Hello Sheel,

Having meet with the Applicant Auction staff in Beijing and reviewing both the original documentation as well as the most recent RFP here are my open and transparent comments.

The Good - I think for this first round limiting the ability for a withdrawing applicant to have funds from that auction debited to their account to use in other concurrent auctions is a good thing. Applicant Auction may wish to consider changing that aspect in future rounds as the value of the TLDs are likely to increase. However, for this first round I believe it is prudent to address concerns of applicants engaged in one or two auctions as oppose to the portfolio applicants.

The Indifferent - I personally liked the previous ability to increase the deposit on account during the bidding process, as opposed to the current system where you are “locked in” based upon your initial deposit. While there was always a risk that an applicant would not be able to have a wire transfer reconciled in time, this did provide an applicant a heightened sense of confidence on several fronts.  First, notwithstanding representations that deposits would be held in confidence, the ICANN “glitch” is still a sore spot for many in the community. Second, in light of all the bid rigging “noise” it allowed an applicant to hold in confidence what it was eventually willing to spend. In the current system for a single applicant bidder their maximum bid is locked in based upon their initial/final deposit. This should not be an issue as long as the deposit amount is held in confidence, see point #1 about the glitch. Third, there was a concern following my meeting in Beijing that the software might look to the value of the deposit on account and ratchet up the bidding increments accordingly.  However, considering all the data points currently available to me I am probably indifferent to this proposed change. The fact that Applicant Auction has now stated how the bid price will be increased per round is probably the biggest confidence booster, and there is no reason to suspect that there should be another glitch with the Applicant Auction system having tested it out several times.

The Bad - I am a BIG believe in openness and transparency as evidenced by this response. Therefore I believe the original representations made by Applicant Auction that the system would show all bidders the exit bid per round and all final bids for all TLDs during the auction, and making this information publicly available after the auction was a very prudent course of action. Not only did it provide openness and transparency but it put all bidders on equal footing as opposed to Portfolio Applicants which inherently because of their multiple auctions would information NOT AVAILABLE to other bidders. So here are my questions to the experts at Applicant Auction.

1) What is the percentage of auctions that it has held in the past in which the winning bid was not publicly disclosed and only disclosed to the bidder?
2) Does this not potentially benefit portfolio applicants which will have better data sets in advance of the subsequent auctions as to the price the marketplace is willing to spend?
3) What is the “logic” behind this proposed change since the original approach appeared to be in sync with ICANN proposed auction of last resort?
4) Who requested this change?

To be fair, I do NOT expect an answer to Question #4.  However, I suspect that this might be a question that our friends at a competition authority might be asking.  If there is one thing that the whole Jeffrey Stoler never ending saga has proven is that some people will leave no stone unturned.

Therefore I personally believe that this change which on its face appears to be more closed and opaque is NOT a positive development, and would welcome Applicant Auction to explain (either legally or academically) while this is a positive change and consistent with best practices in the auction space.

In closing, while I was originally not a big champion/believer of the private auction solution, I have gained confidence over time in the processes and protocols which Applicant Auction has put in place and I look forward to any response which you can provide to this post.

Michael,

Thanks for your detailed comments. Looks like we could have done a better job explaining the following:

As before, we propose that ALL auction participants can see, after each round, the demand for ALL TLDs in the auction - not just for the ones they are bidding on. So we did not change this in favor of portfolio applicants. (Although some had openly requested this in Santa Monica).

We did make one small change - we no longer disclose the exact price that each winner pays for each domain. Instead, we publish the sum of these prices, publicly. We felt that this was a good compromise to protect information about individual applicants’ business and budget situation, while still informing the public about the general price level for the TLDs.

We do think that for this first auction, this is a positive change. Especially when it can affect bidding behavior in future auctions, It’s good practice to protect sensitive business information of bidders in an auction, which was the goal of this small change.

To answer your questions:

1) For the 120 auctions I have been involved in, 90% had the same policy as we propose: Do not disclose the amount of the winning bids. Among Second Price auctions, it’s 100%. In fact, this is a key reason for choosing the ascending clock auction format both ICANN and the Applicant Auction use: In most cases, nobody, not even the auctioneer, knows how much a bidder was willing to pay.

The price that the winner pays is indeed usually disclosed, and it’s likely that we will do so in future auctions. But participants in the first auction are still contributing price information to the public, and I think they deserve some protection of their private budget and financial information.

2) All participants are treated the same - they know how much they pay or receive for TLDs they were involved in, and they have per-round demand information for ALL TLDs, not just the ones they bid for.
The only change since Santa Monica is that we protect all of the bidder’s budget and business information by not disclosing the exact winning price.

3)  We are doing almost everything exactly the same way as ICANN - except that we are protecting private budget information for applicants who are participating in the first applicant auction.
In the final Applicant Auction, I would favor disclosing the winning prices as well, publicly.

4) Actually, nobody requested the particular approach we put in the proposal. It’s a compromise that we came up with after looking through our notes with the comments from Beijing.

On the deposit, you make some excellent points. We acknowledge that this information is extremely sensitive and we will keep it confidential via encryption, which is what we have done for over $30B worth of auctions without any security breaches. That said, if there is still concern, we are open to suggestions.

I hope this helps and answers your questions - please do follow up if there is anything else we can explain better or should change.

Hello Sheel,

Thanks for your timely, open and transparent response.

With regard to my first question, thank you for clarifying between the winning bid and the winning price. I see how my choice of wording may have created an issue. I agree the winning price is the more critical factor. While I think knowing the exact finial winning price would be the more optimal outcome for all stakeholders, I understand that in trying to balance competing interests/concerns compromises needs to be made.  I think disclosing the pricing per round and the knowing the final range is a reasonable compromise for those applicants participating in this first round.

With regard to my second question, I believe your clarification in connection with Question 1 is important. Currently I have only one applicant which has expressed an interest in the use of a private auction. I believe based on the clarification you have provided and re-reading the RFP, non-portfolio applicants would be provided equal footing in this round in connection portfolio applicants. So in light of my previous rating I would change my “bad” to an “indifferent.”

I appreciate your response to my third and fourth questions.  Having addressed my primary concern of what data will be available to participants and when, I think my primary concerns of portfolio applicants having a competitive advantage in the current/future round has been largely addressed/mitigated. I appreciate that the service you are trying to provide is one in which one must balance many competing interests. 

I have been impressed by the professionalism of the Applicant Auction team and I look forward to participating in your upcoming auction.

Wasn’t MoFo representing Name.Space in the lawsuit against ICANN over new gTLDs? (and which has apparently gone to the court of appeal) I’d find it odd that they’d be helping the new gTLD process along, if they’re still representing Name.Space (which wasn’t clear from the appeal documents that were posted on DNW.com last week).