DomainFest’s theme was domaining 2.0, where does the industry go from here.
I was honored to speak about the topic. Since the session was a sit down chat, answering questions from a moderator and the audience, I didn’t prepare remarks. Instead I spent a lot of time reflecting on the domain business, where its been and where its going. Unfortunately the session was only a hour and after the moderator’s opening remarks. less than 50 minutes remained.
So let me take the time to deal with this in depth.
Domaining 2.0, I have to disagree.
We just lived that over the past 7 or so years.
Were heading to domaining 3.0 now.
Let me explain.
For me domaining is, as I posted about last week, comprised of three activities, the acquisition of domains, the holding of domains and the sale of domains.
Domaining 1.0 was born in the 1994 or so.
Before my time.
Back in the day when people could just register a great domain for FREE.
This was followed by a $70, two year registration cost, by the one and only registrar Network Solutions.
There was basically no way to monetize non-adult domains.
This was before Google, before GoTo which became Yahoo search.
This was before PPC.
This was before drop auctions.
So when I started lightly in 1997, to register domains, i did so with two criterias.
I registered domains that made sense. Domains that I thought I, or someone else could develop into sites at some point.
I registered adult domains that also made sense, domains that you could make money on.
A couple of years later, once domains that had been registered for free, or for the 2 years for $70, started to expire, I went though the one central list for all domain that would be dropped each day and got up at 5 in the morning, to grab them when the got released by the central registry.
Once again, looking at domains that were either adult domains I could put into an affilate program and make money off of, or non-adult domains that made sense and would be wanted by someone else to build a site around.
In 1999 we started MostWantedDomains.com.
I figured if we had all these good domains, most of which made no money, I had better sell enough to at least cover the cost of all the registrations.
I’ve met this goal, every year since then.
That was Domaining 1.0.
Domaining 2.0 came along when Google started their PPC program. I know Goto.com did it first, but the industry really took off with Google.
Now you could make money with all the domains you owned.
Not only the good domains, that people wanted for their site, but basically any domain that had traffic.
Many registrars sprang up. Network solutions monopoly was gone. Now you could register a domain for one year for $10.
Acquisition strategies changed for many, with a ton of new people coming into the business, from not only buying or registering good domains, but crap domains, domains that made little or no sense but had traffic, or trademark domains.
Shortly thereafter, drop services came along, offering to get drop domains for a premium fee.
Snapnames.com charged $39 and allowed one person, the first person who “backordered a domain” to use their automated script to catch dropping domains. The first day the service came out I, the first name i tried to backorder was fuck.com. It was already backordered (eventually dropped with Snap picking it up).
Other services came along, many domainers had their own scripts and the market exploded as people were getting paid big money though direct contracts with Google or Yahoo or though parking companies that sprang up.
People started “tasting” domains, registering thousands, tens of thousands and in some cases hundreds of thousands of dropping domains, seeing what traffic the domain had and keeping those that had enough to cover the registration fee and then some. 99% of these domains were had crappy traffic related to trademark infringing domains.
As more and more people came into the business, and people started to understand the value of good domains, the good names dropped less and less, and over the last couple of years the quality of dropping domains went down, way down.
This caused domainers to get very active in tradeshow auctions. Great domains were offered and sold for ten’s of thousands, hundreds of thousands and millions of dollars at these auctions. These Auction produced $2M, then $5M, then over $10m in sales.
That was domaining 2.0.
Which leave us in our current situation.
Parking revenues are down 50%.
Crappy domains are dying as Google, Yahoo and parking companies are blocking more and more of them from their systems.
The legal cost of owning such domains is growing.
Trademark holders are getting much more aggressive in going after domain holders, especially those who deal in large amounts of registrations with many variations of their trademarks.
Trademark holders have now organized a trade group just to deal with this problem.
This year they will go to Congress and ask for current trademark laws to be amended to increase the civil penalties for violation and add criminal penalties as well.
From the domainer perspective, crappy domains, including typo’s, trademarks and other bad traffic is a large reason why quality domains are earning less, and why advertisers opt out of the domain channel altogether.
Domain Tasting is dead. ICANN killed it.
VeriSign continues to raise registration fees.
Revenue going down, costs going up.
Domaining is changing, but the world is changing.
The economics of domaining is changing, but the world’s economy has changed.
So what can we say about the future?
More quality domains will drop, we are seeing that already.
As better domains drop, at wholesale prices, people will be less willing to spend their money at big tradeshow auctions, unless and until those prices reflect the values that you can find at the daily drop auction houses.
With revenue down there is less money to spend on new acquisitions.
On the other hand end users need domains.
Now more than ever.
As the world economy melts down, people are losing their jobs by the hundreds of thousands.
There are no new job openings. Companies are looking to survive, cut costs and labor is the first to go.
Many of these people are turning to the net. People need to feed their families, need to make money and no one is hiring.
A Horrible economy, retail stores are closing everyday, in every town.
Peoples equity in their homes are gone
People’s 401k retirement plans are gone.
A guy who could have pulled a couple of hundred grand to open a business off a home equity line a couple of years ago, can’t do it.
He has no equity in his home.
Bank aren’t lending.
On the other hand, the net continues to explode.
Just look at public companies earnings from the last couple of weeks.
Google earnings better than expected.
Yahoo earnings, better than expected.
Amazon, way better than expected.
So the people who now find themselves, unemployed with no job prospects, limited capital to invest and not able to get a loan, are turning to the net.
No they don’t have $100,000 to buy a great domain, but they have $10K to buy a good one.
End user sales are doing well.
I talked about it at the show. You want to sell to end user, you have to first develop a sales strategy.
There is no right or wrong answer.
Its what ever your goals are, and what ever your portfolio can support.
Some people like my good friend Rick Schwartz, won’t even talk to you unless you offering six figures for one of his domains.
Rick will sell a couple of domains a year for big money.
Works for him, but he has the quality portfolio to support those sales.
Big companies, with big overhead and hundreds of thousands of domain names, take the opposite approach, and sell domain for hundreds or a few thousand dollars, but do it in mass quantity. Sites like buydomains.com sell hundreds of domains a month.
Works for them.
Fabulous.com sells millions of dollars of lower priced domains through their domain distribution channel, that works for them.
We have always take the middle approach.
We will sell 150 domain or so a year, but we will acquire more than that. We don’t sell domain at hundreds of dollars. Our average sale is in the $10K range. This works for us.
You have to find what works for you.
Find a sales model, or use someone elses.
But do something.
In Domaining 3.0, you will see more development.
But until someone comes along with a platform that can monetize thousands, tens of thousands and hundreds of thousands of domains, parking is still going to be a big part of the industry.
The future may lie in companies like Sendori who are building their own network of advertisers.
What’s missing in our industry, that’s an easy one.
There’s a total lack on innovation.
In a show touting itself as being about change, innovation, and what’s coming next, parking companies have failed to deliver.
Look at a Domainsponsor landing page. It’s pretty much identical to the same page that was up 6 years ago.
They may tell you the page looks the same but the technology behind it is different, which may or may not be true, but bottom line our revenue continues to decline.
And please do think this is an attack on Oversee. The lack on innovation is true for all parking companies.
It’s basically the same old, same old.
Maybe one companies landing pages look prettier than anothers, but parking companies have failed to innovate. They all still resell and repackage one of two products, a Google feed or a Yahoo feed.
They rely on those companies to provide the advertisers, search results, billing, and collecting and then take whatever money Google or Yahoo gives them, takes there share and payout the rest to the domain holders.
Years later, we still have no accountability from Google or Yahoo.
Ask Google a question as I did at the show, about how they determine smart pricing, or how they determine how much to pay you, or how many advertisers opt out of the domain channel, or how aggressively they try to keep advertisers in the domain channel or ask basically any question and you get the same answer you would have gotten 6 years ago, its propriety information and we aren’t going to tell you.
Bottom line, Google and Yahoo pay the parking companies what they want.
There is no way of verifying numbers, to see if a parking company has a 70% revenue share, whether they are actually getting 70% of the advertisers dollars or 50% or 30%.
They pay what they pay.
No parking company has set up a large network of their own advertisers. No parking company has gotten any transparency from their upstream partner. None have come out with any revolutionary technology in 6+ years
No innovation in a high tech industry.
Now to the Domainfest show.
You have to hand it to the Oversee. Extremely well organized, well presented, well run show.
The look and feel of the show is highly professional. Behind the scenes, they are very prepared, very organized and on that basis, a whole different level from other shows.
Was it the best ever.
I think back to the first TRAFFIC show held in Delray Beach, meeting people for the first time I had only communicated with via e-mail or just heard about.
The great, simple party Ron Sheridan from DomainSponsor put together. A bunch of domainers, who never met, sitting around in a circle playing bongos together. A few “regular” girls, dancing, playing mingling, adding color to the evening.
I remember Chris from Domainsponsor asking me if I would like to meet Frank Schilling.
He took me to a back bar where I meet Frank for the first time. With his incredible long hair and infectious personality, I immediately knew why the guy was so successful. Brilliant, incredibly nice, tremendous outlook on life, and clearly had his head on straight.
I learned that that night that nice guys don’t always finish last, sometimes they rise to the front of the pack.
There have been other excellent shows since.
At each show you learn something, you meet people who will impact your life, you have experiences that will stay with you a lifetime. I’ve never gone to a show and left thinking that was a complete waste of time or money.
The First TRAFFIC show where a live domain auction where over a million dollars traded hands, unheard of in our business. Where would our business be if that didn’t take place?
The First TRAFFIC show in NY where $14 million dollars traded hands in one 4 hour auction.
TRAFFIC Vegas, where I got to go clubbing and bonding with many of you.
Yes there have been many great shows and this years DomainFest added to the body of work.
It moved the industry forward
If you missed it, you missed a lot.
Was it the best show of all time, who cares.
It was a great show, a great experience and if you were lucky enough to attend, you will have great memories, and you will have built at least one relationship that will last a lifetime.
For me DomainFest was my chance to support a good friend.
Unfortunately, DomainFest was the last show Ron Sheridan will be involved in.
Ron left Oversee after the show closed out.
Although he will be consulting with them, it won’t be the same not having Ron around.
Ron told me years ago, he was going to do the Playboy party.
He wouldn’t rest until he did.
I went to Vegas one year and told Ron I spent sometime at a really cool place, the Skybar at the Palms.
The next year he booked the Oversee party there.
He had a vision for his company, for the industry and worked very hard to achieve incredible success.
One of the first domain parking guys I ever encountered, Ron became a very good friend and moved the industry forward in ways few realize.
There are some great people in this business.
I can count on one hand people In the business I’ve met and simply don’t like. There a few guys I just can’t warm up to and no longer care to.
But hell that’s 5 out of hundreds, maybe thousands of people I’ve met.
There is an amazing amount of really smart, outstanding people in the business.
Ron is one and will be missed.