[AfrICANN-discuss] The man who owns the Internet

[Vika Mpisane]

Wow, interesting story this is, Anne-Rachel. I didn't finish the story, but
Ham is a quick-thinker. I wonder if his practice is all ethical. Whatever
the answer is, Ham is a shrewd entrepreneur....
 
Regards,
Vika

  _____  

From: africann-bounces at afrinic.net [mailto:africann-bounces at afrinic.net] On
Behalf Of Anne-Rachel Inné
Sent: 22 May 2007 23:18
To: africann at afrinic.net; African Information Society Initiative -
Discussion Forum
Subject: [AfrICANN-discuss] The man who owns the Internet



Ham makes money every time someone clicks on an ad -- as does his partner in
this venture, the West African country of Cameroon. Why Cameroon? It has the
unforeseen good fortune of owning .cm as its country code -- just as Germany
runs all names that end with .de. 

The difference is that hardly any .cm names are registered, and the letters
are just one keyboard slip away from .com, the mother lode of all domains.
Ham landed connections to the Cameroon government and flew in his people to
reroute the traffic. And if he gets his way, Colombia (.co), Oman (.om),
Niger (.ne), and Ethiopia (.et) will be his as well. 


----------------------------------------------------------------------------
----



The man who owns the Internet

http://money.cnn.com/magazines/business2/business2_archive/2007/06/01/100050
989/index.htm



Kevin Ham is the most powerful dotcom mogul you've never heard of, reports
Business 2.0 Magazine. Here's how the master of Web domains built a $300
million empire.

By Paul Sloan
<http://money.cnn.com/magazines/business2/business2_archive/2007/06/01/10005
0989/mailto:psloan at business2.com;talkback at business2.com> , Business 2.0
Magazine editor-at-large
May 22 2007: 2:17 PM EDT 
 <http://money.cnn.com/magazines/business2> 


(Business 2.0 Magazine) -- Kevin Ham leans forward, sits up tall, closes his
eyes, and begins to type -- into the air. He's seated along the rear wall of
a packed ballroom in Las Vegas's Venetian Hotel. Up front, an auctioneer is
running through a list of Internet domain names, building excitement the
same way he might if vintage cars were on the block.

As names come up that interest Ham, he occasionally air-types. It's the
ultimate gut check. Is the name one that people might enter directly into
their Web browser, bypassing the search engine box entirely, as Ham wants?
Is it better in plural or singular form? If it's a typo, is it a mistake a
lot of people would make? Or does the name, like a stunning beachfront
property, just feel like a winner?

When Ham wants a domain, he leans over and quietly instructs an associate to
bid on his behalf. He likes wedding names, so his guy lifts the white paddle
and snags Weddingcatering.com for $10,000. Greeting.com is not nearly as
good as the plural Greetings.com, but Ham grabs it anyway, for $350,000.

Ham is a devout Christian, and he spends $31,000 to add Christianrock.com to
his collection, which already includes God.com and Satan.com. When it's all
over, Ham strolls to the table near the exit and writes a check for
$650,000. It's a cheap afternoon.

Just a few years ago, most of the guys bidding in this room had never laid
eyes on one another. Indeed, they rarely left their home computers. Now they
find themselves in a Vegas ballroom surrounded by deep-pocketed bankers,
venture-backed startups, and other investors trying to get a piece of the
action.

And why not? In the past three years alone, the number of dotcom names has
soared more than 130 percent to 66 million. Every two seconds, another joins
the list.

But the big money is in the aftermarket, where the most valuable names --
those that draw thousands of pageviews and throw off steady cash from
Google's and Yahoo's pay-per-click ads -- are driving prices to dizzying
heights. People who had the guts and foresight to sweep up names shed during
the dotcom bust are now landlords of some of the most valuable real estate
on the Web.

The man at the top of this little-known hierarchy is Kevin Ham -- one of a
handful of major-league "domainers" in the world and arguably the shrewdest
and most ambitious of the lot. Even in a field filled with unusual career
paths, Ham's stands out.

Trained as a family doctor, he put off medicine after discovering the riches
of the Web. Since 2000 he has quietly cobbled together a portfolio of some
300,000 domains that, combined with several other ventures, generate an
estimated $70 million a year in revenue. (Like all his financial details,
Ham would neither confirm nor deny this figure.)

Working mostly as a solo operator, Ham has looked for every opening and
exploited every angle -- even inventing a few of his own -- to expand his
enterprise. Early on, he wrote software to snag expiring names on the cheap.
He was one of the first to take advantage of a loophole that allows people
to register a name and return it without cost after a free trial, on
occasion grabbing hundreds of thousands of names in one swoop.

And what few people know is that he's also the man behind the domain world's
latest scheme: profiting from traffic generated by the millions of people
who mistakenly type ".cm" instead of ".com" at the end of a domain name.

Try it with almost any name you can think of -- Beer.cm, Newyorktimes.cm,
even Anyname.cm -- and you'll land on a page called Agoga.com, a site filled
with ads served up by Yahoo
<http://money.cnn.com/quote/quote.html?symb=YHOO&source=story_quote_link>  (
Charts
<http://money.cnn.com/quote/chart/chart.html?symb=YHOO&source=story_charts_l
ink> , Fortune 500
<http://money.cnn.com/magazines/fortune/fortune500/2007/snapshots/1591.html?
source=story_f500_link> ).

Ham makes money every time someone clicks on an ad -- as does his partner in
this venture, the West African country of Cameroon. Why Cameroon? It has the
unforeseen good fortune of owning .cm as its country code -- just as Germany
runs all names that end with .de.

The difference is that hardly any .cm names are registered, and the letters
are just one keyboard slip away from .com, the mother lode of all domains.
Ham landed connections to the Cameroon government and flew in his people to
reroute the traffic. And if he gets his way, Colombia (.co), Oman (.om),
Niger (.ne), and Ethiopia (.et) will be his as well.

"It's in the works," Ham says over lunch in his hometown of Vancouver,
British Columbia. "That's why I can't talk about it." He's nearly as
reluctant to share details about his newest company, called Reinvent
Technology, into which he's investing tens of millions of dollars to build a
powerhouse of Internet businesses around his most valuable properties.

Given Ham's reach on the Web -- his sites receive 30 million unique visitors
a month -- it's remarkable that so few people know about him. Even in the
clubby world of domainers, he's a mystery man. Until now Ham has never
talked publicly about his business. You won't find his name on any domain
registration, nor will you see it on the patent application for the Cameroon
trick.

There are practical reasons for the low profile: For one, Ham's success has
drawn enemies, many of them rivals. He once used a Vancouver post office box
for domain-related mail -- until the day he opened a package that contained
a note reading "You are a piece of s**t," accompanied by an actual piece of
it.

Bitter domainers are one thing, lawyers another. And at the moment, Ham's
biggest concern is that corporate counsels will come after him claiming that
the Cameroon typo scheme is an abuse of their trademarks. He may be right,
since this is the first time he's been identified as the orchestrator.

When asked about the .cm play, John Berryhill, a top domain attorney who
doesn't work for Ham, practically screams into the phone, "You know who did
that? Do you have any idea how many people want to know who's behind that?"

Spreading the word

Kevin Ham is a boyish-looking 37-year-old, trim from a passion for judo and
a commitment to clean living. His drink of choice: grapefruit juice, no ice.
His mild demeanor belies the aggressive, work-around-the-clock type that he
is. Ham frequently steers conversations about business back to the Bible.
Not in a preachy way; it's just who he is.

The son of Korean-born immigrants, Ham grew up on the east side of Vancouver
with his three brothers. His father ran dry-cleaning stores; his mother
worked graveyard shifts as a nurse. A debilitating illness at the age of 14
led Ham to dream of becoming a doctor. He cruised through high school and
then undergraduate work and medical school at the University of British
Columbia.

Christianity had long been a mainstay with his family, but as an undergrad,
he made the Bible a focal point of his life; he joined the Evangelical
Layman's Church and attended regular Bible meetings. Ham recalls that it was
about this time -- 1992 or 1993 -- that he was introduced to the Web. A
church friend told him about a powerful new medium that could be used to
spread the gospel.

"Those words really struck me," Ham says. "It's the reason I'm still
working."

After he graduated from med school in 1998, Ham and his new bride took off
for London, Ontario, for a two-year residency. By the second year, Ham had
become chief resident, and when he wasn't rushing to the emergency room, he
indulged his growing fascination with the Net, teaching himself to create
websites and to code in Perl.

Information about Web hosting at the time was so scattered that Ham began
creating an online directory of providers, complete with reviews and ratings
of their services. He called it Hostglobal.com.

>From there it was a short step to the business of buying and selling
domains. About six months after he launched Hostglobal, Ham was earning
around $10,000 per month in ad sales. But when one of his advertisers -- a
service that sold domain registrations -- told him that a single ad was
generating business worth $1,500 a month, Ham figured he could get in on
that too.

>From doctor to domainer

It made sense: People shopping for hosting services were often interested in
buying a catchy URL, so Ham launched a second directory, called
DNSindex.com. Like similar services operating at the time, it gave customers
a way to register domain names.

But Ham added the one feature that early domain hunters wanted most: weekly
lists of available names, compiled using free sources he found on the Web.
Some lists he gave away; others he charged as much as $50 for. In a couple
of months, he had more than 5,000 customers.

By the time he finished his residency in June 2000, his two small Web
ventures were pulling in more money in a month -- sometimes $40,000 -- than
Ham made that year at the hospital. That was enough, he reasoned, to put off
starting a medical practice for three more months, maybe six. "It just
didn't make sense not to do it," he says.

With a new baby in tow, Ham and his wife moved back to Vancouver, settling
into a one-bedroom apartment. Ham's timing, it turned out, was spot-on. Tech
stocks were tumbling, dotcoms were folding left and right, and investors
were fleeing the Web. More important to him, hundreds of thousands of
valuable domain names that were suddenly considered worthless began to
expire, or "drop." Ham and a handful of other trailblazers were ready to
snap them up.

Figuring out when names would drop was tedious work.

At the time, Network Solutions controlled the best names; it was for a long
time the only retail company, or registrar, selling .coms. It didn't say
when expiring names would go back on the market, but twice a day it
published the master list of all registered names -- the so-called "root
zone" file (now managed by VeriSign
<http://money.cnn.com/quote/quote.html?symb=VRSN&source=story_quote_link>  (
Charts
<http://money.cnn.com/quote/chart/chart.html?symb=VRSN&source=story_charts_l
ink> )). It was a fat list of well over 5 million names that took hours to
download and often crashed the under-powered PCs of the day.

So Ham wrote software scripts that compared one day's list with the next.
Then he tracked names that vanished from the root file. Those names would be
listed briefly as on hold, and Ham figured out that they would almost always
drop five or six days later -- at about 3:30 a.m. on the West Coast. In the
dark of night, Ham launched his attacks, firing up five PCs and multiple
browsers in each. Typing furiously, he would enter his buy requests and
bounce from one keyboard to the next until he snagged the names he wanted.

He missed a lot of them, of course.

Ham had no clue that there were rivals out there who were way ahead him,
deploying software that purchased names at a rate that Ham's fingers
couldn't match. Through registration data, he eventually traced many of
those purchases to one owner: "NoName." Behind the shadowy moniker was
another reclusive domain pioneer, a Chinese-born programmer named Yun Ye,
who, according to people who know him, operated out of his house in Fremont,
Calif.

By day Ye worked as a software developer. At night he unleashed the programs
that automated domain purchases. (Ye achieved deity status among domainers
in 2004 when he sold a portfolio of 100,000 names to Marchex
<http://money.cnn.com/quote/quote.html?symb=MCHX&source=story_quote_link>  (
Charts
<http://money.cnn.com/quote/chart/chart.html?symb=MCHX&source=story_charts_l
ink> ), a Seattle-based, publicly traded search marketing firm, for $164
million. He then moved to Vancouver.)

Ham went back to the keyboard, writing scripts so that he, too, could pound
at the registrars. Ham's track record began to improve, but he still wasn't
satisfied. "Yun was just too good," he says.

Then Ham did something brash: He bought his way to the front of the line.
Since registrars had direct connections to Network Solutions's servers,
Ham's play was to cut out the middleman. He struck deals with several
discount registrars, even helping them write software to ensure that they
captured the names Ham wanted to buy during the drops. In exchange for the
exclusivity, Ham offered to pay as much as $100 for some names that might
normally go for as little as $8.

Within weeks Ham had struck so many deals that, according to rivals, he
controlled most of the direct connections. "I kept telling them to hit them
harder," Ham says in a rare boastful moment. "We brought down the servers
many times." During one six-month period starting in late 2000, Ham
registered more than 10,000 names.

Rival domainers, locked out of much of the action, didn't appreciate Ham's
tactics. It was one of them, most likely, who sent him the turd. "Kevin came
in and closed the door for everyone else," says Frank Schilling, a domainer
who figured out what Ham had done and sealed similar deals. "There was a ton
of professional jealousy."

Ham, in fact, owes a lot to Schilling. Both men lived in Vancouver at the
time, and after Ham sought out Schilling in November 2000, the two met at a
restaurant to compare notes.

"How much traffic do you have?" Schilling asked. An embarrassed Ham replied
that he had no idea. Schilling mentioned that he was experimenting with a
new service, GoTo.com, that would populate his domains with ads. Ham spent
the next week figuring out how much traffic his sites were generating, and
he was amazed by the initial tally: 8,000 unique visitors per day from the
375 names he owned at the time.

"From then on," Ham says, "I knew that what I was building would be very,
very valuable." He soon signed up with GoTo (which was later purchased by
Yahoo). On his first day, Ham made $1,500.

The system worked then as it does now: People don't always use Google
<http://money.cnn.com/quote/quote.html?symb=GOOG&source=story_quote_link>
(Charts
<http://money.cnn.com/quote/chart/chart.html?symb=GOOG&source=story_charts_l
ink> , Fortune 500
<http://money.cnn.com/magazines/fortune/fortune500/2007/snapshots/3967.html?
source=story_f500_link> ) or Yahoo to find something on the Web; they'll
often type what they're looking for into a browser's address bar and add
".com."

It's a practice known as "direct navigation," or type-in traffic, and
millions do it. Need wedding shoes? Type in "weddingshoes.com" -- a site
that Ham happens to own -- and you'll land on what looks like a
shoe-shopping portal, filled with links from dozens of retailers.

Click on any one of those links, and the advertiser that placed it pays
Yahoo, which in turn pays a cut to Ham. That single site, Ham says, brings
in $9,100 a year. Small change, maybe, but the name cost him $8, and his
annual overhead for it is about $7. Multiply that model several thousand
times over, and you get a quick idea of the kind of cash machine that Ham
was creating from his living room.

By early 2002, roughly $1 million a year was pouring into Ham's operation,
which he ran with the help of his high school friend and current partner,
Colin Yu. But again he felt the tug of his conscience. He occasionally left
Vancouver to do medical missionary stints, helping patients in Mexico, the
Philippines, and China. He found the experience rewarding, but the
development boom he saw taking off in China just reminded him of the virtual
real estate boom he was leading back home.

Soon Ham was back working full-time on the Web. "There was just too much
more to do," he says.

A little taste

There was no looking back. The next few years were among Ham's most
aggressive. One of his most valuable tricks was one he had experimented with
in the early days, a practice called domain "tasting." Tasting takes
advantage of a provision that allows domain-name buyers a free five-day
trial period. Intended to protect customers who mistakenly purchase the
wrong name, it handed aggressive domainers another means with which to
expand -- and exploit -- their portfolios.

Ham cobbled together new lists of domain words in every combination,
registering hundreds of thousands of new names for free, monitoring the
traffic, and then returning the duds. By 2004, Ham had amassed such a deep
portfolio that he pulled his names from third-party registrars, launched his
own registrar, and then created another company, appropriately named
Hitfarm, that could do a better job than Yahoo of matching ads with domain
names -- for himself and 100 or so other domainers.

Like any shopping spree, though, Ham's tasting binge didn't last. It brought
in so many names -- offbeat strings of letters, names with too many dashes,
and other variations that humans would be hard-pressed to think of -- that
Ham saw the quality of his portfolio dropping in proportion to its growing
size. For every few thousand names he'd register, he'd toss back all but a
hundred or so.

Tasting exacerbated another problem too: Ham's software grabbed all kinds of
typographical variations of trademarked names. Called typo-squatting, it's a
practice now coming under the same intense scrutiny long faced by
cybersquatters. Microsoft
<http://money.cnn.com/quote/quote.html?symb=MSFT&source=story_quote_link>  (
Charts
<http://money.cnn.com/quote/chart/chart.html?symb=MSFT&source=story_charts_l
ink> , Fortune 500
<http://money.cnn.com/magazines/fortune/fortune500/2007/snapshots/879.html?s
ource=story_f500_link> ) and Neiman Marcus are just two companies whose
lawyers have brought anti-cybersquatting lawsuits, charging domainers with
intentionally profiting from variations of their trademarks.

"Tasting changed everything," says Ham, who has since abandoned the
practice, though he concedes that Hitfarm still holds some problematic
names. "I said, forget it," he says. "Generic names are already too hard to
come by. And the legal risks are too great."

The legal risks should diminish, however, if you don't own the domain names
at all -- and that's the secret behind the Cameroon play.

New world order

The domain confab in Vegas is like any other trade conference: The real
intrigue happens at cocktail hour. One subject in the air is Cameroon. Late
last summer, domainers began noticing that something odd happens to .cm
traffic: It all winds up at a site called Agoga.com. Domainers know, of
course, that .cm belongs to Cameroon. And they know that whoever controls
Agoga.com has created a potential gold mine.

What they don't know is who's behind it all.

At one of the meet-and-greets, Ham is standing drinkless, as usual, sporting
a polo shirt, chatting with a few people he knows and some he's just met. In
this crowd, it seems, everyone wants to know Ham. Finally, he is alone.

"I hear you're the guy behind .cm?"

Ham looks surprised by the reporter's question, then flashes a big smile and
says, "I had help."

Over a series of conversations a few weeks later in Vancouver, Ham shares
some details about a deal that, despite his innate reticence, he's clearly
proud of. About a year ago, he says, he worked his contacts to gain
connections to government officials in Cameroon. Then he flew several
confidantes to Yaoundé, the capital, to make their pitch. His key programmer
went along to handle the technical details.

"Hey," Ham says, flagging his techie down near the office elevator. "Didn't
you meet with the president of Cameroon?"

"Nah," the programmer says. "We met with the prime minister. But we did see
the president's compound." 

It's an odd scene to picture: a domainer's reps in a sit-down with Ephraim
Inoni, the prime minister of Cameroon, to discuss the power of type-in typo
traffic and pay-per-click ads. And yet, as with most of the angles Ham has
played, the Cameroon scheme is ingeniously straightforward.

Ham's people installed a line of software, called a "wildcard," that
reroutes traffic addressed to any .cm domain name that isn't registered. In
the case of Cameroon, a country of 18 million with just 167,000 computers
connected to the Internet, that means hundreds of millions of names. Type in
"paper.cm" and servers owned by Camtel, the state-owned company that runs
Cameroon's domain registry, redirect the query to Ham's Agoga.com servers in
Vancouver.

The servers fill the page with ads for paper and office-supply merchants.
(Officials at Yahoo confirm that the company serves ads for Ham's .cm play.)
It all happens in a flash, and since Ham doesn't own or register the names,
he's not technically typo-squatting, according to several lawyers who handle
Internet issues.

The method is spelled out in a patent application filed by a Vancouver
businessman named Robert Seeman, who Ham says is his partner in the venture
and who also serves as chief adviser at Reinvent Technology. (Seeman
declined to be interviewed for this story.)

Ham won't reveal specifics but says Agoga receives "in the ballpark" of 8
million unique visitors per month. Fellow domainers, naturally, are envious.

"As soon as it started happening, there was a huge sense of 'Why didn't I
think of that?'" says attorney Berryhill, who represents Schilling and other
domainers.

Still, several companies have already tracked down Ham's attorneys, claiming
trademark infringement. Ham argues that his system is legally in the clear
because it treats every.cm typo equally and doesn't filter out trademarked
names.

Berryhill concurs. "You can't really say that [wildcarding] is targeting
trade-marks," he says. "It captures all the traffic, not just trademark
traffic." Moreover, the anti-cybersquatting statute applies only to people
who register a trademarked domain; using a wildcard doesn't require
registering names.

Clever though it may be, .cm is "a very small part of our operations," Ham
says. He won't disclose how much he pays to the government of Cameroon,
whose officials could not be reached for comment.

The partnership has been a rocky one so far, and the system has sporadically
shut down. But .cm is only one of several country domains where the typo
play can work. According to Ham, he and his team are working with other
governments. The dream typo play -- .co -- belongs to Colombia, to which Ham
says Seeman paid several visits long before they began working on Cameroon.
(Citing safety concerns, Ham hasn't yet made the trip. "I would only go if
the president requests to meet me," he says.)

As for other countries he might soon invade, Oman (.om) is an obvious
target. Niger and Ethiopia are out there too, but since they would play off
less lucrative .net typos, they might not be worth the trouble.

As for Colombia, Ham says, "we're making progress."

The long view

Ham leans over his office PC to check on a domain auction. Steven Sacks, a
domainer based in Indianapolis who works for Ham, is telling him about some
names up for sale. Ham shoots back an instant message: "I like
doctordegree.com ... and rockquarry.com ... sunblinds.com."

The days of figuring out the drop are long over. Everything's open now.
Lists are easy to obtain. You can preorder a name before it drops and hope
to get it. Or, like Ham, you can shell out five or six figures in online
auctions. The only great deals, at least for .com names, tend to happen
privately, when a domainer manages to find an eager or naive seller.

Ham still buys 30 to 100 names a day, but he's no longer getting them on the
cheap. In fact, he and Schilling, who today maintains a $20 million-a-year
portfolio from his home in the Cayman Islands, are often accused of driving
up prices.

Take, for example, the $26,250 Ham paid for Fruitgiftbaskets.com, or the
$171,250 for Hoteldeals.com. "The amount he will pay is crazy," says Bob
Martin, president of Internet REIT, a domain investment firm that has raised
more than $125 million from private investors, including Maveron, the
venture firm backed by Starbucks founder Howard Schultz.

Nonsense, Ham says. The names are expensive only if you value them the way
people like Martin do. The VCs and bankers, who were late to the domain gold
rush, assess names by calculating the pay-per-click ad revenue and attaching
a multiple based on how long it would take to pay off the investment.

Viewed that way, Ham's personal portfolio alone is worth roughly $300
million. But some of Ham's recent domain purchases would also look silly:
They'd take 15 or 20 years just to justify the price, and that assumes
continuation of the pay-per-click model.

But Ham is taking a longer view. The Web, he says, is becoming cluttered
with parked pages. The model is amazingly efficient -- lots of money for
little work --but Ham argues that Internet users will soon grow weary of it
all.

He also expects Google, Microsoft, and Yahoo to find ways to effectively
combat typo-squatting. Some browsers can already fix typos; Internet
Explorer catches unregistered domains and redirects visitors to a Microsoft
page -- in effect controlling traffic the same way that Ham is doing with
.cm. "The heat is rising," Ham says.

When Ham buys a domain now, he's not doing pay-per-click math but rather
sizing it up as a potential business. Reinvent Technology aims to turn his
most valuable names into mini media companies, based on hundreds of niche
categories.

Among the first he'd like to launch, not surprisingly, is Religion.com. Ham
recently leased the entire 27th floor in his Vancouver building and is now
hiring more than 150 designers, engineers, salespeople, and editorial folks.

Much of that effort is going into developing search tools based more on
meaning and less on keywords. "Google is only so useful," Ham says.

The aim is to apply a meaning-based, or "semantic," system across swaths of
sites, luring customers from direct navigation and search engines alike.
Religion.com would then become an anchor to which scores of other sites
would be tied.

"It's time to build out the virtual real estate," Ham says. "There's so much
more value in these names than pay-per-click." Seeman's patent application
even mentions the possibility of turning Web traffic from Cameroon and other
future foreign partners into full-fledged portals.

It's all part of the master plan, as Ham aims to become the first domainer
to move from the ranks of at-home name hunter to Internet titan. Smaller
players have been selling out to VC-backed groups, and Ham expects that the
best names will eventually be owned by just a handful of companies.

If he bets right, he might very well be one of them. "If you control all the
domains," he says, "then you control the Internet."

Paul Sloan, an editor-at-large at Business 2.0, covers the ever-changing
Internet landscape on his blog, The Key <http://blogs.business2.com/sloan/>
.
<http://cnnmoney.printthis.clickability.com/pt/cpt?action=cpt&title=Kevin+Ha
m%2C+the+%24300+million+master+of+Web+domains+-+June+1%2C+2007&expire=-1&url
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>From the June 1, 2007 issue
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