Let me say from the start: I do not like domaining. I think it gains income by at best, misleading search engine users, at worst it cheats them. However, it is not illegal so it should be considered to be a legitimate business model. Those people who have made a lot of money from the practice [and I don't think there are that many, particularly latecomers to the industry] would point at me and say 'fool'. And some might agree. Given that I was a first-mover in the domain name business in the UK, I was in a position to have registered a whole host of domains that have subsequently become prime real estate in the domaining field. But hey-ho, maybe I would be happier on a beach in Bermuda with fewer scruples?

The following paragraph is from the chapter on how a domain name can generate income in my book choosing the right domain name.

Domaining
This practice also goes by a number of other names, including domain name parking and domaineering - and is a descendant of an earlier incarnation, cybersquatting. Although still a popular term in the offline media, the original concept of cybersquatting was founded on registering names with a view to selling them to legitimate owners. As the courts got to grips with this practice it evolved into domaining, which can be divided into the legitimate and the not-so-legitimate. The success of early cybersquatting was based around the practice of 'direct navigation', but domaining has spun off into search engine optimization and pay per click (PPC) advertising - the latter being made possible by the emergence, and subsequent market dominance, of Google and its AdSense service.

I think the best way I can describe the practice in more detail is to use an example. I came across this case on the website of the World Intellectual Property Organization [WIPO]. It is the result of an Administrative Panel Decision from the WIPO Arbitration and Mediation Center in the case of Inter-Continental Hotels Corporation, Six Continents Hotels, Inc. v. Daniel Kirchhof, Case No. D2009-1661.

I would encourage you to read that report in full, but in a nutshell it is this.

The Inter-Continental Hotels Corporation and Six Continents Hotels successfully argued that the defendant held 1,519 domain names which contained clear references to trade marks and locations of the hotels owned by the complainants.

Yes, that's right: one thousand five hundred and nineteen domains. Furthermore Kirchhof was found to control over 70,000 domain names. That, newcomers to domaining, is how many domains you need to own in order to make significant amounts of money.

Each domain name hosted a website which was designed to look like the hotels' official sites, and so users would be likely to believe that they were indeed on an official website for one of the complainants' hotels. However, in reality, the websites linked to:
(i) websites [price comparison sites] offering bookings at the hotels. Note that these sites are innocent in the scam. However - in my opinion - they do make money from the practice, and so perhaps on an ethical stance they should question from where their visitors are referred.
(ii) sites that offer alternative accommodation in rival hotels at the same locations.
(iii) both types of site.

Under the Uniform Domain Resolution Policy (UDRP), domain names can be transferred if it can be shown by the complainant that the name is 'identical or confusingly similar to terms that it has rights to, that the person who owns it has no rights to the domain name, and that it was registered and is being used in bad faith' and WIPO agreed this was the case, stating that:

'when Internet users arrived at the respondent's websites, they were likely to believe that they had arrived at the official website for one of the complainant's hotels ... as that is the clear impression given by the website content.' and that 'as the websites provide a mechanism for booking at the hotel (albeit through another provider), the complainant is likely to suffer commercial loss when an Internet user books through the respondent's website when compared with a booking directly on one of the complainant's websites. The respondent is likely to receive a commercial gain through such transactions, as well as from displaying sponsored links to competitive goods and services.'

So there you go, bang to rights. But ... no fine [WIPO is not a court] - Kirchhof losing only the domain names. I say only, because 1,519 might represent a lot of registration money - but just one hotel booking on each name would probably cover its registration fee, anything else was profit.

Just so you can appreciate the types of domains needed for this kind of scam I've listed a few of the 1,519 below - with a footnote to would-be domainers:
(i) these are the numbers you must be looking at to make money, so some investment cash is required, and
(ii) do you think you can come up with any domain names that the 'professionals' haven't already thought of?