The news today of ICANN’s unanimous passing of a recommendation to the budget committe to remove an exclusion of registration fees for domains returned to the registrar during the Add Grace Period (AGP - Five Days) on top of Google’s announcement earlier this week to not monetize any domain if it is less than 5 days old (the exact span of the AGP) effectively means the death of the practice of Domain Tasting and Domain Kiting as we know it. While I won’t go into detail on what Domain Tasting is (you can get a full description here), I did want to think through what the repercussions to the domain industry might be.

Domain Tasting has evolved into a practice that requires a high level of investment in technology and knowledge to do it effectively. Think about the numbers involved to be successful in domain tasting:

• In Feb 2007 - over 55 million domains were registered. 51.5 million were returned within the 5 day grace period (94%) leaving only 3.6 million actually kept.
• This means that for everyday - 1.8+ million domains had to be registered, DNS managed, site tracked to see what type-in traffic might exist, what the click rate on the sites are and evaluated as a keep or drop.
• If dropped - returned within five days and refund received.

Clearly this is an automated, technology and math intensive exercise executed by sophisticated organizations with direct access to the domain drops and registrars. By definition, this leaves out the small domainers who are trying to find domains at the retail level.

According to the Domain Tools blog, Domain Tasting rakes in ~$3 million per month in click fees for the big players. No small amount of money. So, what will be the effect?

The big companies with a significant position in Domain Tasting will either forgo the money from this practice (doubtful) OR get much smarter about evaluating the domain at the point of purchase. If you can predict the value of a domain in a parked state through instant keyword analysis vs relying on 4 or 5 days of actual traffic, domain tasting can still exist. The 5 day grace period is nothing more than a trial run for the long term value of the domain.

I believe this will put more value into the companies like Trellian that have a database of keyword traffic (Keyword Discovery tool) and an API to access that data. If the Keyword Discovery database can be scaled and accessed fast enough to provide instant analysis of the keywords in a parsed domains, there is no reason to believe that efficient Domain Buying at the bulk level can’t continue to happen. The registration fee makes it more expensive, but not impossible to do.

The other option is that the large domain management companies will create their own keyword database systems for understanding search and type-in value of parsed keyword domains. As long as larger, more sophisticated companies have first crack at dropped domains - regardless of whether they can get them for 5 days free or not - they will have first pick of the better domains.

This leaves out the smaller domainers who operate at the wholesale level or the end users who want to buy a domain at retail. There will just be more lower quality domains available on the market at anyone point in time (the domains that were returned). There is too much money in domain parking to let the passage of Domain Tasting effect their business models.

I may be totally off base here, but it seems like the death of domain tasting won’t have a major structural impact on the availability of dropped domains to a wider audience. The best domains that get dropped will continue to be scooped up by top tier wholesale domainers and the less attractive domains will be available to the rest of us a little bit sooner. If the goal is to allow a wider audience equal access to the entire spectrum of domains at drop (which would maximize the value the domains due to more competition) then there needs to be a structural adjustment with how the domains are allocated and assigned as they are dropped.

Thoughts?