Cyber Investing

Trade.com Goes on the Auction Block,
But Would-Be Buyers Balk at the Price

By DANIALLE WEAVER<<
Special to THE WALL STREET JOURNAL INTERACTIVE EDITION

Entrepreneur Paul Kraaijvanger has had only limited success selling his rights to a number of Internet domain names he has acquired over the years.

His greatest success so far was the sale a few years back of his rights to the domain heineken.com to the Dutch brewing giant, Heineken B.V., for a few crates of merchandise and 25 cases of beer.

But after watching certain brand-name domains change hands for hundreds of thousands of dollars -- and witnessing the explosive growth of online trading in the last three years -- the 31-year-old San Francisco resident was convinced he'd finally strike gold with the sale of his rights to the domain trade.com.

And so, Mr. Kraaijvanger commissioned OnlineInvestors.com to hold a five-day online auction from Sept. 28 through Oct. 2, asking a minimum bid of $100,000 for the rights to trade.com. But to his dismay, not a single bid was placed.

In fact, the only offers Mr. Kraaijvanger received were made by e-mail apart from the auction from a handful of online trading companies, including discount broker Datek Online Holdings Corp. of Iselin, N.J.

Melissa Fox, a Datek spokeswoman, confirmed that the company had indeed been interested in buying the name, but the broker bowed out after Mr. Kraaijvanger said he received a counter e-mail offer from a rival online trading company of as much as $14,000. "We weren't willing to spend the amount of money the gentleman was wanting," Ms. Fox says.

Not satisfied with the highest bid, Mr. Kraaijvanger, who heads the San Francisco-based electronic commerce startup Verza Inc., has vowed to do things differently during his second online auction for trade.com, which runs from Nov. 2 through Dec. 31. This time, he says, there's no minimum opening bid.

Mr. Kraaijvanger, who set his asking price based on sums paid for lesser-known domain names, is hopeful he will eventually get his price. "I think the name is worth at least that much," he says.

Ellen Romy, co-author of "The Domain Name Handbook: High Stakes and Strategies in Cyberspace" (R&D Books, a division of Miller Freeman Inc., 1998), says he may be right. "I do not think you should read the lack of response to a public auction as a watershed event," she says. "Given the current marketplace, trade.com is a very desirable domain name."

Carl Oppedahl of Oppedahl & Larson, an intellectual-property law firm in Frisco, Colo., agrees. "It seems the cachet associated with .com domains will persist for quite some time," even when other suffixes are introduced, he says.

As cyberspace gets more crowded, and the number of available names dwindles, these catchy Web site monikers -- particularly those with the coveted .com suffix -- have become hotly contested properties. Network Solutions Inc., the Herndon, Va., company that registers Web addresses ending in .com, .net, .org and .edu, had registered 2.3 million domain names through June 1998.

"As anyone knows who's tried to start a business lately, all the good domain names are gone," says Ellis Horowitz, who chairs the computer science department of the University of Southern California.

But domain names are worth only as much as someone is willing to pay for them. And pay dearly they have: The biggest deal thus far was the sale of altavista.com -- Digital Equipment Corp., now part of Compaq Computer Corp., was rumored to have paid as much as $3.3 million for the rights, although Digital has denied spending that amount.

Mr. Kraaijvanger still wonders why trade.com didn't garner any bids during the first auction. Nearly three dozen people registered to bid on the name, but when the auction finally got underway no one placed a bid. "It was like everyone kind of looked at one another to see who would pull the trigger first," says Mr. Kraaijvanger, who registered trade.com in 1994, when domain names were free for the asking.

Perhaps it was a cultural difference with the potential bidders from Asia, he muses, who might have thought they were registering for trade leads. Perhaps it was unfamiliarity with the mechanics of online auctions.

Or, it might even had been, Mr. Kraaijvanger admits reluctantly, that his asking price is too high. But he insists the name would be great for an import-export firm, or for any online stock trading company. The name could also be bought as a pre-emptive strike to prevent a competitor from snatching up the rights, he says.

In fact, a recent study of high-tech firms by PricewaterhouseCoopers found about one in five companies already have multiple Web sites, while it has already become common practice to buy up similar domain names so competitors cannot obtain the rights to them.

But Alex Tajirian, principal with DomainMart, a San Francisco domain broker, says the trade.com domain name is far too generic to be worth much cash [as there isn't any "brand name" idetified with the domain].

In fact, a recent study by Georgia Tech's Graphic, Visualization & Usability Center in Atlanta shows Internet users find sites in multiple ways. Interestingly, 86.6% said they follow hyperlinks from other Web sites, while 83.5% use search engines and 64.4% use directory sites like Yahoo!.

That may be true, allows intellectual-property attorney Mr. Oppedahl. But, he adds, "I regularly read court papers where corporations are suing someone for the rights to a domain name." Some companies have spent "many tens of thousands of dollars" to defend or regain a desired domain names in court, he says, adding, "Why would they do it if [the domain name] wasn't important?"

Mr. Kraaijvanger won't say how low a price he will accept for trade.com, but he does say he "won't give the site away." If he can't get his minimum price at the second auction, he says, he will keep the name and work on developing it into financial-services site.