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| Dead Heads to Domain Honchos: How the Internet Real Estate Group Became the Industry's Biggest Hitmakers | ||||||||||
By Ron
Jackson The domain business was just starting to climb out of a severe slump in the fall of 2003 when DNJournal.com began publishing weekly reports on domain sales. As the market heated up in 2004 and prices began an upward trajectory, we started getting complaints that our focus on the biggest sales was causing prices to go higher, making domains more expensive to acquire than they would be otherwise. The common objection was that the large sales we featured were anomalies that made sellers think their domains were worth more than they really were. |
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Internet
Real Estate Group, LLC Partners: |
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About
this time last year, just as the criticism was reaching a crescendo,
I got a call from Andrew Miller, the President and Co-Founder
of the Internet Real Estate Group, LLC (recent
name change from Deal Jam,
LLC) in Boston. Andrew had a complaint too, but his was
one I hadn�t heard before. Miller said the publicly reported sales
we featured showed prices that were much lower than
what premium properties were actually trading for, giving buyers the
mistaken impression that good domains were cheap! Miller filled me in on what was happening at the real high end of the market where prices paid are rarely disclosed. What we show you each week are sales that have been made public, essentially the tip of the iceberg. No one really knows how big the whole iceberg is, but Miller left little doubt in my mind that his view from the top was more accurate than the one I was hearing from so many people operating at ground level. Miller
was the ultimate �man in a position to know�. It was his company
that sold CreditCards.com for $2.75 million (the
highest publicly reported sale of 2004). Ironically, that not only
was not the highest sale industry-wide last year, it wasn�t even
the highest sale at his company! Miller told us, �I have always
said to anyone who cares to listen, the largest domain name sales
are the private ones, which are almost always under strict
non-disclosure agreements (NDA). Most buyers would prefer to
acquire the asset and not disclose the price they paid and we have
made it a key point to develop the trust and respect of those types
of buyers and partners.� Sales
made by the Internet Real Estate Group (or current partners prior to
the company�s incorporation) have included some of the biggest
blockbusters in industry history. Here is just a sampling, some of
them with prices that have been cleared for release for the first
time:
With
spectacular sales like those under their belts, you might be
surprised to learn that Miller and company are taking a different
approach now. Don�t expect a lot of sales from them in the near
future. �Today we are buyers, Period!,� Miller declared.
�We believe that we are still in the Wild Wild West of Internet
Real Estate and the values should increase significantly for
prime generic domain properties.� While Miller and his founding partner, Internet Real Estate Group CEO Peter Hubshman, have been a force in the domain industry for several years, to quote Bachman-Turner Overdrive �you ain�t seen nothin� yet�. A dynamic third partner, Miller�s long-time friend Mike �Zappy� Zapolin has joined the team, creating a triumvirate with credentials that are unsurpassed in this business. Andrew and Mike are both Harvard Business School graduates and Peter has a Masters Degree in management from Yale. Their professional successes could fill a book. We�ll cover some of their career highlights, but the best place to start is always the beginning.
Money
and health can be ephemeral things, so the elder Miller taught his
sons to value things that would last. �I learned the importance of
hard work, discipline, honesty, and maintaining high values and
integrity,� Andrew Miller said. �My dad always says that at the
end of the day all you have is your reputation.� Miller learned
an equally important lesson from his mother that has served him well
throughout his life. �My Mom has more tolerance than most
people I know and only sees the good in everybody.� Sharing
that outlook has made it easier to build relationships and great
relationships are the foundation Miller�s enterprises have always
been built on. He is passing those values down to the son and
daughter he and his wife are raising today. Miller
paid attention to his studies at Belmont Hill School and
earned a place in the Ivy League at Cornell University
(today a good chunk of his time is spent on fund raising activities
for Cornell, GSD and cancer related causes). In 1988, after
graduating from Cornell, Miller was accepted into Drexel Burnham
Lambert's renowned IST (Intensive Sales Training) program
at company headquarters in New York. The concept was to take
20 young people each year (selected from a group of over 1000),
train them for 18 months with time spent in every department of
Drexel, with a goal of placing each of them in Drexel offices as
liaisons to the senior deal makers and traders at the firm. As Miller headed into his second year in the Drexel program a new class came in that included a Boston University graduate named Mike Zapolin, a kid who was voted Male Class Clown at Lexington High School in Massachusetts. The Female Class Clown winner, Rachel Dratch, made a career out of being funny. She is now part of the cast on NBC-TV�s Saturday Night Live. Miller and Zapolin hit it off right away. �We were both from the Boston area - an immediate bond - and we liked to gamble, eat Chinese Food, and shared many a drive that year home to Boston,� Miller recalled. �Sometimes one just meets a friend that they know is a special bond. That is about the best way to describe it.� While Miller�s class was able to finish the Drexel program, Zapolin�s was unfortunately disrupted when U.S. Attorney Rudolph Giuliani (later Mayor of New York) indicted �junk bond king� Michael Milken for alleged security violations and closed the firm overnight. Still, Zapolin soon found a new home at investment bank Bear Stearns where at age 24 he became one of the youngest Vice Presidents in the 100 year history of the company.
Their
business careers eventually brought Miller and Zapolin back
home to Boston where legendary rock band The Grateful Dead
had a hand in launching them to still another success. Miller told
us, �we dreamed up our various entrepreneurial ventures while
following the Grateful Dead around the country, finally creating a
direct marketing television show for the Dead, which lead to us
becoming Executive Producers of a very successful VH1
merchandising show for the band, hosted by NBA Hall of Famer (and
noted Dead Head) Bill Walton. While we both had
successful investment businesses, I believe we both had greater
goals. We both shared the desire to be the client whose money was
managed and not the investment advisor. We both had the balls to
walk away from our early financial success to make it happen.� �We
have started a business together (Marketvision Direct, Inc.),
partnered on several domain successes (Beer.com, Diamond.com, CreditCards.com
and Shop.com) and became alumni of Harvard Business School
together via our graduation in 2004 from the college�s prestigious
Owner President Management program. For the last 2 years
Zappy has taught the eBusiness elective which he developed
for Harvard Business School�s Executive program. Now we are
excited about joining forces to take Internet Real Estate Group to
the next level!� Miller said. Zapolin
certainly brings some unique qualities to the partnership. In 2000
he starred in his own Super Bowl ad for Computer.com.
The award winning ad ran during the final minute of the St. Louis
Rams-Tennessee Titans cliffhanger and according to ABC
was one of the highest rated commercials of all time. Last year he
successfully negotiated the acquisition of Music.com (which
he co-founded), currently being developed in Los Angeles by music
industry insiders. With Asia emerging as a world business superpower, Zapolin is also well equipped to help there. He has traveled to Japan to consult for Akio Toyota and recently was a speaker at the Economist Magazine�s �Branding Conference� in Shanghai. Domainers will get a chance to hear both Zapolin and Miller talk next month as they will be the co-keynote speakers at the T.R.A.F.F.I.C. East conference October 18-22 in Delray Beach, Florida.
He began his career in the early 80's as an Assistant Vice President for Diversified Media, Inc. where he was responsible for the successful turn around and sale of the company's New York based Spanish language daily newspaper, El Diario La Prensa. Hubshman's next success came in the real estate and aerospace manufacturing divisions of DC Trading and Development where he became Executive Vice President and a member of the Board of Directors. He was one of the key founders of a successful New York based leveraged buyout fund, First Atlantic Capital, Ltd. and also spent several years as a finance and management consultant with R.F. Webb Corporation and International Capital Strategies, LLC, where he had direct responsibility for projects in the transportation, energy, biotechnology, medical device, food processing, market research, software, multi-media, finance, and telecommunications sectors. With Internet Real Estate Group having an interest in so many different product categories, Hubshman's diverse experience has made him an invaluable asset to the team. In fact Milller said Hubshman is the guy who makes sure the company's engine keeps purring. "He DRIVES the operations, site performance, engineering management, and has overseen the building of the entire blueprint we follow to make our properties so successful", Miller said. When
Miller and Hubshman collaborated on the founding of Deal Jam, they knew exactly where they wanted to go. �Deal
Jam�s plan was to acquire single word generic domain names and
build successful websites on these addresses, maintaining
operational control,� Miller said. �Previously at Marketvision,
we did the same thing but instead of operating the properties
ourselves, we did deals with outside operating groups or did a lot
of outsourcing. When we formed Deal Jam, we decided to do it all
internally and own the platforms and the technology as well as the
domain name assets. The plan has clearly evolved and expanded,
especially as we created the term Internet Real Estate and began to
see that the prime generic domain names were equivalent to prime
real world real estate, just incredible addresses on which to build
a business and rapidly inclining asset values as well.� The
partners have an �A� list of corporate contacts from their time
in the investment business. They are welcomed in major corporate
suites that many competitors will only see looking up from street
level. With that status, they have become the domain industry�s
most important ambassadors to corporate America. �We have spent
several years educating business leaders on the importance of
incorporating the Internet into their existing business,� Miller
said. �Our success has been accelerated by outside validation as
some of the most successful dotcoms have been built on generic
domain name platforms. Many Fortune 500 companies have
acquired their category domains including Shopping.com,
Hotels.com, Rent.com, Baby.com, and others.� Getting
corporations to realize that owning the name of the category they
operate in is just as important as owning their individual brand
name has been one of the group�s most important accomplishments.
�Branding has changed in the last few years as businesses have
incorporated the web into their operations,� Miller said. �It is
not enough just to have brand recall, it is equally as important to
be present in the moment that the person is proactively searching
for what they want on the web, and the credibility to warrant their
trusting you with vital personal information. We believe in owning
that moment prior to their having made a brand preference
choice. There are only a few prime generic domain names for each
industry or category. However, nothing is easy and the caveat here
is, it is critical to know how to build, validate, educate, and
communicate those values.� �We
have been successful due to hard work, tremendous investment
backers, and by surrounding ourselves with dedicated, smart
believers. We have also spent this time developing our own in-house
expertise for buying, developing, Search Engine Optimizing,
partnering and selling �prime� Internet Real Estate which we are
now able to execute in a �cookie cutter� manner. In addition,
via our promotional sales group, we have undertaken some ancillary
efforts, such as selling corporate promotions, in an effort to build
both a database and strong interpersonal relationships with
Fortune 500 senior management teams. This has been a smashing
success,� Miller added. The Internet Real Estate Group is well aware of the explosion in domain interest over the past year when corporations and venture capitalists entered the space buying up portfolios and entire companies in a rush to secure domain assets. �There is suddenly a tremendous amount of activity and institutional money in the aggregating of large portfolios of domain names, most which are not prime properties in nature,� Miller said. �That is a traffic aggregation game, a strategy to capitalize on CPC/PPC. However, our plan is different, we will continue to be the one and only resorts as compared to say, Marriott. We will continue to acquire and develop properties that are the most prime of Internet Real Estate, single word and category specific generic domain names. We see the most value, the home runs, in owning and developing the world�s most valuable addresses or properties,� Miller concluded. The company's holdings back up what Miller said. They currently own such gems as Chocolate.com, Podcast.com, Podcasting.com, Relationship.com, Safety.com and Carbs.com. They also retain an equity position in Shop.com and have options on, or brokerage deals for Chocolates.com, Sponsorships.com, Jeans.com, Privacy.com and Wireless.com. Miller said some major new acquisitions will be announced soon as well. A mutual interest in gambling was one of the things that brought Miller and Zapolin together over 15 years ago. Today, with everything they have going for them, the Internet Real Estate Group may be the best bet they�ll ever make. |
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Copyright 2005
Domain Name Journal
A Division of
Internet Edge, Inc.