Unveiling GoDaddy’s Expired Domain Warehousing Operations: A Deep Dive into Corporate Practices
UPDATE 12/17/08: GoDaddy is shutting down Standard Tactics.
The Go Daddy Group, headquartered in Scottsdale, Arizona, and renowned for operating GoDaddy.com, the world’s largest domain name registrar, has long been under scrutiny for its practice of warehousing customers’ expired domain names and subsequently profiting from them. This investigative report, originally published by Domain Name Wire, sheds light on the elaborate measures the company has taken to conceal these activities from public view and outlines the findings of a comprehensive inquiry into GoDaddy’s domain warehousing endeavors.
Capitalizing on Expired Domain Names: An Industry Overview
In the dynamic realm of domain names, the expiry of a registration often presents a lucrative opportunity for registrars. It’s a common industry practice for major domain name registrars to monetize these valuable digital assets once they are no longer renewed by their original owners. For instance, industry giants like Network Solutions and eNom facilitate the auction of expired domains through platforms such as NameJet, while Register.com leverages SnapNames for similar purposes. These platforms provide a somewhat transparent marketplace where expired domains can find new owners.
However, The Go Daddy Group, encompassing GoDaddy.com and its affiliated registrars, deviates from this model. Instead of partnering with external auction houses, the company chooses to auction these expired domains on its proprietary platform, initially known as The Domain Name Aftermarket (TDNAM). While this system offers a degree of transparency for domains that successfully sell, a less apparent process unfolds behind the scenes when a particularly valuable domain fails to find a buyer at auction. This distinction forms the crux of the ethical concerns surrounding GoDaddy’s operations.
The act of profiting from expired domains is not, in itself, unique to GoDaddy. What distinguishes GoDaddy’s approach, and what has drawn significant criticism, are the intricate steps it employs to obfuscate its involvement. This includes retaining ownership of specific valuable domains that do not sell at auction and a striking display of apparent hypocrisy, particularly concerning its ownership of certain domain types, juxtaposed with its public stance on issues like combating online pharmacy fraud.
The Genesis of GoDaddy’s Domain Name Warehouse: Standard Tactics, LLC
The initial discovery of GoDaddy’s clandestine domain warehousing efforts dates back to 2005. The investigation began after observing a highly valuable typo domain name that, despite not selling on TDNAM, was never released back into the public pool. Instead, it was subsequently monetized by GoDaddy through a domain parking page, generating revenue from advertising. Concurrently, several other expired domains purchased on TDNAM, which had similarly gone unsold in their initial auctions, were noted. Intriguingly, notifications regarding the transfer of these acquired domains originated from an email address associated with StandardTactics.com.
This led to the revelation of Standard Tactics, LLC, a subsidiary of The Go Daddy Group. This entity was specifically created to assume ownership of valuable expired domains that failed to sell on TDNAM. Standard Tactics then proceeds to monetize these domain names through revenue-generating parked pages and frequently relists them for resale on TDNAM, often at fixed prices. This intricate system allowed GoDaddy to effectively establish a captive market for domains that would otherwise have been deemed undesirable by the broader aftermarket.
Formation and Corporate Structure: An Intentional Veil of Opacity
The strategic establishment of TDNAM in 2005 marked a turning point for GoDaddy, enabling it to fully capitalize on its customers’ expiring domain names. By auctioning these domains, the company could generate substantial revenue even when customers opted not to renew their registrations. However, GoDaddy recognized an even greater opportunity: retaining ownership of certain high-value domains that remained unsold at auction.
On August 16, 2005, GoDaddy formally established Standard Tactics, LLC, not in its home state of Arizona, but in New Mexico. This decision to incorporate in a different state, particularly New Mexico, was a deliberate move designed to create a layer of distance and plausible deniability from the parent company. Prior to this, all of GoDaddy’s subsidiaries were incorporated in Arizona. The choice of a Limited Liability Company (LLC) structure, as opposed to a corporation, further amplified this strategy, as it did not require the listing of corporate directors. Instead, it merely necessitated the listing of an organizer – Scottsdale, Arizona-based lawyer Robert J. Rosepink. Rosepink filed the necessary papers in New Mexico, listing the company’s principal address at his law firm’s location in Scottsdale, a physical separation that symbolically reinforced the perceived independence of Standard Tactics.
GoDaddy maintained that Rosepink served as external counsel for the company, further reinforcing the narrative of Standard Tactics operating as an independent entity. Interestingly, Rosepink and GoDaddy CEO Bob Parsons moved in similar circles within Scottsdale, both having contributed to Jon Kyl’s U.S. Senate campaign. However, Rosepink’s own legal troubles, including an indictment on 102 counts by the Arizona Attorney General’s office for his alleged involvement in a concert promotion investment scheme (later characterized as a Ponzi scheme), cast a shadow. While Parsons initially claimed Rosepink was exonerated, subsequent reports indicated Rosepink struck a plea bargain, pleading guilty to four counts related to the solicitation or sale of unregistered securities.
Despite GoDaddy’s concerted efforts to portray Standard Tactics as a separate entity – with some internal sources even referring to it as a “client” of GoDaddy – the company’s 2006 S-1 filing to go public provided an undeniable link. This crucial document unequivocally revealed Standard Tactics, LLC, as a subsidiary of GoDaddy. The corporate structure further accentuated its distance from the main brand, showing Standard Tactics, LLC, as a wholly-owned subsidiary of Special Domain Services, Inc., which itself is a subsidiary of The Go Daddy Group. Special Domain Services, Inc., also notably serves as the parent company for Domains By Proxy, GoDaddy’s popular WHOIS privacy service, a detail that becomes critically relevant to the concealment tactics employed by Standard Tactics.
GoDaddy’s S-1 filing explicitly lists its subsidiaries, including Standard Tactics, LLC.
This complex, multi-layered corporate structure allowed GoDaddy.com, as a subsidiary itself of The Go Daddy Group, to technically claim it did not engage in direct domain warehousing, thereby creating an additional layer of separation and plausible deniability.
The Operational Mechanics: How GoDaddy Warehouses and Profits
GoDaddy’s method of identifying and acquiring valuable expired domains is highly sophisticated. Upon a customer’s domain expiring, GoDaddy strategically places a parking page on the domain, featuring paid advertising. This initial step serves a dual purpose: it immediately begins generating revenue from the domain and, more crucially, allows the company to meticulously measure the domain’s traffic and, by extension, its potential profitability. Domains exhibiting high traffic volumes are subsequently assigned higher starting bids when they are eventually auctioned on TDNAM. GoDaddy even discloses estimated traffic figures to prospective buyers, adding an illusion of transparency to the auction process.
The true warehousing mechanism comes into play when a high-traffic, potentially lucrative domain fails to sell at the TDNAM auction. In such instances, these domains are frequently transferred internally to Standard Tactics. Once under the purview of Standard Tactics, these domains continue to generate revenue through parked pages. Furthermore, Standard Tactics often re-lists these domains for sale on TDNAM at fixed prices, creating yet another avenue for profit from assets originally registered by GoDaddy’s customers.
A critical component of Standard Tactics’ operations, and a key element in its strategy of obfuscation, is its consistent use of Domains By Proxy’s WHOIS privacy service. This service conceals the true identity of the domain owner, and there are compelling reasons for Standard Tactics to employ it. Firstly, it effectively hides the fact that a Go Daddy Group company owns domains that its customers initially registered. This becomes particularly advantageous when a customer merely forgets to renew a domain and later seeks to re-acquire it, allowing GoDaddy to maintain the narrative that it does not own such domains. Secondly, and arguably more significantly, it serves to obscure Standard Tactics’ portfolio, which has, at times, included a number of controversial or “unsavory” domain names, notably those infringing on established trademarks and even prescription drug names.
Legal Challenges and Ethical Ironies: The UDRP Cases
The veil of WHOIS privacy, while effective, is not impenetrable. One of the most potent methods to uncover the true owner of a domain utilizing such services is to file for arbitration under ICANN’s Uniform Domain Name Dispute Resolution Policy (UDRP). WHOIS privacy services are mandated to disclose the owner’s name when an arbitration request is formally submitted. Through this mechanism, Standard Tactics has been on the losing end of numerous arbitration cases, revealing its ownership of domains such as Ambian.org, buy-ambien-now.com, cheapest-ambien.net, JunoDSL.com, and PorschePartSite.
The ownership of prescription drug names by Standard Tactics presents a particularly striking ethical irony, given GoDaddy’s public advocacy and lobbying efforts in the U.S. Congress to combat online prescription drug fraud. When confronted with accusations of the company’s ownership of pharmacy and trademark domains, Camille Ede, Director of Domain Services at GoDaddy, initially denied such claims. However, records from arbitration companies definitively proved otherwise. In one notable UDRP case, a Standard Tactics representative explicitly communicated with the complainant, Sanofi-aventis, a major French pharmaceutical company, offering to transfer the domain automatically if the arbitration request was withdrawn:
“Hello
We are aware of the domain dispute that has been filed on this domain. This domain was purchased in a bulk backorder. We do not support trademark infringement. We would like to transfer this domain to you at no cost you.
You will have to contact WIPO to close the dispute before I will be allowed to transfer the domain to you.
Please feel free to contact me with any questions.
Regards
Administrator
Standard Tactics”
In a subsequent response to further questioning, Ede revised her stance, stating:
We by no means meant to mislead you about trademarks. We are NOT saying Standard Tactics doesn’t own a variety of names in a variety of different contexts, but disagreed with your characterization. Go Daddy treats all parked pages in the same way. If the trademark holder contacts DBP, asking us to remove…we remove it.
This revised statement, while acknowledging ownership, attempted to frame it within a broader context, yet it did little to dispel the perception of intentional obfuscation and a conflict of interest.
Standard Tactics Today: Justification vs. Reality
The extensive measures taken by GoDaddy, including the strategic establishment of a subsidiary in a different state, undeniably demonstrate a deliberate effort to obscure its domain warehousing activities. With over 30 million domains registered under its various entities, and a daily stream of high-traffic domains auctioned on TDNAM, the scale of GoDaddy’s operations is immense. Reports indicated that Standard Tactics domains alone generated millions of hits per week, highlighting the significant financial benefits derived from this practice.
Camille Ede characterized Standard Tactics as a “research” subsidiary, offering the following justification:
For a number of years, traffic aggregation, monetization and advertising has become an increasingly prevalent aspect of the domain name industry.
As the world’s largest registrar, we felt it was important for us to understand trends and developments in this industry. As a result, we created Standard Tactics as a research group.
All names in Standard Tactics are presented to the public for purchase in TDNAM. We do not withhold these names from TDNAM. There are relatively few names with Standard Tactics and there is randomness built in to the process in order to provide sample types representing all domain characteristics. By comparison, domain aggregators have 100’s of 1000’s of domain names.
This “research group” narrative, however, strains credulity when weighed against the wealth of evidence. The aforementioned UDRP case, where a Standard Tactics representative explicitly stated the domain was acquired in “bulk backorder,” directly contradicts the assertion of “few names” and “randomness.” Whether Standard Tactics technically acquires domains before or after the initial auction phase becomes a moot point, as expired domains are typically in a grace period until after the auction and should not, under conventional ethical guidelines, be transferred to a new owner within the registrar’s ecosystem.
Further undermining the “research” claim, Standard Tactics’ own website clearly stated that the company buys and sells domain names, acknowledged it might own trademarks as a result of bulk purchases, and directed interested buyers to TDNAM. This overt commercial positioning directly conflicts with the notion of a purely research-focused entity.
Attempts to contact Standard Tactics via a New Mexico phone number, found on the WHOIS record for a .us domain name owned by the company (as .us domains prohibit WHOIS privacy), led to a recording that eventually routed calls straight to voicemail, further highlighting the company’s elusiveness. A fax number on the same record was located in the Phoenix/Scottsdale area, maintaining a subtle link to GoDaddy’s headquarters.
The difficulty in obtaining candid discussions from former GoDaddy employees regarding Standard Tactics underscores the sensitivity surrounding these operations. While happy to discuss GoDaddy in general terms, the mere mention of Standard Tactics often elicited a palpable pause, followed by a resolute “I can’t talk about that.” This pervasive silence suggests a tightly controlled narrative and a deep-seated awareness of the controversial nature of Standard Tactics’ activities.
Ultimately, the existence and operational methodology of Standard Tactics may also provide a critical answer to another pertinent question: why GoDaddy CEO Bob Parsons was so vociferously adamant about the necessity of WHOIS privacy for customers. This advocacy, when viewed through the lens of Standard Tactics’ practices, takes on an additional, self-serving dimension, suggesting that the privacy service could also shield GoDaddy’s own controversial domain acquisitions.
[This story was edited at 2:18 PM CDT on Wednesday, 12/3/08 to include Ede’s response to denying that the company owns trademark and pharmaceutical names.]
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