The first sealed bid auction for a new gTLD contention set was completed last week for the string .One.

To our knowledge this is 1st auction to be conducted by a third party other than Applicant Auction to settle a contention set and marks the first time a new gTLD contention set was settled through a “Single Sealed Bid Second Price” auction. The auction was conducted by RightOfTheDot™, LLC (also the developer of the auction method), and their partner Escrow.com. The winning bidder for the new TLD extension was One.com of Dubai, AE, which will act as the worldwide registry for .One domains.

The new method is unlike the traditional ascending clock auction in that it provides complete customization and flexibility in when the auction will be held, how the funds will be disbursed, payment timing, application withdrawal, auction timing, auction type, and more.

The results from a Single Sealed Second Price Auction generally yield fairer and lower winning bid prices, less bid rigging, less confusion, and less time to determine a winning applicant. Single Sealed Bid Second Price auction method also protects the participants from ‘auction fever,’ which often causes over-bidding as people get emotionally tied to the process of winning at any cost due to time committed and sometimes throw their budgets out the window. This potentially results in less money and resources to successfully launch and market the new TLD participants are bidding for.

The flexibility of a Single Sealed Second Price Auction solution is unique and based on the philosophy that the applicants in each contention set should be the ones to determine when, where and how the auction should be held; and how funds are disbursed, whether to the non-winning bidders, a third-party charity or industry association, or a combination of all. These decisions will vary by contention set depending on the TLD and the participants in each contending set. This auction model also allows applicants to send in the full amount of their bid into Escrow.com, which is licensed, insured and has handled over $1.5 Billion in transactions.

Many applicants have expressed interest in a private auction whereby instead of a deposit being wired to allow bidding, either in an amount tied to the amount of the deposit or in the case of a ICANN Last Resort auction $2 Million to allow for unlimited bidding, for the applicants just to wire the funds into Escrow.com with the wired amount serving as the bid.

The auction is still in the form of a sealed bid auction and the winning bidder still pays the second highest bid.

After all wires are received by the deadline by Escrow.com, the winner is declared and instructs non-winning bidders to withdraw their application.

Once all non-winning applications are withdrawn, Escrow.com will distribute the winner’s bid (which would be the second highest amount wired in) to the losing bidders, along with their wired bid amount back, and the winning bidder would be refunded their overbid (the amount bid over the 2nd highest bid).

This method has several advantages.

• It saves time and steps. Since a winning bidder in a contention auction only has a short period to get its winning bid paid, why require that each bidder send in a deposit only to be allowed to bid? Why not just have each applicant send in the amount the string is worth to the applicant with the wire representing the bid?
  
  Payment in full is then set in escrow.One wire in, and one wire out for all applicants.
• Second it addresses some applicants concerns that an applicant may not actually have the funds on hand that they will be bidding.
  
  Using a wire bidding method eliminates the possibility of a defaulting winning bidder and the delay in the non-winning bidders receiving their funds waiting for the winner to pay.
• Thirdly such an auction eliminates possibility that non-winning bidders will use the auction process to artificially drive up the price paid at auction so as to just increase their share of the winning bid.

It’s an interesting concept and now with one successfully held we expect other applicants to use the Single Sealed bid model including those that desire just to wire in their bid and pay the second highest amount.