An E-Commerce Empire, From Porn to Puppies

TRIBUTES on the Web site of Richard J. Gordon‘s company strike all of the uplifting chords one would expect of a digital maverick. He is described as a “trailblazing businessman” who is “operating in the front ranks of those transforming the Internet into the global marketplace of the future.”

There is an echo of truth in all of this. Though most Internet buffs have probably never heard of him , Mr. Gordon, 62, played a significant role in the birth of electronic commerce. While Amazon.com and eBay were still fledgling enterprises, the companies that Mr. Gordon founded in the early 1990s were already laying the groundwork for electronic transactions conducted with credit cards — a development that opened the doors to the first generation of e-commerce start-ups.

And if the Internet is for porn, as the hit Broadway show “Avenue Q” asserts, perhaps it was only natural that many of Mr. Gordon’s early clients were purveyors of X-rated entertainment.

While riches were being minted and squandered in the dot-com ’90s, Mr. Gordon made a fortune by taking a commission for processing sales on a range of sites from small, mainstream retailers to others like ClubLove, which published the Pamela Anderson-Tommy Lee sex tape. Today, his payment processing company continues to have roots in the world of sexual entertainment. One of the several companies he owns or operates, Processing Solutions, facilitates credit card transactions for the Web sites of DTI, or Dial Talk International, according to current and former employees familiar with the arrangements.

DTI is based on the Caribbean island of Curaçao and runs, from Los Angeles, a vast and profitable network of explicit Web sites for the Japanese market.

As the Web has evolved since the early days of e-commerce, so has Mr. Gordon. Although he fashioned his early career around credit card transactions and helping Internet pornographers, he has more recently adopted an ecumenical approach to business as the shepherd for an altogether different endeavor: a Christian charity.

Until last week, Bold New World, his Los Angeles-based Web design firm, had a lucrative contract to design sites for the American Bible Society — the 192-year-old philanthropy based in Manhattan whose mission is to make a Bible available to every person in the world.

Bold New World has also created the Web site for a charity called SPCA International, which fights animal abuse; it helps members of the armed forces bring dogs home from Iraq. That charity has been stirring controversy in the animal-rights world because it owns no animal shelter and is unaffiliated with older and more established societies for the prevention of cruelty to animals.

Although Mr. Gordon has yoked together disparate endeavors that support pornography, the Bible, and prevention of animal abuse — all by marrying the universal purchasing power of credit cards to the respectability conveyed by slick Web sites — those familiar with his operations say his relationship with DTI remains the nexus of his enterprise.

There are no official numbers on the pornography industry. But those who have studied its operations view DTI as a pivotal player in the world of pornography. “DTI appears to rank in the top 1 percent of adult entertainment companies in the world,” said M. J. McMahon, publisher of AVN Online, an Internet news site covering the industry.

Mr. Gordon’s lawyer, Miles Woodlief, said that “neither Mr. Gordon nor his companies have involvement in” the pornography business. For his part, Mr. Gordon, in a brief e-mail message, describes his career in more elevated terms.

“I have been an inventor, creative genius and pioneer,” he asserted in a statement sent by a spokesman. “I have worked with thousands of people around the world in the last 30 years, countless of whom, including legislators, governors, United States presidents, C.E.O.’s and self-made billionaires, all of whom I personally made aware of earlier mistakes, and would be happy to sing my praises.”

MORE than a dozen current and former employees and business partners of Mr. Gordon say that whatever operations his business now encompasses, processing transactions for pornography sites has long been a central component. Some of them requested anonymity, worried that Mr. Gordon might sue them for speaking publicly about his operations.

These people characterized DTI, which is owned and operated by Wataru Takahashi, a Japanese billionaire who has worked with Mr. Gordon on various enterprises for at least a decade, as one of the most lucrative and enduring clients for Mr. Gordon’s credit card processing business.

DTI is an amalgam of dozens of Web sites, offering paying customers everything from live video sessions with pornographic performers to sexually explicit manga cartoons. The sites bring in revenue of about $15 million a month, according to several current and former DTI employees who have knowledge of its finances. DTI produces the content for many of these sites in Los Angeles, then pipes the material to computer screens in Japan, which has strict laws on explicit performances.

Central to the sales and billing portion of DTI’s business are services provided by Mr. Gordon’s company.

“Gordon processes credit cards for every single Web site owned by Mr. Takahashi,” said Alex Becker, a contractor who was a senior executive of Stickam, a social network based in Los Angeles. “Mr. Takahashi depends on Richard, and they always work together.”

Stickam, a live video chat Web site aimed at teenagers, is financed and operated by DTI, according to Mr. Becker. Scott Flacks, a former senior executive of Stickam who left the company this spring, said that Mr. Gordon and Mr. Takahashi appeared to have a close relationship.

“There’s a loyalty between the two that transcends business,” he said.

One other employee who worked directly for DTI for several years said that Mr. Gordon had helped to set up accounts for DTI with at least two banks in America and one in Germany. The employee says that Mr. Gordon’s company receives regular monthly payments from DTI for facilitating these relationships. He requested anonymity because he signed a confidentiality agreement with DTI.

“Richard is the smoother,” this person said. “He is the relationship between the banks and Takahashi for sure, although you are not going to find it anywhere on paper.”

Mr. Takahashi and Mr. Gordon also appear to help one another hire employees and court business and political contacts. In February 2007, Mr. Takahashi held a lavish weekend birthday party for his wife on Grand Cayman, where he spends part of each year in a condominium at the Ritz-Carlton hotel.

According to accounts from four people who were there, about 100 guests, including Mr. Gordon and several of his colleagues, were flown in from all over the world in private jets. Among the attendees was a representative of a major casino company in Las Vegas — Mr. Takahashi is an avid gambler and a frequent visitor to the city — and Stanton D. Anderson, a longtime Republican activist and a consultant to the American Bible Society. Mr. Anderson did not respond to interview requests.

Guests were treated to a Caribbean cruise and a resplendent dinner on the beach with an orchestra and electric fans that blew multihued sheets into the air. As guests feasted on grilled lobster tail and filet mignon, Mr. Takahashi and the casino representative lavished expensive gifts, like a Tiffany diamond tennis bracelet, on Mr. Takahashi’s wife.

IN 1979, six years after being honorably discharged from the Navy, Mr. Gordon found himself on the bad end of a bust. Federal Bureau of Investigation agents arrested him after finding him hiding in a closet of a friend’s apartment in Washington, D.C. On a living room table were four round-trip Concorde tickets to Paris.

According to a 1981 review of the case by a federal appeals court, New York State authorities had been investigating accusations that Mr. Gordon, who then lived outside Albany and ran insurance and financial planning companies, had dipped into customer funds. When he learned of the investigation, according to the court documents, Mr. Gordon closed his businesses and fled Albany, planning to go to Europe.

He was ultimately convicted in 1980 of mail fraud, interstate transportation of a stolen check and making a false statement to a bank. He served more than two years of a seven-year sentence in federal prison in Danbury, Conn., and Lompoc, Calif.

“Nearly 30 years ago, as a zealous, eager young entrepreneur, I made a mistake. I was convicted and served a sentence,” Mr. Gordon says of this period in his life. “I have diligently and honorably been an entrepreneur, inventor and businessman for almost three decades. I created jobs and career opportunities for thousands of people.”

After moving to Los Angeles in 1983, he worked as a business consultant throughout the ’80s, according to reports in Los Angeles business publications at the time. Mr. Gordon then engineered yet another act in his business career: facilitating credit card transactions over the phone.

According to reports in trade journals at the time, he appears to have started by processing credit cards for 1-900 and other telephone services, mail orders and television infomercials. He also became among the first to process transactions on the Web.

At the time, the credit card industry was aghast at Web transactions since they were not face-to-face dealings. In addition, many of the early Web commerce operators were so-called high-risk merchants, like pornographers and online gambling companies. Banks charge higher rates for these transactions because people tend to contest those items on their bill, perhaps to mollify an angry spouse.

While other payment processors avoided the stigma and high rates, Mr. Gordon saw opportunity. His companies in the ’90s, including Electronic Card Systems, devised ways to mitigate the risk. One method involved creating databases of unreliable customers and then refusing troublesome users when they returned to the Web to make purchases.

Mr. Gordon “was a pioneer,” said Jeffrey D. De Petro, who worked as a risk manager for Electronic Card Systems from 1995 to 1998. “We came up with different ways to monitor e-commerce transactions, and I think it defined the pros and cons of the industry.”

Mr. De Petro and five other former employees from this time say that CryptoLogic, an early Canadian online gambling network, was one large client. They also say that Mr. Gordon processed credit card transactions for ClubLove and other sites owned by the Internet Entertainment Group, now defunct, which offered pornographic photographs and videos for a monthly membership fee.

“He was the house for Internet porn in the early days,” said Steven Peisner, a veteran of the card processing industry who worked for Electronic Card Systems in 1997. “At that time, if you had anything to do with Internet porn, you called Electronic Card Systems.”

Mr. Gordon’s employees from the time remember extravagantly decorated offices on the fifth, sixth and seventh floors of the Luckman Building on Sunset Boulevard in West Hollywood. There was fine art on the walls and a constant supply of fresh flowers in the lobby. Mr. Gordon held sumptuous parties for employees at his home in the Hollywood Hills and drove a Bentley.

He appears to have created and run many companies in the ’90s, though they were all related and shared office space, according to Mr. Peisner and other former employees. In addition to Electronic Card Systems and a related entity, Electronic Authorization Systems, Mr. Gordon was involved with magazine publishing, long-distance telephone service and an interior decorating company, among other pursuits.

In 1999, to take advantage of the dot-com gold rush, Mr. Gordon combined many of these companies into a single entity, CreditCards.com, according to a company press release at the time. But the company was having financial problems. Former employees say they remember paychecks occasionally bouncing and leased furniture being repossessed.

According to documents filed with the bankruptcy appellate panel of the United States Court of Appeals for the Ninth Circuit, Mr. Gordon brought in new partners from Nashville in 1999 and borrowed several million dollars from them, using his stock as collateral.

The documents, filed as part of litigation relating to business disputes at the company, say that when Mr. Gordon could not pay his partners back, they removed him. The company is now called iPayment and is based in Nashville.

“He played so many games that eventually he got played himself,” says Masih Madani, the former chief technology officer of CreditCards.com, referring to Mr. Gordon.

But Mr. Gordon didn’t walk away from the enterprise empty-handed. The new owners paid him $2 million to settle his lawsuit against them, according to court documents. Mr. Gordon also ultimately rescued one other prized asset from this first Internet foray: his relationship with Wataru Takahashi and DTI.

RICHARD GORDON has one other man to thank for helping him land on his feet after the CreditCards.com debacle: Paul Irwin, the head of the American Bible Society, who from 1996 to 2004 was chief executive of the Humane Society of the United States.

In his two decades preaching animal rights, Dr. Irwin, an ordained minister of the United Methodist Church, turned the Humane Society into the largest animal welfare charity in the world. But his tenure was also pockmarked by scandal.

USA Today reported in 1987 that the society spent $85,000 renovating Dr. Irwin’s vacation cabin in Maine. A decade later, a judge ordered the organization to pay $1 million to the Humane Society of Canada for soliciting donations in Canada and then transferring funds to the United States.

It was toward the end of his tenure, in April 2003, that Dr. Irwin first hired Mr. Gordon. Tax returns for the Humane Society show that the organization paid $881,000 to Mr. Gordon’s new venture, Exciting New Technologies.

In May 2003, according to a press release at the time, Mr. Gordon also hired Dr. Irwin’s son, Christopher, as director of business development at Exciting New Technologies. The younger Mr. Irwin could not be reached for comment, and it is not clear how long he worked there.

Dr. Irwin said in an interview that Exciting New Technologies built a “technology platform” that allowed the Humane Society to become the top publicly supported animal charity offering help after Hurricane Katrina in 2005. A spokesman for the Humane Society says that Dr. Irwin canceled the software project in 2004 and that the organization bought the technology from another company.

Nevertheless, when Dr. Irwin left the Humane Society and took the reins of the American Bible Society, he hired Mr. Gordon again. Dr. Irwin said the organization had multiple Web sites — “everyone and his brother had one” — that needed to be streamlined.



BETWEEN July 2005 and June 2007, tax documents indicate, the Christian charity paid Exciting New Technologies more than $5 million. A spokesman for the philanthropy said that the $5 million in payments involved projects other than Web design, including e-mail marketing and digitizing the Bible, that were performed by subcontractors.

Dr. Irwin said those charges were expensive, but that the organization needed to catch up quickly on the Web. “It was so far behind the curve on Internet development that we simply were in the process of rapidly ramping up,” he said. “The tax form will show next year that we spent a lot less, and the year after that will show we will continue to spend a lot less.”

But questions have been raised inside the Bible society about the payments to Mr. Gordon. One employee — who requested anonymity to avoid Dr. Irwin’s ire — said the tax documents disclose what is “fairly widely known within the walls of A.B.S., and yes, the exorbitant costs have been questioned from the start.”

This person also said that “there have been attempts made to determine where the money is going.”

Dr. Irwin said he was unaware of Mr. Gordon’s ties to the pornography industry. “I have absolutely no knowledge of Richard Gordon’s involvement in pornography,” he said. “If anyone can provide me evidence that he is involved in pornography, then I want you to know he will be out of the American Bible Society today.”

On Friday, after being questioned about its dealings with Mr. Gordon, the society said “the American Bible Society and Richard Gordon have mutually agreed to terminate all existing business relationships.” The society added that it was continuing to investigate Mr. Gordon and his business with the organization.

Dr. Irwin and Mr. Gordon have also apparently intersected on other business transactions as well.

In March 2007, the two men considered redeveloping valuable property that the American Bible Society owns at 1865 Broadway, near Columbus Circle in Manhattan, according to two people familiar with the discussions. Dr. Irwin and Mr. Gordon met with executives at Sonnenblick Goldman, the real estate investment banking firm, about the project, according to a person at the bank who was privy to the discussions but didn’t want to be named disclosing details about a confidential business matter.

The discussions ultimately fell through, in part because Mr. Gordon made an unusual request, this person said: he asked the investment bank to pay him a $20 million commission on the deal out of the firm’s own fee. Asked about these talks, Dr. Irwin said only that “there was no agreement whatsoever.”

Mr. Gordon “would be the last person I would have anything to do with on real estate development in New York City,” Dr. Irwin said. “The American Bible Society has access to world-class developers, and he isn’t one of them.”

Twice this past March, more than a hundred activists gathered on Jean-Talon Road in Montreal to protest what they saw as improprieties at the city’s Society for the Prevention of Cruelty to Animals.

The protests came after Canadian press reports of possible financial abuses by the Montreal S.P.C.A.’s executive director, Pierre Barnoti. Among other things, Mr. Barnoti was said to have used S.P.C.A. funds for personal travel while engaging in improper fundraising activities and euthanizing an unnecessarily high number of animals.

In April, the protesters prevailed: Mr. Barnoti stepped down and was placed on “indefinite sick leave,” according to the organization. The Canada Revenue Agency, the country’s counterpart of the Internal Revenue Service, began an investigation, and a majority of the charity’s board of directors resigned.

A new board is now combing through the Montreal S.P.C.A.’s financials, trying to reconstruct how the organization wound up more than $4 million in debt. The board is also trying to solve a little Internet mystery: what happened to the organization’s prized Web address, SPCA.com.

Two years ago, a new United States organization called SPCA International took over the SPCA.com Internet domain and started using it to solicit money for animal rights.

According to public records and a report last November in Animal People, an animal care industry newspaper, Mr. Barnoti registered a company called SPCA International in May 2006 in Delaware. Registering an animal rights organization in the United States allowed Mr. Barnoti to raise money here, and he hired a New York City direct mail company to solicit donations.

In an effort to beef up the group’s Web presence, Mr. Barnoti consulted Paul Irwin. In an interview, Dr. Irwin said that he introduced Mr. Barnoti to Richard Gordon.

Mr. Gordon’s company designed the SPCA.com site, and James D. Winston, a longtime business associate of Mr. Gordon, is listed on tax documents as the organization’s executive director. SPCA International declined to make Mr. Winston available for an interview.

It’s not clear how much Mr. Gordon profits from his work on SPCA International. But the chief executives of petsupplies.com, an e-commerce partner listed on the SPCA.com site, and Pet-Togethers, an advertiser on the site, both say their company’s financial relationship is not with SPCA International but with a separate entity, the SPCA Foundation.

According to California corporate records, the foundation was registered as a for-profit company last August by Mr. Gordon’s lawyer, Mr. Woodlief.

As for SPCA International, Mr. Gordon appears to have no operational role there. Even so, the group is involved in a range of initiatives. Every few weeks, the SPCA International selects a “shelter of the week” from around the world and then asks for money for that shelter.

Four of five shelters that were awarded this distinction over the past two months say that they received a $1,000 check and a plaque for the honor — but not a percentage of any donations. The fifth shelter, Welfare of Our Furry Friends, in West Sacramento, Calif., says it received $48.

SPCA International has also undertaken one other significant project. Last year, it created a program called Operation Baghdad Pups that tries to rescue stray dogs in Iraq on behalf of the American soldiers who have befriended them.

The program is run by Terri Crisp, who is primarily known in animal-care circles as the founder of Noah’s Wish, an animal-rescue charity. Last October, Noah’s Wish settled an investigation with the attorney general of California, agreeing to pay $4 million over allegations that it misappropriated donations it received after Hurricane Katrina.

In an interview, Ms. Crisp declined to discuss the Noah’s Wish troubles. But she said SPCA International was “in its infancy” and was trying to “find something unique to make a difference for animals.”

She said she has traveled to Iraq five times to bring 14 dogs back to the United States for soldiers. The program is now prominently promoted on SPCA.com, alongside an ABC News story about it. Donations are solicited to support Baghdad Pups as well as “to further the mission of the SPCA International to stop euthanizing adoptable and healthy animals.”

SPCA International’s fund-raising is hard to assess. Last week, the group filed for an extension on its tax returns. It has yet to reveal how much money it has raised or earned from sponsorships — a requirement for charitable organizations.

Still, the site comes up first on any Google or Yahoo search for the term “SPCA” — ahead of even the 142-year-old American Society for the Prevention of Cruelty to Animals, which has 420 employees and runs a shelter in New York City.

The A.S.P.C.A. declined to comment on SPCA International. But the SPCA.com Web site has angered other animal rights activists who contend that the new organization is exploiting the goodwill of similarly named, more established charities.

Ms. Crisp acknowledged that the organization’s name might mislead people.

“We have people who are trying to reach us that call the A.S.P.C.A. in New York, and we have people who think they are calling the A.S.P.C.A. or contacting their local S.P.C.A. but who call us. We get a lot of that,” she said. “Nobody owns the name, so yeah there’s confusion.”

Back in Canada, meanwhile, the new board members at the Montreal S.P.C.A. are looking at how to get their domain name back.

“If Pierre Barnoti transferred this domain name to another company, that was not in the best interest of the Montreal S.P.C.A.,” said Wendy Adams, a board member and a law professor at McGill University. “It appears he has used this asset to his own benefit. It’s self-dealing, and it’s a breach of fiduciary duty.”

LAST month, Stickam, the live video social network operated by Mr. Takahashi’s DTI, sent out a press release proclaiming a new partnership: the social network had been selected, the release said, as the exclusive provider of live Web video for the SPCA International’s Operation Baghdad Pups and would broadcast regular updates on the program’s progress.

The announcement was ordinary and easy to overlook: two seemingly disparate organizations unveiling a partnership.

But to people who knew the men behind the two companies and their long and fruitful collaboration, it was clear that Richard Gordon and Wataru Takahashi were still looking for new ways to work together.

[Via - NYTimes.Com]

How To Build A $300 Million Domain Name Empire

Kevin Ham leans forward, sits up tall, closes his eyes, and begins to type -- into the air. He's seated along the rear wall of a packed ballroom in Las Vegas's Venetian Hotel. Up front, an auctioneer is running through a list of Internet domain names, building excitement the same way he might if vintage cars were on the block.

As names come up that interest Ham, he occasionally air-types. It's the ultimate gut check. Is the name one that people might enter directly into their Web browser, bypassing the search engine box entirely, as Ham wants? Is it better in plural or singular form? If it's a typo, is it a mistake a lot of people would make? Or does the name, like a stunning beachfront property, just feel like a winner?

When Ham wants a domain, he leans over and quietly instructs an associate to bid on his behalf. He likes wedding names, so his guy lifts the white paddle and snags Weddingcatering.com for $10,000. Greeting.com is not nearly as good as the plural Greetings.com, but Ham grabs it anyway, for $350,000.

Ham is a devout Christian, and he spends $31,000 to add Christianrock.com to his collection, which already includes God.com and Satan.com. When it's all over, Ham strolls to the table near the exit and writes a check for $650,000. It's a cheap afternoon.

Just a few years ago, most of the guys bidding in this room had never laid eyes on one another. Indeed, they rarely left their home computers. Now they find themselves in a Vegas ballroom surrounded by deep-pocketed bankers, venture-backed startups, and other investors trying to get a piece of the action.

And why not? In the past three years alone, the number of dotcom names has soared more than 130 percent to 66 million. Every two seconds, another joins the list.

But the big money is in the aftermarket, where the most valuable names -- those that draw thousands of pageviews and throw off steady cash from Google's and Yahoo's pay-per-click ads -- are driving prices to dizzying heights. People who had the guts and foresight to sweep up names shed during the dotcom bust are now landlords of some of the most valuable real estate on the Web.

The man at the top of this little-known hierarchy is Kevin Ham -- one of a handful of major-league "domainers" in the world and arguably the shrewdest and most ambitious of the lot. Even in a field filled with unusual career paths, Ham's stands out.

Trained as a family doctor, he put off medicine after discovering the riches of the Web. Since 2000 he has quietly cobbled together a portfolio of some 300,000 domains that, combined with several other ventures, generate an estimated $70 million a year in revenue. (Like all his financial details, Ham would neither confirm nor deny this figure.)

Working mostly as a solo operator, Ham has looked for every opening and exploited every angle -- even inventing a few of his own -- to expand his enterprise. Early on, he wrote software to snag expiring names on the cheap. He was one of the first to take advantage of a loophole that allows people to register a name and return it without cost after a free trial, on occasion grabbing hundreds of thousands of names in one swoop.

And what few people know is that he's also the man behind the domain world's latest scheme: profiting from traffic generated by the millions of people who mistakenly type ".cm" instead of ".com" at the end of a domain name.

Try it with almost any name you can think of -- Beer.cm, Newyorktimes.cm, even Anyname.cm -- and you'll land on a page called Agoga.com, a site filled with ads served up by Yahoo.

Ham makes money every time someone clicks on an ad -- as does his partner in this venture, the West African country of Cameroon. Why Cameroon? It has the unforeseen good fortune of owning .cm as its country code -- just as Germany runs all names that end with .de.

The difference is that hardly any .cm names are registered, and the letters are just one keyboard slip away from .com, the mother lode of all domains. Ham landed connections to the Cameroon government and flew in his people to reroute the traffic. And if he gets his way, Colombia (.co), Oman (.om), Niger (.ne), and Ethiopia (.et) will be his as well.

"It's in the works," Ham says over lunch in his hometown of Vancouver, British Columbia. "That's why I can't talk about it." He's nearly as reluctant to share details about his newest company, called Reinvent Technology, into which he's investing tens of millions of dollars to build a powerhouse of Internet businesses around his most valuable properties.

Given Ham's reach on the Web -- his sites receive 30 million unique visitors a month -- it's remarkable that so few people know about him. Even in the clubby world of domainers, he's a mystery man. Until now Ham has never talked publicly about his business. You won't find his name on any domain registration, nor will you see it on the patent application for the Cameroon trick.

There are practical reasons for the low profile: For one, Ham's success has drawn enemies, many of them rivals. He once used a Vancouver post office box for domain-related mail -- until the day he opened a package that contained a note reading "You are a piece of s**t," accompanied by an actual piece of it.

Bitter domainers are one thing, lawyers another. And at the moment, Ham's biggest concern is that corporate counsels will come after him claiming that the Cameroon typo scheme is an abuse of their trademarks. He may be right, since this is the first time he's been identified as the orchestrator.

When asked about the .cm play, John Berryhill, a top domain attorney who doesn't work for Ham, practically screams into the phone, "You know who did that? Do you have any idea how many people want to know who's behind that?"

Kevin Ham is a boyish-looking 37-year-old, trim from a passion for judo and a commitment to clean living. His drink of choice: grapefruit juice, no ice. His mild demeanor belies the aggressive, work-around-the-clock type that he is. Ham frequently steers conversations about business back to the Bible. Not in a preachy way; it's just who he is.

The son of Korean-born immigrants, Ham grew up on the east side of Vancouver with his three brothers. His father ran dry-cleaning stores; his mother worked graveyard shifts as a nurse. A debilitating illness at the age of 14 led Ham to dream of becoming a doctor. He cruised through high school and then undergraduate work and medical school at the University of British Columbia.

Christianity had long been a mainstay with his family, but as an undergrad, he made the Bible a focal point of his life; he joined the Evangelical Layman's Church and attended regular Bible meetings. Ham recalls that it was about this time -- 1992 or 1993 -- that he was introduced to the Web. A church friend told him about a powerful new medium that could be used to spread the gospel.

"Those words really struck me," Ham says. "It's the reason I'm still working."

After he graduated from med school in 1998, Ham and his new bride took off for London, Ontario, for a two-year residency. By the second year, Ham had become chief resident, and when he wasn't rushing to the emergency room, he indulged his growing fascination with the Net, teaching himself to create websites and to code in Perl.

Information about Web hosting at the time was so scattered that Ham began creating an online directory of providers, complete with reviews and ratings of their services. He called it Hostglobal.com.

From there it was a short step to the business of buying and selling domains. About six months after he launched Hostglobal, Ham was earning around $10,000 per month in ad sales. But when one of his advertisers -- a service that sold domain registrations -- told him that a single ad was generating business worth $1,500 a month, Ham figured he could get in on that too.

It made sense: People shopping for hosting services were often interested in buying a catchy URL, so Ham launched a second directory, called DNSindex.com. Like similar services operating at the time, it gave customers a way to register domain names.

But Ham added the one feature that early domain hunters wanted most: weekly lists of available names, compiled using free sources he found on the Web. Some lists he gave away; others he charged as much as $50 for. In a couple of months, he had more than 5,000 customers.

By the time he finished his residency in June 2000, his two small Web ventures were pulling in more money in a month -- sometimes $40,000 -- than Ham made that year at the hospital. That was enough, he reasoned, to put off starting a medical practice for three more months, maybe six. "It just didn't make sense not to do it," he says.

With a new baby in tow, Ham and his wife moved back to Vancouver, settling into a one-bedroom apartment. Ham's timing, it turned out, was spot-on. Tech stocks were tumbling, dotcoms were folding left and right, and investors were fleeing the Web. More important to him, hundreds of thousands of valuable domain names that were suddenly considered worthless began to expire, or "drop." Ham and a handful of other trailblazers were ready to snap them up.

Figuring out when names would drop was tedious work.

At the time, Network Solutions controlled the best names; it was for a long time the only retail company, or registrar, selling .coms. It didn't say when expiring names would go back on the market, but twice a day it published the master list of all registered names -- the so-called "root zone" file (now managed by VeriSign (Charts)). It was a fat list of well over 5 million names that took hours to download and often crashed the under-powered PCs of the day.

So Ham wrote software scripts that compared one day's list with the next. Then he tracked names that vanished from the root file. Those names would be listed briefly as on hold, and Ham figured out that they would almost always drop five or six days later -- at about 3:30 a.m. on the West Coast. In the dark of night, Ham launched his attacks, firing up five PCs and multiple browsers in each. Typing furiously, he would enter his buy requests and bounce from one keyboard to the next until he snagged the names he wanted.

He missed a lot of them, of course.

Ham had no clue that there were rivals out there who were way ahead him, deploying software that purchased names at a rate that Ham's fingers couldn't match. Through registration data, he eventually traced many of those purchases to one owner: "NoName." Behind the shadowy moniker was another reclusive domain pioneer, a Chinese-born programmer named Yun Ye, who, according to people who know him, operated out of his house in Fremont, Calif.

By day Ye worked as a software developer. At night he unleashed the programs that automated domain purchases. (Ye achieved deity status among domainers in 2004 when he sold a portfolio of 100,000 names to Marchex , a Seattle-based, publicly traded search marketing firm, for $164 million. He then moved to Vancouver.)

Ham went back to the keyboard, writing scripts so that he, too, could pound at the registrars. Ham's track record began to improve, but he still wasn't satisfied. "Yun was just too good," he says.

Then Ham did something brash: He bought his way to the front of the line. Since registrars had direct connections to Network Solutions's servers, Ham's play was to cut out the middleman. He struck deals with several discount registrars, even helping them write software to ensure that they captured the names Ham wanted to buy during the drops. In exchange for the exclusivity, Ham offered to pay as much as $100 for some names that might normally go for as little as $8.

Within weeks Ham had struck so many deals that, according to rivals, he controlled most of the direct connections. "I kept telling them to hit them harder," Ham says in a rare boastful moment. "We brought down the servers many times." During one six-month period starting in late 2000, Ham registered more than 10,000 names.

Rival domainers, locked out of much of the action, didn't appreciate Ham's tactics. It was one of them, most likely, who sent him the turd. "Kevin came in and closed the door for everyone else," says Frank Schilling, a domainer who figured out what Ham had done and sealed similar deals. "There was a ton of professional jealousy."

Ham, in fact, owes a lot to Schilling. Both men lived in Vancouver at the time, and after Ham sought out Schilling in November 2000, the two met at a restaurant to compare notes.

"How much traffic do you have?" Schilling asked. An embarrassed Ham replied that he had no idea. Schilling mentioned that he was experimenting with a new service, GoTo.com, that would populate his domains with ads. Ham spent the next week figuring out how much traffic his sites were generating, and he was amazed by the initial tally: 8,000 unique visitors per day from the 375 names he owned at the time.

"From then on," Ham says, "I knew that what I was building would be very, very valuable." He soon signed up with GoTo (which was later purchased by Yahoo). On his first day, Ham made $1,500.

The system worked then as it does now: People don't always use Google or Yahoo to find something on the Web; they'll often type what they're looking for into a browser's address bar and add ".com."

It's a practice known as "direct navigation," or type-in traffic, and millions do it. Need wedding shoes? Type in "weddingshoes.com" -- a site that Ham happens to own -- and you'll land on what looks like a shoe-shopping portal, filled with links from dozens of retailers.

Click on any one of those links, and the advertiser that placed it pays Yahoo, which in turn pays a cut to Ham. That single site, Ham says, brings in $9,100 a year. Small change, maybe, but the name cost him $8, and his annual overhead for it is about $7. Multiply that model several thousand times over, and you get a quick idea of the kind of cash machine that Ham was creating from his living room.

By early 2002, roughly $1 million a year was pouring into Ham's operation, which he ran with the help of his high school friend and current partner, Colin Yu. But again he felt the tug of his conscience. He occasionally left Vancouver to do medical missionary stints, helping patients in Mexico, the Philippines, and China. He found the experience rewarding, but the development boom he saw taking off in China just reminded him of the virtual real estate boom he was leading back home.

Soon Ham was back working full-time on the Web. "There was just too much more to do," he says.

There was no looking back. The next few years were among Ham's most aggressive. One of his most valuable tricks was one he had experimented with in the early days, a practice called domain "tasting." Tasting takes advantage of a provision that allows domain-name buyers a free five-day trial period. Intended to protect customers who mistakenly purchase the wrong name, it handed aggressive domainers another means with which to expand -- and exploit -- their portfolios.

Ham cobbled together new lists of domain words in every combination, registering hundreds of thousands of new names for free, monitoring the traffic, and then returning the duds. By 2004, Ham had amassed such a deep portfolio that he pulled his names from third-party registrars, launched his own registrar, and then created another company, appropriately named Hitfarm, that could do a better job than Yahoo of matching ads with domain names -- for himself and 100 or so other domainers.

Like any shopping spree, though, Ham's tasting binge didn't last. It brought in so many names -- offbeat strings of letters, names with too many dashes, and other variations that humans would be hard-pressed to think of -- that Ham saw the quality of his portfolio dropping in proportion to its growing size. For every few thousand names he'd register, he'd toss back all but a hundred or so.

Tasting exacerbated another problem too: Ham's software grabbed all kinds of typographical variations of trademarked names. Called typo-squatting, it's a practice now coming under the same intense scrutiny long faced by cybersquatters. Microsoft and Neiman Marcus are just two companies whose lawyers have brought anti-cybersquatting lawsuits, charging domainers with intentionally profiting from variations of their trademarks.

"Tasting changed everything," says Ham, who has since abandoned the practice, though he concedes that Hitfarm still holds some problematic names. "I said, forget it," he says. "Generic names are already too hard to come by. And the legal risks are too great."

The legal risks should diminish, however, if you don't own the domain names at all -- and that's the secret behind the Cameroon play.

The domain confab in Vegas is like any other trade conference: The real intrigue happens at cocktail hour. One subject in the air is Cameroon. Late last summer, domainers began noticing that something odd happens to .cm traffic: It all winds up at a site called Agoga.com. Domainers know, of course, that .cm belongs to Cameroon. And they know that whoever controls Agoga.com has created a potential gold mine.

What they don't know is who's behind it all.

At one of the meet-and-greets, Ham is standing drinkless, as usual, sporting a polo shirt, chatting with a few people he knows and some he's just met. In this crowd, it seems, everyone wants to know Ham. Finally, he is alone.

"I hear you're the guy behind .cm?"

Ham looks surprised by the reporter's question, then flashes a big smile and says, "I had help."

Over a series of conversations a few weeks later in Vancouver, Ham shares some details about a deal that, despite his innate reticence, he's clearly proud of. About a year ago, he says, he worked his contacts to gain connections to government officials in Cameroon. Then he flew several confidantes to Yaound?, the capital, to make their pitch. His key programmer went along to handle the technical details.

"Hey," Ham says, flagging his techie down near the office elevator. "Didn't you meet with the president of Cameroon?"

"Nah," the programmer says. "We met with the prime minister. But we did see the president's compound."

It's an odd scene to picture: a domainer's reps in a sit-down with Ephraim Inoni, the prime minister of Cameroon, to discuss the power of type-in typo traffic and pay-per-click ads. And yet, as with most of the angles Ham has played, the Cameroon scheme is ingeniously straightforward.

Ham's people installed a line of software, called a "wildcard," that reroutes traffic addressed to any .cm domain name that isn't registered. In the case of Cameroon, a country of 18 million with just 167,000 computers connected to the Internet, that means hundreds of millions of names. Type in "paper.cm" and servers owned by Camtel, the state-owned company that runs Cameroon's domain registry, redirect the query to Ham's Agoga.com servers in Vancouver.

The servers fill the page with ads for paper and office-supply merchants. (Officials at Yahoo confirm that the company serves ads for Ham's .cm play.) It all happens in a flash, and since Ham doesn't own or register the names, he's not technically typo-squatting, according to several lawyers who handle Internet issues.

The method is spelled out in a patent application filed by a Vancouver businessman named Robert Seeman, who Ham says is his partner in the venture and who also serves as chief adviser at Reinvent Technology. (Seeman declined to be interviewed for this story.)

Ham won't reveal specifics but says Agoga receives "in the ballpark" of 8 million unique visitors per month. Fellow domainers, naturally, are envious.

"As soon as it started happening, there was a huge sense of 'Why didn't I think of that?'" says attorney Berryhill, who represents Schilling and other domainers.

Still, several companies have already tracked down Ham's attorneys, claiming trademark infringement. Ham argues that his system is legally in the clear because it treats every.cm typo equally and doesn't filter out trademarked names.

Berryhill concurs. "You can't really say that [wildcarding] is targeting trade-marks," he says. "It captures all the traffic, not just trademark traffic." Moreover, the anti-cybersquatting statute applies only to people who register a trademarked domain; using a wildcard doesn't require registering names.

Clever though it may be, .cm is "a very small part of our operations," Ham says. He won't disclose how much he pays to the government of Cameroon, whose officials could not be reached for comment.

The partnership has been a rocky one so far, and the system has sporadically shut down. But .cm is only one of several country domains where the typo play can work. According to Ham, he and his team are working with other governments. The dream typo play -- .co -- belongs to Colombia, to which Ham says Seeman paid several visits long before they began working on Cameroon. (Citing safety concerns, Ham hasn't yet made the trip. "I would only go if the president requests to meet me," he says.)

As for other countries he might soon invade, Oman (.om) is an obvious target. Niger and Ethiopia are out there too, but since they would play off less lucrative .net typos, they might not be worth the trouble.

As for Colombia, Ham says, "we're making progress."

Ham leans over his office PC to check on a domain auction. Steven Sacks, a domainer based in Indianapolis who works for Ham, is telling him about some names up for sale. Ham shoots back an instant message: "I like doctordegree.com ... and rockquarry.com ... sunblinds.com."

The days of figuring out the drop are long over. Everything's open now. Lists are easy to obtain. You can preorder a name before it drops and hope to get it. Or, like Ham, you can shell out five or six figures in online auctions. The only great deals, at least for .com names, tend to happen privately, when a domainer manages to find an eager or naive seller.

Ham still buys 30 to 100 names a day, but he's no longer getting them on the cheap. In fact, he and Schilling, who today maintains a $20 million-a-year portfolio from his home in the Cayman Islands, are often accused of driving up prices.

Take, for example, the $26,250 Ham paid for Fruitgiftbaskets.com, or the $171,250 for Hoteldeals.com. "The amount he will pay is crazy," says Bob Martin, president of Internet REIT, a domain investment firm that has raised more than $125 million from private investors, including Maveron, the venture firm backed by Starbucks founder Howard Schultz.

Nonsense, Ham says. The names are expensive only if you value them the way people like Martin do. The VCs and bankers, who were late to the domain gold rush, assess names by calculating the pay-per-click ad revenue and attaching a multiple based on how long it would take to pay off the investment.

Viewed that way, Ham's personal portfolio alone is worth roughly $300 million. But some of Ham's recent domain purchases would also look silly: They'd take 15 or 20 years just to justify the price, and that assumes continuation of the pay-per-click model.

But Ham is taking a longer view. The Web, he says, is becoming cluttered with parked pages. The model is amazingly efficient -- lots of money for little work --but Ham argues that Internet users will soon grow weary of it all.

He also expects Google, Microsoft, and Yahoo to find ways to effectively combat typo-squatting. Some browsers can already fix typos; Internet Explorer catches unregistered domains and redirects visitors to a Microsoft page -- in effect controlling traffic the same way that Ham is doing with .cm. "The heat is rising," Ham says.

When Ham buys a domain now, he's not doing pay-per-click math but rather sizing it up as a potential business. Reinvent Technology aims to turn his most valuable names into mini media companies, based on hundreds of niche categories.

Among the first he'd like to launch, not surprisingly, is Religion.com. Ham recently leased the entire 27th floor in his Vancouver building and is now hiring more than 150 designers, engineers, salespeople, and editorial folks.

Much of that effort is going into developing search tools based more on meaning and less on keywords. "Google is only so useful," Ham says.

The aim is to apply a meaning-based, or "semantic," system across swaths of sites, luring customers from direct navigation and search engines alike. Religion.com would then become an anchor to which scores of other sites would be tied.

"It's time to build out the virtual real estate," Ham says. "There's so much more value in these names than pay-per-click." Seeman's patent application even mentions the possibility of turning Web traffic from Cameroon and other future foreign partners into full-fledged portals.

It's all part of the master plan, as Ham aims to become the first domainer to move from the ranks of at-home name hunter to Internet titan. Smaller players have been selling out to VC-backed groups, and Ham expects that the best names will eventually be owned by just a handful of companies.

If he bets right, he might very well be one of them. "If you control all the domains," he says, "then you control the Internet."

[Via - The man who owns the Internet]