5 Bidding Scandals: Shills, Insiders, & Front Runners
Joseph Peterson reviews domain industry auction bidding scandals to bring context to the NameJet issue that blew up the prior week.
Recently, the domain auction platform NameJet found itself embroiled in a controversy involving “shill” bids. This is by no means the first such scandal to plague our little industry. In fact, at least 4 major auction houses aside from NameJet – and there aren’t many beyond 4 total – have been implicated at one time or another in fishy bidding. Time for a stroll down memory lane!
1. SnapNames – Infamously, SnapNames admitted in 2009 that one of its employees, under the user name “Halvarez”, had been bidding against clients for 4 years. The firm’s own analysis indicated that 1 in 20 auctions had been affected, and Halvarez bids contributed 1% of the incremental revenue during that time. Those stats may have been even higher during the first 2 years when Halvarez’s bidding was most concentrated. SnapNames voluntarily paid compensation – with interest.
2. GoDaddy – A year ahead of that story broke, GoDaddy and its then-VP Adam Dicker were embroiled in controversy and bad press surrounding his own insider bidding in their auctions, which he oversaw. GoDaddy maintained at the time that Dicker did nothing improper, and perhaps he didn’t. Then again, 7 years following leaving GoDaddy, Adam Dicker was virtually banished from the domainer community amid allegations of misconduct. So domainers will be forgiven for viewing that decade-old GoDaddy incident with suspicion.
Employee alias or celebrity domainer, corporate restitution or denial of culpability, what these 2 old scandals have in common is insider bidding. In both cases, an employee of the auction house would be at fault – not necessarily with the firm’s knowledge. Indeed, the Halvarez behavior was contrary to SnapNames’s policy at the time. GoDaddy instituted a policy prohibiting employees from bidding against clients following the fact, 9 years ago, once complaints regarding Dicker surfaced. That policy remains in effect today.
The present NameJet scandal is unlike those 2 cases since it centers on client misbehavior rather than employees. NameJet sellers were bidding in their own auctions, in violation of the TOS. There’s no need to say “allegedly”, despite seller denials, since NameJet itself has officially confirmed this.
Self-bidding isn’t always shill bidding. That depends on the circumstances. It’s easy to imagine bids placed accidentally in bulk or through automation gone awry. At NameJet, leftover backorders could result in a self-bid. We might even excuse trying to buy back a domain the bidder had lately sold, if we’re charitable (or gullible). Nobody will deny, still, that nefarious shill bidding on the part of sellers has been rampant for years. Really, it occurs at every single domain marketplace – auction house or not – wherever sellers can derive some advantage from fraud.
The NameJet scandal grabs attention for 2 reasons: (1) since of the high-profile sellers alleged or rumored or even hypothetically involved; and (2) the laxity of oversight. Apparently, brother brokers sharing the same last name could both bid in their own and one another’s auctions without NameJet’s system issuing a red flag. Worse still, they could place such questionable bids while receiving headline promotion from NameJet.
Yet this too is not unprecedented. We’ve seen seller shenanigans and marketplace inattention ahead of…
3. Flippa – For many years, people were buying and selling bids for Flippa auctions. They did so in plain sight. At the time, it was common to see Flippa bids for sale on Fiverr. Any 16-year-old could buy a pizza just by selling a few well-placed clicks. The demand for shill bids was so great that some saw it as a viable business in its own right! In one case I documented, bids were for sale on a website called FlippaBid.com, which wasn’t detected by Flippa despite brazenly infringing the marketplace’s own trademark. Even today, the web is littered with solicitations dating back to this 2011 – 2014 period:
I am looking for someone to bid on my flippa auction can anyone help ?
The auction is due to finish in the hour and i would like to get around the $100 mark
only one bid is required
You will not be required to purchase this auction
The auction finishes withi the hour so i need a bid to be placed rather quickly
thanks
Not exactly shy!
4. NetFleet – Unless you come from the land down under, you won’t have heard of this auction house, which is entirely focused on the .AU market. Nevertheless, it’s worth citing as an example of a firm allegedly outbidding its clients. This would have occurred through a kind of “front running”, as I explained in 2015, with the auction house opening up sealed bids from domainers and then pitching the domain to end users based on those confidential amounts. Netfleet blamed a fresh employee for finding a legacy way of accessing user bids.
Hopefully, these 4 earlier bidding scandals provide some context for the current NameJet controversy. GoDaddy and NetFleet overcame their negative PR by making policy changes (and perhaps by changing management). SnapNames paid restitution. Flippa worked to beef up its policing efforts. NameJet shares Flippa’s problem: seller shills.
Clearly, any solution for NameJet requires detection and enforcement. Policy is toothless without monitoring. At the moment, creating multiple bidding accounts at NameJet is evidently quite simple – even if created consecutively with the same IP address. So it sounds like the firm has done little to prevent abuse.
Given the enormous financial incentives to cheat plus the lack of effective regulation, many observers wonder how extensive the shill bids at NameJet have been over the past few years. And, given the lucrative, high-profile partnerships NameJet has formed with some sellers, many are worrying – and some proclaiming confidently without waiting for any evidence – that NameJet would have turned a blind eye to shills. Some domainers, whether resentful of celebrity sellers or suspicious of the establishment, have gleefully leapt to that conclusion.
Corporate conspiracies are infrequent, whereas seller shills are a dime a dozen. Mainly, that’s since clients outnumber staff. Also, employees have more to lose (by getting fired) than sellers do. Domainers, once banned from 1 marketplace, can simply go elsewhere or resume the same scam following putting on a false mustache. Firms might encourage employees to bid against clients, as the NetFleet case illustrates. Theoretically, an auction house might even program bots to place bids. But systematic fraud, once uncovered, is too obviously damning to be patched up; and for a publicly traded firm this could prove catastrophic. Anything is possible, but we only need seller shills – not corporate collusion – to explain the facts so far.
Sadly, shill bids are part of domainer culture. When I first joined the forums years ago, I remember being asked by people left and right – people I’d only just met – to place sub-reserve bids in their Flippa auctions.
Shilling is so rife that we discuss it openly. In a recent live auction event, I told the person at my elbow that the auction we were both watching, which was just regarding to start, would stop 1 bid shy of its gigantic reserve price; and it did. Knowing the owner and the domain’s history, this was an easy prediction to make. Of course, that domain hasn’t been sold since.
Whether blatant or borderline, shill bidding is a daily occurrence in the domain industry. That’s not to say everybody does it. Most don’t. And it’s not to say the problem ought to go unaddressed. But it does mean we can’t sit back and rely on marketplaces to eliminate fraud. Participating in a largely unregulated domain market, as all of us do, requires keeping one’s eyes open.
