November 06, 2012    


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Dead Heads to Domain Honchos: How the Internet Real Estate Group Became the Industry's Biggest Hitmakers

By Ron Jackson
Editor/Publisher

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.


 

 

 

 

 

 

 

          Internet Real Estate Group, LLC Partners:
         
Andrew Miller (left)
          Mike "Zappy" Zapolin (center)
          Peter Hubshman (right)
          Website: InternetRealEstate.com

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: 

  • Beer.com - Sold to Interbrew for $7 million

  • Shop.com - Sold to Altura International, a Bill Gates/Amazon.com backed private company, in November 2003 for $3.5 million.

  • Diamond.com - Sold to Odimo (NASDAQ ODMO), a partnership between Steinmetz Group (the 2nd largest raw diamond company in the world) and Softbank in 2000 for $6 million.

  • Telephone.com - Sold to a private equity group in 2000 for $2 million cash plus equity.

  • Computer.com - Sold to Office Depot in 2001 (price subject to NDA)

  • College.com - Sold to private buyer in December 2003 (price subject to NDA)

  • Timeshares.com – Sold in October 2004 to Cendant (price subject to NDA)

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. 

Andrew Miller was born in Boston, the oldest of three brothers who grew up just outside the city in Wellesley, about half mile from Wellesley College (one of America’s most famous women’s colleges). Andy's dad was a management side labor attorney with a very successful firm of his own that enabled him to provide his family with all of the material things they needed or wanted. However he couldn’t buy the one thing he wanted most, even though he would have given his last cent to have it. That was good health for his two youngest sons. Both of Andrew’s brothers suffered from a rare illness called Glycogen Storage Disease (GSD). In fact they were among the first children ever diagnosed with the disease and were pioneers in developing treatments. The youngest son, Greg, died in 2002 from cancer that may have been triggered by the underlying illness. Scott Miller is still battling the disease but is holding his own well and is an integral part of the team at Internet Real Estate Group. 

Andrew Miller

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.   

Mike "Zappy" Zapolin

Zapolin was also an early pioneer in the infomercial business and was interviewed by Katie Couric on the Today show. At the end of his segment he gave out the company phone number, generating calls from future direct marketing clients including Diana Ross and Time Warner. He has been featured on all of the major TV networks as well as newspapers and magazines like Business Week, the Wall Street Journal, New York Times and USA Today.

In 1994, Zapolin began to investigate Kabala and has traveled extensively to study with many of the World Masters. He has co-written (with Deepak Chopra) Ask the Kabala, an interactive Kabala beginners kit due out next year from publisher Hay House. Zapolin credits some of the basic principles of Kabala as being factors in how he evaluates, selects and develops internet real estate.  

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. 

Miller, Zapolin and Hubshman are now making an even more indelible mark with the Internet Real Estate Group which Miller and Hubshman founded in the spring of 2001 (originally named Deal Jam, LLC). They had been together in a previous venture, Marketvision Direct, which they sold in 1998. They stayed on as officers to help do a public offering before finally leaving in December 2000. Hubshman, who has a degree in economics from Boston's Tufts University in addition to his Masters from Yale, has over 20 years of high level business management and investment experience.

Peter Hubshman

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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Editor’s Note: For those who would like to comment on this story, we invite you to make use of our Letters to the Editor feature (write to editor@dnjournal.com).



All previous Cover Stories are available in our Archive

 

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