Steep price paid for 'drugs.com'
By Brock N. Meeks - August 7, 1999 11:55 AM PT
Cybersquatters auctioned off 'drug.com' domain name for more than
$800,000.
WASHINGTON -- A twenty-something entrepreneur is sitting on a large sum of cash
as a result of 'drug' lust -- the result of his auction of his "drugs.com"
domain, which sold for $823,456 according to the broker, GreatDomains.com.
The lucrative reselling market for popular domain names has shed light on the
treacherous practice of "cybersquatters," those who scoop up brand names in
hopes of extorting a high price from companies wishing to protect their trademarks in
cyberspace. The issue has risen to crisis level, leading to passage by the Senate
Friday of a bill that would prohibit the practice.
Easy-to-type and easy-to-remember domain names are, apparently, worth their
weight in gold. Jeff Tinsley, CEO of Greatdomains.com which brokers domain names, said he
had several "open" contracts for the "drugs.com" domain name. Tinsley
said earlier he believed the bidding could hit the magic $1 million mark.
"These open contracts have been signed by people that said, 'We want to
win' and they've left the price open on their contract," Tinsley told MSNBC. He
expected some chaotic moments and frantic phone calls as the open contract bidders toss in
their best and final offers before the 5 p.m. PST Friday deadline.
Because of confidentiality agreements, Tinsley declined to name any of the
bidders but said several "major" companies have coughed up confirmed bids or
open contracts.
Record is $3.35 million
The million-dollar milestone isn't unprecedented. Wallstreet.com and Linux.com
were sold for more than $1 million; Altavista.com was sold to Compaq Computer for $3.35
million. Each of the domains was originally registered for a mere $70.
Drugs.com has taken another route. Eric MacIver, who turns 22 on Saturday and
runs a Web design firm located in Mesa, Ariz., will reap the lion's share of the auction
proceeds despite the fact that he doesn't own the domain outright.
In May, MacIver bought the rights to drugs.com from its registered owner, Bonnie
Neubeck, owner of a Minneapolis Internet marketing company. Neubeck, who has sold other
domain names for six-figure amounts, will get a small cut of the final drugs.com price.
MacIver originally bought the rights to drugs.com intending to set up a kind of
online pharmacy operation but dumped the idea in favor of a free-for-all auction.
Auctions feed 'squatting' frenzy
Even well-known companies with stellar brand names, such as the recently
launched Drugstore.com with the $2 billion it raised during its initial public offering
windfall, would have interest in owning drugs.com. Although it's unlikely that any
established pharmaceutical firm would dump its brand name in favor of
"drugs.com" any company could easily have anyone typing "drugs.com"
into their Web browser redirected to the company's flagship site.
And therein lies the rub. Companies are finding themselves increasingly
confronted by "cybersquatters" who have snatched up and registered their
trademarks, or variations of them, who then demand top dollar figures for the
"right" to reclaim their own hard-won brand names.
The practice has caught the attention of Congress. Late Thursday night, just
hours before Congress closed up shop for its August recess, the Senate, on a unanimous
voice vote, passed a bill, that takes aim at denting the practice of cybersquatting.
The bill would allow trademark owners to recover statutory damages in cases
where it is proven that a trademarked name was registered in bad faith by a person who
intended to unfairly profit from its sale.
The measure also would allow trademark owners to seek the forfeiture,
cancellation or transfer of an infringing domain name after satisfying the court that it
has tried but was unable to locate the person who registered it.
The bill also would seem to be a dagger aimed at the heart of Tinsley's own
entrepreneurial efforts, which feed the domain name profiteering frenzy.
Not so, Tinsley said. "We deal only in legitimate domain names, not those
that are trademarked," he said. Greatdomains.com won't play the middleman for a
trademarked name, unless it's the trademark owner doing the selling, Tinsley said.
Yet Tinsley's site seems to be begging to be embroiled in a trademark suit. His
site lists "prudentialinsurance.com" for sale, price: $250,000. The site is
registered to Survival Network Inc. of Rosemont, Pa.
Tinsley said the domain had just been listed with his site on Friday and that it
would be deleted from his database; as of the publication of this article, the domain was
still for sale.
In addition, someone is offering "LosAngelesCity.Com" for the cool
price of $200,000 via Tinsley's site.
All flash, no cash
"To a large degree, the success of the recent IPO by Drugstore.com can be
attributed to the underlying solid domain name used by the company," Tinsley said.
"Leading Internet companies recognize that they need an outstanding domain name to
compete successfully."
Despite the hype from Tinsley, it's not entirely clear that a flashy name
equates to the bottom line in cyberspace.
Companies seeking an Internet presence are scrambling to find domain names that
are easy to remember and likely to appeal to customers, said Preston Dodd, an analyst with
Jupiter Communications in New York. But a successful site requires more than just a name.
"In terms of building the brand itself, there obviously could be a huge
head start. It's even easier to remember than 1-800-Flowers," said Dodd. "It's
not a silver bullet. They have to build a brand around it, and they have to build
awareness."
Related Links:
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Cybersquatters'
face domain eviction
'Cybersquatters'
targeted by WIPO
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