WHO'S CONTROLLING THE DOMAIN NAME SPACE AND WHAT THAT MEANS FOR BRANDS

Phil Lodico, Managing Partner

Agenda

  Level Set – Domain Names: Why are they important?

Exploitation on the Internet       What’s going on?

Who’s getting hurt?

How much does it cost?

ICANN- What it is and how it works   IANA IPC, GNSO, BC, ALAC, etc.

Tomorrow’s Main Challenge for Businesses and Users    New gTLDs IDNs Internet Governance The Big Picture   What’s ineffective?

Who’s working towards improvement? 2

Domain Names – www.CADNA.org

❚ ❚ ❚ Serve as an entry point for consumers  Domains are easy to remember labels of IP numbers translated into alphanumeric strings separated by dots Protect trademarks ❙ Domains reduce negative brand impressions by keeping intuitive domains out of the wrong hands Promote brands ❙ Domains capture traffic and make more positive impressions that can lead to new business 3

❚ ❚ ❚ ❚

The New Internet Landscape

Over 1.1 billion Internet users Global online advertising is projected to grow to over $80B in 4 years Web 2.0 – user-generated content Mobile Web – the handheld is increasingly the primary browsing tool ❚ Need for enhanced “Findability” – how Internet users find and interact with content has changed dramatically ❙ Search Navigation – SEO and SEM helps sites capture traffic ❙ Direct Navigation – Internet users type a desired destination into the browser address bar to reach destinations whether they intend to leverage a search engine (e.g. Google.com) or “Freestyle” navigate (e.g. DHLTracking.com) to find more targeted information within Web sites ❚ Domain Name Infringement, which is defined as registering, trafficking in, or using a domain name with bad faith intent to profit from the goodwill of someone else’s trademark, is growing 4

Exploitation on the Internet: What’s Going On? Cybersquatting Techniques

E-commerce is all about customer traffic Step 1 – Identification of target domains   Cybersquatters register domain names that brand owners fail to register so they can profit from visitor traffic in bad faith or resell these names.

- Typosquatting (myspac.com) - Combosquatting (disneyplyhouse.com) Step 2 – Traffic Monetization  Pay-Per-Click (PPC)   Affiliate fraud Direct Sales fraud Exploitation: Cybersquatters profit at the expense of honest users and brands 5

Exploitation on the Internet – What’s Going On?

A Pay-Per-Click Site: mycokereward.com

Advertisers pay the host only when their ad is clicked 6

        

Exploitation on the Internet - What’s Going On? Cybersquatting Data Findings

Cybersquatting grows at a rate of 100% year after year Most cybersquatting activity is committed by “small timers” and a few big offenders An estimated 5% of cybersquatting is responsible for 95% of traffic hijacking Less than 50% of cybersquatting sites receive meaningful traffic Sites that garner meaningful traffic receive an average of 600 visitors/year On average, a global corporation will face 5,000 infringements every year 25% of visitors click on the links posted on Pay-Per-Click (PPC) sites Of those who click on PPC sites, an estimated 75% click on the link provided, which is paid for by the brand owner represented in the domain name The average cost per click is $0.50

Owning the rights names will counter diversion and financial loss 7

Exploitation on the Internet: Who’s Getting Hurt?

Consumers, Business, Government & Nonprofits

Consumers     Confusion and poor online experiences - a feeling of being “hijacked” Exposure to malware and spyware Risk of divulging private information to fraudulent sites Risk of purchasing counterfeit medication and products Businesses    Billions of dollars in lost or misdirected revenue and extortion Reputational damage Increasing enforcement costs to recover domains containing owned trademarks Government and Nonprofit Organizations   Confusing or misleading government sites Lost campaign donations due to phishing and fake charity sites Exploitation persists because cybersquatters are not punished 8

Exploitation on the Internet - Who’s Getting Hurt ? Customers

The content and links on a counterfeit site appear authentic 9

Exploitation on the Internet: Who’s Getting Hurt?

Government Bodies

Users are confused, shocked or frustrated 10

Exploitation on the Internet: Who’s Getting Hurt?

Nonprofit Organizations

Users are diverted and think sponsored links are credible 11

Exploitation on the Internet: How Much Does It Cost?

Business Impact (1/2)

Tangibles  Lost leads and sales for some trademarks exceed $1M per year per brand Example: homedpot.com

 Value = Traffic x Conversion Rate x Avg. Order Size   $2,725,932/yr = 132K/yr x 10.7% x $193 Over $1,000,000/yr if half of users are diverted to competitors while half persevere and find the brand site  Online monitoring programs cost $40,000 per year, on average  Companies file an average of 10 UDRP complaints per year at an average cost of $6,000  Companies send an average of 150 cease and desist letters annually 12

Exploitation on the Internet: How Much Does It Cost?

Business Impact (2/2)

Intangibles  Lost goodwill and customer loyalty due to poor experiences  Brand dilution  Lost impressions Example: Mypsace.com

 Value = Traffic x Impression  $300,000/yr = 3M x $0.10

Combining tangible and intangible costs, brand owners worldwide lose over $1 billion each year 13

❚

Take Aways

Own the right names ❚ Use them as expected ❙ Pair tire information with tire related names for example ❚ Ensure that domain considerations are an integral part of naming and branding 14

Tomorrow’s Challenges for Business and Users: More gTLDs and Internet Governance

ICANN’s plans for new gTLDs   An unknown number of registrations are expected Registries may be run by brands, cities, affinity groups or speculators Concerns      Financial costs Dilution of the current space and brand strength Unstable IT infrastructure Global cybersecurity More malicious abuse It pays to be prepared- know the possible impacts of new gTLDs 15

❚

What is ICANN?

California based not-for-profit corporation ❚ Founded in 1998 to oversee the operation and assignment of names (domain names) and numbers (IP addresses) – previously managed by the US government ❚ Responsible for setting minimum standards and agreements with contracted parties (registrars and registries) ❚ ICANN’s authority to manage the operations of the DNS is derived from the IANA contract. The IANA contract, which provides ICANN with the technical capabilities to operate the DNS, was awarded to ICANN by the U.S. Department of Commerce. The contract is up for renewal in 2011. 16

ICANN Structure

17

Why is ICANN Important?

❚ Domain Names are critical. They are online doorways.

❚ Many brand owners are beginning to more fully understand the impact that domain abuse and other issues in the current domain space have on their consumers and businesses ❚ Consumers look to the brands they trust as stewards of the Internet ❙ Threats need to be reduced or eliminated to create more safe and productive user experiences ❚ ICANN is the hub of all domain policy ❙ Registrars ❙ ❙ ❙ Standards & Compliance New TLDs Abuses: AGP (tasting), WHOIS, Fast Flux, Front Running, Cybersquatting 18

ICANN- Policy Development ICANN creates policy through “bottom-up” development process.

❙ ❙ ❙ ❙ Issues are raised and discussed within the supporting organizations within ICANN: ❙ ❙ ❙ Address Supporting Organization (ASO) Generic Names Supporting Organization (GNSO) ❙ Commercial & Business Constituency ❙ ❙ ❙ ❙ ❙ gTLD Registries Internet Service & Connection Providers Non-Commercial Registrars Intellectual Property Constituency Country Code Names Supporting Organization (ccNSO) Once a report has been produced, the document is made available for public comment.

After several rounds of discussion amongst and between supporting organizations and the general public, viable policies or policy changes are brought before the Board of Directors for review. Policies and policy changes only become final when a compromise is reached between the different components within ICANN.

19

Issues with ICANN

❚ ❚ ❚ ❚ ❚ ❚ ❚ ICANN is a captured regulator ICANN is not independent ICANN is not transparent ICANN is more interested in making a profit than working for the benefit of Internet users ICANN is not accessible ICANN is failing to address numerous issues corrupting the Internet ICANN is not looking at itself critically ❚

ICANN is accountable only to itself.

20

❚

The Changes – Launch of IDN ccTLDs -

東京

.

東京 Launch of Internationalized TLDs ❙ ccTLD operators will be able to offer their Roman character extensions: country codes such as .JP will be .

東京 (Japan), .CN will be .

中国 (China), .AE will be .

تارامإ (United Arab Emirates) and .RU will be .рф (Russia) ❙ ❙ ❙

Implications

❙ For regions where populations whose first language is not English, consider registering key names and brands into the specific language sets

Timeline

❙ To begin Q1 2010

Costs

❙ TBD: estimate $500/name 21

Considerations for IDN ccTLDs

Deciding which IDN ccTLDs (if any) should be registered will require a targeted approach – it is not necessary to register in all new IDN ccTLDs. Instead, register only in those that are most appropriate for the business and most intuitive for consumers. High level considerations: ❚ ❚ ❚ Which countries are the most important to the business strategy? ❙ These countries should be monitored. If they are awarded IDN ccTLDs, it would benefit the company to register certain IDNs within that IDN ccTLD.

Which brands should be registered in IDN ccTLDs?

How should messaging and brand promotion in an Internet of IDN ccTLDs change?

❙ The IDN ccTLD space will focus on providing localized content in local language. It would be helpful to consider how to adapt brand promotion strategy to optimize the new opportunities that IDN ccTLDs can provide. 22

❚

The Changes – Launch of gTLDs - .FAIRWINDS

Launch of unlimited gTLDs ❙ ❙ Today: .COM, .NET, .ORG, .TRAVEL, .MOBI, etc.

Tomorrow: .SHOP, .NYC, .PARIS, .WORK, .MUSIC, .ECO, .NIKE, .GOOGLE, .FAIRWINDS, etc.

❙ ❙ ❙

Implications

❙ ❙ ❙ Significant costs in 2010 and 2011 – defensive registrations in others’ TLDs and possible costs associated with obtaining a TLD of your own Possible consumer behavior shift in 2011 and beyond Risk of competitors using the new TLDs to gain a competitive advantage

Timeline

❙ To begin Q3 2010

Costs

❙ ❙ Defensive Registrations: estimate $500/name .FAIRWINDS (or other name for the company): $500,000 in 2010 and then roughly $100,000/year in maintenance 23

New TLDs- Possible Rewards

The introduction of the new TLDs may result in several rewarding benefits across three different areas for companies and brand owners: branding, market dominance, and security.    Branding:   A new TLD, such as a .COMPANY, could enable a company to tie all of its brands back to the company name and master brand. Due to the high application and registration costs, a company would be limited to registering a select few dot-BRANDs and dot-KEYWORDs. This will encourage companies to agree on a corporate identity, thereby strengthening and unifying their core brands.

Market Dominance:  A few key dot-BRANDs and dot-KEYWORDs could provide a company with market dominance. Security:  If a company were to choose to operate a TLD, it could control what domain names, if any, are allowed to exist in the name space. This would provide that company’s consumers with confidence that as long as they type in “anything”.COMPANY they will find the company they are looking for.

24

New TLDs- Possible Risks

New TLDs pose risks to companies in four different categories: direct costs and lost sales as well as consumer confusion and search.    Usage: Based upon current Internet user behavior, it is not expected that new TLDs will receive direct navigation traffic unless marketed heavily.  Consumer Confusion: If millions of new TLD domain names are registered and companies begin marketing themselves under new monikers, Internet users will be hard-pressed to remember which company uses which TLD. Cost: Securing a new TLD will cost roughly $500,000 in application fees and infrastructure setup.   Beyond securing a TLD such as .COMPANY, businesses may be forced to register key domain names in others’ new TLDs. Third-party infringements will expand and the cost to recover harmful registrations will increase.

Search: The search engines have not released information on how they will adjust their search scoring when new TLDs are released and industry experts are concerned that if the search engines do take these TLDs into account, rankings will be impacted. 25

❚ ❚ ❚ ❚ ❚

Costs

One-time cost of roughly $200K to apply (if the TLD is not applied for by anyone else- otherwise, there will be auction fees and dispute resolution/review fees).

$700k over ten years in ICANN fees.

$200,000 for infrastructure setup.

$50,000 annually for infrastructure. $200,000 for legal and consulting services for application process.

Over the course of 10 years, fixed fees will exceed $1,500,000.

26

The Big Picture: What’s Ineffective? (1/2)

Legislation   International Law - there is no international regulation that protects businesses or that awards damages to rectify actual harm.

US Law - The Anti-Cybersquatting Consumer Protection Act (ACPA) awards damages ranging from $1,000 - $100,000. ACPA is only effective against cybersquatters who own a large number of infringements of one brand. Arbitration  The UDRP process, which is overseen by approved dispute resolution providers NAF (USA) and WIPO (Switzerland), was introduced by ICANN. It provides only for the cancellation or transfer of a domain name. No damages are awarded. A cybersquatter can choose not to respond to a filed complaint and simply hand over the domain.

Only minimally effective legal and dispute deterrents currently exist 27

The Big Picture: What’s Ineffective? (2/2)

Policy ICANN   A “bottom-up” policy development process claims to represent global multi-stakeholder interests, but is rife with conflicts of interest  Example: GNSO was restructured to heavily favor contracted parties There are issues with transparency and accountability on the Internet, which makes it easy for cybersquatters to operate without being detected  Example: false Whois records U.S. Government  The Affirmation of Commitments (AOC) signed between ICANN and the U.S. Department of Commerce on September 30, 2009 addresses many of the concerns of the Internet community and establishes oversight of ICANN. However, one glaring omission from the AOC is any measure that binds ICANN to these commitments.

Conflicts of interests + lack of oversight at ICANN blur judgment and agenda 28

The Big Picture: Who’s Working Towards Improvement?

Legislation     International Law - WIPO is interested in developing an international treaty US Law - Updating ACPA to impose higher penalties US Congress - Cyber Security Act 2009 US Executive Office - White House Cyber Security review Policy  ICANN review and reform would improve governance, transparency, and reduce cybersquatting 29

Questions

Demo footer

30