Earlier this week the domain name industry was rocked by a shill bidding scandal at SnapNames. The company made the right early moves by admitting the problem and promising refunds, plus interest, to customers. Now, though, they are forcing customers to release them from liability to get the refund. We think this this is a mistake.

SnapNames acquires expiring domain names from registries and then auctions them off to interested buyers. When everything goes well people are happy. SnapNames gets a good return on investment, and the domains go to the buyer who values them the highest.

But it turns out things most certainly have not gone well. Since 2005 a substantial number of domain auctions had shill bidding by a SnapNames employee.

This isn’t run of the mill eBay shill bidding. On eBay a seller may try to participate in the auction to drive overall bidding higher. But for the most part pricing doesn’t get out of control because most stuff sold on eBay isn’t particularly unique and price boundaries are well established.

What happened at SnapNames is much worse. The company is the seller and has the most to gain by shill bidding. And the company is also in control of all auction information. Sometimes an auction may have two bidders, with one bidder putting in a maximum bid of $100,000 (yes, they go this high sometimes). Another may bid just $10,000, and so the winning buyer would just pay some small amount over $10k. From SnapNames perspective that isn’t a $10k gain. It’s a $90k loss.

So SnapNames “fixed” the problem. An executive with the company simply bid on those domains. He could bid up to, say, $90,000 with full certainty that he wouldn’t be burdened with actually winning the auction and having to pay up. SnapNames made lots of extra money. And if the top bidder backed out and the executive accidentally won, SnapNames was secretly reimbursing him on the back end. Zero risk.

If you’re a Twitter freak and think that a dedicated Twitter device is just the thing for you, read on.

This week we saw the launch of the TwitterPeek, a cute little device built by Peek that will do just about anything you want it to do, as long as all you want it to do is access Twitter. It won’t surf the web. It won’t make phone calls. It won’t support third party apps. But it most certainly does run Twitter.

You can get it in black. Or, if you want to show a little flair, you can get in in cyan.

For some crazy reason I wanted one. A friend bought me one that I will truly love forever(ish). But the company also sent me one. And while I may or may not need one TwitterPeek, I almost certainly don’t need two TwitterPeeks.

This is where you come in.

We’re giving one of these away to a TechCrunch reader. It’s the cool one, cyan, with lifetime service that costs $200. And it’s all yours. Just retweet this post and make sure to include the short URL link – http://bit.ly/3U2Yhy – as well as the #crunch hashtag. Please only tweet the message once, anyone tweeting repeatedly will be disqualified. Tomorrow we’ll sort through all of the tweets and pick one randomly for the win. You’ll get the TweetPeek device in the mail, and we’ll throw in a TechCrunch tshirt. Even the postage is on us. But please note that in this case only U.S. readers are eligible, because the device only works in the U.S.

If you are a tech lover, there is nothing quite like the launch day of a much hyped new gadget. Expectations run high. And since those expectations are rarely satisfied once you have the special little device in hand, it’s a moment to savor. In the hours before you own it, that device is perfect in every way. It will make you happier, a better person. There are no bugs, there are only features. It is whatever you want it to be.

Launch day of a new cool gadget is the closest thing to being a kid again on Christmas day (or whatever your winter solstice holiday of choice). You’ve anticipated the day. You’ve called in sick to work. And you are standing out in the freezing cold at 7 in the morning, hoping your place in line assures you a device before the carefully-planned sell out occurs. You’ve worked yourself into…a Fever Pitch.

I’ve always been let down with the real world gadget after that high of anticipation. But that’s ok. It’s part of the cycle of tech.

Today is Droid day. In just a few hours Verizon stores will open and the first customers will get their hands on their very own Droid.

And I promise you, if you are one of the people waiting in line, you will have a much lower than average amount of letdown. That’s because, in my humble opinion, the Droid is the coolest mobile phone to exist to date. It is as close as we’ve come to the Platonic ideal of a smartphone. It’s very existence ensures that the next iPhone will be even better than it otherwise would have been. Competition is good.

Yes, this is an unabashed love letter to the Droid. If you want the dispassionate reviews, we’ve got em. And then some. That isn’t what this post is about.

Zynga CEO Mark Pincus said earlier this week that he intends to make sure his company’s games don’t include scammy offers in the future. Our full background on this story is here.

But what he didn’t say in that blog post is that Zynga has been scamming users from the beginning quite intentionally as part of their revenue model. Rather, he pointed much of the blame at middlemen offer companies: “We need to be more aggressive and have revised our service level agreements with these providers requiring them to filter and police offers prior to posting on their networks.”

Last spring, though, he gave a much clearer explanation to an audience at a Startup@Berkeley mixer, admitting that scamming users was part of Zynga’s business model from the start. And it was all caught on video. I think everyone sort of knew that this was exactly Zynga’s gameplan. But to hear it said so directly is just shocking.

The full 30ish minute video is here. We’ve taken the relevant section of the video, roughly starting at around the 10:40 mark, and embed it below. From the video:

I knew that i wanted to control my destiny, so I knew I needed revenues, right, fucking, now. Like I needed revenues now. So I funded the company myself but I did every horrible thing in the book to, just to get revenues right away. I mean we gave our users poker chips if they downloaded this zwinky toolbar which was like, I dont know, I downloaded it once and couldn’t get rid of it. *laughs* We did anything possible just to just get revenues so that we could grow and be a real business…So control your destiny. So that was a big lesson, controlling your business. So by the time we raised money we were profitable.

Yesterday Offerpal Media changed CEOs. Cofounder Anu Shukla, who just last week denied that her company engaged in any questionable advertising on social gaming applications, was replaced by veteran startup executive George Garrick. For all the background, see our Scamville post and the related updates at the end.

Garrick, who has been the CEO of Offerpal for less than 48 hours, is already taking a polar opposite approach to his predecessor. He left a lengthy comment, reprinted below, on a post earlier today about Facebook’s policy and enforcement changes around application offers.

The full comment is below. But he doesn’t beat around the bush.

Garrick admits that Offerpal made mistakes – “I have quickly concluded that regrettably, Offerpal has been guilty of distributing offers of questionable integrity from some of our many advertisers.” And he says that recent communications with partners stating that Offerpal was in compliance with Facebook rules were innacurate – “…we’ve also made some erroneous communications to partners and developers about the state of our compliance. In particular, we recently sent a letter to our Facebook developers which assured them that we were completely in compliance with Facebook standards, when in fact we were not.”

Garrick also makes a series of promises in the comment, including “any offers we distribute meet stringent standards of integrity and quality, as specified by our partners, credible industry experts, and good old common sense” and “we will do everything we can within reason to lead the industry and set the example in these efforts.”

This is, apparently, not a fake exchange. A young journalist comes to Aardvark user Ryan Asava for help. Things go downhill from there. If you never quite understood the service, you’ll get it now. Our previous coverage of the company is here. Thanks Marshall.

Click below for the very funny conversation.

Ah, Engrish. There’s a whole world of funny translations out there to laugh at.

Cyworld, the massive Korean based virtual world, is shutting down its U.S. site, which draws all of 112,000 monthly visitors according to Comscore. And while the shutdown is sort of sad, the message they sent to users more than makes up for it. The translation is bad. Not Matrix DVD cover in Korean bad, but bad.

Yes, I know Americans and others butcher other languages in reverse all the time. But that doesn’t mean I can’t laugh a little at this, too.

CyWorld first launched in the U.S. in 2006, and we estimate that they are the twelfth most valuable social network in the world overall. Email is below:

Facebook published a long blog post today about their enforcement efforts around app advertising and offer scams. And while they didn’t mention all the negative press that has hit them this week, that’s the reason for the new communication.

Facebook says that deceptive ads are a widespread problem on the Web (which is true), and they say they’ve been fighting these scams for some time (which is also true, albeit a little slowly sometimes). They point to their updated policies on third party ads on the Facebook platform from July – which are aggresively pro-user but have rarely been enforced. They also note that they have disabled two ad networks since then, and are disabling two more now.

In my talks with Facebook earlier this week they took the position that they’ve been aggresively protecting users, and they’re taking the same tone in this blog post. They say that with so many ads and so many apps its impossible to monitor the entire platform effectively. My answer was that it took me about 10 seconds to find really scammy ads on FarmVille, the most popular social game on Facebook with 63+ million monthly users. If they just start with the big guys, a lot of the problem will go away.

Zyxio is a Las Vegas based startup that we’ve been tracking for a while now. They’ve developed proprietary technology called SensaWaft that lets people control computers via air flow. As in, you can control a mechanical device, or a mouse pointer on a screen, or whatever, by blowing. How hard you blow, as well as minute differences in direction, are converted to commands.

The possible products from the technology are limitless. Combine this with voice recognition for less dangerous in-car computing. Or design applications to help the handicapped. You can get an idea for how the technology works in the video below.

The company is busy productizing the technology. But today they’re launching a contest to crowdsource new product ideas. If you have an amazing idea for the technology, you can get paid to help them build a product around it. And if you just want to vote on ideas from others, you can do that too.

Go to BeAMindBlower and register for more details. Submit your idea in as much or as little detail as you like. Others can register and vote. At the end of November the company will take the top ranked ideas and put them to a final round of voting, which ends on December 13.

It wasn’t all that long ago that Digg captured our collective imagination. In fact, even last year Google thought it was important enough to seriously consider buying Digg, only to back out at the last minute. Digg was the future of news. It was crowdsourced, democratic editorial. The masses decided what was news, not some 50 year old guy in a skyscraper in New York, who secretly hated the Internet.

a lot of the shine has come off Digg. And while it still drives a tremendous amount of traffic, it’s amazing to see just how completely it has been eclipsed by Twitter, which in turn is still just a drop in the Facebook bucket.

Comscore worldwide data says Digg, Twitter and Facebook have 32 million, 58 million and 411 million unique monthly visitors (September 2009), respectively. Google Trends says much the same thing, but the growth over time is fascinating visually. We started with Digg, then added Twitter, and then added Facebook. In the end, Digg and Twitter are just footnote blips in the chart.

About a third of all Internet users worldwide visited Facebook in September 2009, says Comscore. A year ago it was 17%. And what about Digg? They grew from 15 million worldwide unique visitors a year ago to 32 million today. And they tripled page views to 171 million. So it’s not really about Digg doing anything wrong. They just pale in comparison to the guys currently in the spotlight – Twitter and Facebook.

If you could only use one service, which one would you choose? I’d be unhappy about the forced decision, but I’d go with Twitter, even with all its flaws.

Charts below:

Offerpal Media, the central character in the Scamville drama, is changing CEOs. Anu Shukla is no longer the CEO of the company she cofounded. Veteran executive George Garrick, most recently the CEO of Mochi Media, is now the CEO of the company.

From the press release quietly announcing the change:

Offerpal Media, the leader in virtual currency monetization for online games, virtual worlds and social networks, announced today that George Garrick has been named chief executive officer.

Garrick brings more than 25 years of experience in technology, advertising and consumer businesses to Offerpal Media. His track record of accelerating revenue growth and brokering strategic relationships with customers and partners will be critical assets in leading Offerpal Media.

I had an…interesting public exchange with Shukla last week at the Virtual Goods Summit in San Francisco (see video at end of this post). I’ve also embedded it below.

She vehemently denied that her company’s offers ever scammed users. Despite her defense of the industry, MySpace, Zynga, RockYou and others have since made significant policy changes to protect consumers from the types of offers Offerpal peddles.

Brad Garlinghouse, a former SVP at Yahoo, joined AOL as President of Internet and Mobile Communications two months ago. And he’s clearly doing a little housekeeping, and forming his own exec team. His first major hire? Kiersten Hollars, a Digg PR exec.

Hollars is part of Garlinghouse’s old team at Yahoo, and left the company shortly after Garlinghouse did to take over PR and communications at Digg. She joins AOL later this month.

“This is more about working with Brad again, and nothing about Digg,” she told us in a phone interview this morning, adding that she’s excited about the turnaround opportunity at AOL. She joins AOL as senior director of corporate communications, reporting to both Garlinghouse and EVP Corporate Communications Tricia Primrose.

Digg’s looking for Hollars’ replacement immediately. So if you want be the person to handle all corporate communications and Kevin Rose babysitting duties at Digg, let them know.

Anyone who doesn’t know how dirty the domain name business is just doesn’t know the domain name business. People pay exorbitant sums to acquire domain names, put Google or Yahoo ads on the parked pages, and collect the advertising fees. They often buy and sell individual domains and portfolios with other domain squatters. But the real feeding frenzy is around deleting domains – the domain names that people let expire and that go back into general inventory.

The process for expired domains to get back into the system is complicated, but every day 20,000 or more previously owned domain names become available. Domain squatters know the list in advance, and spend time looking at Alexa/Compete rankings and lots of other data sources to try to figure out which ones are valuable. If they can just eek out $10 or so per year on a domain via ads, it’s profitable. And at scale, large amounts of money is made.

There are a variety of companies that grab as many of the domains every day that they can and then auction them off to the highest bidder. I once ran a Canadian-based company called Pool.com that invented the practice of auctioning expired domain names, and our company was making over $1 million in profit every month from these auctions – there’s lots of money in this business.

Today the largest company conducting these auctions is SnapNames, which was acquired by Oversee.net in 2007 for $25 million or more.

Today SnapNames admitted that one of its executives was shill bidding on auctions. 5% of auctions from 2005 – 2007 were affected, the company says, and a lesser number since then.

Stealth search engine Blekko, which we’ve been tracking since early 2008, has closed another $2.5 million in funding, bringing the total raised to $20 million. This most recent round, says CEO Rich Skrenta, was a inside round led from existing investors USVP and CMEA Ventures.

Blekko is taking their own sweet time to launch, so don’t expect much more from them until they are good and ready.

Among the 800 or so employees laid off by Microsoft today: Don Dodge, Microsoft’s Director of Business Development for the Emerging Business Team, reporting to VP Dan’l Lewin. Don writes about the change on his personal blog.

All layoffs suck, but letting Don go is a huge mistake for Microsoft. He nearly singlehandedly defends the Microsoft brand in a fairly anti-Microsoft developer and user community. For many people in the startup community, Don is the face of Microsoft. He travels constantly, speaking at events whenever he’s asked, and makes a big effort to give young startups the attention they deserve. This is a guy who gives a heck of a lot more to the community than he ever takes back.

Don has been an expert panelist at all three TechCrunch50 conferences. He has also written guest posts for us covering startup events we couldn’t attend personally.

His reaction to today’s news shows what kind of person he is. I reached him by telephone just an hour after he heard the news. And he didn’t have a bad word to say about Microsoft. He was more concerned that I not write anything negative about the company than anything else. Even after they turned their back on him, he was still on their side.

My opinion of Microsoft dropped a notch today. A big notch. Don invested years of his time making Microsoft seem more human, and there are very few people I respect more than this man. He wasted all that time, apparently.

Last week we posted a hazy screenshot of a new Digg voting feature called Digg Trends. It launches today.

The new feature shows an upcoming/trending story at the very top of the Digg home page. These are stories that are popular but haven’t yet made the top stories list. Users vote on whether or not they think the story should go to the top.

Digg says the goal is to put high activity stories in front of the community.

In our October 8 post on the state of the Skype sale and litigation, we ended with a prediction: “The likely outcome of all of this remains the same – Joltid will get a stake of some size in Skype. But given the players involved, anything could still happen.” If GigaOm and the NYTimes are right, that’s exactly what’s happening. Even the “anything could still happen” part.

The old Skype founders will now have a stake in Skype according to unnamed sources. That makes sense. It was what eBay was negotiating with Skype long before the current buyout offer, and the team has to get something in exchange for dropping the intellectual property litigation.

But Index Ventures, the architect of the deal, is apparently out. For Silverlake Partners and Andreeseen Horowitz to agree to that either means there’s too much money involved for anyone to be worried about business loyalties, or there’s enough of a smoking gun that Index had no choice but to get away from the deal and all that liability.

Whatever the truth, everyone is in for a wild ride. Nobody who does business with the Skype founders ever seems to come out of it happy. Maybe Marc Andreessen has the patience to change all that this time around.

Just one problem, though. No one has ever described Marc Andreessen as a patient man.

The industry is definitely making big changes to self regulate around social gaming offer scams (complete background here, with updates). Zynga, the largest social gaming company and the worst offender when it comes to scams, said yesterday that they will take steps to remove scams from games. They were quickly followed by RockYou.

Today MySpace is making a big move itself. They are instituting a “zero tolerance for app scams” policy, says CEO Owen Van Natta, and are amending their apps developer terms of use to further restrict the types of offers than can be presented to users.

The existing terms of use already prohibit many types of scams and require clear and accurate descriptions of offers. But as we’ve shown in previous posts, sometimes a clear and accurate description hidden at the bottom of a page in 8 point type isn’t all that useful.

An update to our post in late October about OneRiot and Yahoo partnering to build real time search results into Yahoo: OneRiot CEO Kimbal Musk now confirms the relationship. The new search engine will go live tomorrow.

In the email, Musk says that OneRiot results will appear in the main Yahoo search results page for certain queries:

Today, we are pleased to confirm that OneRiot is working with Yahoo to deliver realtime search results to Yahoo users. We have been working with Yahoo for 18 months, initially as the launch partner for the Y!BOSS platform and now as the provider of realtime search results. Yahoo joins a list of 70+ partners who utilize the OneRiot realtime search API (others include Microsoft and Reed Elsevier). During an initial test phase, OneRiot results will appear on the main Yahoo Search Results Pages (SRPs) for certain queries, complementing Yahoo’s usual results. OneRiot has a robust realtime index of the web and orders search results via PulseRank, the company’s proprietary ranking algorithm which reflects the current social buzz around any piece of web content.

More than 1/3 of all Internet users worldwide visit MSN every month. 400 million people. That’s way more than AOL’s 80 million, and not ridiculously out of reach of Yahoo’s nearly 600 million. But still, it’s the most popular Internet portal that no one actually ever goes to. Starting tonight though that’s going to change. Or at least, MSN is changing. We’ll have to wait and see how usage numbers are affected if at all.

The most notable change is a new logo and lots less blue (a screen shot of the old MSN is below for posterity). Everything is sleeker and easier to read. Not as many links. More video (hot HD stuff using Silverlight). Lots and lots of Bing bling and Live.com services.

And of course, there’s Facebook. And Twitter.

Log right in on the bottom right of MSN. Half of their monthly visitors are already Facebook users, says Microsoft. And 15% use Twitter. So having the ability to read and create Facebook and Twitter messages right from the portal page is a good idea. For users with Silverlight, more advanced apps will be available.

Microsoft will roll out the new version over time. But if you want in right now, and just absolutely positively can’t wait in line, you can see it immediately by going to http://preview.msn.com.

Real time search and discovery engine Topsy is releasing a bunch of new products and tools this afternoon.

Topsy is all about the power of the ReTweet on Twitter. When the service first launched publicly in May we noted that ReTweets are the new currency of the web. And it isn’t just the number of retweets that matters (which is subject to large scale spamming efforts). It’s the authority of the people doing the retweeting, too.

One way Topsy is distinguishing itself from competitors like OneRiot and TweetMeme is by holding on to data forever. Most real time search engines are focused on right now, which is exactly what people want. But they dump data periodically, and anyone looking for older stuff won’t be able to find it. Here’s a sample search for “skype andreessen” on OneRiot (4 resutls), TweetMeme (0 results) and Topsy (37 pages of results, which can be sorted and filtered by time). So when you want to look up old Tweets around a link, Topsy has the data that no one else is currently showing.

It’s no surprise that Animoto’s new video product is a hit. Upload a few short videos and images, add a song, click a button and bam, you’ve got a very high quality souvenir of your recent holiday or other event. Here’s one I put together for Foo Camp in August. More examples are here.

So far it’s a one-size-fits-all product. And since it’s such a good one no one is complaining. But there have been requests for holiday themed platforms, says CEO Brad Jefferson. And so on December 1 they’ll release themed templates for various holidays. The new product will be called Animoto Originals, and the video below is an example.

Look for holiday and life event themed templates (Christmas, weddings, etc.). Short videos are free. Full length videos (the length of a song) are $3 each, or you can buy a yearly subscription. My parents loved one holiday video I made so much that I had a DVD of it sent to them for $20 – which is another revenue source for the company.

Sample video is below.

Zynga changed their lead gen scam policy this morning (the whole Scamville background is here, see updates at bottom as well). And now RockYou is taking steps to clean up their act to, according to an email we’ve been forwarded.

In an email to RockYou’s publishers, they say that they will begin complying with Facebook’s rules on offer scams (and like you, we’re not sure why they haven’t been complying all along, but lax enforcement is likely the cause).

Two interesting nuggets from the email though. First, RockYou says that from now on you’ll only see “clean, safe surveys from top tier brands advertisers.” All of the surveys we’ve seen are mobile subscription scams, so I’m not sure there’s such a thing as a clean, safe survey.

Second, the email says “the Facebook compliance team will be keeping a very close eye on offer walls starting tonight.” We’d heard that Facebook is coming down hard on app developers around scams right now, but Facebook won’t comment about it other than to say that they have always been monitoring application offers and enforcing the rules. From what we’ve seen, that enforcement didn’t bring much in the way of results, but perhaps they’re more serious about the situation now.

The full email:

If you’re a Google Voice user like me, you’ll be glad to print out this quick reference card that gives you all the menu options when you call the service to listen to voicemail or change settings, or receive calls.

For example, when you receive a call with Google Voice you can hear who’s calling before you answer. Hit 1 to answer the call, or hit 2 to send them to voicemail. Easy to remember. But you can also hit 3 to send them to voicemail and listen in. Or 4 to answer the call and record it. Four is too many things for me to remember, which is why I’m printing this out and putting it in my wallet.

Thanks for CoolGeex for creating this!

Well that didn’t take long. We outlined the not-so-ethical ways that the big social gaming startups are generating revenue through lead gen scams and subscriptions through a series of posts over the last week. Starting with Social Games: How The Big Three Make Millions and Scamville: The Social Gaming Ecosystem Of Hell. We also threw in some comments by other companies and a former scammer, and a quote from Zynga that 1/3 of their revenues come from offers, much of which are scams.

We thought this would be a fight that would take months to end successfully, and we thought that only Facebook or MySpace would make the move to clean up their own platforms.

But boy am I surprised today to see Zynga, the worst of the offenders, admit publicly to the problem and take quick steps to change. CEO Mark Pincus says:

Michael Arrington posted over the weekend about CPA offers within social games and questioned why facebook, myspace, zynga and others would expose these to our users. He raises good points about ‘scammy’ advertisers and the bad user experience they create. I agree with him and others that some of these offers misrepresent and hurt our industry.

Later in the post he also says: