Looking at Bido, it seems pretty damn hard to build a new viable aftermarket platform

February 21st, 2010

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.