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3 July 2023

A Hand Wavy Defense Of Domaining

by Florian

I have really mixed feelings about domaining. I’ve been way, way overcharged for domains that I’ve wanted and I’ve also bought a few domains explicitly to sell.

Most of the online discourse around domaining never seems to give a credible defense of what domainers do. What they do feels like being gouged for an entry on a database somewhere, but is there actual value there? I’m not sure, but I’d like to try to cobble together some defense that goes beyond the normal - often very bad - arguments, such as…

“It’s just like real estate!”

Most domainers will retort that domaining is no different than real estate speculation. You buy some asset in an area that you think will grow, sit on it for a while until the growth happens, and then sell it.

I’d like to note two things here. One, this is still not good and is pretty obviously rent seeking behavior. Another industry doing a similarly sh** thing is not really a good defense of what you’re doing.

Second, it’s not really like real estate speculation at all other than the rent seeking.

Domains have near zero costs

Maintaining a domain costs essentially nothing. There’s a $12 to $80 a year registration fee and that’s… pretty much it.

Compare this with real estate deals which often cost tens of thousands of dollars in upfront costs and then thousands of dollars each year in taxes (we’ll talk more about this later). The higher upfront cost is a good thing in real estate, since it prevents charlatans from entering the market. Buyers who don’t care and are just out to extract value have a very high barrier to entry, which discourages that kind of behavior. Does it work? Not always, but domainers have a basically zero barrier to entry and they exploit that - a lot!

I think about the 8chan owner who bought the pokiman domain and turned it into a porn site until he could essentially blackmail Nintendo into buying it from him. Had the upfront cost been significantly higher, would he have done this? Probably not.

Domains are far more similar to stocks in this regard - anybody can buy a stock - and anybody can buy a domain.

This is pure speculation - but I’d also guess that the lower costs provide fewer incentives to develop the space. A larger investment and upkeep means you’re more invested in the outcome, and invested in the outcome in a reasonable timeframe. I get that some domains do have a high upfront cost, but the essentially free upkeep means their time horizon is basically forever. If I can sell a domain for $1000 more than I bought it for, I can hold it for ~80 years before it starts cutting into my (predicted) profits.

Average people don’t care about dead domains

Domains are kind of funny in that a really good domain is extremely valuable, but highly valuable, dead domains don’t bother people. Say my local city’s .com domain is being squatted and redirecting to one of those awful landing pages littered with ads. That’s bad and annoying, but most people will just Google their city, redirect to the .org or .gov or whatever and then be done with it. And that’s it?

Real estate actually doesn’t behave this way. If you abandon a lot in a highly coveted area, you’ll get fined by the city for neglect, your taxes will increase, and numerous local city councils, governments, 311 services, etc. will hound you incessently. Which they should! You’ve just abandonded a key part of the community.

For better or for worse, most people don’t see the internet that way. A great .com being abandonded isn’t something to write your congressman about, it’s an annoyance.

Domainers provide a marketplace

Domainers speculating on and buying/selling domains are providing a marketplace. That’s their value add. Let’s think of the counterfactual world - there is no domain marketplace. No GoDaddy, no Afternic, no Dan(.com), whatever.

People have a very fanciful view of what this would look like: I’d login to some central registrar, get the domain for $12 and go on my way.

I don’t actually think this would happen. Again, domain costs are so low that I think people would just buy them and sit on them. Every person since the inception of the internet who’s ever had the idea to develop the domain would just buy it and say “oh eventually I’m going to do something with this.” There’s no incentive to sell them because there’s no market and there’s no incentive to drop them because they’re so cheap to hold.

Domainers are a necessary evil - yes they’re gouging you for a database entry somewhere - but I still think this is a better world than one where you can never buy the entry at all. They provide the market forces which keep people moving domains around and the relatively painless buying/selling process. Without them, you’d have a stale internet full of dead links with unreachable contacts.

People who are mad about domainers are mad about the Internet

Most people complaining about domaining are mad that we don’t live in the weird, wild Internet of yore. One where every website was developed with no JS, just raw HTML! One where there were no abandonded websites - each was a curated garden, lovingly maintained. All domains were free for the taking - all you needed was a good idea and a good name and you could start building! Developers talked on mailing lists! They shared resources! They swapped domains out of the good will of their hearts!

Unfortunately, this isn’t the world we live in. The internet is too commercial and there’s been too much money pumped into it for something like that to realistically exist. Is it annoying that I have to pay many multiples of its value to get a domain, yeah, it is. But at least I have the ability to buy the domain. I’m not emailing a defunct address only to eventually find that the guy who owns it has no idea how to value it, doesn’t know how to sell it, and is keeping it for “sentimental value.”

I know HackerNews thinks gail.com is really clever/cool, but imagine if every single domain was like this. Just some filler text, “holding because I bought it a long time ago” kind of thing. Imagine how peeved you’d be if your startup, or SMB, couldn’t buy the domain that would actually really help it because some guy in Wichita got it for his birthday. At least in the system we have now, there is a way to buy it, however outrageous.

The domain market maybe just needs some regulation?

If we start from outcomes and work our way backwards - what most people interested in domains want are either the domains to be developed or fairly priced. It doesn’t bother me that I can’t buy google(.com). Google is a well used domain name! They’ve earned it! It also doesn’t bother me all that much that I have to pay to acquire a smaller domain that has a business running on it. It’s a fair exchange.

The problem is targeting the people who not only own a domain to resell it, but also do nothing to work towards that goal, and also have no intention of truly developing it. They squat on it, filling it with garbage ads, while arbitraging on other people’s work to develop a space.

Land taxes actually do prevent this - business property in NYC is taxed on the value it could produce, not the value it does produce. An empty lot is taxed according to it’s value not a flat tax, and the same with homes, they’re taxed by their assessed value. Perhaps there’s a similar solution for domains. If you aren’t developing it, you need to pay for it as if you were instead of being charged an abysmally low flat “tax” each year the way it is now.

Would that cause other issues? Probably. How do you assess “development” of a domain? I have no idea. But the current system provides no incentive to develop a domain or quickly offload it to someone who would. It also doesn’t provide much stake in the digital community to which the name belongs, so you get squatters and get gouged when you try to buy a domain.

But, at least you can buy it.

tags: posts - coding