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April 03, 2015

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The State of the Industry January 2007: 15 Domain Experts Ponder What Happened in 2006 and Predict What’s Coming Next - Page 2

Many mainstream media outlets (who are steadily losing advertising dollars to the web) were delighted with the opportunity click fraud and other perceived Internet advertising ills gave them to try to scare advertisers away from going online. Many of the reports, particularly in print media, blew the problems dramatically out of proportion, something that Sedo.com’s Chief Strategy Officer, Matt Bentley, found especially irksome. 

“In 2006, we saw the mass media outlets consistently and dramatically bungle even the most basic domain stories. If there was a raspberry for “Complete Incompetence in domain reporting”, the 2006 edition would have gone to BusinessWeek. First came a sensationalized “exposé” (and cover story) last October which all but defined click fraud as something involving a domain parking site, without ever mentioning the legitimate business of direct navigation, let alone conceding that the vast majority of domain parking sites generate highly valuable traffic for advertisers. Then last month BusinessWeek followed this up with an article (The Great Internet Brand Rip-Off) which indiscriminately lumped domain tasting with cybersquatting and phishing, as if the latter two were an inevitable result of the first,” Bentley said. 

Matt Bentley
Chief Strategy Officer

“But perhaps the most irking media blunder in 2006 was their incessant focus on “domain kiting." This term, invented by GoDaddy CEO Bob Parsons, tries to equate domain tasting with check kiting and other forms of prohibited fraud. Again, domain tasting is an issue which needs to be addressed, but “domain kiting”, the repetitive add-drop of the same domain names every 5 days to avoid paying for them, is at most a small minority of the registrations being deleted in the add-drop cycle, not the intent of the practice as the media consistently suggests," Bentley said. "The intent of domain tasting is to identify domains that receive traffic, and then return the remaining domains after the 5-day “tasting” period. In other words, tasting has over the past years generated millions of legitimate paid domain registrations, a fact which may have been omitted in Bob Parson’s comments on the subject because, well, they weren’t through his company.” 

Bentley believes it is critical for the domain industry to start counteracting calculated attempts to tar a business that is steadily taking ad dollars away from the media critics who operate offline. “The greatest challenge we face in 2007 is improving the perception of our industry in the public eye," Bentley said. “In the past year we managed to shift the public’s conception of domain investors from “cybersquatter” to “typosquatter”, “phisher”, or “domain kiter” – hardly an improvement! Even the rare positive pieces on domain investing tends to portray domainers as “cowboy entrepreneurs”, living large, partying hard, and exalting the fortune made quickly and easily."

networking online

“In 2007 we need to begin presenting the new faces of the domain industry: entrepreneurial visionaries who are among the first to grasp new trends on the Internet and elsewhere... Sophisticated technology companies whose automated website generation technologies harness content and relevant advertising feeds to create millions of genuinely useful, highly-targeted “micro-vortals”... Direct navigation as a viable alternative to search engines for finding what you’re looking for.... and perhaps most importantly, traffic from domain parking sites as a source of quality, highly-targeted visitors that bring significant value to advertisers.”  

“These are the goals that we need to pursue, and the image that we need to present to the public, if we are to continue in 2007 and beyond the kind of booming success we enjoyed in 2006,” Bentley said. 

Another troubling issue that arose in 2006 was ICANN’s apparent marriage to domain registries who were handed lopsided new contracts at the expense of domain registrants around the world. Frank Schilling, who heads Name Administration, Inc. (and is regarded by many to be the world’s most successful domain investor) said “In 2007 domain registrants will have to plan and organize against the trifecta of unscrupulous registrars, registries intent on pricing registrants out of the renewals on their hard won intellectual property; and other covetous latecomers who unfairly try to unseat registrants from their generic names.” 

“The pendulum always swings both ways however and I think there will be significant, multifaceted pushback on any bold-faced inequity. The stakes and number of industry participants at this later stage have just grown too large to permit one-sided or unbalanced outcomes,” Schilling said. 

Frank Schilling
Name Administration. Inc.

To that end, Name Administration and several other major industry players, including iREIT, Sedo, Oversee.net and Straat Investments are putting their money where their mouths are by coming together as founding (and initial funding) members of the new Internet Commerce Association. iREIT’s Bob Martin said “The ICA is a non-profit organization devoted to protecting the rights, interests, equality and assets of website property owners.The ICA stands for: 

1)  Widespread recognition that direct navigation traffic and domain names are valuable assets with validation for the internet advertising, pay-per-click business model. 

2)  Fair and balanced property rights and protections relating to the ownership of  domain names and web properties.

3)  An established medium to participate fairly, equally and openly in the discussions regarding Internet governance, ICANN, and rules and laws. 

Phil Corwin, Legal Counsel
Internet Commerce Association

You will hear much more about the ICA in 2007 when a general membership drive will begin to, among other things, help retain Phil Corwin, the veteran legal counsel and lobbyist currently representing the ICA in Washington, DC and to help enable the hiring and retention of a full time Executive Director for the organization. (Disclosure: DN Journal Editor/Publisher Ron Jackson serves on the ICA’s Board of Directors). 

While Name Administration’s Schilling has been devoting a lot of time to helping get the ICA off the ground he has continued to keep a close eye on the domain business and  made these predictions for the year ahead:

  • PPC advertisers will have to spend more and work harder to convert leads to sales in a flattening economy and against greater competition.
  • Large scale traffic arbitrage will continue to negatively effect CPC across certain PPC marketplaces and keywords.
  • 'Break-up value' considerations will increase domain portfolio sale multiples from historically accepted 'PPC revenue multiples' alone.
  • The secondary market for domain names will become "the primary market" in 2007 (based on dollar volume). 
  • 2007 will see domainers rebrand their companies as 'lead-gen networks', 'social networks', 'secondary marketplaces', 'micro search engines', 'Wikis' and other newfangled monikers.  The engine behind the curtain of these "new Web 2.0 companies" will continue to be the same: "Generic domain names with lots of built-in, targeted traffic".

Schilling and Ari Goldberger are on the same page here (in addition to being a top domain attorney, Goldberger is active on the business side of the industry as a co-owner of PPC company SmartName.com).

 "I expect 2007 to usher in new forms of advertising models that go beyond traditional PPC, such as contextual advertisers for Web 2.0 applications, as well as a greater focus on pay for conversion as advertisers continue to demand more bang for their buck," Goldberger predicted. 

"On the other hand, advertisers may begin to recognize that advertiser value is more than just converting an eyeball to an immediate sale," Goldberger said. "As the desktop (and cell phone) continues to eclipse the living room TV as the most important media vehicle, advertisers will use the Internet to build long term brand value as they have with so-called traditional media. Once Madison Avenue comes to this realization, the value of Internet advertising will skyrocket – and with it the value of domains. 2007 might be the year for that!" 

Ari Goldberger (left) with 
SmartName.com partner Larry Fischer

Moniker.com CEO Monte Cahn is another industry veteran who believes the domain bull still has a long way to run. "Values will continue to rise, bringing even more awareness and, in turn, dollars to the space. I predict that as more high-profile sales occur, marketers, advertisers and many more individual investors will finally start to see the value of owning and investing in domains, bringing the idea of domain asset management out of the shadows and into the mainstream,” Cahn said.

“With greater awareness also comes misunderstandings about our business from those who are unfamiliar. We as an industry need to make the effort to educate the marketplace about the benefits that domains offer." 

“I also think there will be a large movement to full or partial domain development for domainers this year. The popularity of conferences such as T.R.A.F.F.I.C. (the real-estate owners), WebmasterWorld and Affiliate Summit (the real-estate developers), and Search Engine Strategies (customer conversion, search engine optimization, and customer acquisition) will start to converge together."

Monte Cahn
CEO, Moniker.com

Cahn said, "The valuable information gained by these conferences will educate and help domainers/investors diversify their domain development strategies and target their domains by industry and category based on what names to monetize on PPC, or whether to develop micro sites, affiliate sites, and/or full development web site offerings. Beyond that, there are a few other areas that deserve mention: 

  • As more individuals enter the industry and values continue to appreciate, we expect to see more demand for domain financing options and solutions.

  • Mergers and acquisitions will continue to affect the industry in a positive way through both consolidation and investment capital. It’s likely to be another active year in 2007. 

  • The launch of the .mobi top-level domain was also significant in 2006. As more individuals access the Web on mobile devices, the .mobi domains will become significant in the aftermarket in 2007 and beyond."

Auctioneer Joel Langbaum
conducting the Moniker Live Auction 
at T.R.A.F.F.I.C. East 2006

Cahn’s company stages the wildly successful live domain auctions that have become a staple at the T.R.A.F.F.I.C. conferences (they will also be doing one for the adult domain industry Jan. 17 at the Internext Expo in Las Vegas). “These auctions raised awareness surrounding the domain industry with high-profile sales and highly desirable inventory,” Cahn said, “In addition, the Moniker Live Domain Auctions helped set prices for virtual property in a public marketplace. As lucrative transactions begin to take place in public, it’s a critical reminder of how valuable the domain aftermarket is.” 

“The live auctions also helped all domain holders regardless of their participation in these events, as the events increased the value of domains in all extensions worldwide.  Major records were broken at these events with the sale of the largest .mobi name -  Flowers.mobi for $200,000, the largest .net name - Sex.net for $450,000, and the largest name ever sold in live and silent auction history -  Cameras.com for $1,500,000.” 

The Cameras.com and Flowers.mobi sales were made during Moniker’s live auction at the T.R.A.F.F.I.C. East conference in Florida in October. The T.R.A.F.F.I.C. shows, staged by Rick Schwartz and Howard Neu, have played a pivotal role in generating mainstream investment interest in domains. Neu told us “2006 was a watershed year for T.R.A.F.F.I.C. The conference in Santa Clara, California, T.R.A.F.F.I.C. Silicon Valley, planned in just 90 days, set an attendance record and was kicked off with a huge cocktail party at Google headquarters. For the first time, the banking and finance industry took notice of domains and participated with give and take in the conference.  It marked the beginning of the expansion of the industry, but also meant that we had to say goodbye to the smaller venues that had treated us so well.” 

T.R.A.F.F.I.C. West 2006, held once again at the beautiful Venetian Resort & Casino in Las Vegas, became the first domain conference ever to gather 500 persons in one place to network and talk about domains.  In conjunction with Moniker.com, the auction of domain names led to over $2 million in domains sold. Then T.R.A.F.F.I.C. East 2006 was held for the first time at the world class Westin Diplomat Resort in Hollywood, Florida. Once again, all attendance records were broken, with at least one-third of the attendees new to T.R.A.F.F.I.C., though hardly new to the industry,” Neu said. "At that show, the biggest domain name auction to date resulted in more than $5 million in domains changing hands.”

Neu promises more growth in 2007, even though the conference schedule will be more crowded. "Imitation is the sincerest form of flattery - the success of T.R.A.F.F.I.C. is leading others to try to replicate the formula, and it remains to be seen whether or not those attempts will be successful,” he said. 

“More and more people are being lured by the success of domainers who have sold individual domains or portfolios for substantial gains. The "business" of domain investing and development is where we intend to concentrate our efforts which seem to be paying off as we presently have the largest advance registration for T.R.A.F.F.I.C. West 2007 that we have ever had. It will be held March 5-8, and will be showcased by the Venetian Hotel & Casino in  new beautiful ballrooms they recently completed.”

“For the first time ever, domainers will be meeting in New York City at the impressive Hyatt Grand Central in the heart of Manhattan from June 18-22 at T.R.A.F.F.I.C. New York with its emphasis on bringing Wall Street and Madison Avenue into the mix.  In conjunction with our overall sponsor for 2007, TrafficZ, the excitement of the Big Apple will blend nicely with the investment community and the advertising gurus in spotlighting domains as a great investment and a profitable business,” Neu said.

Howard Neu
T.R.A.F.F.I.C. Co-founder

“Finally, to top off the year, T.R.A.F.F.I.C. East 2007 will once again be held at Florida's magnificent Westin Diplomat Resort in October. Because we keep the programs fresh and interesting without repeating ourselves, the theme of that conference will not be determined until much later this year. However, I can guarantee that whoever attends will get more out of it and will do more business than ever before. For all of these reasons, I believe that 2007 is going to be the best year ever for domains, domain investors and domain developers.”   

Next Page:

  • The Man Who Sold Vodka.com for $3 Million: 
    Roy Messer Makes His Predictions for 2007

  • Robert Alfano Wants to Loan You Money to Buy Domains!

  • CEO Tim Schumacher Breaks Down Sedo's Big Year

  • EuroDNS VP Frederick Schiwek Makes the Case for ccTLDs

  • The Domain King, Rick Schwartz, Gets the Last Word!

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