The practice is called "warehousing" domain names, and it works like this: When a user's domain name expires, GoDaddy takes ownership of the domain and fills the defunct webpage with moneymaking ads and links. At the same time, the domain name itself is shunted into GoDaddy's auction system to be sold off.
None of these practices is illegal or even prohibited by the Internet's chief governing body, ICANN, but online analyst Andrew Allemann of DomainWire.com criticized the practices because of GoDaddy's clandestine approach to them.
When a domain name expires, GoDaddy changes the ownership of the domain to one of its subsidiary companies, Standard Tactics LLC, a company that is located in a different state and whose whois information is private. That's when the ads appear on the expired domain, which then goes up for resale through GoDaddy's domain auction service, The Domain Name Aftermarket (TDNAM).
"It’s clear that GoDaddy has taken a number of steps, including setting up a subsidiary in a different state, to cover its tracks warehousing domain names," Allemann said. "GoDaddy has over 30 million domains registered, and a quick look at TDNAM shows a number of high traffic domains being auctioned off every day. One source said the company receives millions of hits a week on its Standard Tactics domains."
Tech writer Robin Wauters noted that although none of GoDaddy's actions are illegal or prohibited, they could have an anti-consumer effect on the domain-buying marketplace.
"ICANN hasn’t yet adopted specifications or policies prohibiting or restricting warehousing, leaving registrars in a unique position to impact domain name pricing top-down by introducing competitive bidding or auctions for expired domain names," she wrote for TechCrunch.com.