I don’t know what’s going on but in the last two weeks we have been approached by 3 different midsize VC/private equity firms enquiring about investment possibilities in EO. Obviously we aren’t on the radar of the big names such as Sequoia Capital or KPCB, but it still is encouraging in a way. The dilemma we have is quite funny – we really don’t know what we would use the cash for. I don’t really believe in “strategic looking” acquisitions (think Oversee buying Moniker and SnapNames) since I think they rarely create value, only opportunistic small bolt on acquisitions. Also a partial exit for our investors or me isn’t that interesting, since we really don’t need the cash either (would result in another dillema – where to put the money). So I really wonder how this will play out. In a way it is good that you really don’t need the cash, since you can really be picky and only accept a really good valuation. It also might be good to wait another year or so because I believe things will heat up again and there will be more institutional money swirling around.
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 firstname.lastname@example.org . 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.
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.