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Here's what Verisign (ticker: VRSN) CEO Stratton Sclavos said at the Goldman Sachs 2005 Technology Conference about the domain name registration business. He addressed two key issues: the business of buying up expired domain names to run them as advertising sites with pay-per-click ads, and the rights for registration of the .net domain:

...the cherry on top over the last few quarters, has been page search. There is a lot that is going on with Yahoo and Google. You watch what is going on with keywords and the prices for those going up. There is a cottage industry that has developed to buy back com addresses to monetize those addresses for paid search. And there is a brokering system that buys the name and sells them off to various individuals. And that makes up an incremental 10 percent.

So we are averaging in 2005 well over 50,000 more names a week than we were at the exit of 2004. And it seems to be an accelerating proposition again… We will past 40 million names this quarter in .com and .net...

.net makes up about 5 million of those names. That is a $30 million business, very simple math. It is a deferred revenue business, so if you were to lose the bid to run .net the impact to our P&L would come sometime in '06, not in '05… But our expectation is that we have the best bid in…

(Quotes are from the CCBN StreetEvents transcript.)

Source: Verisign (VRSN) on domain name arbitrage and the .net domain (quotes from the Goldman conf)