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Inside Sedo: Co-Founder & Former CEO Tim Schumacher Leaves With a Fascinating Look Back at the Decade He Spent Running the Show

By Ron Jackson 

January 31, 2012 marked the end of an era at domain aftermarket and parking powerhouse Sedo.com. It was the day that company Co-Founder and long time industry leader Tim Schumacher officially completed his run as Sedo's CEO and, after more than a decade leading the Cologne, Germany based company, set his sites on new business ventures outside of the domain space. 

Schumacher will still sit on Sedo's Supervisory Board but will no longer have a daily role at a company that was based on a paper he wrote for his master's thesis at the University of Cologne titled “Price Formation in the Trade of Internet Domain Names." 

With that paper as their road map, Schumacher and college pals Ulrich Priesner and Marius Wuerzner founded Sedo in 2001, then quickly added a fourth college friend, Ulrich Essmann, to their group. Essmann went on to medical school and became a neurologist but has also continued to serve as a key Sedo executive through the years.

Less than 48 hours after Schumacher turned over his CEO duties to Tobias Flaitz, I sat 

Tim Schumacher
Sedo Co-Founder and Former CEO 
(February 2012)

down with him in Santa Monica, California, where we were both attending the 2012 DOMAINfest Global conference, for a private chat about his years at Sedo and the company's meteoric rise over the past decade. Schumacher would be catching a flight home to Germany just a couple of hours later - the first leg of a completely new chapter in his life. So we also talked about what, after so many fruitful years in our industry, he plans to do next.

To start at the beginning, the first thing I wanted to know was what was it about domain names that prompted Schumacher to make them the topic of his master's thesis? "I just saw a need there," Schumacher said. "Back then we ran a web design business while we were students to earn some extra money and we always ran into the same problem – a customer would say they wanted a certain name and that name was already taken, but often not being used. Others had names they didn’t need. We thought “there is something wrong” between demand and supply."

"So, we had already gotten the idea for Sedo, we had mapped out a business plan. We put up an early site where you could search for names that had been put up for sale on other sites.  We thought the biggest issue in the domain market was going to be how to price them and that topic would require a lot more research. I’ve always been a guy who tries to combine things in a more efficient way, so for me the thesis paper was an efficient way to get this problem solved while allowing me to finish my studies. I didn’t want to drop out. So, I thought I can do this research and get credit and hopefully come up with that magic formula to value domains," Schumacher said.

And did he find the magic formula?

"No!", Schumacher laughed. "I didn’t come up with the formula – the data was all over the map. It was really almost random. I didn’t have a lot f data back then – if DN Journal had existed back then I would have had a lot more data and if Sedo already existed we would have gotten data from there – but without sources like that the topic had sort of haunted us for years. It was actually just last year (2011) with the founding of IDNX that we really re-doubled our efforts on the “setting the pricing” topic.   

Schumacher wanted those pricing answers from the start so Sedo could give customers some guidelines on what they should expect to pay for various domain names. "Right," Schumacher said, "so all of these factors went into our manual appraisal system – but I was really looking for this formula where you could plug in a couple of factors and you get a value out. It was much later that I learned much more about the process, the industry, and all of these thoughts went into it – like what makes a good domain? How do you get names? So the paper was really more of a learning experience for me that anything else."

Even so, Sedo managed to make money from the start. "We were profitable very quickly," Schumacher confirmed. "Largely due to our appraisal product which was our most important product. That’s where my masters thesis really helped. Doing the appraisal was a manual process.  I did most of the appraisals the first two years myself but I had developed a nice template system and it was a unique product, especially in Europe. It was something people wanted to know – their first question was “what is my domain worth?” We answered that question and charged around $9 to $19, depending on the  type of appraisal. We had very little overhead – little salaries – so we were profitable very quickly. After the first 18 month we had about 10 people but many of them were interns or apprenticeships. All of the founders were working on the company in different roles though."

While Sedo grew more and more profitable in

Image: Stuart Miles / FreeDigitalPhotos.net

the years ahead - one thing remained the same - finding an appropriate domain name can still be a difficult process. "There are still entrepreneurs starting up new companies and they run into a naming issue every time," Schumacher concurred. "With all of that effort in pricing names, making the information accessible, fast transfers, it is still only applied to a small sub-set of names – so it is still a pretty imperfect market."

When you look at how people find names, there are really only three sources. One is if you know Sedo or one of the other marketplaces you go to them – that is what the professionals do, but Sedo is not a household name so we needed to be in the purchase flow of the second source – the registrars – and that is why we are so excited about the GoDaddy announcement (made at DOMAINFest Global 2012) because that is really a huge step. The third source is parking – that is why we tell people parking and selling need to be closely linked together and we need to make sure that someone who types in a name they are interested in and lands on a parking page, knows the name is for sale," Schumacher said.

"Finding a name is a creative exercise," Schumacher noted. "Somebody says something and then you say, “let’s check and see if that name is taken”. That is when the purchasing decision is made. If that name is seemingly unavailable, you just cross it off the list, unless it is a name you absolutely want to have. But if you land on a page, or are searching through Sedo and you see a name is available for $1,000, you say “Perfect – then it’s an option – it makes it on the short list and that’s how naming decisions are made in  the majority of cases."

Though domain pricing is still an arcane process, Sedo's sales platform has evolved considerably over the years. "The first site was very basic," Schumacher recalled. "I actually programmed parts of it myself – the html stuff.  Uli (Priesner), the partner who served as CTO, coded the difficult stuff – the data base stuff. Essentially it was only a search platform – and that’s where the name “Sedo” comes from - Search Engine for Domains. Back  then we searched GreatDomains (a company Sedo later acquired), we searched Afternic (owned by Register.com back then), we searched  tons of other places – most of which aren’t even around anymore - so basically we became an aggregator of all of those other sources so people could search in one place."

"We could make a little money through their affiliate programs but we quickly realized that wasn’t going to let us go any further because when searchers went over to GreatDomains they had a completely different purchasing flow than Afternic and others had different ones as well. So, we quickly decided we had to put that side of the equation on our side and let people place names for sale on our platform and provide real value to domain sellers," Schumacher said.

Sedo Co-Founder and CTO Uli Priesner

Once they had their own sale platform, the next task for Sedo was to let people know the new option existed. Even that was more of a challenge back then because the industry did not have the many dedicated media options that it has today.

"That is one thing that has really changed." Schumacher agreed. "Back then the whole social networking thing did not exist, there was no Google Adsense and DN Journal didn't come along until 2003, so a lot of it was guerrilla marketing. We emailed people that owned domains, posted in forums, told the mainstream press what we did and got coverage by doing studies rather than just putting out a press release – for example, breaking down how many domains were not being used, how hard it was to find a name, etc. You need to provide value to the press to get quoted."

Sedo also had to overcome a naming issue of their own. When the company decided to set up an office in the U.S. they had to do it on Sedo.us because they did not own the .com (as a German company, they started on Sedo.de). Getting Sedo.com turned out to be a real negotiating ordeal. "It took four years!," Schumacher recalled ruefully. "We finally got it for $80,000. It was a lot of money, but it was still a very good investment. It is still a lot of money for a four-letter .com that means nothing but it was a fair deal. Before we got it we seriously considered re-branding because we knew we couldn’t go into the U.S. market with Sedo.de."

Tim Schumacher in 2007

With that problem solved, and the established of offices in key territories, Sedo really started hitting its stride. After starting with approximately 20,000 domain listings their platform has more than 15 milliion today and Shumacher expects that number to grow exponentially. "At 15 million it is still small," he declared. "The total number of domains registered just passed the 200 million mark and we all know a lot more than 15 million registered domains are not currently being used, so I think there is a lot of room for growth."

Speaking of growth - Sedo's business went through the roof not long after they opened their U.S. office in Boston in 2005. "Parking was exploding and as a result domain prices also started exploding, so those were the golden years, 2006 and especially 2007," Schumacher said. "Private equity were showing up at all of the shows. A lot of our competitors got major funding but we have always been profitable and always grew our business organically. Yet, with some of the companies

getting $50-100 million in funding we thought, “They are just going to kill us”  but it didn’t turn out that way. We did invest $10 million or so buying new portfolios, etc. and those were bad investments but not as bad as some of the others were making."

"There was actually over investment," Schumacher continued. "I think we were a bit more sophisticated than some of the new players who rushed in and thought that is going to be a great market and didn’t see the pitfalls. They came from the outside, the financing world or whatever, and thought they were going to conquer the world. In retrospect I learned that whenever you invest make sure there is at least one person who really understands the business. Having a good finance person is a great counterpart but you can’t just have three MBA guys running a business who really don’t know what’s what. Even if they had some knowledgeable people below they may not have been listening and that’s what happened in many of those cases – people just got greedy. They thought if I pump in $100 million I’ll make 10 times more money than if I pump in $10 million."

NameMedia CEO Kelly Conlin
A competitor Schumacher admired

Things really started going south when practically the entire world went into a severe recession in 2008. The carnage was widespread, but Sedo managed to weather the storm. "We had to switch gears and it took us a little longer than most of our competitors," Schumacher said. "Take NameMedia for example. Kelly Conlin (NameMedia's CEO) - a guy I really respect who is a brilliant leader – had been through that before and I think he shifted gears very quickly. They did some painful cuts early on to get themselves right and executed them early on. For us it was a totally new situation. We had 7-8 years that had just been up, up, up so we really did not make any painful cuts until around the summer of 2009, later than probably any of our competitors."

"We also did it a lot more moderately – about 15% of the workforce -  so it probably hurt us in terms of cash flow but it did help in terms of retaining some people and retaining knowledge. It was probably a good thing to have to do because we had just become too big and too used to growth and so I think we 

used this to re-align strengths in some areas as well. It was a learning experience. Since then we have been pretty much stable but it changed the mood and emphasized that profitability is just as important as growth and that we have to work harder for every dollar than we did back then," Schumacher said.

"In 2006 we sold about 20% of the company and that turned out to be good timing – a little too early maybe, perfect timing would have been 2007 – but it was OK for our investors as those proceeds all went to them, not into the company as it never had a cash flow issue. In 2008-09 profitability dropped but we never lost money. In 2009 we swapped the remaining shares into the public company (Sedo Holdings AG). It was a complicated transaction but it worked out well. We have two business lines that are very profitable Sedo and Affilinet – Europe’s largest affiliate network, and we have cash in the bank.  We never did a fancy IPO which would have been kind of fun too with a lot of press and attention but we just did it kind of quietly and we are in a good position now.

One area where Sedo has been especially dominant is ccTLDs. As a look at our weekly sales charts on any given week will show you, they essentially own the resale market for country code domains. "With respect to our success with ccTLDs, the various markets actually work in similar ways," Schumacher said. "Of course, every TLD has their own regulations, but regulations are just a process issue. You determine what is the process for transferring that name – that needs to be done right - but it’s not changing the business model so we have just been growing the business model all over the world. Almost every successful Internet business works that way and sees that there is really very little difference around the world. We have a very international staff so we have people who speak the various languages. That is something we did early on an basically just repeated it in other countries."

Having helped navigate the company through the worst of the recession and back into a position poised for renewed growth, Schumacher decided it was the perfect time for him to take a well deserved family break, then explore some new investment opportunities that he is excited about. Still, leaving his his daily duties at Sedo leaves him with mixed feelings.

"It will probably really hit me once I am out of the office," Schumacher said. I have been working together with new CEO Tobias Flaitz, handing things over, introducing him to people, giving him background on a lot of things and preparing information so he can hit the ground running, so I really haven’t had time to reflect and that will probably come when I am out of the office. It’s sad because there are a ton of people I will probably not see for at least a good while and a lot of good things I leave behind. But at the same time I am looking forward to having some free time and thinking about completely new things and having the luxury of time to do that."

"So, it’s a mixed bag, but overall I am positive – I think the company is in good hands with a fabulous team – I am really proud of the team we have. All of the other co-founders are on board as well. One of them, CTO Ulrich Priesner is currently on a sabbatical traveling the world but he will return in a couple of months. He always had a very important role with the company, a very sharp guy who was instrumental in Sedo’s growth and he will work well with Tobias. That gives me a good feeling. I made the decision to leave earlier in 2011, so it  has been almost a year in planning and a great team will remain in place."

With the freedom to go in any direction now - what is in store next for Schumacher?

Tim Schumacher (center) sharing a Sedo 10th 
cake with T.R.A.F.F.I.C. Co-Founder 
Howard Neu
and Sedo Strategic Alliances Director 
Kathy Nielsen
at the 2011 T.R.A.F.F.I.C. conference 
at Fort Lauderdale Beach, Florida (October 2011). 

"First, some travel with my family including a trip to New Zealand," Schumacher said. "I also have a couple of projects I am involved in, mostly in the online space but not in the domain space. I will still be a shareholder in Sedo and be on the board so I don’t want to create a conflict of interest that could arise if I got involved in something in the domain space so that is one reason I will get involved in another sector. As much as I love the domain space, I also want to explore some other areas. Over the next ten years domains will continue to be important though. You’re still going to need a domain  ten years from now."

"I might get involved in something like online advertising or spend more time on a new project like enbreeze that I am working with. They make small wind turbines that generate energy for private homes. First, I’m giving myself a couple of months to relax. I don’t want to jump right into the next thing, but after that I expect to get really involved in something new, "Schumacher said.

"I’ll have some investments too but simply investing in a

project doesn’t fulfill you in the same way as having control of a project and building something yourself does. I love the investments I have supporting a lot of bright entrepreneurs. I get a lot of ideas from them and some are younger and are much better with social media or SEO and other topics I can learn, so it’s a very mutual exchange, but it’s their company –and it has to be - so if I started to get too involved they would probably be like hey that’s not what we wanted you for!," Schumacher laughed.

Schumacher has been such a large part of the domain industry that not having him around will feel very strange to us. Though we will certainly miss him, we wish him all the best as he goes off to explore new opportunities in the business world. Many chapters remain to be written in  the Tim Schumacher story and I'm sure they will be just as interesting as those we have read over the past ten years. I am looking forward to that.


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