Facing The Absurd

Happy New Year’s everyone! Hope 2011 will be a great year for you!

Anyway, just wanted to share an idea I have had for some time now. Never really got a chance to do it myself initially, then I decided that the business opportunity isn’t that huge and I have to focus on bigger niches. It’s basically an aftermarket play exploiting the drop game, a domain flea market if you will.

The idea is simple – all of us domainers drop domains sometimes, we choose to let them expire. The idea is that somebody would build a service where you could push these domains, say 2 weeks before they expire, and offer them for $10 a piece + renewal fee. If two or more people would be interested in the same domain, a standard namejet style auction would follow. The service operator and the domainer would then split the proceeds 50/50.

The service would just need to create accounts at all the main registrars where domainers would push the domains and do some simple programming of the marketplace, not much work imho.

This idea is based on a simple premise: some people can find gems (in their perception) in your garbage.

I personally drop a couple hundred thousand domains a year. The thing is that my only criteria for renewal is if the domains make reg fee. If they don’t, I simply let the domain drop and there are definitely gems in these drops that other people can discover but I don’t have time for.

I hope I created a new buzzword “drop monetization”:). Hope somebody picks this idea up. Good luck with it!

Over the short time I’ve been in the domaining business, I’ve experimented with both reserve and no-reserve auctions. If I balance the pro’s and con’s I am strongly in favour of no-reserve auctions, especially for domains where it is likely multiple parties will be interested in the domain. The upside of a no-reserve auction here outbalances the risk for me (of the domain selling for less than I’d like). For example, just a few minutes ago we had two no-reserve auctions ending on Sedo. We ended selling 949.com for $13,560 and 313.com for $25,000. My original expectation was aroud $30k for both, so the upside (even less Sedo’s commission) worked out well for us. I think the fact that it was a no-reserve auction brought a lot of this upside. Few months ago, the no-reserve format worked out very well for us with the our auction of 64.com, which went all the way to $90k. So I continue to strongly support the no-reserve format because I also want to see more liquidity.

DOMAINSPONSOR® EXPANDS DOMAINFEST® TO EUROPE
--Early October event in Prague will focus on networking, building European business interest in online real estate--

LOS ANGELES, Calif. and FRANKFURT, Germany. DomainSponsor®, the domain monetization business unit of Oversee.net® and organizer of the DOMAINfest® series of conferences, said today that it will expand the highly regarded franchise into Europe with a conference in Prague, Czech Republic.

The two-day event will be held Wednesday and Thursday, October 6 and 7, 2010 at the landmark Hotel Intercontinental located in the heart of one of Europe’s most beautiful cities. Building on the success of last month’s event in Santa Monica, California, the October meeting will continue DOMAINfest’s focus on increasing the value of Internet real estate and will offer a rich setting for extensive networking involving topics relevant not only to domain investors from Europe, but also from around the world.  

Subject-matter experts will be invited to facilitate the networking sessions on Wednesday, October 6th.  The first day will also include a Moniker® Premium Domain Name Auction powered by SnapNames LiveTM technology.  Day 2 will be focused on social activities in and around Prague designed to provide the kind of shared experiences that can contribute to the building of long-term relationships between DOMAINfest Europe attendees.  Conference details, including the agenda and speakers, will be released in June, 2010.  

“DOMAINfest Europe is an excellent opportunity for European publishers, online marketers, and domain-related service providers to meet and discuss ways to increase the value of domain names, which we like to refer to as Internet real estate, “ said Peter Celeste, Senior Vice President of Oversee.net and General Manger, Monetization Services. “The DomainSponsor team looks forward to becoming more engaged with the European domain investor community, and this forum is the perfect venue to exchange ideas and build relationships.  As with all DOMAINfest events, we will be offering affordable registration rates to encourage maximum participation from a wide range of talented professionals from both inside and outside our industry.”

In January, 2010, DomainSponsor hosted a highly successful DOMAINfest Global® conference in Santa Monica, California that attracted more than 600 professionals from a variety of internet-related industries.  The conference included a variety of sessions over a three day period, including a keynote fireside chat with Tony Hsieh, CEO of Zappos.com. This recent DOMAINfest conference also featured a first-ever PITCHfest contest, structured networking sessions, and moderated general sessions with experts from the world of investment, advertising, and marketing. Videos of each session, including the keynote fireside chat, can be viewed at http://www.domainfest.com.  

In November 2009, DomainSponsor announced the establishment of its European head office in Frankfurt, Germany with Joerg Schnermann as General Manager. 

Moniker® Auction
Moniker will host a live premium domain name auction on Wednesday, October 6 followed by an extended online-only auction from October 7 to October 14.  Specific start and end times for each auction event will be announced June 1, 2010.  The live auction offers real-time online viewing and bidding from anywhere in the world via a free software download.  Details on how to bid in-person or remotely in any Moniker live auction can be found at http://domainauctions.moniker.com
.
Registration and Sponsorship Opportunities
Registration for DOMAINfest Europe will be open June 1, 2010. The early bird registration rate will be US$395 until July 1st.  A discounted rate of US$495 will then be available until September 1st, at which point the price increases to US$595. Companies interested in sponsorship opportunities can contact sales@domainfest.com
.
About DOMAINfest®
Founded and hosted by DomainSponsor®, the domain monetization division of Oversee.net, the DOMAINfest® conference brings domain industry and Internet professionals together to learn, network, and do business. Attendees include online advertising experts, domain publishers, domain monetization experts, SEO and SEM specialists, website developers, online marketers, ad or affiliate network suppliers, search advertising providers, venture capitalists, bankers and trademark/legal advisors. Visit http://www.domainfest.com for more information.

About Oversee.net
Oversee.net® is the leader in Internet real estate, specializing in monetizing, registering, selling and developing domain names. The company provides an array of managed services to domain investors, corporations, and individuals across more than ten million web sites. Oversee owns one of the largest portfolios of domain names in the world. The company’s unique optimized technology connects consumers and advertisers with highly relevant advertisements. Headquartered in Los Angeles, the company’s core brands include DomainSponsor®, SnapNames®, Moniker® and LowFares.comTM. To learn more, please visit www.oversee.net.

There’s been a lot of buzz lately about sex.com hitting the auction block soon. So how much can this beauty make on parking? My educated guess is about $80-100k a month, so let’s say $1 mil a year. That’s a pretty decent passive income for the buyer who picks it up.

One thing I never understood is why the current owner never really monetized the US traffic, just redirecting it to some kind of informational resource. He only monetized the non-US traffic via DomainSponsor. Lot of money wasted there…

The potential with sex.com is to monetize via selling directly to advertisers, CPA etc. I think the potential there strictly from the type-in traffic is about $1.5-$2 million a year.

It will be very interesting to see who ends up buying sex.com. I don’t think this time it will really be a domainer. There are not that many domainers out there that could do a deal this big on such a short notice and are generally involved with adult. Really only A1 National Advertising and Xedoc Holding pop on my mind.

Some things are irrational or absurd, without explanation. One of these things seems to be a complete lack of revenue data about domains on the various aftermarket platforms. Even though a domain’s parking revenue would strongly influence the selling price of a domain, nobody is even bothered with communicating this information to potential buyers who may be interested in bidding and revenue is a key factor for them. For some unknown reason potential buyers are forced to estimate and their accuracy determines their success. Buyers focused on traffic/revenue names on the various dropcatching platforms can strongly support this argument.

Domains that generate a constant stream of parking revenue are the most liquid part of the domain universe because most smart domain investors buy on yield, not on potential development potential, end-user resale value etc since these values are just hypothetical and speculative whereas yield=cashflow. There is always somebody who wants to buy yield. The people who have had the biggest success in this business focused on yield.

Cashflow domains generally sell in bulk portfolios for a given revenue multiple. Say you buy a portfolio o 1000 domains making $10k/month for a 5 year revenue multiple, so you pay $600k for it. You are buying/selling the revenue of the entire portfolio, you are not really looking at the individual domains.

This is where the opportunity in the aftermarket lies – If you would unbundle the portfolio and sell it by individual names, you might get a total of 7 years revenue, for example, for the entire portfolio. The reason being that certain people might see more value in certain names for which they are willing to pay more (because for example they have a better way to monetize the traffic). So somebody may be willing to pay a higher multiple for your travel traffic names, somebody for finance traffic names etc. Somebody may see development potential in the name. Somebody might assess the risk of the domain differently etc.

Somebody smart can quickly carve out this niche in the aftermarket and start focusing on revenue names and include detailed parking stats with every domain for sale. Buyers will then simply be bidding based on what revenue multiple they are willing to pay for the name, ideally in an auction format.

In a previous post about Bido, I said that I think Bido will have to fundamentally change its model to start making money. This is the direction I think it should go, because this is where potentially the money is and it is an unoccupied niche. Instead of focusing on names with predominantly speculative value that usually catch the eye of 1 or 2 bidders (as hard as you try), why not focus on revenue names where you are likely to get interest from tens of different bidders if you can create a liquid marketplace.

I was just looking through Bido at the recent sales page. Since Bido get’s so much PR and buzz, I was really surprised about the miniscule amount of volume in dollar terms. Looks like on a typical day maybe $1,000-$1,500 of sales go through. That’s $100-150 of margin for Bido a day. And a hell of a lot of effort is put into that from Sahar’s team with no doubt to even get that result. I don’t really want to show off or anything, but just to put that number in context, I make that kind of money in less than 10 minutes, 24 hours a day, just from parking.

What the example of Bido clearly shows us is how difficult it really is to create a new viable aftermarket platform and especially get the model right. I think Sahar&co will really have to fundamentally change Bido’s model and I sincerely wish them a lot of luck, because any efforts like this help increase liquidity, which is always positive for all of us.

Overall, if you look  at the various aftermarket platform models, I think only some work very well, some moderately and some don’t at all.

Somebody who I think got the aftermarket model working really well is Namemedia with BuyDomains etc. Why it is so nicely profitable is that to a large degree, Namemedia is what I call in the business of proprietary domain trading. They own the inventory (or most of it) that they sell, hence their margins are really thick. Whereas others just rely on their 10% cut, Namemedia takes almost 100%. That’s why they can market their names proactively. Dark Blue Sea has been trying to do something similar to that with it’s Domain Distribution Network, but they are clearly not even close to as good as NameMedia is on this.

Another aftermarket model that I think makes a lot of sense is the dropcatching-to-auction model of Namejet, Snapnames and Pool. If you create liquidity in the marketplace, you can snap up domains for $7 and sell them for $79 or even thousands of dollars. Obviously most of the inventory comes from preferred registrar partnerships so the margins are not that high (as they have to give a big chunk to the registrars), but these dropcatching services definitely take a bigger cut than 10% that for example Bido or Sedo rely on.

Rick Latona gets it right as well through his whole aftermarket package (newsletter, auctions, active brokering). He also engages in what I call a lot of proprietary trading, a lot of the inventory he sells is his.

To a lesser degree I don’t think the whole marketplace model of Sedo (on a standalone basis) is that awesome and profitable. On a typical month, Sedo sells something like $6 million in inventory, with a 10% margin of $600k roughly. However Sedo has a HUGE overhead to keep this operation running, spends significant amounts on marketing etc. There’s probably very little left of the $600k a month after all the costs. However why this model seems to work is the marketplace’s impact on Sedo’s parking business. Because of the marketplace, Sedo gets a lot of parking business, where it can make thicker margins. Pretty much all the small guys making $50 a month on parking park with Sedo now, but they probably have thousands or maybe even tens of thousands of them so it adds up. The impact of the marketplace on the parking side of the business is exactly why Namedrive went into this business with its NDX Market. Overall clearly, on a standalone basis, the marketplace model is nothing very profitable.

So bottom line is that if you want the marketplace model to work, you really need some kind of upsell to make it work – to parking, a registrar or something like that.