It doesn’t matter whether you’re selling cars, homes, financial instruments, religion..  everyone sells something.  Some of us are hard-sell : Timeshares on Maui spring to mind.  Some of us are soft-sell: Water in the desert for example. Make no mistake, the global economy functions on sales and whether you’re paparazzi or a politician, a plumber or a pastor, everyone sells something.

A few years back I was approached by a company and encouraged to place my domain names for sale through their marketplace. I was given a host of reasons why this was a good idea. “These names don’t make any money”.. “ Selling the names will actually improve my overall portfolio’s value”..  “Selective pruning is just prudent”. Shortly thereafter, a second domain marketplace called. They suggested I sell my names through ‘them’ and that I should cap my purchase prices at $5,000 because that was the limit of automated credit card processors in their scenario..  They even sent me a list of names that I should sell..  tens of thousands of them that don’t make enough to cover their renewals..  and If I could get $2,000-$5,000 each wouldn’t that be Fabulous?!  The problem as I looked through my list was that many of the names they suggested I sell were pretty good.  I’d pay more than 2-5k for many of these names if they were dropping at auction.  I politely declined their offer.

Understanding the Ecosystem

Years ago before I began in the domain business, before I had built the grubstake in real-estate which I’d ultimately use to kick-start my move to the Caribbean, I worked for a glass manufacturer/distributor and sold crates of flat glass to assorted manufacturers. Glass (like domain names) is a commodity business. Everyone is going to need glass at some point, whether they know it or not. The guy who hired me was named Ralph. I watched Ralph in awe as he took orders and worked his calculator selling hundreds of thousands of dollars in glass, pushing buttons on his phone to get trucks moving and called on clients who seemed genuinely delighted to see him.

Ralph was a great salesman in the pure, honest and wholesome sense.  He was a facilitator and he made things happen.  The most important lesson Ralph ever taught me was never to sell your product too cheaply.  We’d make sales calls and very convincing glass buyers would swear up and down that the maximum they could pay for a crate of glass was .75 cents a foot. They’d threaten to purchase the product elsewhere, they swore they had a lower offer, they’d beg and cajole using the carrot and the stick. Ralph would switch the conversation to a personal tack, disarm them with his personable manner and elegantly decline to sell.

On the drive to lunch I’d ask Ralph why he wouldn’t fill the order when we were making 20 or 30 percent margins on that ton of glass.. “Because they can easily afford to pay more” he’d reply..  “and once I sell that crate it’s gone, it will take 3 months before I get another crate..  somebody else will buy it because it’s a specialty size with low cut-loss”, and if I sell it at that price, next time he’ll ask for another nickel discount.. “

Ralph knew his customers, he knew their business and most importantly he intimately understood the ecosystem of the pond in which he lived. Ralph knew that if he discounted this glass then his competitor wouldn’t get the order and his competitor would have to sell something else at a discount, hurting Ralph’s margins on that other product which would potentially unravel Ralph’s other orders for the other product at ‘that’ price, forcing Ralph to compete against his competitor on yet other products he wasn’t as strong in - In the final analysis, there were a dozen good reasons not to take the order at that price.

I was a young sales-guy-in-training and this ran completely counter to my order-taking instinct,  but as time wore on I came to respect and appreciate the eco system of our pond and Ralph’s logic. I could bust my hump running around town to sell ten crates of glass for 10% margin or I could put my feet up on my desk, sell just two crates at a 50% margin, making the same profit and still have another 8 crates to sell on another day!

“Good” Domain Names — more like Oil than Glass.

The domain name business is much simpler than the glass business.  If you look at the names which people want, you’ll find that sales (and sales inquiries) occur for names which get some kind of traffic.  I’m not talking about revenues from PPC.  You can have poorly implemented domain names which make no money from the traffic that comes to them, that still get some trickle of type-in traffic.  I am talking about a heartbeat folks..  Names which somebody will either type into their address bar because the string means something to them, or names which people look-up the whois record of, to see who owns it.  Names which compell other human beings to take some form of action. Some domain sellers suspend this law of physics by baiting and switching — taking buyers who are looking for XX.com domain name because it has meaning, resonance, gravity, traffic and switching them into Y-Y.info domain name because it “feels similar” or costs one tenth / one-hundredth as much.  Those plays notwithstanding, the fuel that drives the machine and makes the magic possible are good meaningful domain names with resonance, gravity and a heart-beat of some kind. Unlike glass which is made of sand, these meaningful gems which bring warm bodies through the turnstiles are of a finite quantity — more like oil.

As mentioned previously, I’ve spent the better part of the last decade sifting through expiring domain name lists and I’ve gotten pretty good at telling the good ones from the bad ones.  I’ve also watched other people who do what I do, and learned how they interpret “good-ones” and “bad ones”.

In my 6 years of scanning expiring domain name lists I’ve found that only 7-12% of all names that expire mean anything to more than one person..  The rest are such poor made-up quality that they have no resonance or gravity and they will likely never be looked up on whois, or typed into the browser by anyone other than the name’s registrant. This other 88-93% of names are meaningful to the sole distinctive entity that registered them.  They include odd/trademarked strings, made up words, disjoined phrases. They are the trees in the forest, falling, that nobody is there to hear.  The successful people I see at domain shows who spank my wallet pocket with their bidder’s paddle seem to share my viewpoint of what constitutes a good name.

Domains Expire Every Day

In the past, the average daily-list of expiring domain names was reflective of the broader registered namespace. If 20,000 names expired, that would mirror a random sampling of 20,000 names from the registry zone file. Today, quality expiring names are even scarcer due to registrar/auction-house name withholding. Additionally, the high renewal rates and exhaustion of the name-space mean that a diminishing percentage of ‘all names’ meet this meaningful , resonant criteria. Today it’s 7-12% of names that fall into my “good bucket”..  in 5 years as more made up schlock gets added to the zone-file mix, it will be 5-7% of all names registered that have meaning.

To put this in perspective, the types of names which constitute my theoretical “best 7-12%” of all names registered include all 2 and 3 character names, nearly all 4 letters, any search-term no matter how far down the long-tail. It includes zip codes and popular screen-names, first/last name combos that are popular/less popular, pretty much anything that means anything to anybody and a second or third person. It includes the best .info’s .us names (even .mobi’s)…  All the “good ones” amount to just 7-12% of all names registered. The rest is an ever circulating torrent of backfill which expires and gets replaced in a grand water like cycle, with new garbage..  A never ending boulevard of broken dreams to come.

If you’ve read this far and you buy into my viewpoint, or just suspend your disbelief and follow my thought process, you will see why blanket-selling names that mean something for $2500-5,000 is not as sustainable as it may seem.  Businesses will think nothing of spending $10,000 or $15,000 for a one month, one-time insertion into a trade publication, or for 2 months employment of a junior staff member.. yet the meaningful domain name which quietly keeps on giving and can itself be resold at a profit is somehow worth whatever you can get, simply because it hasn’t generated any PPC revenue yet? I believe a  great deal of overall portfolio value is lost as large scale sellers accidentally burn the furniture, selling names with even 30 uniques a month but no PPC revenue,  I see it as destroying long-term portfolio value in the name of short-term EBITDA.

A Hundred Million Bucks Ain’t What it Used to Be.

Forget the correction in commodities and the rise in stocks this last week, the bottom line is that papering over problems with more paper, and bailing-out ‘the troubled’ will only hasten the demise of the currency doing the papering.  If a credit expansion renews and continues at all cost, then warm up your wheelbarrows folks..  you’ll need one per name.

The supply of meaningful and generic domain names is tight as a drum today. In an effort to increase revenues for itself and to simultaneously ease that demand, ICANN plans to start entertaining proposals for new namespaces in about a year’s time. I predict this will do little to quell the desire for meaningful .com, net and CC TLD names. Corporate IT departments overwhelmed by the task of managing existing .com typos simply won’t be up to the challenge of managing a corporate GTLD such as .COKE or .IBM.  Even with the help of a presently absent killer app from the likes of Godaddy, Enom or Tucows such sideshows will be an uphill push in a recession year. If my hunch is correct then .web .blog and other new .extensions will come to pass and they will marginalize the .info, .us, .eu, .asia and .mobi namespaces just as those namespaces relegated .ws and .cc to obscurity before them.  I predict that .com and other established namespaces will continue to thrive with some very minor marginalization at the fringes . The failure of former would-be contenders such as .travel, .biz and .pro to satiate demand for coveted names, shows us that adding more skim milk to the mix will not stop the cream from rising, and that cream is .com. 

I suppose all this brings me back to my first point..  With 6+ billion would-be “sellers” on our planet and just 10 to 18 million “meaningful” domain names across “all extensions” good enough to do the selling, this might just be the right time to put your feet on your desk and triple your prices - or to not sell at all.

Some would argue that not selling anything may be a bit extreme.. and that may be.  Fortune favors the bold after all.  But we live in unprecedented times, amid an unprecedented sea-change. In the future, fortune could well favor those who didn’t sell their good domain names too cheaply, or too boldly.

The night I left town Josh sent me this link which focuses on an interesting observation.

  While $4+ million worth of domain names just sold at the Las Vegas TRAFFIC auction, the real story is that actual bidding totalled more than $30 million..  I bid at least a million dollars for names that I didn’t win.. Others did too.  All-tolled there was more than $20 million of unrequited love, bids never to matter, a desire to own domain names that would not be satiated.

Again for impact, more than 20 million dollars of cash-money was bid in about a day (8 hours over two days) by a handful of people who wanted to own just a smattering of domain names.  Some of these names were good, many were just average, few would have blown the average man-on-the-strip’s hair back.  The would-be suitors were there with cash in hand, and many (like yours truly) went home empty handed..  or nearly empty handed.

All this happened during a week in which markets corrected, new credit/banking problems came to light, mortgage rates inched higher, inflation made headlines and other generally bad stuff happened or was foreshadowed to happen in the broader economy. It happened with less than 600 would be bidders worldwide in attendance!  How can that be?  Several reasons..

–1–  Because for the most-part, domain names are un-leveraged..  they have no debt on them..  and sellers can afford to tell you how they really feel by declining what you view as a generous overture. There is no incentive to “sell now” when your cost of carrying the investment is nil to low.

–2–  Because the shift of offline publishing to online is only getting warmed up.  Much promoted but under-delivered, just 7% of advertisers are online vs. 93% offline..  Domain registrants who understand the significance of their investment are sitting on the sidelines whispering “come to Papa” under their breath, knowing that you are not the first (or last) guy to try to wrest a name away with the siren call of cold hard cash.

–3–  Because a good domain name is like a storefront..  and you can’t buy a decent storefront for 50,100, 200 thousand dollars these days. You can’t buy a bad storefront in Rachel Nevada for that, you can’t even buy the bathroom fixtures in a storefront on the fabled Vegas strip for that. Not good ones..  not a bad ones.. Not any-ones.  Only about 7% of all domain names registered (11 million names worldwide) mean anything to anyone at all..  The rest are pretty much speculative crap that somebody has convinced themselves are good.. a virtual boulevard of broken dreams – or breadcrumbs of back-fill massaged into the meat of good portfolios; painstakingly built by smart investors like you. 

Those truly good domain names are what constitute the entire “visited” Internet. The “Internet that matters” exists on the domain names which matter to anyone other than you.. More on that another time.

If there’s one thing I know for-sure folks,  it’s that Las Vegas is not the only home of lonely hearts and unrequited love. What happened in Vegas the other day, happens all around the world each and every day..  Hundreds of millions - billions each year are offered for domain names which will never sell.

What’s a domain lover to do?!?  Sigh..  Perhaps I’ll have more luck at the Affiliate Summit Domain Auction at the Rio Suites this coming week.

What a world we live in..  and what a great deal a man (or woman) can learn in a month away from the blog-sphere.. Deals announced, partnerships strategized and all roads lead to the ability to reach our fellow-man.   I’ve been traveling for family issues (nothing serious folks) over the past month –  I’ve been home and away from home. It will be great to reflect on the industry and vent some thoughts about the way things are ..  and the way they might go in the coming few weeks (go easy on me.. I’m traveling here).

Some thoughts for you to consider..  This blog has been inactive for 30 days and has somehow managed to add 400 subscribers since I took a posting sebatical.  In that time it attracted 1200+ spam posts..  It’s all about the eyeballs folks. 

In a world where people still operate 800/900 numbers to capture users “phoning in” common numbers (Good work folks) – In a world where new billboards are appearing on the LA skyline month to month –  In a world where those Sunset Blvd billboards generate more revenue than the buildings they are emblazoned on; what are your unique domain-name visitors worth?  The battle to reach (and win) the hearts/minds of our fellow man has been raging since Gutenberg invented the printing press. How much greater is a medium’s value when that ability to connect can be quantified and judged against its peer group?  Is a unique visitor the same as a phone-in, a qualified lead or paid introduction? 

Stay tuned folks. You live in exciting times.

I won’t bore you folks with the details of my trip, but suffice it to say, I was glad to get away for the holiday sojourn and will probably spend more time traveling this year.. (business and pleasure).

New years bring new resolutions, new promises — cleaning out old cobwebs, retiring issues and ramping-up for a new cycle of work/changes. One of my resolutions this year is to slow down on the blogging.  Charity starts at home and I need to spend more of my non-working time with my wife, kids, family and those close friends and acquaintances in our family’s life..  I just can’t do that, run a domain media co and continue to scribe each day.  Since I began SevenMile.com, several others in the industry have joined the blogging ranks ..  many of those folks have done a terrific job creating news-sites and the existing journals and periodicals just get better and better.  There are even mash-ups now about domaining where we can get the most recent commentary and daily news across many blogs/journals/sites.

I plan to continue to write, albeit much less frequently with more personal, concentrated and in-depth thoughts relating to specific industry affecting issues. I look forward to several such posts over the course of the year..  but I will leave the daily color and roundups to those who do it so much better than I could.  It has been fun sharing (daily) and part of me will miss that but hopefuly my personal relationships and biz will thrive with the extra time in what is sure to be a challenging 2008.

Looking back on the predictions for 2007 made in late 2006,  many of those thoughts came true..  increased trouble for the most flagrant violators of IP rights, continued consolidation within the industry as the big get bigger, coupled with a spreading of the cottage industry footprint of work at home hopefuls with stars in their eyes; broadening our great industry’s base as it continues to mature.

If 2007 and my winter vacation of the year taught me anything, it’s how incredibly lucky we all are to participate in a space where anyone..  anyone can still “make it” if they have the gumption and desire to dig-in and better their life.  There are no defined paths in the domain industry.. and domain names continue to act as the nucleus of all Internet commerce. If nothing in business happens without ‘a sale’,  nothing on the Internet happens without ‘a domain name’..  and it’s still an adolescent industry with lots of room for those who want to make a great life for themselves. 

The game today is similar,  but just a little different.  I encourage you to stake your claim this year if you haven’t in earnest and continue to work hard for a few years..  If you adopt that glass half-full outlook and apply yourself,  I predict you too will be reciting the words of that Talking Heads song…  as you “wake up in a beautiful house”, “find yourself behind the wheel of a large automobile”.. and you ask yourself .. How did I get here?

Have a great year folks…

I’m gonna miss you guys..  I wish you all a safe and happy New Year with much domain prosperity in 2008 …  It’s going to be a very exciting year.

We can all feel the changes reverberate across the Web..  Domain names registered by small registrants and large aggregators who create content and take eyeballs/market share away from established media/content co’s are the ultimate disruptive technology. It’s a great time to be in this industry..  I’m really looking forward to seeing what happens.

http://www.elliotsblog.com/index.php/2007/12/10/b-king-on-three-letter-com-sales/

***FS*** There are only 17,576 3 letters in .com ..  This piece probably explains which a have gotten scores of spam sales offers for my three letter and 3 number domains over the past few days.
Google reduces the importance of sub domains in it’s ranking system.

Excerpt: “As eBay and others have aggressively used subdomains to dominate branded AND unbranded search results, and Google has improved their sitelinks technology, any relevancy gain by treating subdomains as a separate site will be going away. Google is going to start  treating subdomains like subfolders, and limit the number of results from any site to just two.” http://www.domainnews.com/general/2007120823/google-changing-handling-of-sub-domains/#more-1905

***FS*** Enjoy getting google traffic.  Don’t rely on it as the primarily source for traffic for your website/business. The best traffic is the traffic tha Google wants to “buy”  and that traffic comes from generic type-in traffic producing domain names.

Microsoft introduces free Live.in email addresses to Indians.

http://www.domainnews.com/general/2007120817/microsoft-india-introduces-new-livein-e-mail-domain/

***FS***  I think many more folks would run email on their own proprietary domains (for email) if they understood how to go about it.  There is a knowlege gap where getting email or getting a domain is not simple enough for regular folks.  Domain values will have their next dramatic leg-up when an intermediary comes along that makes the registration, management and renewal of names and email easier for the average person…  and once that application “takes off” in a significant mainstream way. Perhaps a mechanism that allows anyone to get an email on anyone else’s name or pays a fee for each email account to the name-holder.

Josh: Elliot Silver takes some of Jay W’s advice…

.. and thanks him for it. Elliot bought an existing site that google didn’t include in it’s results.  By following Jay’s advice, his name was reincluded, now appears as the #1 listing, and he’s getting additional traffic.  Even the experts learn something from time-to-time. There’s alot of learning from each other going on in the domain/development realm. http://www.elliotsblog.com/index.php/2007/12/08/thank-you-jay/

More from Elliot:  Honesty and integrity critical when doing business in the domain realm.  To be fair it’s critical everywhere http://www.elliotsblog.com/index.php/2007/12/08/domain-industry-lesson-1/

Sahar opens his blog wider,

..and hopes to spark discussions and learning in his new area call “Debates”. http://www.conceptualist.com/category/debates/

***FS***  Another great idea from Sahar

79.1 percent of marketers plan to increase their online budgets for 2008.

No surprise here, but good to see nonetheless.

http://www.btobonline.com/apps/pbcs.dll/article?AID=/20071207/FREE/71207006

ParkingWhois.com

Smart idea that’s in beta.  Tells you if a domain is parked or not, and where.  Problem is i tried 5 examples.  Two worked, and the other 3 said the domain is not parked,.. and it is.  It was a bit slow on a couple of the searches.  They need to make it more accurate or this service won’t get used.

Music business in Japan sees 1% rise in sales

…industry observers attribute this to mobile music downloads. http://news.bbc.co.uk/1/hi/programmes/click_online/7130596.stm

ConsumerReports.org

…Paid subscriptions, no ads.  3 million viewers who pay for web access. 4.5 million who buy the print vrsion. 208 million in revenue and operating margin of 28 million. http://www.news.com/Success-without-ads/2100-1038_3-6222063.html?tag=nefd.top

***FS***  Only 13% margins..  Sounds low for a publishing outfit. 

Ad company installs tracking capabilities at the ISP level.

SP’s hold alot of power.  With great ower comes great responsibility.. Without great responsibility, comes great regulation. http://www.theglobeandmail.com/servlet/story/RTGAM.20071209.wsniff1209/BNStory/Technology/home

“The Ultimate Domain Name Guide”

I think it’s from 2006.  It’s relevant today.

The headline is over the top.  That said, it’s a good overview, especially for people just getting started.  The writer, Sebastian Robinson, thinks that the right domain name is critical for your business. Excerpt: “Domain names have become more than just an address on the web. Today they can make or break a business.”

Josh says:  I don’t think a domain name can make a business. (Unless your business is buying and selling domains, or parking names that have type in traffic.)   But, i agree with the basic sentiment that having the right name / domain name is important, if not very important.  The writer is mistaken that the .XXX extension has been granted. http://www.micromart.co.uk/features/article/default.aspx?id=22516

This piece deserves to be set apart from the Linkfest..  Berkins has that “oh-my-gosh” moment and realizes how cheap domain names are when viewed against overpriced pieces of modern-art. Art hangs on a wall and costs you money..  Domains activate on the Web and “make you money”. To be fair..  the art market is held-up by inflation and aspration..  returns are made via the sale of pieces to a richer buyer or greater fool..  Domains often contain revenue streams in the form of traffic which help pay for the up-front acquisition cost..  Art typically doesn’t ..  unless it’s a Monet and you lease it to a museum.

I know many of us have experienced the same epiphany about the value of domain names relative to other real-world items..  This one is just the latest but is very poignant.

Give it a few years .. people will start to figure out that perhaps less than 10 million domain names have any generic or descriptive value to anyone. When that concept becomes widely accepted you’ll see an even greater appreciation in the values of those names.  Get them while you still can.

Excerpt: “”Domain parking sites collect and index additional links where domain name registrants share revenue generated by web traffic but do not directly compete with the holders of similar legitimate trademarks or brand names. Registrants of parking sites typically use computer software to automatically register expired domain names and then ‘park’ those domains on pay-per-click portal sites..”
http://www.archerip.com/beware-of-domain-name-traffickers/

***FS*** That statement above is just wrong. That is not a “typical” parking practice. In fact if anything in this author’s piece is “typical” it’s the incorrect use of industry lingo and vernacular serving to cheapen a well intended piece summarizing the ills that plague the domain industry..  It’s unfortunate that some IP wonks (intentionally or unintentionally) throw the baby out with the bath-water, lumping domain parking, legitimate monetization and domain name investment activities with the darker ills of kiting trademarks and cybersquatting.  Reading this piece I was left wondering what kind of Internet folks like Mr. Letchford would have us all visit? There is no Internet without domain name registrants.  Shrill pieces which lump the good and bad elements of domain investment together, simply serve to flail their arms at decent newcomers wanting to learn more about the space.

I get the sense that the secondary domain “trafficking” or domain resale industry would surely be legitimate if it were controlled by “legitimate” clients like mother telco or father infrastructure co.. or aunt search engine – any legitimate brand really, who will pay the bills of IP ‘experts’ who know little of entrepreneurship and turn a blind eye to cottage industry American capitalism..  I have a good deal of disdain for those who come late to an industry, know little about the subject matter about which they write, then speak from an expert’s pulpit, only to place their feet in their mouths by mischaracterizing the space they profess to have knowledge about.

“”I am giving fullname.com domains as gifts for Christmas this year. Any suggestions on how to give as a gift? I am thinking about just registering and hosting myself and if they want to take full control I will transfer it to an account they create. Otherwise, I’m not sure how to register in another person’s name easily (have to create and verify whois info for them and setup payments for them, etc.). Asking Elliot the same, but not sure if there is an easy answer. I know the domain gift card idea has been mentioned previously, but how about just gifting domains in general?”"

   ***FS*** Giving a name domain gift can be a big responsibility ..  and if done correctly, can really change a person’s online life.  I would renew the name for 10 years upfront..  spend the $100 or so, so that the name doesn’t expire right away..  I’d set the name up in a seperate account with a top-tier registrar and a very easy to remember password (unless the name is bobsmith.com it’s unlikely that somebody will try to hack the account and hijack the name) .. You want an easy password because the person receiving your gift may not be net/name savvy and may let their administrative email address lapse at some point over the next 10 years and you don’t want to loose control of that registration.  Conversely you could manage the name on behalf of the gift’s recipient..  I’m still managing family gift names ..  my oldest one is 7 years now.  I couldn’t buy that name back today and have actually had offers to sell the name, so you are doing the right thing..  It’s entirely likely that you won’t be able to get your desired .com first and last name in 5-10 years time.

Danno

  “”Watched a TV comercial this morning, advertising this website: http://www.discovernursing.com/

Johnson & Johnson ‘gets’ generic domain names. Maybe someone should invite the person in charge of their marketing to speak at domainfest about how generic domain names have added value to their business(s).”"

***FS***   So right Danno..  these folks have done a terrific job with Baby.com and all their names really.  They sooooo “get” it.  A few major corps have had marketing staff with great naming instincts.. I remember P&G had one of the biggest generic name portfolios back in the mid nineties.  They ultimately let many of those valuable names expire..  I scooped some of them up at the depth of the bust (ie. razorblades.com) .. They still own some of their big single word generics but many of their compound phrases expired.. I can only hypothesize that the individual who acquired their portfolio was let go or left to go to another company.

   ***FS***  So much loose money and price swings in the domain business…  a perfect opportunity for ne’er-do-wells to profit..  Only one problem..  it’s hard to keep a secret on the Internet. Crime doesn’t pay..  especially online.

http://www.elliotsblog.com/index.php/2007/12/07/everybodys-doing-it/

***FS*** Investing in domain names that is

Domain Valuations : Chris Stewart

Domain Value (DV)=Traffic Value (TV)+Brand Value
(BV)+Utility Value (UV)+Discretionary Value (DiV) : Part 1
http://marketforlemons.com/?p=5

Via.com sells for 157,000.

(scroll down.) http://www.domainstate.com/showthread.php3?s=bf857a50211d7889c72645f54b38beb6&threadid=84867  Great name to build on.  Good price for buyer (fully valued for name-investor), esp if they are going to develop.  Via would be a good name  for a search engine or some kind of portal.  Lot of other possibilities.  Has meaning in multiple languages.

 From Danno:

AfternicDLS Member Sells UI.com for $275K (nice story)

http://afternicdlsblog.com/2007/12/07/afternic-success-story-uicom-sells-for-275k/

 ***FS***  Still sooo much untapped opportunity in the name business for those who care to try. 

iREIT leaves the ICA

(Scroll down at the link.)
http://dnjournal.com/newsletters/2007/november.htm

***FS***  It was really more Bob Martin who was behind iReit’s participation in the ICA..  with Bob gone it’s no surprise the group dropped out.

Sedo.com now shows that invest.com sold for $ 1,015,000.

http://www.greatdomains.com/auction/auction_history.php?language=us&auction_id=21998&tracked=&partnerid=32392  Josh says :  I think the buyer got a good deal. You can buy a parking spot in Central London for  $50,000 - $90,000 and in some cases you’ll pay considerable monthly fees on it.  And to go with your parking space, you can buy this 3 bedroom, 3 bedroom flat for $13,000,000. http://www.findaproperty.com/displayprop.aspx?edid=00&salerent=0&pid=059058&agentid=07711
Renewal fee each year on invest.com: $ 7.50 . Taxes and maintenance costs on your $13,000,000 flat in London: Priceless.

***FS***  Agree with J’man’s logic but as a wildcat investor (me) who has to front the 1mm,  the carrying charge is about 70k a year.. so I’d say the name’s fully valued from an invetor’s perspective.

Considerable controversy around the sale of Music.mobi.

Excerpt: “Constantine Giorgio Roussos thought he was the winner of Music.mobi in yesterday’s.mobi auction at Sedo. He bid $66,000. The auction ended and he received an automated invoice from Sedo. He then received a  “personal” e-mail from a Sedo employee (which also may have been automated). But then something happened. Sedo extended the auction due to a server slowdown in the final minutes of the auction.” The name was then sold to someone else who bid $616,000.  http://domainnamewire.com/2007/12/07/musicmobi-winner-vows-lawsuit-against-sedo/

***FS*** This is the classic fight over nothing.  Wouldn’t be surprised if it’s a publicity stunt.

Opportunity Cost of Lost Opportunities.

Interesting article by Elliot Silver.  Sometimes you “overpay” now, and benefit later.  Perhaps you never overpaid in the first place. http://www.elliotsblog.com/index.php/2007/12/07/opportunity-cost-of-lost-opportunities/

***FS***  Historically speaking, if the name was generic and got type-in-traffic, it was very hard to loose money in the domain biz..  the market has consistently caught up to your overpayment..  That won’t go on forever tho.

Light of Logic Creeping Through

New York Times David Pogue blasts companies that have chosen wierd and hard to remember company names.He points out plenty of hard to remember names. Trulia and Zillow are two better examples than “Fark” which is witty enough.

http://www.nytimes.com/2007/12/06/technology/personaltech/06pogue-email.html?ex=1354683600&en=e08b6ea2e4dad1dd&ei=5124&partner=permalink&exprod=permalink

Danno Sends Related

Seussical-Sounding Web Site Names

http://pogue.blogs.nytimes.com/2007/12/06/the-dr-seuss-jumble-naming-web-sites/?hp 

***FS*** Nice to see people having that..  “hayyy… waita minute.  “  moment of logic setting in.  Most Web2 names are awful.

Eric Litman becomes Managing Director of WashingtonVC.

http://www.domainnews.com/general/2007120709/eric-litman-becomes-managing-director-of-washingtonvc/#more-1890

***FS***  Congrats Eric.

Where’s the money?

Excerpt: “”The venture (capital) industry is headed into a wall. All the best companies are being sold,” Deninger said. “For seven straight years, the number of companies going public has declined. That means the number of (prospective) buyers is also declining. Eventually, the VCs will have fewer companies that they can sell their companies to.”"  http://www.news.com/8301-10784_3-9830529-7.html?tag=nefd.blgs

***FS*** Blame SarbOx man ..  People are getting sloppy overpaying for nothing and the good stuff never sees the light of day..  Irony: Rules meant to protect investors only serve to make the rich richer and give said investors fewer opportunities.

Domainer Chris Stewart runs through the numbers for us and explains why Name Media’s leveraging up is a “good thing”. Chris is a very bright guy and this is an excellent post and argument. Posted in it’s entirity with permission:

Why Companies Borrow, and Why I Think NameMedia Borrowed Smart

This is the first post on our blog so I thought I would start off with something that is both timely and controversial: DEBT. Timely because of last week’s announcement that NameMedia had completed a deal to establish a $125 million credit facility; and controversial because of the topsy-turvy ride we have taken in the global equity markets this past month mostly attributed to the spillover from credit concerns in the US. Therefore, I believe that speaking to the topic of debt is a great starting point.

Before I go into some financial analysis let me first state that, admittedly, debt is an uncomfortable topic for me. I am not fond of debt, personally. As a business manager, however, debt can and often is the best friend to a growing company. It is cheap – let’s come to this a little later, and it is often easy to acquire. Quite simply, debt shouldn’t be a dirty word. And using debt to finance acquisitions or new capital projects should not be frowned upon.

Debt is cheap. What do I mean by this? Well, I should be more specific and say that debt is almost always relatively cheaper than other financing sources. It is cheaper than other financing sources because the interest payment on debt is also a tax deductible expense. The impact of this on the cost of debt can be significant. In financial terms, the amount of “benefit” you receive from being able to deduct your interest payments on your income statements is equal to your marginal tax rate multiplied by your borrowing rate. Wow, that was a lot to say. So, instead of trying to explain this let me illustrate this for you.
 Let’s imagine a scenario where you are seeking $100,000 to finance new projects. You are given two choices. Your first choice is to use debt financing at a borrowing rate of 15% p.a. and your second choice is to sell shares of your company to an investor who demands a 12% p.a. return on his/her investment achieved through an annual dividend payment. And, let’s further imagine that you already have an opportunity to invest the funds into a new domain acquisition, which will cost $100,000 and yield $20,000 in annual gross cash flow. We will assume you are a profitable company with a 35% marginal tax rate. Which method of financing would you choose based solely on the “numbers”? Let’s take a look…

From this over-simplified analysis above you may be surprised to see that, despite having a higher borrowing rate it is the debt financing choice providing the most benefit to your company. This isn’t always the case because we could fiddle with the borrowing rate, the required rate of return from the investor, or the tax rate to achieve numerous different results. But what I wanted to show you here is that even when things appear to be cheaper (such as the investor who only wants a 12% dividend) they may not always be.

One of the quick and dirty ways to figure out your effective borrowing rate on debt is to do this quick calculation. Multiply your corporate tax rate by the rate quoted to you by the debt financier. If you are borrowing at 18% and your tax rate is 25% then your benefit is 25%*18%=4.5%. Then reduce your borrowing rate by the benefit you just calculated, or 18%-4.5%=13.5%, which is your effective borrowing rate. Recall, this benefit is attributed to your ability (in most cases) to deduct interest expense on the income statement.

Clearly, I have ignored all of the “soft” considerations when choosing between debt and equity financing. Some people, like me, don’t particularly like debt. Others prefer the benefit of having the inputs of investors who may be more experienced. No amount of value can be placed on having mentors guide you in the right direction and surely your debt financier won’t be answering the phone at midnight to “discuss the business.”

What’s more, my calculation doesn’t demonstrate when and IF you should choose either form of financing. There is a separate calculation to figure out if you should borrow to finance a new acquisition altogether. I can, however, give you a tip to remember: if the net return on the asset is greater than the effective borrowing rate then you should probably invest. That’s a great topic for my next post so come back to see me massage some numbers to make that one work out for you.

Speaking of debt, most recently we learned that NameMedia has established a new credit facility for $125 million, which will be used to pay down a prior credit facility and for continuing operations and new acquisitions. And while I am not privy to the specifics I can probably estimate that this deal is both positive for NameMedia and the domain industry overall. Having perused some of the other domain blogs I have yet to see anyone come out and give a good/bad opinion on this announcement. I have seen some comments from individual posters who believe that this news had negative implications. I couldn’t disagree more.

As I illustrated above, debt financing is typically cheaper than equity financing. And for a company, such as NameMedia, I would argue that equity financing is significantly costlier to the company than debt. Recall, NameMedia has recently filed for their IPO and I believe that investors would place a discount rate (a.k.a. required rate of return) of anywhere between 15-20% on the firm’s equity value. Such a significant discount rate would lower the equity value of the company, requiring NameMedia to issue a greater number of shares to raise the capital necessary to paydown its previous credit facility. This scenario (on a much larger scale) resembles the average Joe paying one credit card bill with another credit card carrying a higher interest rate. Using new debt, rather than equity, to paydown the previous debt is the better alternative.

I also believe that this new credit facility is positive because it signals to me that the creditors believe NameMedia’s cash flows are both stable and long-term, at least enough to cover the debt going forward.

I would not be surprised if we see NameMedia cancel or reduce the size of its IPO altogether, and here’s why. From my calculations, I believe that NameMedia’s cost of equity financing is north of 15% and as high as 20%. There is no similar tax benefit to equity financing when compared to debt financing. And if you are borrowing at 15-20% from the markets then any and all new capital projects suddenly have this rate of return as the benchmark for new investments,…anyone know someone selling generic domain portfolios at 5x? I didn’t think so. The prior need to “go public” was to paydown the prior expiring credit facility and with this need now answered to by the new credit facility I see no reason for the company to require a significant source of capital at such a high cost at this time. I think it’s also important to note that the planned sale of equity was not an exit strategy for the current shareholders, as stated in the IPO, it was merely an exercise in raising capital”"

***FS*** My personal aversion to debt is several fold.  As the credit markets have shown this year,  you can’t necessarily control when the bank will stop lending ..and for unforseen reasons, or when they’ll call a loan on you..  If everyone levered up and carried debt,  we could get to a precarious place where no company operates to it’s full potential.  There is no such thing as “no strings attached” and when you start taking money from strangers, their covenants on what you can/can’t do with your business often become restrictive and fail to allow the company to take risks and make investments otherwise possible if they were unleveraged.  This can hold the company’s true potentiual back..  lastly..  not everyone operates from a tax jurisdiction..  Drug companies, and other multinationals often use transfer pricing to offset the tax benefit that debt provides..  Ditto with a domain biz which can be run from anywhere..  Even a little island 250 miles south of cuba.

 

Witty commentary from this blogger …  link courtesy of Adam

***FS*** I left a $15,000 tip at “Light” in Las Vegas once..  but then I called my credit card company and they corrected it back to the $1,500.00 I “actually” left.  I also had a very large charge from a restaurant called the ”Olympic Garden” that night.. But the former CEO of Savis taught me how to explain that one off my expense account 

Related:  Adam points out that cheetahs.com is going to expire for non-payment, likely because of a bad administrative email address.  Many a Las Vegas bound domainer has found himself with Trump-esq. charges at a similarly named establishment.

auction is still live. 4 hours to go, as of 10 a.m. EST. Friday, Dec 6, 07  Reserve is 200,000 - 499,999. http://www.greatdomains.com/auction/auction_detail.php?language=us&auction_id=21998&tracked=&partnerid=32392

***FS***  Great name..  This is fully valued from a wildcat-return investor’s perspective.

Which domain extensions have increased in value the fastest. 

Between 2004 - 2007. http://www.domainbits.com/increase-value All the data:  http://www.domainbits.com/data

***FS***Summary:  Buy .com’s

Whizzbang: Where to buy domains.

http://www.whizzbangsblog.com/content/view/335/86/

***FS*** still find deals on SEDO.com,  Afternic.com and GreatDomains.com

Verisign states that 146 million domain names registered across all TLD’s.

12 million in the last quarter. http://www.dnjournal.com/archive/lowdown/2007/dailyposts/12-05-07.htm Josh

***FS***  Most of the 12mm new names were discovered through tasting ..  and (very very important) only 5-10% of all 146mm names are worth anything whatsoever.. to any more than one distinctive entity.  That means there are just 7 - 14 million investment grade names available to the world.. How many do you own?

Alvaro Albarracin goes on a .mobi speculation shopping spree.

http://www.conceptualist.com/2007/12/06/alvaro-albarracin-breaks-dotmobi-sales-record/

MUSIC.MOBI = USD 616K
GAMES.MOBI = USD 401K
SPORTS.MOBI = USD 101K
MOVIES.MOBI = USD 82K
PHOTOS.MOBI = USD 51K
VIDEOS.MOBI = USD 51K

Alvaro says “I am not planning on developing these names,  I am planing on selling these sometime in the near  future.” .. 

***FS***Sell Alvaro ..  run like the wind and sell.  This man will be joining Dr. Van Neeste in the land of irrelevance shortly

Pubcon coverage.  Domaining.

Effective Domain name strategies  http://www.seroundtable.com/archives/015575.html

***FS***  These are good beginnings..  bet that a handful of folks had the light-bulb domaining moment.. 

Domains and trademarks.

Clark Walton, Esq. - Domain Name Law http://www.seroundtable.com/archives/015574.html

***FS***  Synopsis of presentation provides interesting insight into lawyer’s thinking, tactics.. Most domainers I know don’t run from lawyers.. They have lawyers too  :)  In 7 years I’ve found that you are more likely to be challenged by an over-reaching lawyer on a legitimate registration that you are to be backed into a corner over a name you really shouldn’t own.

Bruce Clay’s take on Richard Rosenblatt’s keynote

http://www.bruceclay.com/blog/archives/2007/12/keynote_address.html

***FS***  I like Richard Rosenblatt..  He’s a one in ten million character..  One of the most charismatic people I have ever drank Patron with / met.

Pubcon coverage links above via Sahar.

http://www.conceptualist.com/2007/12/06/pubcon-coverage-effective-domaining-strategies/

***FS***  Thanks Sahar!

Domain industry events listed.  Til May 2008.

http://www.domainnews.com/industry-events/

***FS***Nice summary to bookmark on DomainNews.com

Domain Truffles.

Josh says: Michael Berkens talks about domains as commodities and collectibles.  As well, he highlights the notion of quality by briefly discussing buying oil paintings at a flea market as compared to going to Art Basel in Miami, where 500 million dollars worth of art is expected to sell in just 4 days. He likes truffles, too.  Btw, Michael, it was a dog and not a pig that found the giant truffle that recently sold at auction in Macau. http://www.thedomains.com/2007/12/05/domain-truffles-2/

***FS***Berkens is an attorney turned domainer..  He has great insight into the value proposition that meaningful generic names represent.  Love the truffle analogy Mike.

Moniker Pubcon auction results.

Monte continues to move auctions outside of the  domain investment community.  That’s a good thing. http://www.domainstate.com/showthread.php3?s=&threadid=84850
GrandPa.com - $55,000
FamilyServices.com - $45,000
MortgageRates.org — $17,000
BlindDating.com — $14,000
ComputerDiscounts.com - $10,000
More sales results of other names here: http://www.domainnamenews.com/events/moniker-pubcon-2007-auction-results/1328#more-1328

Tips for finding brandable domain names. 

by Bill Eisenmann.
Excerpt: “”Not everyone is looking for keyword rich, generic domain names. Many Internet startups are looking for a simple, catchy name or phrase to build their online identity around. Brandable, web 2.0 style domain names have gained popularity in recent years mostly due to the explosion of social-networking sites. http://availabledomainnames.com/2007/tips-for-finding-brandable-domain-names/

***FS***  Everybody wants traffic..  Everybody..  Whether they say it or not..  whether they know it or not..  nobody wakes up in the morning, says “I want to start a website that nobody will visit”.  Nothing happens on the Internet without traffic.  Generic keyword style domain names get a primer-level of organic type in traffic for nothing more than the keyword weight or gravity of the name itself.  Those are the “catchy”, “brandable” and “cool-sounding” names which constitute the 5-10% of all names registered which are worth anything at all..  Those are the names you want.

Domain Tools Auction

Jay responds to auction criticisms, reduces after auction pricing reduction for names that don’t sell to 10% reduction from previously stated 20% reduction, and drops his commission to 9 % from 10%. http://blog.domaintools.com/2007/12/auction-rules/

Joshsays: Read the post for more details and other info.  One of the things that Jay says is they they will do alot of pre auction promotion, to generate interest.  Thing is, the cut off date for name submissions is Christmas eve, and the auction is on January 3rd.  ?. Jay retains exclusive rights to sell the domain for 60 days after the auction.

***FS***  It’s his sandbox..  and he needs some kind of tool to discourage off-block sales after auction close.  Understand the sellers POV too tho.

Facebook bows to pressure about Beacon Ads.

Allows users to turn them off completely.  How many will turn it off?  Choice. http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9051119&intsrc=hm_ts_head
http://yro.slashdot.org/yro/07/12/05/2114247.shtml

***FS***  Josh Quitner was unfairly silenced on this..  It’s Facebook who deserved the slap-down IMO.  http://valleywag.com/tech/media/facebooks-foolish-foes-330424.php

Nokia to continue to invest in online services

.. to add value to their phones. http://www.news.com/Nokia-sets-eyes-on-Internet-to-support-handsets/2100-1039_3-6221589.html?tag=nefd.top

***FS***  Nokia is in trouble long-term..  They don’t have the software..  Anyone can make hardware.

List here:  http://logistiklabs.blogspot.com/2007/12/20-most-influential-people-in-domain.html

As a quick aside..  Josh Quittner recently wrote a hard hitting critique of the flimsy business model and dishonest culture at Facebook, only to be publicly dressed down by Time Inc.  I am continually struck that the tech-community acts like such a fawning sycophant as it relates to Facebook.  They treat this co. like the last girl at the bar on a Friday night.  We need more Josh Quittners to tell us to give our heads a shake and to take our collective tongues out of Facebook’s caboose long enough to see what it is we’re taking home…

This is the kind of direction we need to see more of..  It’s an unhealthy and unsafe dynamic when brand holders can beat you up because you told the world “their brand stinks” via a website which incorporates their brand-name.  Taken to it’s illogical conclusion, we’d have to invent codewords to talk about the products and services we dislike. 

“”There is a certain inevitability” that more and more of the sites will be allowed, according to Wilbers. Companies will have to go along with it, he said, because there are too many sites and alternate sub-domains to police their branding effectively.

“Whether they like it or not, the internet is being used for such purposes,”"

Ya gotta love Free-speech.  Power to the people..  What the Internet is all about.

Those trying to do good, caught doing bad? .. I couldn’t make this stuff up if I tried..  as reported on Rick’s blog.  Let he who is without sin cast the first unsolicited email.  I think Rick is chagrin that those who would label the domain space as uncouth,  go ahead and themselves “do the uncouth”..  looking forward to reading more.