(WEB HOST INDUSTRY REVIEW) -- According to reports issued this week, the domain name Sex.com will be put up for auction next week by its owners, with the bidding set to start at $1 million.

The domain, once considered one of the Internet’s most valuable, is definitely one of its most storied. Acquired by Escom LLC in 2006, the domain is set to be auctioned off March 18 by New York law firm Windels Marx Lane & Mittendorf LLP, as part of a foreclosure by lender DOM Partners LLC, which backed the acquisition.

Escom, which, according to a Reuters report, published in the Globe and Mail, has been in default on its loan for more than a year. The article quotes a lawyer for DOM Partners, Scott Matthews, who says the company is foreclosing according to its rights outlined in the loan agreement.

The company acquired the domain in 2006 – for an amount believed to be in the range of $14 million – from then-owner Gary Kremen, who first registered the domain in 1994. Prior to its sale, Sex.com had been the subject of a long legal battle, one that continued until 2007.

In May of 2007, lawyers for Kremen announced that the Ninth Circuit Court of Appeals had issued an order dismissing the most recent appeal of a $65,000,000 judgment against Stephen Michael Cohen, effectively ending the case – at the time, it was considered a landmark decision in Internet law.

The story, in brief, is that Cohen used a fraudulent fax to convince the domain’s then-registrar, Network Solutions, to transfer the domain to him. While Kremen sought to have the domain returned, Cohen operated a banner farm on the domain that reportedly generated between $50,000 and $500,000 per month, and continued to operate until 2000, when the courts ordered Network Solutions to return the domain to Kremen. Cohen left the country, and was arrested in Mexico in 2005.

Sex.com’s story has been the subject of several books. But to date, the most interesting thing anyone has done with sex.com is steal it. The 2006 sale would seem to have been designed to tie the domain to a proper business venture, but – as observed in this week’s TechCrunch report on the auction – as of earlier this week, the domain pointed to the PG landing page of a fairly ill-conceived sex-related “portal” site (as of Friday morning, the domain pointed to a parked page).

One of the most interesting subplots to the story is the fact that one of the Internet’s most valuable properties has never really been properly developed. It’s not clear who the suitors for the domain might be, but according to the announcement, they’ll be required to bring a certified check for $1 million to the auction.

“I'm sure you've heard it before but the analogy I use is: it's like real estate,” says Adam Eisner, director of domain services at wholesale registrar Tucows. “There are lousy properties, good properties, and great properties. As an address, sex.com is a great property. And in general, more people are starting to realize the value in the good and great names. It doesn't only apply to the great properties, though. Even smaller businesses are increasingly shelling out one to five thousand dollars to get domain names that are a perfect reflection of their business. Sure, they can have an okay name for a few bucks. Or they can spend a bit of their marketing budget to secure a good or great name.”

Obviously there is still a great deal of inherent value in the domain sex.com – it’s a single word, extremely topical and relevant, a powerful keyword related directly to a product people have proven very willing to pay for online. The question is whether that inherent value in the specific domain has diminished over time, though the changes in the nature of web navigation, the domain space itself and the user’s relationship with the domain.

The question of the specific value of sex.com will be answered at next week’s auction. The question of whether something compelling can be done with the property may take a little longer to answer.

While the auction is set to be an in-person affair at the law firm’s New York offices, the Globe story quotes one of the partners as saying the firm was arranging for potential buyers to be able to bid online.

Comment by Charles Carreon on Friday, March 12, 2010

Comment by Liam Eagle on Friday, March 12, 2010

Comment by Charles Carreon on Friday, March 12, 2010

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