thread.119

thread.119

From: Chris Lin <nanchou§hotmail.com>
Date: Wed, 16 Jan 2002 10:11:45 +1100
Hi
I am interested in the claims that the auction is the 'fairest way' to 
dispose of the domain names and that the entity that 'values them the most' 
will be able to purchase them
So we understand what we are talking about here lets develop the scenario of 
two entities who will be bidding for the domain name ‘widgets.com.au’.
Business 1 is a publicly listed company with assets of $35,000,000 and
yearly profit of $4,000,000. Widgets are a very small part of their overall 
business but they do own the business name: ‘australian gidgets, 
didgets,nidgets, fidgets and widgets service’ which they obtained as a 
result of taking over a smaller competitor. They have no plans to purchase 
‘widgets.com.au’ but the web-development company they use contacts them and 
tells them it is available at auction. Although they can’t see any use for 
it in the short-term their web-developer tells them that they can just point 
it to their company site and if they get it their competitors will not be 
able to use it. Not wanting to end up with egg on their face if a competitor 
gets ‘widgets.com.au’ they decide to allocate $10,000 to secure the name at 
auction.
Business 2 is a small family business named ‘Anne and Dave’s Complete
Widgets’. Anne and Dave specialise in widgets and pride themselves on having 
the widest range in Australia. They have a shop front but rely mainly on 
mail orders for business. Business has been slow for a while and  some time 
ago they became concerned about how the Internet would eat into their 
mail-order business. Eighteen months ago they decided to develop a website 
and contacted a specialist who informed them that ‘widgets.com.au’ was 
available for purchase and would make an excellent domain name. After giving 
the developer the go-ahead they received the bad news that after they 
applied the domain name ‘widgets.com.au’ had been placed on the list of 
GENERIC names and was no longer available.
After that Anne and Dave put their Internet plans on hold and have been
tossing around the idea of getting out of the industry. Anne and Dave’s only 
assets are $250,000 equity in their family home and their business is 
currently making a yearly profit of $50,000. Now the developer they
initially contacted about the web site contacts them and tells them the name 
‘widgets.com.au’ is going up for auction. This makes Anne and Dave very 
excited because this is a chance for them to stay in the industry and build 
a business for their future. They decide to allocate $5,000 for the purchase 
of the domain name.
Who values it more?
Business 1 was not really interested in the name and does not intend to use 
it but will buy it so a competitor will not be able to use it.
Business 2 have previously applied for the name when it was available and 
see the name as the key to the survival of their business.
Business 1 have allocated $10,000, or 0.03% of their total assets and 0.25% 
of their annual profit on purchasing the name.
Business 2 have allocated $5,000 or 2% of their total assets and 10% of
their annual profits to purchase the name.
What is the best social outcome?
Purchase by Business 1 will mean the widget business become more centralised 
and result in higher prices. Purchase by Business 2 will mean that the 
people involved can remain with their business and the people of Australia 
can have a wider choice of widget retailers.
What is the best outcome in terms of the development of Internet businesses 
in Australia?
Purchase by Business 1 will mean the name will not be used, purchase by
Business 2 means the Internet business will become the focus of their
operations and increase the overall number of Internet businesses in
Australia.
(Purchase by Business 1 also brings substantial benefits to those involved 
in selecting and managing this style of auction disposal method which I do 
not intend to discuss here)
What is the final decision regarding the fairest way to dispose of
‘widgets.com.au’?
Organising the disposal so that Business 1, the company with the deepest
pockets, can buy it is seen as the ‘fairest way’ to dispose of
‘widgets.com.au’.
What do you think?



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Received on Fri Oct 03 2003 - 00:00:00 UTC

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