Although we’ve repeatedly suggested sword fights, pistol duels, pick a card, and freeze tag as possible resolution methods for deciding which new TLD applicant should win a contention set, ICANN’s decided to stay with auctions. And okay, ICANN, maybe that’s more “mature,” but where’s the fun? We’re still trying to advocate for the micro machine commercial guy to moderate the auctions, which we’d like to be held in a life-size replica of Thunderdome, but until we hear back from ICANN, we’ll review how contention sets are actually going to resolve so you’ll know what to realistically expect as the application process continues.
What is a contention set?
A contention set is any group of applicants applying for the same new TLD. There are over 200 strings that have more than one applicant (the most applicants one TLD has is 12). For these sets, community applications get first priority. If the community application does not pass Initial Evaluation, or in the event there is no community application, there are two main methods for resolving the set: private auctions and ICANN auctions.
Private auctions occur only when each applicant in a contention set agrees to an auction method and third party moderator. There are currently three proposed methods: A “sealed bid” auction, in which every applicant issues one bid and the winner pays the second highest bid, which is then distributed among the other applicants; an “ascending clock model” auction, in which each applicant is given an order of betting and must either bet higher than the last applicant or bow out; a “live auction,” much like our Thunderdome proposal (you know, sans battling to the death), in which all applicants will meet to outbid one another.
It should be noted that ICANN does not want to hold ICANN auctions. In the guidebook, ICANN highly encourages applicants to settle contention sets privately. If sets go to an ICANN auction, meaning not all applicants agreed to a private auction, the proceeds of the auction will go toward funding the ICANN program or “good works.”
Private Auction Pros:
- If auctions are held early, applicants that do not win auctions will be able to recuperate some of their costs by withdrawing. If the applicant withdraws before their Initial Evaluation is over, they’ll receive 70% of their $185,000 investment. If they withdraw after IE, they’ll receive 30%. If they wait until ICANN auctions, they’ll receive nothing.
- Private auctions allow for the flexibility to partner with other applicants, meaning that two smaller entities might be able to run a TLD together or outbid a bigger applicant.
- Applicants that lose one or more private auctions will be able to use their losing funds to win an auction somewhere down the road. This is particularly advantageous for applicants with more than one application.
Private Auction Cons:
Google, Uniregistry, and Amazon stated that they will not be headed to private auctions, while Donuts has agreed to enter into private auction for 63 strings (set to occur on June 3). Many wonder why Donuts, who applied for 307 TLDs, agreed while other TLD behemoths Google (101 applications) and Amazon (76 applications) bowed out. It’s hard to say what advantages an applicant gains from waiting until a last resort auction, but here are some drawbacks to private auctions that may be holding some companies back:
- Private auctions can result in large-scale bidding wars between heavy hitters. Because the big three companies have applied for a lot of TLDs, many worry that they’ll strike agreements with one another that will leave all other smaller entities out of the private auction process. It should be noted, however, that an ICANN auction will probably cost bidders more money than a private auction and just as easily box small bidders out.
- It’s hard to determine the worth of a new TLD until all applications make it through IE.
- Waiting until after IE will ice-out a lot of competitors who are worried about facing big corporations and passing IE. Applicants with objections and little financial backing are likely to bow-out before an ICANN auction occurs.
- Most importantly, waiting until after IE ensures that all bidders are in fact in the running. If an applicant wins an auction, but does not pass IE, that TLD is left in the lurch.
Private or ICANN auctions – determining which applicant will win contention sets is sure to be an exciting and dramatic process, and since we love dramz, keep checking back here to read about new updates in the application and auctioning process. To watch your favorite new TLDs, sign up for our free watcher here.