Bidders are right to be upset, but solutions can be controversial, too.
There’s been some discussion about gaming expired domain auctions lately, including a good back-and-forth on NamePros.
The instant concern is people gaming auctions by setting up two bidders for the auction. These two bidders quickly bid up the price, and when the top bidder doesn’t pay, the second bidder gets the domain for whatever price he would have paid had the top bidder not bid in the auction. The auction house rolls back the bidding to pretend that the top bidder wasn’t there. Since both bidders are the same, the bidder gets the domain while pushing out all other bidders through the fast price escalation.
This is how GoDaddy handles non-paying bidders.
People are frustrated. But what’s the alternative?
Just a few weeks ago, a domain investor complained to Namecheap about how it handles (handled) non-paying bidders. In that case, the investor was the second-highest bidder, and the top bidder didn’t pay. The investor said he was required to buy the domain at his second-highest bid.
Namecheap CEO Richard Kirkendall told the investor that he was not required to pay the second-highest bid. If he didn’t pay, the domain would be relisted. This option probably wasn’t clear.
But after some discussion, Kirkendall reported a change: the second highest bidder will no longer be given the option to buy the domain. The auction will be restarted instead.
This seems like a reasonable option, although I know it can be difficult for marketplaces selling expired domains to do this. These systems are automated, and relisting a domain requires a bit of manual involvement or recoding to handle a domain that’s about to expire. The auction house would probably need to renew the domain itself. It might seem simple, but it could get complicated when dealing with third-party registrar inventory.
Kirkendall said another change is in the works. Namecheap will begin running credit card authorizations for bidders as they bid in auctions.
This is what Sav.com did a long time ago. Since sellers can list any domain on Sav, people rightfully complained that sellers were pumping up prices. If no one took the bait to bid higher, they simply relisted the domain.
So Sav.com introduced credit card pre-authorizations for bidding increments. It restored trust in bidding at Sav.com.
This might inconvenience legitimate bidders, but it certainly cleans things up.
But is the problem as big as people think?
Writing on NamePros, NameBio’s Michael Sumner said he believes these bidding improprieties impact about 1 in 1,000 auctions with bids. So perhaps it’s not so common. Granted, it happens with higher-priced auctions, which makes it more visible.
At the end of the day, the most important thing is how it looks to bidders. If they don’t trust the auction platform, they’ll stop bidding.
Post link: Domain name auction gaming and what can be done about it
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