Here’s why you can’t find a domain name

Chances are good that you’ve never heard of the add/drop scheme, so dubbed by GoDaddy CEO Bob Parsons. But if you’ve recently struggled to find a decent .com domain name or paid a king’s ransom to regain control of one your organization forgot to renew, the chances are also good that you have been victimized by this growing blight.

Adding insult to injury, it’s all legal and within the rules as set by ICANN – a situation that needs to change. Parsons provides more detail than I’ll get into here in this post to his blog.

At the heart of the add/drop scheme is a seemingly reasonable five-day grace period that domain registries allow all customers: Claim a name and you’ve got five days to kick it back into the pool without having incurred a penny of expense – your deposit money is returned in full. It was originally seen as a way to guard against buyer’s remorse, simple mistakes and fraudulent registrations.

What’s happened is that the grace period has spawned one of those Internet “businesses” where the clever – some might call them the unscrupulous – swoop in to skim off profits without adding anything meaningful in the way of value. The add/drop schemers are locking up millions of .com domain names every day, wringing five days worth of revenue from them via a handful of sub-schemes, and then kicking back all but a tiny fraction just before the grace period expires. … Think of it as Internet strip mining.

The numbers parsed by Parsons are nothing short of astonishing:

— At any given moment, about 3.5 million domain names are tied up in add/drop limbo instead of being made available to the businesses and individuals who would otherwise claim and use them;

— During the week of March 27 to April 2, for example, fully 92% of the approximately 5.4 million names registered were returned for a full refund – and 99% of the returns came from add/drop players.

— The number of grace-period .com drops increased 15-fold from March 2005 (1.85 million) to March 2006 (27.7 million).

The trend should be setting off alarm bells throughout the Internet industry, says Peter Alguacil, an analyst at Ipwalk, which tracks statistical trends on the ‘Net. He has whipped up a telling graph that captures the rise visually.

“If this is allowed to continue, within a year, more than 60 million domain names will be added and dropped every month. Almost all of these domain names will be part of the add/drop scheme,” Alguacil says. “This will cause enormous costs for registries and make legitimate domain name business close to impossible.”

GoDaddy’s Parsons says the answer to the problem is actually quite simple, albeit perhaps easier said than done. His proposed solution is to simply make non-refundable a 25-cent deposit on domain names that is already paid to ICANN every time a registration sticks beyond five days. The theory here is the same as with anti-spam measures that seek to make everyone put some skin in the game; under those conditions those who aren’t providing any real value cannot expect to reap any return. Instead, they will quit the game.

“There is a small problem with this approach,” Parsons concedes. “ICANN is a consensus-based organization and of course, many registrars are participating in the add/drop scheme. It will be interesting to see how ICANN steps up to handle this problem now that it is in the light.”

I put the question to ICANN. A public relations representative promised me an e-mail response or an interview with an ICANN official yesterday, but as of this writing Friday morning neither has arrived.

Whether the organization adopts Parsons’ proposal or conjures up a fix of its own, this much appears to be certain: Someone’s got to put a stop to this nonsense.