Domain name auction house admits internal bidding corruption

David M Williams
Thursday, 05 November 2009 09:11

Opinion and Analysis

Domain name broker SnapNames.com has always had its measure of detractors complaining the company permitted dubious practices. One grievance is now proven true with SnapNames admitting a staff member was bidding on domain name auctions, winning some for personal gain and inflating the price of others.

Chances are if you’ve looked up a domain name of interest using a whois service only to find it already taken you’ll have had SnapNames.com recommended to you.

Like its name suggests, SnapNames claims to ‘snap’ up domain names the moment they become available should the current holder fail to renew in time.

I used SnapNames myself once in the past to secure vanity domain name davidmwilliams.com. I paid a small fee for SnapNames to monitor the domain, attempting to register it if it lapsed. Months later, pleasantly, SnapNames.com did advise me the domain had not been renewed and they had secured it but it was going to be auctioned.

I was surprised by the auction because I had believed their service was securing the name for myself. It does stand to reason multiple parties might use SnapNames for the same domain name but in my case there were no other bidders. After a couple of days davidmwilliams.com was mine. (After all, that domain has no value unless your name is, well, David M Williams.)

I thought nothing more about this until I read blogs and forum posts by others who felt indignant that SnapNames were effectively preying upon customers to determine which domain names were valuable, charging them in the process, and then gouging more money in a competitive process opened up to everyone.

Jeff Kupietzky, President and CEO, and Craig Snyder, General Manager, today released a joint announcement to customers, like myself.

“Recently, SnapNames discovered that an employee had set up an account on the SnapNames system under a false name and, under this name, bid in SnapNames auctions. This is a clear violation of our internal policy and was not approved by the company. We deeply regret that this conduct has impacted our customers.”

The announcement continues, stating that bidding affected approximately 5% of total SnapNames auctions since 2005, most of which occurred between 2005 and 2007 and that the incremental revenue from the bidding represented approximately 1% of SnapNames’ auction revenue since 2005.

What does this mean, and who was the employee?