The main targets of domain name speculation are generic words which can be valuable for type-in traffic and for the dominant position they would have in any field due to their descriptive nature.
The speculative characteristics of domain names may be linked to news reports or current events.
Domain speculation occurs in other TLDs as well, such as NET and to a lesser extent in ORG, INFO, and BIZ.
These TLDs are mature markets where good domain names may command high prices.
The EU ccTLD is an example of what happens when speculative activity overtakes "ordinary" domain registrations.
[9] A combination of an inept registry (EURid)[10] and excessive speculation by businesses exploiting a poorly structured regulatory framework[11][12] meant that, according to EURid's own statistics at the end of 2006, over 50% of the registrations could be considered at best speculative and at worst domain name warehousing.
One of the best examples is that of the .tv ccTLD which has found the fact that TV is an abbreviation for the word television to be rather lucrative.
In the 1990s, much of the ccTLD landscape had yet to appear, and the growing public awareness of the COM TLD was gathering momentum owing to the growth of the Dot-com bubble.
No clear legal position existed to distinguish domain name speculation and cybersquatting.
[19] Cybersquatting is defined as registering, trafficking in, or using a domain name with bad faith intent to profit from the goodwill of a trademark belonging to someone else.
The key element in this definition is that the intellectual property rights of another's trademark are infringed by the cybersquatter.
This is due in part to typosquatting, a form of cybersquatting where variations of the spelling of a brand's domain will be registered in an attempt to profit from users mistyping the URL of the site they wish to visit.
[25] The Canned Foods, Inc. v. Ult Search Inc. decision[26] specifically deals with a case involving a generic term, "Grocery Outlet" and the domain name "groceryoutlet.com".
The decision contains the key sentence "Generic terms receive no protection in US trademark law when they are used to label the goods and services that they describe."
Cybersquatting was first used as a legal term in March 1998 by a U.S. District Court in California in the case of Avery Dennison vs Sumpton.
The definition was "These individuals attempt to profit from the Internet by reserving and later reselling or licensing domain names back to the companies that spent millions of dollars developing the goodwill of the trademark.
The process can take two months or more[30] and all costs (typically more than $1,000 even for a single domain) are borne by the complainant, while the infringing party stands to lose nothing except the registration fee (usually under $10) for the original domain and the registrar of the infringing name incurs no penalty at all.
The main operators in this business typically set up a number of front companies as registrars.
VeriSign, in the case of TLDs COM and NET, allows each registrar a slice of the resources that may be used to register dropped domains.
The effect of this was to massively curtail the number of domains deleted in .com and .net during the Add Grace Period.
The survey quoted in the Verisign Domain Brief does not explain the methodology or provide anything other than a summary of the results.