-government – it’s going to be a continuing trend. So as more attention, more energy, is focused online, the places in which those communications occur will become increasingly important. And now we have a generation of young people growing up accustomed to these devices; accustomed to sending email, to surfing the Web and visiting domains, visiting those websites – I just think you’re going to see more and more attention on this space and a greater understanding of the power of the Internet as a tool to do more, to explore your full potential online and to do more in a business and personal setting.
Monte: And, and . . . just . . . I know a lot of the listeners and a lot of the domainers are wondering when Microsoft’s going to put their foot down and get into this game that Yahoo! and Google are dominating so much. I know there’s been a lot of talk about it. Are you able to share with us any realistic dates or plans where Microsoft’s going to get into this direct navigation game and take advantage of some of their power and you know, grasp of the Internet?
Aaron: Monte, I can’t give you a firm date. It’s in part because its not the area that I’m focusing on. I am in the legal shop working on enforcement and am in close communication with the people who are working on those products and services. But I can’t share an exact date because I don’t have one in hand. But I certainly know, coming away from DomainFEST, for example, there is great interest in that area and it’s something that we are focusing on everyday.
Monte: Great. Is there anything else you’d like to add? Or let the domain community know from our discussion today?
Aaron: Ah, I guess the bottom line is you know, having a well known trademark, a high profile trademark, a high profile brand in your domain name is an easy but potentially illegal way to attract that traffic and that as tempting as that might be, I encourage your listeners to not take that approach; that’s something brand owners are becoming increasingly aware of and savvy to. I think you’ll see more announcements similar to the one by Microsoft today in the months ahead, not just by Microsoft but by other larger brands that are going to be looking at putting resources into this area of enforcement. So, perhaps a note of caution. But at the same time a note of excitement that this is a . . . we recognize a growing space and one where increasingly more people are going to be participating and interested in. As I mentioned the online advertising phenomenon continues to grow.
Monte: Great. Well, Aaron, we really appreciate your time and your commitment for being on Domain Masters. Domain Masters is listened to in about 2000 different downloads each week, and I’m sure a lot of people and a lot of domainers and a lot of webmasters will get a lot of benefit from this conversation that we had today, and I really appreciate your time.
Aaron: Thanks, Monte. A pleasure to be here.
Monte: Great. I’d love to have you on again some time, too. And I look forward to seeing you at one of the next conferences.
Aaron: I look forward to that.
Monte: Okay; thanks a lot, Aaron.
Aaron: Thanks, Monte.
Monte: Have a good day. Thanks again to Aaron Kornblum, the senior legal counsel and attorney for Microsoft in charge of protecting Microsoft’s brand, enforcing programs against spam, phishing and cyber-squatting. That was an interesting perspective with him, both on the side of what they’re doing to protect spam and also their position on what they do when 404 re-directs happen from their own IE browser and how they interpret that. So, if anyone does have any questions or any domain names they want to give up to Microsoft, based on what you heard today, you feel free to contact me at Monte@Moniker.com; we have a corporate account for Microsoft here at Moniker and it is used, you know, periodically when people want to give up domain names. So, it’s in our disputed account, actually. So, we do protect our customers and in case you want to yield them up or come after you, there’s a possibility we’ll give you the opportunity to do that.
We’re going to take a short commercial break and be on with Michael White, our vice president of business development; he’s going to give us an update on the silent auction in its final hours of closing. We’re looking pretty up; I’m not going to tell anybody what the totals are so far, but I think we’re kicking some major ass out there. And we’ll go over some of the top names that sold in the domain auction, live auction, that was last Thursday . . . ah, last Wednesday; and a couple unique things happened during that auction which were very significant and very important for the industry. We’ll be back on in a minute.
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Monte: After my domain and your domain. My next guest, who I’m very proud to have on the show, is his first Domain Masters experience and visit with us – he is Michael White. He is the Vice President of Business Development for Moniker.com. He oversees the development and processes of several web generating business lines, including Marketplace and the live and silent domain auction events. Prior to joining Moniker, he served as Director of Partner Relations for Kanoodle and at Kanoodle he was responsible for the growing and maintaining the search distribution channel. He is one of the most valuable resources we have here at Moniker and is basically the engine behind both our live and silent auction planning and closing and processing and distribution. Michael White, welcome to Domain Masters.
Michael: Monte, thank you for having me and thank you for the kind words.
Monte: Yeah; I don’t get to thank you enough and you’ve done a fantastic job as we’ve evolved this whole online auction process and silent auction process onto the Internet and making it a new vehicle where buyers and sellers really transact domain names and we establish values live in front of their eyes. Before we get started with the silent auction update, just a reminder to everyone, we held our third live domain auction at TRAFFIC West in Las Vegas last week. We conducted 155 sales, generating $4.3 million in domain name sales. We literally ran out of time and were kicked out of the room because we ran out of time because one of the things we didn’t anticipate was that we had a high percentage of closing or sales on the list. We sold 67% of all the names that were presented at the time. We got through 233 names and 155 of those sold. Very few passes and a lot of bidding back and forth, even on some of the pass names, there was a lot of bidding going on and we came very close to selling Foreign.com, which got a high bid of $7 million; that’s an incredible amount. We needed five or six hundred thousand dollars more to have that transaction go through; and the good news is we’re probably going to end up closing that in the next week to ten days because there’s three or four interested parties in that name. And, some of the other notable, history-making things that happened during the auction was that we sold two active websites, which were the Top 3 sellers in our auction last week. One was Families.com, which was a whole website and infrastructure and customers and you know, whole business, along with Blogster.com, which was the same. It’s one of the leading online blogging sites and applications on the Web as well. Families.com sold for $650,000; Blogster sold for $275,000. In between that was the domain name Greeting.com for $350,000. So, we didn’t have a million dollar domain name at this auction, like we did at the last auction, which was Cameras.com; even a . . . we had a $520,000 at the InterNext, which was Shemales.com. But we had a very strong showing with Families at $650,000; Greetings.com at $350,000; Blogster at $275,000; ET.com at $225,000; Settlement at $200,000; OL.com at $150,000 and PX.com at $120,000. And then it just went down from there. RealEstate.mobi was the top MOBI name at $85,000. So we had a very successful show and as a result of running out of time, a hundred names made it into the silent auction that were scheduled for the live auction, along with 3,500 of the top names that we’ve selected out of the some-44,000 submissions that we had. So, it’s a very hard and astringent process to weed down this list; but obviously we’re getting better at it because we had such a high percentage of sales. Now, turning to the silent auction, Michael, tell us how everything is going because I don’t have the current news or update on where we are thus far.
Michael: Well, let me be the first to tell you that slated right now is more than a million dollars in sales, currently . . .
Monte: Wow!
Michael: . . . in the silent auction system, with about 2 hours to go in the closing process in those hundred domains that did not get to the live auction are actually slated in and will not close for awhile; and they are included in the silent auction. So those are still available.
Monte: Wow. So we’re already over a million dollars, which is a big record. Our last best performance in the silent auction was over $600,000. So it looks like we still have a lot to go and our closing is actually a staggered closed. Explain how that works in the silent auction process.
Michael: Well, the staggered close works to the benefit of the bidders. Most people have certain budgets that they are allocating towards these domain sales and if they do not win the domain at the last minute, then this gives them the opportunity to bid on other domains that they may be interested in if they lose out on a domain.
Monte: Oh, okay; got it. And plus, I guess, it’s pretty hard to close 3,500 domain transaction, whether they’re bought or not at one time, I guess. So the system staggers them so you can get out all the invoices and get everything closed as well.
Michael: Correct.
Monte: Great. Uhm, how does someone find out if they have a name that’s sold in this silent auction?
Michael: Well, uhm, sellers will be notified via email after the silent auction closes and some of the sales have been verified. Uhm, buyers can easily . . . auction participants can easily log into the system. It is an exclusive event, so if they don’t have access, uhm, they will have to be notified by going to our Markeplace system, our live auction page, or we’ll have a list in a few days of all the live and silent auction domain sales.
Monte: And what are some of the highlights that you see so far in the silent auction? What are some of the top names?
Michael: Well, some of the top names, just some quick stats, we have more than 10 sales that has topped the $20,000 mark. We also have two sales that have topped over $100,000.
Monte: What are those?
Michael: Well, the highest sale so far is UB.com at almost $130,000 and then UsedMotorcycles.com, a little over $100,000.
Monte: Oh wow, that’s great. That’s a surprise latecomer, huh?
Michael: Yeah.
Monte: Wow, wow, wow. Uhm, and, we’ve done a lot to enhance our silent auction system based off of a lot of feedback that we’ve heard. What are some of the cool features about our silent auction so that the next time that somebody has the opportunity to participate they can look out for some of the cool stuff that we have available?
Michael: Right. Well, they have the ability to add domains to their watch list; they’ll be notified if they’re outbid or if there’s any activity on the domain if they’re not a current bidder on the domain. We also have a lot of advanced search features so everyone can view and look for and research the domains that they want by keyword; whether or not that the domain name has bid on it, placed on it; and also, we have the ability to do limit bidding so you can basically set it and forget it, where the potential buyer goes in and puts a max bid in that he’s willing to pay for the domain . . . [inaudible] . . .
Monte: . . . that is [inaudible] . . .
Michael: . . . at the lowest price possible in order to win that domain.
Monte: Set it and forget it – it sounds like the Ronco Rotissier oven, doesn’t it?
Michael: [laughs]
Monte: Set it and forget it.
Michael: Well, that’s the way to go, if you want to research, you know, you want to spend most of your time researching on the domains that you’re interested and then put the price in that you’re willing to pay for it and then let it ride.
Monte: Yeah, that’s probably the smart way to do it. Now, I guess a lot of this last minute . . . so if a bid, if something happens in the last minutes of the domain closings, what happens if there’s active bidding going on. I guess, it still continues. How does that all work?
Michael: Yeah, if there’s active bidding going on in the final closing time period, the auction itself, the individual auction will actually extend for 10 minutes, 10 or 15 minutes, depending on how close to the close that the activity or the last bid came in. That will stay open everytime someone has activity or puts a new bid in on the domain near the close. So it allows for not allowing potential bidders to come in and snipe the bid away from someone who has it on their watch list. Another reason to put it on their watch to make sure that you’re notified when your bid is outbid; it gives you time to get in and decide whether or not you want to pay a high price for that domain.
Monte: Yeah, definitely. And what are some of the tips and recommendations you have for buyers and sellers in the silent auction?
Michael: Well, buyers, they really need to know their budget. They need to use the watch tools, the watch list tools and just like I said earlier, they need to place their limit bids, you know, what they’re willing to pay for the domain, that way they can do more research and you know, really look through the 3,500 domains that are in the system.
Monte: That’s great.
Michael: On the seller side, uhm, you know, you know this as well as everyone here, uhm, we need to set the reserves as low as we possibly can. We need to let the market determine the value of these domains. We’re setting precedents here with the live auction events. So as a seller, you should be asking yourself, what am I willing to accept for this domain? Versus the question of, what do I think this domain is worth?
Monte: Now, a lot of people have questions about how they price domain names when they send them in both for live and silent auction, and as you know, you and I have stayed up many hours wee hours of the night, working on reserve prices and making sure that the names are priced right. What do you feel the best strategy is for getting the highest dollar as a seller and getting the best buy as a buyer based off of the reserve price?
Michael: Well, from the seller, just like I said, the lower the reserve, the better. You know as well as everybody that the more bidding activity that happens on a domain, the history has proved that it goes higher than the actual reserve that you, you know, were, you know, the high reserve that you were willing to put on it initially. For buyers, you know, its really just research. Again, you know, don’t spend all your time setting bids; spend all your time doing research on the many domains that you want to bid on.
Monte: Right, right. Well, that’s great. Anything else you want to add before we wrap up the show?
Michael: Uhm, no, it’s just great working for you, working for a great company like Moniker and its exciting times with these auctions. It’s just really exciting. Every auction that I’m a part of is better and better than the previous one.
Monte: Yep; and we’re looking very much forward to our New York auction. We have several auctions slated this year that we’re going to be working our asses off on in making sure that they’re very successful. The next big auction, live auction, is at TRAFFIC New York, which is going to be from the 19th of June through the twenty . . . let’s see here, I’m looking at my calendar just make sure I have the dates right . . . uh, 18th . . . 19th of June through the 22nd. I think we’re having the auction on the 21st that day. We’re also doing a silent auction at the CAC Conference (that’s the C-A-C conference, Casino Affiliate Convention, ah, Conference) in Amsterdam and its going to be related to gaming and gambling names specifically. So we have those two exciting events coming up. And then we roll right into InterNext, which is the adult webmaster conference, which we had such a success in January on in their Vegas conference. That’s coming up in August, in the middle of August. Then we roll into TRAFFIC East in Hollywood Florida in October. And then we have a couple more slated before now and the end of the year. So we’re really excited to provide this service for the domain community, were domain names are counted and considered assets and live transactions and asset values are established right there on a live floor or in a silent venue where buyers and sellers are determining the values of domains and really helping our industry. So, Mike, we appreciate all that you’ve done to help this be successful and for this history making event of being over a million dollars in the silent auction, it’s going to be a big splash in the news, I’m sure and great for the industry.
Michael: Yeah, thanks, Monte. And congratulations on another successful event.
Monte: Thank you and thanks for all your hard work. I’ll let you go. Alright, with that we wrap up another great week of Domain Masters and I was real fortunate to have Aaron Kornblum on. It’s rare you get a chief legal counsel from a big corporation like a Microsoft on board, so hopefully, everyone picked up a few things that were of interest there, especially their positioning and their stance in the industry, and I appreciate his time and effort in that. And also thanks to my second guest, Michael White, who’s our VP of Business Development and really the engine behind the success of our silent and live auction system and the processing of all the closings and all the domain name postings and everything that we’re doing here at Moniker.com.
With that, I’m going to let everybody go. Stay tuned for another live show next week. I will then be on vacation for the following week, but Victor Pitts, my great stand in guest host and VP of Client Services will be my guest host that week and we’ll have another great live show as well. We’re going to be live at SES New York in April and doing a live show from the probably the WebMasterRadio.fm booth at that time on Wednesday the 11th of April and have several other live venues and conferences that are going on. Possibly, I’ll be live at either the Casino Affiliate Conference or AOE, which is the adult online Expo, which is in Europe, in Amsterdam as well, which is going to be the end of April and the beginning of May. With that, I’ll let everybody go. Have a great week. Go Wildcats (that’s Kentucky Wildcats in the big men’s championship, NCAA basketball championship); so root for your favorite team. I know everybody’s filling up their brackets and getting ready for a big day tomorrow. And, be the master of your domain. See you next week. Bye.
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