Entrepreneurs profit from free Web names

updated 7:54 a.m. ET Feb. 20, 2007

NEW YORK - It's not often you can compare Internet addresses with clothing, but a growing practice comes close, contributing to a global shortage in good names.

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.

It's akin to buying new clothes on a charge card only to return them for a full refund after wearing them to a big party.

The grace period was originally designed to rectify legitimate mistakes, such as registrants mistyping the domain name they are about to buy. But with computer automation and a burgeoning online advertising market, entrepreneurs have turned the return policy into a loophole for generating big bucks.

Experts believe spammers and scam artists are also starting to use the grace period as a source of free, disposable Web addresses.

With up to 6 million names tied up at any given time through a practice known as domain name tasting, individuals and businesses are having even greater difficulty finding good names, particularly in the already-crowded ".com" space.

"The system really doesn't work to the advantage of people who have legitimate reasons for wanting names," Frederick Felman, chief marketing officer with MarkMonitor, a brand-protection firm. "It allows people with criminal or speculative intent to dominate."

Cybersquatting has been around for more than a decade, and scores of entrepreneurs have made thousands and even millions of dollars reselling names they had bought for as little as $6 each. With tasting, entrepreneurs generally aren't grabbing names to resell but to generate traffic and share in online advertising revenues.

The Internet's key oversight agency for domain names, the Internet Corporation for Assigned Names and Numbers, or ICANN, has for years required operators of major Web suffixes such as ".com" to refund cancellations within five days. Tasting became more practical about two years ago when automation allowed newly available ".com" names to go live almost immediately, providing an additional half-day for sampling.

Millions of domain names daily
The practice has spiked, with an average tasting of 1.2 million names each day in December, compared with 7,200 two years earlier, according to data from Name Intelligence Inc., which analyzes domain name patterns. Legitimate registrations made up 2 percent of the registrations at the end of 2006, down from about half in 2004.

In an e-mail statement, one company that engages in tasting, Wang Lee Domains, said the practice was "perfectly legal" and brings "customers to the companies that advertise."

Moniker Online Services LLC, which lets customers try out domains for a small service charge it keeps, said companies can identify the right names to buy and not overspend for ones that don't matter. Monte Cahn, Moniker's founder and chief executive, said many leading brands do it, although he would not name them.

"Tasting is similar to test driving a car before you buy it or doing a walkthrough of a house before you buy," Cahn said.

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