How do so many startups register domain names similar to existing businesses?

Just as one can't believe everything s/he reads, one can't presume that others' business decision-making is legally prudent. While using another company's name may not necessarily cause a problem (e.g., where the use is for something so unrelated as to preclude a likelihood of confusion), some brand names are sufficiently strong (i.e., famous) such that technically unrelated uses may still cause a problem. To your example, a common practice among domain squatters is to register a company's name on obscure TLDs in the hope that said company will in the future be motivated to pay the squatter for those rights. Domain name squatting isn't necessarily a problem (absent facts underlying a 15 U.S.C. s 1125(d) action), though appending a .___ to another's trademark will itself not likely save you from a likelihood of confusion problem. This is all merely academic in the absence of specific facts, and if you are seeking actionable guidance you should speak with a trademark attorney in private.

This has to do with whether there is a 'likelihood of confusion' between your good or service and existing ones. For this reason the US Patent and Trademark Office allows for registering within certain 'Class'es of product or service. For example if someone started making books with pop up faces (somehow) they might well be able to call it Facebook. I cannot imagine where a .co or any of them would lose that likelihood of confusion although there are several different countries which allow for registration in that country. This also holds true for the European Community. I am licensed in the US, England and Wales with an LLM in International Intellectual Property if I may be of further service. Alexander@PenleyGlobalLaw.com