For the past few days, I have been digesting the news about a GoDaddy employee bidding on GoDaddy Auctions. As I wrote on Thursday evening, the news is disappointing. In the article revealing the discovery, Paul Nicks wrote, “We are also reviewing platform changes to make things even more transparent.” After thinking about this, I think there are three things GoDaddy should do to be transparent and reassure customers that GoDaddy Auctions is a fair auction platform.
Before I get to the three action items I think GoDaddy should take, I think I should my understanding of what happened based on what Paul shared in his article and subsequent comments. If I am incorrectly interpreting things, my feedback might change.
It sounds to me like an employee was also involved in domain investing and was bidding on auctions (“This was not a “bad guy”. He was an employee that loved the space as much as any investor.”). Bidding is against company policy and has been against the rules for years. From what I understand, the bidding was not done to generate revenue for GoDaddy by driving up prices, nor was it done to achieve any type of bonus for hitting revenue numbers. It was done because an employee was trying to buy domain names in auction.
Although it sounds like the employee was using the same type of on-site bidding as customers and did not have access to private bidder information (proxy bidders or who was bidding), the employee could have had information about what domain names were selling via Afternic or GoDaddy Auctions, what domain names were bought and sold by customers, and other information that a third party would probably not possess. Even though this probably isn’t rigging the system, I think there is a very narrow border here and depending on the person’s role and access to customer data, it doesn’t sit well with me. I would not want a GoDaddy employee to see a sale of mine and use this information I consider private to bid against me and buy domain names I want to own. I don’t know if this happened, but I don’t know it did not happen either.
One thing that I keep thinking about is that this is a very difficult thing to guard against. Sure, GoDaddy can tell employees they can’t bid on auctions, but it seems like it could be very difficult to prevent an employee from starting an outside company or working with a friend or family member to set up an outside company and participate in auctions. It’s easy to say “don’t do it,” but it can be difficult to actually ensure nobody is breaking company policy.
All that said, there are three things I think GoDaddy should do to reassure customers:
Hire an outside consulting firm to investigate. I have known Paul Nicks for several years, and I trust what he says. I trust that the company investigated this and reported accurately. I will continue to bid on auctions. I could be in the minority though. I would bet there are a lot of people in the domain investment community who are more concerned about this than I am, and I think an outside investigation will clear things up and offer additional reassurances. I also think people should know if they were bid up in auctions and offer some sort of refund or opportunity to give the name back if that was the case. From my perspective though, I care more about the names I may have lost (and the lost opportunity from those names) than I care about additional money I paid. At least I think I do without knowing actual figures. I don’t know if anything can be done about lost opportunities.
Add bidder nicknames or other tracking. I want to be able to see who I am bidding against to ensure it’s a legitimate bidder. I don’t typically bid on non-expiry names and I am confident nobody is shill bidding to help the house, but I think this would offer reassurance on an ongoing basis.
Publish the full GoDaddy employee policy about bidding on auctions. I think it is probably clear, but GoDaddy should publish a follow-up article with specific information about what GoDaddy employees can and can not do when it comes to GoDaddy auctions. This should also specify the penalty for breaking the house rules. In addition, to the extent it can reveal the information, GoDaddy should discuss what steps it takes to make sure employees are not bidding on domain names in auction.
I do not think GoDaddy Auctions is rigged. I do believe the GoDaddy employee bidding was not doing so to generate revenue for the company or to get a bonus for hitting a revenue target. I do think the employee was probably trying to buy domain names for investment reasons. This has been against the rules and the company dealt with it internally. I think GoDaddy should take the steps if it wants to be more transparent.