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'Drop Catchers' Buy and Sell Web Names Others Let Slip

Last month, Chicago real-estate agent Judy Orr discovered that a Web site she used to showcase area homes had gone off-line. It turned out she had failed to pay the $9 annual renewal fee for her Web address, oak-lawn-real-estate.com.

But getting her site back online wasn't as easy as she had hoped: Another company had snapped up the domain name and wanted nearly $2,500 to return it to her. "I was sick to my stomach," Ms. Orr says. It took two years of work to build up the site so it would rank prominently in Google's search results, and that time "went down the drain," she says.

The new owner of the address was Lease Domains Inc., which is run by a 21-year-old graduate student, Anthos Chrysanthou, who works out of his parents' house in a Chicago suburb. Mr. Chrysanthou says his two-year-old company owns more than 2,000 domain names, many obtained through a process called "drop catching" -- snagging names owners have let expire, either accidentally or because they no longer want them.

"I liken the whole situation to tangible real estate," says Mr. Chrysanthou, who is pursuing his master's in business administration at St. Xavier University in Chicago. "If you're not paying your mortgage or your taxes on it, it's going to get taken away."

Mr. Chrysanthou is one of hundreds of drop catchers who either resell names or use them for Web sites loaded with advertisements. (Ms. Orr's former site now features text ads for real estate.) Many drop catchers have learned the trade in the past year, seeking a piece of the booming market for domains spurred by a surge in online advertising. The practice also has gotten a lift from providers of domain services, such as SnapNames.com Inc., Pool.com Inc. and GoDaddy.com Inc., which have introduced tools aimed at helping people grab expiring domains.

The services circulate lists each day showing which domains are about to go up for grabs. Auctions are held for particularly in-demand names, and prices can go sky-high: A1.com sold for $260,250 in December, after its previous owner let the registration lapse.

Drop catching "has pretty much changed completely in a few years' time," says Michael Berkens, who runs MostWantedDomains.com, owner of about 45,000 domains, which range from 4nudepictures.com to 401kplans.com, out of his Fort Lauderdale, Fla., home. "There's more people," he says, and "prices have just escalated."

DNJournal.com, a publication that tracks the domain industry, reported 2,291 sales of expired domains in auctions last year, with winning bids totaling a combined $11.5 million. That was up from 885 sales totaling $4.2 million a year earlier. Auctioneers don't report all deals to DNJournal, and the site doesn't track deals valued at less than $500.

Roughly 20,000 expired domain names become available each day, according to industry executives. While many were consciously discarded by their owners, others, like Ms. Orr's, are the product of a domain-registration system that many users don't understand well.

When a user registers a domain name, it can be reserved for as many as 10 years, typically for $80. But many choose a one-year registration because it is less expensive, often about $10, and because they may not want the site for a longer period. At the end of the year, the domain registrar generally sends renewal notices to the owner, but such messages can be missed if the owner has changed email addresses in that time.

Under rules administered by the Internet Corporation for Assigned Names and Numbers, the group that oversees the assignment of Web addresses, domain registrars such as GoDaddy and Network Solutions LLC have as many as 45 days after the expiration date to notify the official domain registry whether a name is being renewed or deleted. Typically, registrars have given users a grace period -- sometimes as long as 45 days -- to renew their name.

If a name is deleted, ICANN guidelines then call for a 30-day "redemption grace period," during which the original owner can still claim the name. If there is no claim in the redemption period, the name is dropped from the registry after a five-day holding period, and anyone is entitled to seek it.

For the .com and .net registries, managed by VeriSign Inc., names drop starting around 2 p.m. Eastern each day, all year long. What follows is a process that some in the industry call "pounding." As the names drop, Internet companies that help users acquire expired names send rapid computer commands to the registry, seeking to grab the most valuable names. It is "a mad rush," says Dan Rubin, who runs justdropped.com, which helps people identify and acquire expired domains. Registries for other domain suffixes drop names at different times of day.

The drop process underwent a key shift starting in late 2004. That is when SnapNames started a new service for grabbing domains. The company has signed exclusive agreements with more than a half-dozen registrars, including Network Solutions and Moniker.com, under which the registrars transfer expired domains to SnapNames, and SnapNames auctions them off. That way, names that people are interested in don't go through the traditional drop process that is open to anyone.

GoDaddy, the largest domain registrar, has introduced its own auction service for expired names that were registered with it, as have other registrars, as they seek a cut of the action for expired names. They begin auctions for names even before the names have officially expired but warn auction participants that the original owner could still redeem the name.

For domain owners, the new system means names can be grabbed from them even more quickly than they could before. Instead of going through the full deletion cycle -- which went as long as 75 days -- names are being transferred to new owners in 30 to 45 days.

Paul Twomey, chief executive of ICANN, says some people in the domain industry recently have raised concerns that the guidelines governing expired names are "being utilized in ways that were not originally intended." But Mr. Twomey says no one has proposed a formal change in policy to address the issue.

Ms. Orr's name, oak-lawn-real-estate.com, is one of those that was transferred before going through the full deletion process, says Jay Westerdal, who runs Name Intelligence Inc., a Bellevue, Wash., company that tracks the industry.

Tim Ruiz, vice president of domain services for GoDaddy, which transferred the name, says, "We make every attempt to give ample opportunity for registrants to renew." He says the company gives registrants 30 days to claim a name after it has expired.

If a corporation loses a domain name that it believes is copyrighted or trademarked, it can seek to recover the name by appealing to an arbitration panel under ICANN's dispute-resolution policy. It also could take the domain's new owner to court, though that can be more expensive.

Ms. Orr says she lost her site's name, which wasn't copyrighted or trademarked, because she made the mistake of relying on her Web-hosting company to keep track of her registration. She says she didn't see renewal notices from GoDaddy because it had an old email address for her. Ms. Orr plans to use another site -- oak-lawn-il.com -- to replace the one she lost.

Write to David Kesmodel at david.kesmodel@wsj.com

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# posted by (hris @ 7:42 PM