Nov

14

Domain ownership tracking

November 14, 2007 | 1 Comment | Joshua Gans

The pure Coase Theorem states that assets (such as domain names) should go to those who value them the most. Thinking about this, Steve Levitt asks:

But there must also be some stark counterexamples in which the Coase Theorem fails. One example is the following: what do you think happens when you enter www.american.com, as I did yesterday, while searching for a plane ticket. American Airlines? Nope — a new magazine

However, the question does not really fit the market. While the Coase theorem says that ownership should track efficiency, market transactions for assets (given that they usually link an asset owner with a single potential buyer) will not necessarily lead to ownership tracking efficiency. Indeed, I demonstrated just that in my 2005 RJE paper on the subject.

Take this example: http://www.survivor.com/. They explicitly say they are not CBS but they are a site about the TV show Survivor. Now you would have thought that CBS would be the natural owner. However, they are only willing to pay as much for the site to cover their next best alternative; presumably, www.cbs.com/survivor which costs them nothing but gets them value. My guess is that the owners of survivor.com would get no rents unless they had that domain name. Hence, it is entirely possible, they would win an auction for that asset.

Just to put some numbers on this. Suppose that CBS can get promotional value out of www.cbs.com/survivor to the value of $1 million and, in this age of Google, it could increase that to $1.25m if it used www.survivor.com. On the other hand, suppose that the present discount value of profits from the current owners of survivor.com were say, $400,000 but that if they didn’t have that domain they would only earn $50,000. Finally, suppose there were a group of 200,000 consumers who go to survivor.com no matter what but will prefer a CBS flashy site to the collective tune of $1 above the current site there.

In this case, CBS would not be willing to pay enough for survivor.com (only $250,000) to wrest it from the $350,000 additional value it gives its current owners but total value in the economy would be lower as the survivor.com consumers would lose $200,000 in value. The Coase Theorem fails because there is no easy way of adding the consumer value to the potential asset market transaction.


Comments

One Response to “Domain ownership tracking”

  1. JetteroHeller on September 16th, 2008 7:41 am

    Do you know of any way to track whois data over time? I.e. a tool that will let you see who registered a website when, and when and if the whois data has changed on it?

    I’m looking for a tool that would let me take something like survivor.com that you mentioned, and be able to see (for example) that it was first registered on blah date by blah people, then was transferred to blah servers and then again to blah with a different name, etc.

    The data itself is all freely available, so it would seem that someone can do this or has done this.