There was a mini brouhaha that had broken out on Namepros in the Flippa strategies thread. There was a reference to an old interview I had done here with the CEO of Flippa David Slutzkin. In that interview I asked him:
6) Does Flippa allow employees to bid on auctions ?
“We do allow our staff to bid on auctions as long as the bidders are
clear about this with sellers, however we’re usually so busy working
with Flippa, that our staff of 12 doesn’t have the time to be buying
more sites.
Hey Now on Namepros felt that there needed to be more in the way of a protection for buyers, that they should know they are potentially bidding against Flippa employees. Of course this is not the first time employees and auction bidding has come up. Adam Dicker while a VP at Go Daddy was allowed by management to bid on auctions. This caused quite a backlash from other bidders, the story was covered by Wired Magazine.
From the article:
Go Daddy put the kibosh on employee after-market domain bidding after Adam Dicker, a Go Daddy exec, got busted bidding on domains on TDNAM (The Domain Name After Market).
“To ensure customer confidence and to avoid any possible future questions of impropriety all GD employees are now and in the future prohibited from participating in TDNAM auctions, purchasing, sales & back orders,” said Christine Jones, Go Daddy general counsel and corporate secretary, in a prepared statement.
Although Go Daddy insists Dicker, vice president of the Domain Name After Market, did nothing “improper,” his actions raise concerns about Go Daddy’s policies and practices.
This isn’t the first time the company has come under fire for serving personal interests before those of customers.
Go Daddy was quick to point out that Adam had no access to inside information.
Kevin Fink to his credit joined Namepros as official Flippa staff and started to reply to concerns, it is good to see a company have a representative get into the muck on a forum, it is one thing to do a guest post on a blog, that is the equivalent of box seats at Wimbledon. It is a very different thing to get into it on a domain forum, the equivalent of being in the mosh pit at a heavy metal concert.
JB Lions pointed out a very good idea, that there should be some kind of symbol so everyone knows that Bidder 2 for example is an employee.
So what are your thoughts on employees bidding in auctions ? Will you participate less in those auctions ?
Just no.
Employees always have inside information.
And even if no one is doing anything wrong, it LOOKS bad.
Any hint of impropriety can drag a company down.
“Go Daddy was quick to point out that Adam had no access to inside information.”
YEAH RIGHT!!
Auction house employees bidding in their company’s auctions does present a conflict of interest for management. Managers could incentivize bidding to the point that it’s no longer genuine — instead motivated by a desire to maximize revenue, enhance seller satisfaction, or create the impression of a vibrant market versus a ghost town. Here I’m not implying that any website does this, but the motivation would logically be there.
There is also a disincentive for management. Where there’s an appearance of impropriety, customers conclude the worst. And, when the economy is arranged to present them with alternatives, they’ll go elsewhere. Some areas of the domain economy are too monopolistic for this to be so. In that case, domainers who smell a rat in their soup must continue to slurp by the spoonful. Not naming any names.
It’s strange to me that domainers are concerned about employee bidding on Flippa to this extent. While I do agree that there’s a potential conflict of interest, albeit tempered by the possibility of public fallout, I’m amazed that domainers are less concerned about much larger problems with domain auctions on Flippa and everywhere else.
Flippa, Sedo, or other seller auction platforms only make a 10-15% commission. Whatever their theoretical incentive to rig auctions, that same incentive exists elsewhere magnified by a factor of 10. Where? Well, sellers have a much stronger incentive to rig their own auctions because they benefit more from doing so. That’s why we seem to detect so much shill bidding initiated by sellers at venues where listing information (including telltale signs) is more conspicuous. But other auction platforms — those where the registrant does not profit from a sale — take home 100% of the auction winnings. So their motive for rigging auctions would be much more intense.
Again, I am not insinuating that anybody in the domain industry has ever or would ever deceive buyers or cheat. Of course, I have heard prominent domain bloggers excuse such tactics by hypothetical individual sellers; but I can only safely assume that their statements are strictly for the sake of argument. The apologetics go along these lines: A buyer shouldn’t blame shill bidding because he’s chosen his own budget and made his own purchase decision. Whether the price rose during negotiations or was pumped up by shill bids ought to make no rational difference. So runs the argument. I disagree. But (crucially) other prominent domainers regard shill bidding (if it occurs) as ok.
Domainers ought to be most concerned about auction rigging on the part of the individuals with the strongest incentives. Focusing on Flippa management’s policy about employee bidding (although it is worth a look), probably is barking up the wrong tree.
No, they shouldn’t. Period.
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I agree 100%:
“Again, I am not insinuating that anybody in the domain industry has ever or would ever deceive buyers or cheat. Of course, I have heard prominent domain bloggers excuse such tactics by hypothetical individual sellers; but I can only safely assume that their statements are strictly for the sake of argument. The apologetics go along these lines: A buyer shouldn’t blame shill bidding because he’s chosen his own budget and made his own purchase decision. Whether the price rose during negotiations or was pumped up by shill bids ought to make no rational difference. So runs the argument. I disagree. But (crucially) other prominent domainers regard shill bidding (if it occurs) as ok.”
I have my suspicions… When I find some evidence they should run and hide.
Not saying anything more but this is not about Flippa.
Again, I am not insinuating that anybody in the domain industry has ever or would ever deceive buyers or cheat
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That’s chicken shit cop-out. Everyone knows it goes on so just come out and say it. A large number of people in the domain industry deceive, cheat, and act in a large number of unethical ways.
There you go, I’ve saved you the burden.
There are legal standards for the appropriate running of an auction – perhaps abiding those should be the way to go?
i·ro·ny1
ˈīrənē,ˈiərnē/
noun
the expression of one’s meaning by using language that normally signifies the opposite, typically for humorous or emphatic effect.
When I ran the drop at eNom and then Demand Media, from 2003 through 2013, I never bid on name. Ever. In fact, when I started running the drop I specifically asked to have my access to the database that ran such things deliberately blocked. I could only see the data I needed to see to run the drop and had no accounts at any auction site nor could I see our own auction data other than what was fed to the drop processor.
And then any time anyone ever even THOUGHT of accusing me of playing fast and loose, I simply informed them that it was physically impossible for me to do so. Worst I could have done would be to somehow look over someone’s shoulder and then tell someone *else* what to do.
Ain’t nobody got time for that.
And now, 20 years into this game, I still sit here with my ethics intact.
Anyone claims otherwise, I say STICK IT.
There will be different arrangements on different platforms, and different people will see the ethical situation differently.
What matters, I’d say, is for management at these auction platforms to
(1) anticipate possible conflicts of interest for employees as well as areas of likely public suspicion (right or wrong);
(2) identify vulnerabilities for manipulation and implement safeguards (external and internal) to prohibit or reduce auction rigging;
(3) articulate the company’s position regarding what can and cannot take place, expressing it as transparently as possible for the benefit of customers.