Fraudulent bidders or non paying bidders pose problems for both domain investors and auction websites. The question that comes up is what is the best way to deal with a closed auction where either the auction site detected fraud, or the winner did not pay for whatever reason?
Some say the best way to handle this is to award the name to the second highest bidder, that can be gamed rather easily. (I will get back to that).
Others believe the domain should be re-auctioned, and we start with a whole new round of bidding.
There is a third group, they don’t come out into the light often but they are in the shadows, they are also small in numbers. This is the group that believes no registrar or aftermarket site ever had the right to make money off of other people’s drops. I have had emails for over a decade from people asking me, “Why does godaddy get to make thousands off the misfortune of others?” They got lucky, that’s always been my reply, if ICANN had decided to have a rule about drops and force everything to just expire well a lot of companies would be a lot less wealthy.
But the reality is only the first two choices are relevant.
On Namepros there was a good discussion between Abdul Basit and Michael Sumner from Namebio.
Instead of re-auctioning the domain, it’s better to award the domain to 2nd highest bidder. Similarly what GoDaddy does when the 1st bidder fails to make payment. That will also save everyone’s time.
Michael Sumner:
I actually like re-auctions because they are more transparent, awarding to the runner-up means only one person knows the winning bidder didn’t pay and it is kind of swept under the rug. I’m a little biased though because it helps with our tracking, when our software sees a re-auction we can easily remove the data from the prior auction.
A huge issue with the runner-up idea, which GoDaddy had very serious problems with for the better part of a year, is this: scammers create two accounts which they use to run the price up extremely high within minutes to the point nobody else will join in, and then when it gets rolled back the scammer gets a domain that is worth thousands for $69. Replace the one banned account and rinse and repeat. It wouldn’t be terribly easy with DropCatch because they have one of the tightest account verification systems in the industry, but with enough family and friends you could scam them out of tens of thousands of dollars before you run out of IDs.
Michael brings up the point I made about second highest bidder being easy to game.
scammers create two accounts which they use to run the price up extremely high within minutes to the point nobody else will join in, and then when it gets rolled back the scammer gets a domain that is worth thousands for $69.
So which option do you prefer?
The fraud in the auctions of domains is very difficult to eradicate completely there is no intention to solve it really speaking a lot in interviews but always fearing their doubts.
I suffer two times in difference of 12 years one was bestial the company to register in the middle of the auction or voiy to give names because all defend themselves, nor is there a lawyer who pedagoy solve it since many times they resort to them for other problems .
The first was the pioneer in the fraud in making domain auctions buyers buy a $ 20 certificate that then those who pay this money had the option of getting a premium domain for a maximum of $ 25000 the fact was to sell more than 500 names per day of domain in auction that the owner believed that the final day would come and take something of profit nothing would disappear the domain name, but the most impressive is that go to the registrar and there be the domains (.com) without expiring the podias to use if and not the strategy was like this, they renew automatically assume that the purchase of registration was 20 domain names (, com) to $ 12 and suddenly 60 days before the expiration of the 20 domains (.com) renew and you say that happens because so much hurry, they are in auction immediately and can not enter your costumer acccount go to the auction company and neither be the domains ask and nobody answer. The cunning of them was very wrong and I inquired online and ask the question of wanting to buy a domain name with a certified $ 20 immediate exit the registrar. ICANN accredited from the first.
Flippa.com is putting the name because I have not used more prestige in fraud of premium domains many in last minute poujas I three letters and no extension gtdl to find a final bid of $ 1 this was the benefit of the auction for me as owner of the premium domain name get from the auction. Discover everything by myself
There is nothing clean in the online auctions Flippa I read interview to admit that it happened but as much as they put on their part there was always something that exceeded them, there was nothing that exceeded them had a domain name very similar to flippa to do the times to bid at the last moment and take all Flippa and their domain partners in an interview in Domainnamewire.com to an affected in flippa auction to talk about a web page, a respondent of flippa asked all solved and it was not like that yet the domain did not work expired and let pass months, see in news that make changes and the last time between the changes are not made continue as before, I can say if they continue as before with auctions I doubt but never put your hand in the fire and What you burn is that they have not changed.
I vote for second bidder getting the name. Reauctions suck!
If second bidder gets the name…
A) remove all bids made by the fraudulent account
B) what if the second bidder is in cahoots with the fraudulent account?
Reuactions get games to, godaddy has cleaned up their act, and are pretty vigilant nowdays. Dropcatch is currently having hiccups as they seem to have lowered their standards for some trusted clients who have come back to burn them in the end. In doing so their customers have absorbed the brunt of the financial damage in unpaid bids, and bid ups.
It should be awarded to the second highest bidder, but profits before people from the stance of most companies.
How exactly do you game a re-auction? There is no end-game where the non-paying bidder can ever end up with the name. The only thing I can think of is hoping that the re-auction gets less activity because people forget to follow it. But there are many, many times at DropCatch where the re-auction ends higher than the original. So this doesn’t seem like a strong enough reason to create fake accounts and get banned in the hopes that the re-auction actually ends significantly lower than it would have without interference.
@Michael what you write of false accounts occur on Flippa.com the bids were two one that was account false in the name of a Mrs. of Belgian nationality, but the name was half French and Turkish, I warn my friends in Belgium and ask to find name and surname Mrs. Belga and city of Belgium and not find anything, one of the Belgian friends I would say that the name in Turkish is from a famous in this country perform search and give full name ..
I enter flippa and register new account with the full name of the famous and Flippa not accept because have repeated account, then check the previous auctions of a few days and find a domain name auctioned by the same famous but with the account of Mrs. bids come from two opposite sites the website that was used for last minute bids.
In this one that I suffer and discover with my friends from Belgium, the real fraudulent thrust was Mrs. Belgica’s account that was that of the famous Turk.
I agreed to what Michael said. But my main purpose of saying was to implement a way to track such behavior as well if there is some regular activity going between 2 bidders every now and then or even with bidders who win the auction regularly by being 2nd bidder (due to winning bidder being fraudulent) which should flag their system to take notice and look into the issue further manually.
It’s difficult to make such changes but there has to be some strict action to be taken since many regular bidders have paid thousands of dollars just due to fake bidders. In the end, it’s DropCatch who has made the profit.
Unfortunately it isn’t that simple because the scammers cycle through a lot of accounts. Imagine this:
Account A and Account B. Scammer uses them to run up an auction with B winning, but then doesn’t pay. It gets rolled back and A wins for peanuts. Now A is flagged to watch for them winning cheap and B is banned.
Create account C. Run it up with A and C, with A winning and not paying and it getting rolled back to C. Now A, which was sort of compromised anyway by being flagged is banned, and C is now flagged.
Create account D… rinse and repeat. See what I mean? No flagged account would ever win again so you wouldn’t be able to stop it with your suggestion. The scammer could also just create two new accounts each time instead of one, and never even use a flagged account again.
The only way to have a clean runner-up rule is if you have someone monitoring every single auction looking for these unusual bidding patterns. But that doesn’t even really work all that well because of proxies. If Account B puts a proxy of $10k early on and Account A puts a proxy of $9k on a domain that is worth maybe $8k even a human would have a hard time deciding if those bids should be cancelled, the person would have to be an expert appraiser. Many people set proxies early on and it is legitimate.
It would be interesting to know why people are winning expired auctions and then not paying. I suspect sometimes they get carried away with auction fever and then have buyer’s remorse. Sometimes they make a typo in their proxy bid and don’t realize until the auction is over. But I can’t think of any nefarious reason to bid up an expired auction and risk getting banned when the domain will be re-auctioned anyway (and it often ends higher than the first auction). Shilling doesn’t make sense for expired auctions, only public ones.
So by using the runner-up rule, you’re basically getting rid of stupidity but inviting outright fraud, which in my view makes it the worst possible solution. You have to remember that a re-auction is not a positive outcome for a non-paying bidder, there’s no end game in that scenario where the fraudster wins. I don’t think people are doing it for personal gain, I think they’re just dumb.
Here are some ideas to reduce non-paying bidders that I believe would be more effective:
A combination of runner-up and re-auctions. Use the runner-up rule if the rollback is less than X% of the closing price (something small like 5% – 10%), and re-auction if the rollback is more than that. This makes the runner-up abuse way less profitable to the point that most won’t attempt it, but still reduces re-auctions.
Improving account verification to make it difficult to get an account.
Maybe new accounts have a probation period where they can only participate in a limited number of auctions or have a cap on their total outstanding bids until they prove to be serious. If a new account joins just to bid on a specific, expensive name they have to contact support and provide proof of funds (bank statements, etc) or make a good-faith deposit to bypass the restrictions.
When the platform confirms a bid, instead of just showing them the amount and having them click OK (which they might not read carefully), make them type the bid out a second time and compare them (two matching typos in a row are very rare). This will all but eliminate errors.
Create an AI where you train it on data from bad actors, like how long between creating the account and placing bids, number of simultaneous bids placed each day, number of simultaneous auctions led each day, number of auctions won and paid for, geo location, how often they’re logged in, etc. Have it at least flag, but maybe even automatically limit accounts that are acting suspiciously.
Very well said Michael! Considering that, I would take back my idea which won’t be worthwhile in long run.
I was suppose to say that every account should make advance deposit which will only be refunded once you have cleared your dues AND are no long willing to use DropCatch. I think this is what you proposed in one of your idea. That advance deposit may be something like $500-$1,000 for every account holder willing to bid up to $10,000. Anything over that must pre-deposit with more funds.
To show some seriousness in taking action, this idea must be implemented by DropCatch for existing bidders who has clean track record as well as from the new account holders.
Re-auctions are definitely the best solution, and the current system whereby DropCatch transparently notifies you about possible fraudulent activity and invites you to participate again is excellent.
I was in both auctions for Lumeo and was the lead bidder in both with bids slightly above $2000 shortly before the close and examined the bidding history.
In the first I was surprised to see it went for over $14,000, so obviously at least two other players subsequently bid higher than me.
In the second, I think the final price was about $2300. A massive difference.
If the first auction had been awarded to the second bidder, then the runner-up would have had to pay about $14,000.
Instead, the winner of the second auction acquired it for a grand saving of roughly $11,300.
This is a big loss for the house and shows that DropCatch are placing people before profits, and they deserve congratulations for their integrity.
The second bidder in the first auction was ably prevented from having to overpay thousands of dollars by the fake bidder. And notified about the opportunity of a second auction.
I also agree with Michael’s point that re-auctioning with full disclosure creates important general awareness and helps avoid the possibility of any cover-ups.
You’re assuming that the Lumeo runner-up was legitimate in the original auction. Unless the runner-up of the first auction was the winner of the second auction, I would say it is more likely that the runner-up of the first auction was also not legitimate. So without interference from either of these people the auction likely would have closed in the $2,xxx range, and the “savings” of $11k is not real.
Also when you roll back an auction to award it to the runner-up, you have to remove *all* of the winner’s bids, not just their latest one. So if it was you leading at $2k and then two other bidders ran it up exclusively to $14,100 or whatever, when it gets rolled back the runner up gets it for $2,100 not $14,000. So the “savings” in the second auction were probably not really much of anything.
I suspect that some of the non-paying bidders might think there is a runner-up rule like at GoDaddy and are trying to game it. So maybe DropCatch should make it more clear and prominent that non-payment results in a re-auction so scammers don’t even attempt it to begin with.
I addressed some other reasons people might not be paying in my post higher up, and ways to combat that. Another idea would be to show users a running total of all their outstanding bids, like “If you aren’t outbid, you’re on the hook for $3,456”. I think some people might be bidding in a lot of auctions expecting to get outbid on several of them, but then win more than they were planning on and can’t afford to pay for all of them. Showing them a reminder of what they’re on the hook for might scare them away from this approach.
Yeah Michael you’re right about rolling back the fake winner’s bids, apologies to any readers that I overlooked thinking of that. So the “savings” of $11k wouldn’t have been real.
(I did once get awarded a name at Godaddy at a much lower price than my bid when the “winner” didn’t pay, so I should have thought of that). So if NameBright used that system, the runner-up probably would have paid much less.
In the case of Lumeo, I’m still certain that NameBright lost money by doing the right thing.
There’s a bit more to the story.
In the first auction, I had bid to about 2200 and knew there was strong interest in the domain. Someone bid about 2300 and I was arguing with myself, should I go over 3000?
Then I looked at the bidder’s name and it was “golumeo” – so I (wrongly) assumed that somehow an end user had signed up and entered the auction and was bidding. Well who wants to bid against an end user? So I quit. Would have gone a bit higher otherwise.
When the second auction happened, I had no motivation because I thought the first auction’s second bidder was prepared to pay $14,000!
But I just put down about the same bid about 2200 something, you never know your luck, and I fully expected to lose. Though re-auctions often lose momentum.
That’s very interesting that you suspect the runner-up in the first auction may also have been a scammer, that I don’t understand. It would be interesting to know if the final winner in auction two was also the runner-up in the first auction!
All the fraudulent bidders and/or auction fraudulent websites are going to be Exposed at SCAMPROS.COM
Re-auction the domains.
@Raymond:
NONE of the ABOVE is actually the best option to address fraud in online domain auctions.
IMHO I think you forgot, probably on purpose, where the CORE issue here comes from.
Online domain auctions have become the “final phase” of the BACKORDER system, or, in the case of GD Auctions, are a de facto, way more lucrative, replacement of it.
So the alternative is NOT, as you said, between “Online Auctions” and “force everything to just expire”, the real and fair alternative is that ICANN would implement a rule which says “Domain backorders are allowed, but only on a first come, first served basis. All other forms of backorders are forbidden.”
So Dropcatching should continue to be allowed, but only on a first come, first served basis, no need to “force everything to expire”.
That way the first person who backorders the domain will get it, at a fixed, predetermined, price, provided that his /her specific dropcatching company is successful in grabbing it, and auctions would not be needed anymore to assign a domain, removing all related issues, including shill bidding, collusion, pump-and-dump, etc.
That’s the true and original spirit of backorders.
Please keep in mind that the Backorder system was born as a sort of “ancillary service” offered by some Registrants and, as their main business, by Dropcatching companies, at a fixed price.
That fixed price is the remuneration for the Dropcatching company or Registrar for providing this service, nothing more should be due.
Technically speaking, a Dropcatching company or a Registrar should never allowed to be the “owner” of the domain they have backordered for their client, and therefore they should never been permitted to auction it.
A backorder system based only on the first come , first served basis rule is also more fair, since it gives potential interested parties the same chances of getting the name.
On the contrary, the current auction system always favors deep pockets, and Dropcatching companies-turned Auction Houses have become greedy “fat cats” houses which profit, at their clients’ expenses, from a lack of proper regulation.
I didn’t forget anything on purpose not even sure how you would come up with that. I mentioned the areas that people are actually debating. I have no say or vested interest.
You mentioned a problem, but you forgot to mention a key element of it and what are the roots of it …
How do you call that? I call that “OMISSION” … 🙂
I think I mentioned the third group of people that think no one should have ever been able to profit like this. I think we both know that horse left the barn. ICANN could have done that years ago and stuck to your example.
There is a third group, they don’t come out into the light often but they are in the shadows, they are also small in numbers. This is the group that believes no registrar or aftermarket site ever had the right to make money off of other people’s drops. I have had emails for over a decade from people asking me, “Why does godaddy get to make thousands off the misfortune of others?” They got lucky, that’s always been my reply, if ICANN had decided to have a rule about drops and force everything to just expire well a lot of companies would be a lot less wealthy.
Don’t mix things, I’m not dumb.
That was your “force everything to just expire” option, which I mentioned as one of your 3 options.
The OPTION I was referring to is instead allowing only backorders based on the first come, first served rule (no more auctions needed), which is a totally different thing from your “force everything to just expire”.
I think it’s not so hard to understand.
No nothing was omitted, your way you mentioned, I have no problem with, I could care less, but that option is not realistic, who would be ushering in that method? No registrar, registry or any other player in the industry. The only thing I can think of is that a select number of domainers who want your system would start going to ICANN meetings and keep petitioning them to change, which I doubt ICANN would do, but whoever wants to try, best of luck.
Raymond you forget the golden rule, never feed the trolls. There is no other conceivable way of interpreting these comments. I would like for there to be no homeless, that qb’s don’t always get the head cheerleader. domains go to auction, it’s 2017, wake up!
I replied below since I did not want to intrude into this argument you to were having.
two*
No arguement John I didn’t even understand the purpose for the comment about leaving out on purpose.
I don’t care if there is a drop, one back order or auction. I don’t profit or have negative result from any of the options.
I think it’s great to talk about what would be a dream scenario. I don’t think the option of first to backorder gets the name, do you?
First off that system would be flawed as well as big players would place a backorder on every name of significant value.
“First off that system would be flawed as well as big players would place a backorder on every name of significant value.”
That’s not true at all, first of all because searching for “every name of significant value” is a time-consuming activity. Those big players are not doing this even with current biased system …
I’d suggest you walking back memory lane and remember how this balanced first come, first served backorder system was properly working, benefiting many participants, not just a few “fat cats” …
John made a good example in his comment below.
Andrea sure makes a good point.
The way things have evolved is extremely flawed, unfair, and prone to corruption and extreme defect. And as with so many things in life, it is all about the money, money, money, the love of which often leads to so much evil. In the old days when SnapNames first came out, for instance, it was just a $39 “SnapBack” order, first come, first served. I obtained a famous and desirable domain with one of those $39 SnapBack orders then, and I also lost one that someone using another means was able to beat SnapNames for too.
Exactly, that “old days”, first come, first served, backorder system is definitely more fair.
That’s the real, original spirit of backorders.
The reason why someone call it “fairy tale”, “not real life”, “unrealistic” is because a lack of regulation has generated rampant corruption and a lot of Conflicts of Interests, which currently don’t allow such flawed situations to be changed (improved) and fixed.
Too many conflicts of interest, it’s very similar to the financial industry, which is my background.
No something is called unrealistic because it is simply that, unrealistic. There is a lot more money in domaining than the time the polar bear harkened back to. Schilling or Cohen would have a back order on ever 2 and 3 letter.com, every 4n.com.
Are you correct they wouldn’t back order the solid brandables, yeah but the real liquid stuff would be off limits for the little guy.
That was a cute fairy tale Paladini laid out, don’t think anyone has a way to make that happen. Back in the real world, I stand by my comment second highest bidder.
Luckily things can still be changed in the “real world”.
Well lets see you change them sparky. I am willing to bet you do nothing about it.
P.S. Nobody cares, Godaddy,dropcatch and name jet rule the roost.
@Yellow I don’t see them as trolling, I just had a problem with someone implying I purposely left something out, when A) I would not be against it and B) it’s unrealistic today.
Why not go back to domains being free, now that would be sweet. Problem solved />