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AdSense Arbitragers Using Free Domain Names Thanks to Loophole

It’s always satisfying to learn something new about an industry, and today brings to light a marketing practice, I never knew existed.

AP explores a loophole with domain registration, which allows anyone to return a registered domain name within 5 days and get a full refund. This has led to hundreds of thousands of domain speculators and search arbitragers registering domain names, testing which ones do well for type-in traffic, and getting a full refund on any duds.

During the grace period, the entrepreneur puts up a Web page featuring keyword search ads and receives a commission on each ad clicked…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.

How many people are actually engaging this practice? Of the domain names registered in 2006, only 2% of them were legitimate with an estimated 1.2 million domain names a day tested by marketers known as “tasters”.

Ok, so here’s a question for you…

  1. Who knew about this loophole?
  2. Who’s actively “tasting” domain names?

  • http://www.analogpoint.com David

    Domain kiting is not exactly a new phenomenon.

  • Pingback: Arbitrage and Domain Names - WickedFire - Internet Marketing Affiliate Webmaster Forum

  • http://dallas-seo.blogspot.com Mark Barrera

    Bob Parsons mad a big deal about this about a year ago. The blackhats have been hoping to keep this out of the spotlight but it looks like people are finally starting to see the problem of this so called loophole. Although I wouldn’t really call it a loophole since ICANN doesn’t seem to frown on this practice and continues to let this problem grow.

  • http://www.marketingpilgrim.com Andy Beal

    Agreed Mark, if it accounts for so many domain registrations, ICANN would be crazy to pull the plug on the “try before you buy” option.

  • http://www.analogpoint.com David

    Why shouldn’t ICANN pull the plug on “try before you buy”? As far as I understand it, they’re not making any money off it.

  • http://studentexchangetravel.com StudentExchangeTravel

    ICANN charges a fixed non refundable $0.25 on each new domain registration. So now you have to target domains a little more, instead of registering and trying just anything like when it was free.

    Still worth it for lots of people though, and a nice source of income for ICANN…

  • http://www.seonewsblog.com/ seonewsblog

    Wow so they’ve finally figured it out. Took them long enough. This has been going on for a bout a year now. Plus it really doesn’t hurt anyone if you think about it. Check out WF forums they have a ton of posts on this.

    Thank You

  • Andrew

    Good post. I’m glad to see this scourge exposed since it has probably affected more people than we realize. Some companies have taken this form of arbitrage to the next level. One in particular seems to have an arrangement with GoDaddy.com in which they are somehow able to pre-emptively buy (steal) domain names that regular people attempt to register, almost in real-time. The person attempting to buy the domain receives an email offer to sell the same domain (that cost only a few dollars until just then) for $1000. Another recurring theme: if the original buyer doesn’t respond to the $1000 extortion offer, the domain usually goes back on sale 4-5 days later.

    If these complaints are true, which I believe they are due to the varied sources, the companies involved need to be avoided at all costs.

    The comments in this post are more than convincing:
    http://toadstool.se/journal/2005/11/11/giving-away-my-dreamhost-password-to-unasi-inc

  • http://www.jasonblogs.com/ Jason Schramm

    I have heard of this practice before, most notable from Bob Parsons’ well-justified rants. My friend was trying to pick up a domain a few days ago and was upset with me that someone else was able to get it before GoDaddy picked it up for him. A few days later he got back to me that he got the domain. Apparently someone used this very practice and thankfully didn’t want the domain.

  • http://www.timlinden.com/blog/ Tim Linden

    Now that I know that, I’ll try checking again a few days later every time I try to register a domain that is taken by search domainers. It’ll be interesting to see if any of them are tasted.

  • http://www.netmonetization.com The Old Vic

    Seems fair enough to me – they make the rules and they allow it so what’s all the fuss about? In fact I think I’ll try it for myself :-)