Facing The Absurd

the absurd side of domaining

Archive for March, 2010

Can PPC fall further?

Mar 29

Posted by Sisyphus in Domaining | 6 Comments

The last 2-3 years have been tragic for the parking side of the domain business.  Parking earnings have probably gone down by an average of 60%. Can they fall further?

We should probably look at the main factors behind the fall in ppc on the domain channel in the first place to able to make a good judgement:

  • GOOG/YHOO cleaning up the domain channel’s traffic quality alongside with the parking companies. Within the domain community there has always been this belief that domain traffic quality is absolutely outstanding in comparison to search, which is usually based on one stupid report from Efficient Frontier. As a whole, domain generated traffic is worse than search for sure, there are just certain domains/verticals where traffic quality is indeed better, but this cannot be generalized for the whole channel. GOOG/YHOO have worked hard on establishing what domain traffic converts and which doesn’t and have established mechanisms to penalize bad traffic.
  • Along with this clean up payouts have been cut using some kind of quality control mechanism. Although being a black box, it is likely that bad traffic is penalized in financial terms but also good traffic is not rewarded, or at least not rewarded enough.
  • Advertisers are now easily able to exclude the domain channel from their PPC advertising campaigns. That is also a pretty recent case.
  • GOOG/YHOO simply taking a bigger cut. One thing is what the parking companies rev share is in their contracts, second being the real rev share that takes into account the “black box”.
  • Advertisers are more capable of measuring the success of their ppc campaigns. More and more advertisers measure conversions etc. This again is connected to traffic quality I mentioned above.
  • The general economy. Not really necessary to explain.

The good news is that parking earnings have stabilized in the recent months, or at least they are not in free fall anymore.

So I think there is light at the end of the tunnel because a new “equilibrium” is being reached with the major cleanup of traffic quality and PPC should even increase as the economy improves. With the massive previous fall of PPC, other ways of monetizing domain traffic are suddenly kicking in. For example, I am now selling over 5% of my traffic directly to advertisers and I just started sales in January. I haven’t even started to fiddle around with affiliate stuff yet, which should bring another slight boost.

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The Elephant team is growing every day…

Mar 26

Posted by Sisyphus in Domaining | 7 Comments

It was photo time this week in the office so the whole Elephant crew gathered on the roof of our office for some pictures…

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DomainSponsor to introduce two more “domainfest lite” editions

Mar 25

Posted by Sisyphus in Domaining | 2 Comments

More events from DS on the domain conference circuit… I guess these will appeal to more local players:

DOMAINSPONSOR® INTRODUCES DOMAINFEST® ONE-DAY POWER NETWORKING EVENTS IN FORT LAUDERDALE AND NEW YORK CITY

--Regional events will focus heavily on networking; Live Moniker® Auction will feature premium Internet real estate including Dating.com, Hobbies.com, HardDrives.com and GolfResorts.com--

LOS ANGELES, Calif. - DomainSponsor®, the domain monetization business unit of Oversee.net® and organizer of the DOMAINfest® series of conferences, said today that it will further expand the highly regarded franchise with one-day events in Fort Lauderdale, Florida and New York City. 

Both events will precede DOMAINfest Europe to be held in Prague, October 6-7, 2010.

Event Information
The one-day events will be held on May 13, 2010 at the W Hotel in Fort Lauderdale and on August 18, 2010 at the Grand Hyatt in midtown Manhattan, immediately following the Affiliate Summit East conference. 

Each meeting will continue DOMAINfest’s tradition of providing a rich setting for discussions around how to increase the value of Internet real estate with subject-matter experts invited to facilitate free-flowing power networking sessions that will kick off each event from 1:30 pm to 3:30pm EDT. Moniker will conduct a live auction of premium names from 4:00 to 7:00 PM EDT, followed by a private dinner party hosted by DomainSponsor.  

Registration for both Power Networking events will be available online at www.domainfest.com on Monday, April 12, 2010.  The registration fee will be $175 per event.

Moniker® Auctions
Each one-day DOMAINfest event will feature a Moniker live premium domain name auction followed by a weeklong Extended Online Auction.  The live auctions are slated to start at 4:00 PM EDT and run through 7:00 PM.  The SnapNames Live™ technology used to run these live auctions offers real-time online viewing and bidding from anywhere in the world via a free software download.  Details on how to submit domains and bid either in-person or remotely in any Moniker live auction can be found at http://domainauctions.moniker.com

“The DOMAINfest franchise provides an excellent opportunity for publishers, online marketers and internet professionals to exchange ideas and solidify relationships,” said Peter Celeste, Senior Vice President of Oversee.net and General Manger, Monetization Services. “These one-day power networking events are specifically designed to encourage more participation from local and regional professionals who may not be able to afford the time and expense to travel to a distant city for a two- or three-day event.  As with all DOMAINfest events, registration rates are inexpensive to encourage broad participation.”

In January, 2010, DomainSponsor hosted a highly successful DOMAINfest Global® conference in Santa Monica, California that attracted more than 600 professionals from 26 countries representing a variety of internet-related industries.

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$51k RPM

Mar 24

Posted by Sisyphus in Domaining | 5 Comments

Interesting…

xxxxxxx.com 1 0 0 2 200.00% $25.91 $51,821.33 $0.00 $51.82 $51.82

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Marchex should be broken up and its dual share structure abandoned

Mar 21

Posted by Sisyphus in Domaining | 3 Comments

I happen to follow all the listed domain related companies such as Marchex, Dark Blue Sea or Tucows because their annual reports always have interesting information for me.  Most of the information is pretty dull, but sometimes you’re capable to dig out some very interesting info.

Anyway, investors in Marchex have to be very dissapointed. If you would have invested in the stock in 2006, your holdings today are probably worth 80% less. The company has historicaly severely underperformed the NASDAQ composite. Management has in my view clearly underperformed and was unable to exploit all the various opportunities. I think it’s time to get creative…

Marchex is pretty much a mix of various assets that management has acquired over the years, including the famous $160 million Yun Ye portfolio buyout. The problem is that putting all these assets together has in fact depressed their values instead of increasing them through synergies. There is value to be released.

Marchex is an ideal candidate to be broken up into pieces that should be in aggregate more valuable than the current mini-conglomerate structure that Marchex is. The domain portfolio is probably easily worth $150 million. Its annual ebitda potential is probably somewhere around $20-25 million. The domain portfolio should be split off and floated as a separate company or sold. This would release substantial value to shareholders.

Another big problem of Marchex is its dual class structure that is depressing the share price and given management too much control. Its B-class shares are trading on NASDAQ – about 25 million outstanding. But the problem is with the A-class which is held by management. Each A-class share (10 million of them) entitles its owner 25 votes compared to every B class. This gives management 93% voting power in Marchex. I believe a lot of value would be released to shareholders if this dual share structure would be abandoned – suddenly Marchex would become a potential acquisition candidate, it could bring the attention of an activist investor (think Icahn) etc. Otherwise Marchex will just continue to be a cosy kingdom for its management.

Very sad story, isn’t it?

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Is a great domain really a prerequisite of building a successful business online?

Mar 19

Posted by Sisyphus in Domaining | 14 Comments

I am always fascinated how a lot of domainer’s perspective is really narrow. If you ask them if they had $100k to start an online business, in most cases they will tell you that they would start by buying a great domain and say, spend $90k on it. Then use the remaining $10k to build a site by a freelancer and maybe spend some money on Google advertising to get it running. Then you get websites like property.com as a result of this approach.

On the contrary I would spend a maximum of 20% on a domain, more probably even 10%. I would plough the rest into developing a great user experince, great content and at least 50% into various forms of online marketing. When we’ve been developing sites, this approach just brings a better ROI for us.

It’s sad to say, but I don’t think an absolutely great domain is a prerequisite to success online. In some cases I can actually even see it as being detrimental. Because you quickly get the mindset that you have the best domain in the niche and your competitor’s don’t, hence you supposedly have an edge. But that’s the reason why your competitors work even harder to get ahead of you. It’s a little bit like dutch disease, in which natural resources become more of a curse than an advantage. It’s just that here your curse may be a great domain.

And now hate me!

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The new ccTLD rush

Mar 16

Posted by Sisyphus in Domaining | 4 Comments

Reading the various domain blogs and media it seems that ccTLD’s are getting tonnes of buzz lately. It almost seems that if anybody is ignoring them, he must be completely stupid. Because that is supposedly were the new big money in domaining is to be made…

Well, as usual, I like to bust myths. Don’t get me wrong, I do like ccTLDs, but the most money can still be made in .com because it’s such a large pool to dig in. People say there is too much competition in .com. That may be true but because the pool is so large there is plenty of room for everyone to play around.

In contrast the pools for ccTLDs are much smaller and it is difficult to scale to a big operation. For example, I do probably get a better ROI on .nl and .de than on my .com investments, but the money I can plow into these cctlds to get these great ROI’s is very limited. Any marginal money I put in is quickly hit by diminishing returns. I also get decent returns on .be, .se, .co.uk, .it, .es and .in (mainly because how cheap it is).But these ccTLDs are just a sort of hobby operation for me, my main playground continues to be .com where I still see the biggest potential, even today when supposedly there is so much competition.

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Is the battle to control the entire domain ecosystem simply flawed?

Mar 13

Posted by Sisyphus in Domaining | 4 Comments

In the last 2-3 years there has been a trend in the domain biz that I have been puzzled about. The big players started a push to control the entire domain ecosystem. Apart from parking, they wanted a registrar, an aftermarket, a conference etc.

I think it was the wrong choice that stemmed more from the empire building will of management/owners than strictly looking at ROI and ROE of shareholders. There was a promise of up-selling/cross-selling but that never really materialized. Instead the big players lost focus of their core businesses. Plus the acquisitions to control the entire ecosystem often turned out very sour.

Let’s start with Oversee for example. They shelled out several tens of millions for snapnames and Moniker. Snapnames few months later lost its vital Network Solutions contract and a few months ago the Halvarez scandal broke out. Moniker was also bought at the height of valutions. The amount of gross margin that these two companies contribute to Oversee.net is absolutely miniscule in comparison to its owned and operated portfolio and it’s monetization service DomainSponsor. Imagine that instead of plowing this crazy money into acquisitions, Oversee could have invested into its core businesses. It could have acquired more portfolios and invested into better monetization. In my opinion that kind of investment would generate much more substantial ROE for Oversee. Don’t also forget the time spent to integrate the new acquisitions.

A similar example is TrafficZ with its buyout of DomainTools that ended very sour as well – they are fighting former owner Jay Westerdal in court now. Aftermarket.com is home grown project but you cannot really talk about success there either. The Domain Rountable conference is losing traction as well.

Pretty much all the other big parking co’s played this game as well, maybe to a smaller extent though. One exception is Namedrive which kept its focus predominantly on monetization. That’s one of the reasons it has grown so rapidly and became a substantial player in monetization.

Wisdom of the day: Don’t let your Ego into strict business decisions.

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The Golden Touch

Mar 13

Posted by Sisyphus in Domaining | 19 Comments

Things have been really crazy lately. I’ve been working really long hours and the most satisfying about it is that everything is going almost unbelievably well. This will sound really boastful (our friends at DNForum will probably vomitt) but pretty much everything I have touched in the last 2.5 years has turned into gold. I’m almost afraid that a collosal fuckup lies somewhere ahead and everything is going to collapse :) .

It’s fun to look back at the beginnings. I started flirting around with business when I was 14-15. For the next 7 years or so everything I would touch would just screw up. I did have some minor successes that kept me going though. And then suddenly one day everything turned to the positive.

So if you’re still in the phase of taking shit, there is light at the end of the tunnel. I’ve come to appreciate one quote from the movie Layer Cake, it goes something like this:

You’re born, you take shit. You get out in the world, you take more shit. You climb a little higher, you take less shit. Till one day you’re up in the rarefied atmosphere and you’ve forgotten what shit even looks like. Welcome to the layer cake son.

So, anyway, what’s going on…

My various domain holdings are still growing every day. I’m zooming very close to the $20k revenue/day level from parking and expect to hit that level in about two months. With a little luck I think I can hit $30k/day by the end of the year. It’s all about being aggressive with acquisitions, creative with financing etc. It will be a stretch, but I think I can do it.

Few weeks back I was talking about our lead generation business in the Czech Rep with us going over $100k revenue/month next month (March). As things are looking now we are likely to hit $130k in March, which is absolutely great. Our lead gen team is doing a fantastic job. I’m revising estimates upwards again and the target for december 2010 is $300k in revenue.

We started intenstive sales in early February to advertisers with our zero-click platform called Elephant Traffic. At the end of this week advertiser’s were spending about $2k/day with us for domain traffic. We plan to continue scaling that up. There is still a lot of work to be done. The system isn’t great, there are inventory challenges and there are sales challenges. We are tweaking them and we should fly eventually. Again, our ET team has done great work on this. I expect ET to break-even in about two months. That looked virtually impossible even a month ago but a lot of things have changed to the positive.

Our car insurance broker, which I am a partner in, is running fantastic. We have now 40 people fulltime there, most of them brokers on the phone. We are doing about 4,000 closed contracts a month now, which brings in about $160,000 in commissions every month. The real beauty of this business comes with the long term though – if the car owner stays on the contract for another year, you get the commission from the contract again – virtually with no costs associated with it.

Then there is a big potential splash on the horizon. We are in the process of selling our search business that I cannot disclose as of now. The buyer is just in the process of doing due dilligence and if it goes through, this will be a multimillion dollar sale for us. I’m hoping that this deal will close in two months, then I will be able to disclose a little bit more.

Our facebook developer called Viral Maniacs is just days away from launching our first social game. We are going to launch in the Czech Rep first and go international in the next two weeks. What’s new about this game is that it is in 3D and deals with designing the interior of your own apartment, renting it out etc. I am really curious how successful the game will be.

My ultrasound liposuction clinic is off to a great start, beating the business plan. We are in the process of expanding to another ultrasound machine in the coming weeks. I am actually flirting with the idea of opening a proper liposuction clinic with surgery (I always liked the prospect of sucking out somebody’s fat and later selling it to him as soap), so I’m meeting with various plastic surgeons next week etc.

Even our mobile marketing company Crazy Tomato is getting some traction lately. I started this company during University and am not involved with day to day operations for quite some time. Looks like we have a big Czech media company interested in buying it, so we’ll see how that goes.

All looking almost too well… I’ve even started to re-think my idea for a helicopter charter service in the Czech Rep, which I had to postpone. It was always a hobby business that stemmed from my wanting of a helicopter anyway…

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Why I don’t like real estate as an asset class

Mar 11

Posted by Sisyphus in Domaining | 7 Comments

I see a lot of domainers diversify into real estate when they start making money. They view it as something similar to domains. The truth is that they would have been much better off if they would have kept re-investing in domains or other businesses.

My perception is that real estate investments are a sinful waste of money, money that maybe yields 5% per year. For us domain investors that is a petty return. If I would have a choice, I would prefer to have money in the bank than in real estate. Because it’s liquid and available for opportunistic deal making and this liquidity outweighs the forgone yield for me.

The main arguement made by domainers is that real estate is a very secure investment. Every domainer has paranoias that his domains might be taken away but he knows that nobody is going to take his house away. Hence they sacrifice yield in favour of security.

The big secret is that you do not have to sacrifice yield in exchange for security. The answer is diversification. If you have a diversified portfolio of high yielding investments (like domains) or businesses (obviously running the risk that some of these may default/go bancrupt) you will still be better off in the long run than if you plow money into real estate.

I like to illustrate things with analogies, so here’s one from the bond market. In the long run, a well diversified portfolio of junk bonds will perform better than a portfolio of tripleA rated bonds. Some of the junk bonds will obviously default, but the higher yield of the others will more than compensate for this in comparison to the AAA’s.

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