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How GoDaddy Profits from Expired Domains

[Domainnamewire.com]- Scottsdale, Arizona based The Go Daddy Group, which runs the world’s largest domain name registrar GoDaddy.com, is warehousing its customers’ expired domain names and profiting from them. The company has taken a number of steps to hide this practice from public view.

When domain names expire, most large domain name registrars try to make money from them. Network Solutions and eNom auction expired domains at NameJet. Register.com auctions domains through Snapnames .

GoDaddy.com and other registrars that are part of The Go Daddy Group don’t use a partner to sell customers’ expired domain names. Instead it auctions them on the company’s own platform originally called The Domain Name Aftermarket (TDNAM). It’s a fairly transparent system. But when a valuable domain doesn’t sell, something not-so-transparent goes on in the background, as described in detail below.

It’s not unique that GoDaddy profits from expired domains. What’s unique are the steps GoDaddy takes to cover up its tracks, that it holds on to some domains that aren’t sold at auction, and its apparent hypocrisy between domains it owns and some of its activities such as combating online pharmacy fraud.

I first discovered GoDaddy’s domain warehousing efforts in 2005. I noticed a typo domain name that didn’t sell at TDNAM and wasn’t released. It was subsequently monetized by GoDaddy using a domain parking page. At the same time I purchased several domains on TDNAM that had expired but hadn’t sold in the initial auction, much like the typo. Interestingly, I received notification from an email address at StandardTactics.com offering to transfer all of the domains I purchased into my account.

Standard Tactics, LLC, is a The Go Daddy Group subsidiary that takes ownership of valuable expired domains that don’t sell at TDNAM. It then monetizes the domain names using parked domain pages and lists the domains for resale on TDNAM.

When GoDaddy launched TDNAM back in 2005, it finally started cashing in on its customers’ expiring domain names. By auctioning off the domains it was able to generate revenue even when its customers didn’t pay to renew their domains. But GoDaddy understood it could also make money by keeping some of the domain names that didn’t sell at auction for itself.

On August 16, 2005, GoDaddy formed a subsidiary called Standard Tactics, LLC in New Mexico. Before founding Standard Tactics, all of GoDaddy’s subsidiaries were incorporated in Arizona where the company is headquartered. There are a couple reasons GoDaddy may have chosen to form the company as a New Mexico limited liability company rather than an Arizona corporation.

First, by creating the company in New Mexico it could distance itself from it. Second, by filing as a limited liability company instead of a corporation, it didn’t have to list directors of the corporation. It only had to list an organizer — Scottsdale, Arizona lawyer Robert J. Rosepink. Rosepink filed the papers in New Mexico and listed the company’s principal address outside the state at 7373 North Scottsdale Rd, Suite E-200 in Scottsdale. That’s the address for Rosepink’s law firm.

GoDaddy says Rosepink is outside counsel for the company.

He may have run in the same circles as GoDaddy CEO Bob Parsons in Scottsdale. Both Rosepink and Parsons donated to Jon Kyl’s campaign for U.S. senate.

Earlier this year, Rosepink was indicted on 102 counts by the Arizona Attorney General office for his part in a concert promotion investment scheme. Rosepink allegedly earned nearly $1 million in fees for recruiting investors in what The Arizona Republic labeled a Ponzi scheme.

Although GoDaddy did a good job distancing itself from Standard Tactics as a separate company (one source said Standard Tactics was commonly called “a client” of GoDaddy’s even inside the company), GoDaddy’s filing to go public in 2006 provides a definitive link between the two companies.

It showed that Standard Tactics, LLC is indeed a subsidiary of GoDaddy. It’s distanced even further from the parent company as a subsidiary of a subsidiary. Special Domain Services, Inc., is a subsidiary of The Go Daddy Group. Standard Tactics, LLC is a wholly owned subsidiary of Special Domain Services, Inc. Special Domain Services, Inc. is also the parent company of GoDaddy’s Domains By Proxy, a whois privacy service that helps people shield their information from the whois database.

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