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TRAFFIC Auction

Discussion in 'Domain News' started by neddy, Oct 12, 2011.

  1. neddy

    neddy Membership: VIP

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    There is some interesting debate going on with regards whether Rick Schwartz should be able to bid at his "own" Traffic auction next week.

    At issue is whether there is a conflict of interest - does RS have an advantage over other bidders because he gets a 15% effective commission? i.e his $10,000 bid would in real terms (compared to another bidder) be only worth $8500. The seller is still going to get the same price whoever wins - it's just other bidders that could feel disadvantaged.

    There are two sides to the discussion, and they have been perfectly encapsulated in this post by Domain Shane (and the subsequent comments):

    http://domainshane.com/should-rick-schwartz-be-able-to-bid-on-domains-at-his-own-auction/#comments

    What's your opinion?
     
  2. FirstPageResults

    FirstPageResults Membership: VIP

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    Clear conflict of interest when he is bidding and getting paid a commission. Can't really argue with facts.

    Even if nothing untoward happens it still looks bad.
     
  3. domainlover

    domainlover Membership: VIP

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    I agree, conflict on interest when a commission is received even though it has been disclosed.
     
  4. DavidL

    DavidL Membership: VIP

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    There may be a conflict but not strictly in this regard IMO.

    In real terms he is only paying $8,500 but he's foregoing his $1,500 commission which he would get if he didn't bid and the underbidder snagged it at $9,999.

    So comparing 'balance sheets' it's the same isn't it? He's either shelled out $8,500 and has a domain with $10K (so $1,500 in the black) or he's earned $1,500 (again $1,500 in the black)
     
  5. Designer

    Designer Membership: Community

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    Pecuniary interest conflict because he gets financial benefit over others. Even though he is being upfront about it. Whether that makes it right or not?
     
  6. Shane

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    That's exactly what I was thinking.

    I don't see it as a problem, provided that it is disclosed to all involved.
     
  7. Bacon Farmer

    Bacon Farmer Membership: VIP

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    If he snagged it at 10,000 took his 1,500 commission the net cost would be 8,500 and then he could sell it to the next highest bidder (assume 9,999) and make another 1,499.

    Net benefit 2,999.

    He needs to make his commission nil on any domain he bids on to be in the clear IMO.
     
  8. DavidL

    DavidL Membership: VIP

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    No you're doubling up I think (although the more I think, the more I'm getting confused!!)

    He doesn't 'make' the $1500 and get an effective purchase price of $8,500. It's one or the other.
     
  9. Shane

    Shane Membership: VIP

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    Yep, bacon is doubling up.
     
  10. neddy

    neddy Membership: VIP

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    This topic is obviously being discussed on many forums. A online friend of mine posted the following - and with his kind permission, I reprint it here.

    It's just a general observation regarding ethics which really made me stop and think. It doesn't necessarily apply to this particular case, but all the same it is interesting!

    Which side would you argue for?
     
  11. Bacon Farmer

    Bacon Farmer Membership: VIP

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    Yep confused myself. Still a discount to him though. If you were second highest bidder how would you feel?
     
  12. DavidL

    DavidL Membership: VIP

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    Yeah I had to look at your post a hundred times before I worked out what was wrong with the logic!!

    However, it's not a discount to him! To get the 'discount' he has to give up a commission which he would have got if he hadn't bidded! So it evens out.

    The real potential conflicts are:

    "Is he really promoting and working this domain hard to get the highest price if he's planning to throw in a bid himself?"
    "Can he see the reserves and proxies which he may then use to his emotional advantage" (I say emotional because if one is completely rational, it makes no difference - you throw in your proxy at the absolute max you're prepared to pay and leave it to the gods)
    etc
     
  13. joe

    joe Membership: Community

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    I wasn't going to post this but in case anyone is still confused this might help:

    Buy (10000)
    Commission 1500
    Balance (8500)
    ---
    Sell 9999
    Balance 1499

    So no double dipping there.

    DavidL, are you suggesting he might shill the bid because he has access to proxy bid data? I guess that would be a concern on any auction platform.
     
  14. DavidL

    DavidL Membership: VIP

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    Oh no - I meant as a buyer he might see the current bid at $4,900 and the proxy at $5,000 and think 'I'll go in at $5,100' whereas if he didn't know the proxy he might just give up.

    Something like that. Not a real advantage logically speaking (in fact possibly a disadvantage as he's influenced by factors other than the domain name itself)
     
  15. Bacon Farmer

    Bacon Farmer Membership: VIP

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    I've been reviewing bookkeeping software and reacquainting myself with double entry accounting, ledger entries etc. Messes with your thought processes. The brain saw incoming commission of $1,500 and a net profit on sale of $1,499 and added them not taking into account the second transaction already incorporated the first $1,500. If that makes sense lol.

    I must of chewed too many lead pencils growing up.
     
  16. neddy

    neddy Membership: VIP

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    As I suggested before, you can argue or debate this either way! There are pros and cons for both points of view.

    One thing for certain though, I don't think the seller will give a stuff! I think he'd probably be hoping RS bids. ;)

    It's just the underbidder that would have a reason to gripe.

    Other people have suggested that RS donate the 15% differential (his commission) to a charity. That would be good PR.

    Or to put himself on a level playing field with all buyers, he could not charge a commission on domains that he bids on; or; he could pay a buyer's premium of 15%. He then charges his commission, and so he is level pegging with other buyers. Seller would be extra happy!! ;)
     
  17. johno69

    johno69 Membership: VIP

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    I once had a domain broker trying to sell a domain for me with an agreed listing + Commision fee structure. After some time he mentioned he was interesting in buying it himself for the reserve price I had set.

    We agreed there should be zero fees on that transaction and there was never an issue.

    On another note, this has me thinking again about the whole NF bidding on Drop etc.

    Especially with the "Access to proxy bid info" thing. Fair enough they don't have access to proxy bids on the opposing platform but they do on their own. And while that figure is not a sure thing it's a sure guide as to what the proxy may be set at on the other platform.

    Also how hard does one work for their client when they want something themselves was brought up again... The mind wonders..

    Regarding the TRAFFIC issue though, I think he should agree to take no fees on that listing, and pay full price to the seller.

    If he wins $10K then $10K goes to the seller. Bonus for him. It's just a fair way as I see it.
     
  18. johno69

    johno69 Membership: VIP

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    Beat me by a few seconds :D
     
  19. DavidL

    DavidL Membership: VIP

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    NOOOO!!!

    You guys have missed the point. He IS already on a level playing field (as far as the 15% is concerned)..

    If he agrees to waive his fee, then he is disadvantaged!!
     
  20. johno69

    johno69 Membership: VIP

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    Yes he's on a level playing field as he gets $1500 back either way.

    I understand the mathematics of it, but it just doesn't feel right moraly.