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March 25, 2014

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The State of the Industry January 2010: We Asked 16 Domain Experts If We Hit Bottom in 2009 and Will See a Rebound in the New Year
- Page 2 -

By Ron Jackson 

Domain Developers

Michael Castello (Castello Cities Internet Network, Inc.)

The continued decline in PPC revenue in 2009 prompted a number of domain owners to get serious about developing their assets. Many of them hope to follow the example set by the Castello Brothers, Michael and David, of Castello Cities Internet Network who have a very successful development track record with sites like PalmSprings.com, Nashville.com, Whisky.com

The Castello Brothers - Michael (left) and David
Castello Cities Internet Network Inc.

and DayCare.com to name just a few. Michael and David were the subject of one of the most popular Cover Stories we have ever published in December 2006.

Michael, who serves as CCIN's President and CEO told us, "The most significant tend in 2009 was the further movement toward webite development utilizing open-source solutions like WordPress. It’s free and it offers a user-friendly turnkey program that help new domain owners move from parking their domains to setting up shop on their own virtual real estate. Almost anyone can do it and with the addition of free widgets and applets this gives broad appeal to visiting traffic and greater potential of revenue for site owners."

Michael Castello (photo from our 2006 
Cover Story on the Castello Brothers)

"We are seeing a further movement of “connecting the dots” to a future virtual world," Michael added. "That being said, this will further draw battle lines between those like Google and grassroots domainer developers. In reality this is a virtual revolution. Direct navigation is the Achilles Heel of search." 

"I believe this year was the beginning that mainstream media realized and accepted the inevitable. Internet efficiency is tipping the scales to those that can convert their time into money. Today “Jack of all trades” is better suited for the future than the old master. The internet has leveled the playing field with everyone having their own distribution. In the past, how big business got their product or information to the masses was where their power originated. We now have that power, direct from you to your customer. The domain name plus the internet has empowered people," Michael said.

Looking ahead to 2010 Michael sees one particular industry need he hopes will be addressed. "Our Industry needs spokespeople that can represent our interests in the national spotlight. Everyone and every American can benefit from what we are achieving because our needs are their needs, our opportunities are their opportunities. 2010 is where our industry needs to “hold the fort”. We are at a juncture whereas the old social mindsets are being pushed into our industry with new ways of thinking. We are surviving the continued economic downturn as the old elements of value morph into new interests of leverage. Domain names are internet addresses but category killer domain names are worth more than gold. A great domain name is your safe harbor. Convert into something tangible that can hold value into the future. That is what I am telling friends and family," Michael concluded.

David Castello (Castello Cities Internet Network, Inc.)

Michael's brother and business partner, CCIN's COO and Editor-in-Chief David Castello, was quick to identify what he considered to be the most important trends in 2009. 

"#1 is Facebook allowing sub-URLs for their members," David said. This is "training wheels" for future domainers.  The vast majority of people have never bought a domain name and Facebook's massive popularity is allowing millions to associate their "identity" with a domain name for the first time (Twitter, too).  Many of them will eventually branch out and acquire their own domain names for their personal and business use. This will bring millions of newbies into the world of domain ownership and expand the scope of our industry because, as every domainer knows, most people never buy just one name."

"#2 is loss of parked domain names in UDRP arbitration via conflicting advertisements.
This was a huge nail in the parking coffin.  All a Complainant's attorney has to do now is capture a screenshot of their client's business advertisement on your parked page and you're instantly playing Russian Roulette with a good number of UDRP arbitrators.  Allowing unrestricted advertising on a valuable domain name is the legal equivalent of waltzing through a minefield.  Never forget that it's a 

David Castello at T.R.A.F.F.I.C.
Silicon Valley (April 2009)

lot cheaper to file for a UDRP instead of paying fair market value for a great domain and as values rise potential Complainants (and their attorneys) are just waiting for you to trip and make the wrong move. Don't hand it to them on a silver platter by allowing unrestricted advertising," David said.

Looking ahead  to the major challenges to be faced in 2010 David cited, "The future market effect of the new gTLDs. The longer I'm in this business the more it's starting to resemble real estate.  My brother and I have always called our best names "beachfront property" and the arrival of the new gTLDs will set that statement in stone," David said. "Fifteen years ago, most people had no idea how much domain names would be worth and what effect they would have on commerce.  Now they do and it's being reflected in ICANN's lengthy gTLD process.  But no matter how much they try to simplify the process, one thing is finally becoming established for all to see - domain names have extreme intrinsic value and the power to affect world commerce."

"Ironically, it will not be the new gTLDs that will prosper from their activation. The vast majority will be dismal failures for domain speculators because a TLD's success is not measured by how many names are purchased, but ultimately how many are developed," David noted. "Of course, a fair share of new gTLD owners will come out ahead (especially in the early rounds before word gets out how bad the aftermarket will be for these names) but after the dust settles (and the initial plethora of dopey "death of dotCom" stories die down), look for the legacy TLDs (.com, .net and .org) and the highly developed ccTLDs (like .de and .fr, not .cm) to soar in value."

"Mainstream Media courting Geodomains (The Canary in the Coalmine for Category Killers)," David added. "This is already happening and it's going to be huge news (no pun intended) when one of these deals goes down.  How do I know it's happening?  Because it's already happening to us. Unfortunately, the details can't be discussed here, but regardless of the outcome it speaks volumes about the possibilities and potential of a well developed and monetized category killer name (city .coms are category killers in US city markets)."

"The Internet IS the new economy and those that develop and monetize category killers are literally holding the keys to the castle in their respective markets (and those that are still parking category killers are missing the opportunity of a lifetime).  Most of corporate America got caught with their pants down because they never dreamed that a simple domain name could have so much power and could be used alone to build a successful business.  Somewhere along the line they were convinced that Google and SEO were the answer to all their problems and forgot that instantly memorable branding has and always will be the most powerful force in the marketing universe.  Remember - if after a thousand television commercials the public still has to search to find you on the Internet then you're not properly branded. Txmstr.com, anyone?' David concluded.

Andrew Miller (Internet Real Estate Group)

Andrew Miller is President of Internet Real Estate Group LLC (and, along with his partner Mike Zappy Zapolin, was profiled in our September 2005 Cover Story. IREG has owned and/or developed some of the greatest generic domains on the Internet including CreditCards.com, Computer.com, Shop.com and Chocolate.com

When I wrote Miller to ask what he saw as the most important events or trends of 2009 he wrote back, "Before answering this, I looked back at my past contributions to this fabulous annual State of the Industry edition of DN Journal, mainly to make sure I had something new to say. In that process, I determined that sometimes repetition is as important as innovation. I have been taught that once people hear something 3 times, they then remember it. I hope to add some repetition and some new here. Even in a deep recession, I continued to see positive trends in domain names as an asset class, and as a critically important element of building a successful online business or presence."

"As I stated in this edition last year, Domainers continue to do certain things that do not advance their own asset value, position, or the overall understanding of domains, likely for very short term benefit. Each year proves my year after year point that if you take a domain name and draw a value line from 0-100, the value of the type in traffic and any revenue derived from that (parking and pointing to sites that tend to 

Andrew Miller
President, Internet Real Estate Group

be relatively zero value to an end user) would equate to 10-20 percent of the total value in that particular domain name. Whereas, the brand value, the advertising and marketing value, the credibility provided, and the advantages that a generic dotcom domain gives one in search engine marketing, if applied by an end user who is building a website of value, comprises 80-90 percent of the total value of that particular domain name. Yet, to make a market, domainers and domain resellers and auctions continue to hone in on the short end of the value line, which long term paints the wrong picture and fails to properly educate the end users," Miller said.

"I saw this trend continue in 2009, and did not see too many major shifts away from it, maybe because it is fast money or just a comfort zone. There is so much more we are leaving on the table, and there are so many better ways to educate the masses. The more of us who embrace the 80-90 percent side of the value line, the faster the domain industry will become more efficient."

"I believe the same is true with TLDs. Each week, billions of dollars are spent in North America and in many cases, globally, advertising the .COM extension. I often ask people to gauge one week of prime time media in the US and tell me at the end of the week how many .COMs they saw, and then how many dot anything else. The answer is almost always, 99.5 percent .COM with a handful of .org, .gov. I do have respect for ccTLDs but even in those countries where cc’s are important, the top 10 websites are almost always .COM. TLDs are here to stay and yes, I am biased to .COM, but as we allow more and more meaningless TLDs, we add value to the .COM, which is actually good for .COM owners."

"Nothing would make me happier than someone spending millions on TV to advertise Chocolate.biz," Miller said, "because the consumer is so conditioned by the billions of dollars of media spent embedding the .COM as part of the brand (NFL.com, Walmart.com, China.com, AmericanIdol.com, Geico.com) that by advertising a different TLD, which you rarely if ever see to any critical mass level, it drives traffic to the equivalent .COM as that is what the consumer is conditioned to go to and just assumes."

"Every year, there seems to be a new “threat” to domains and each time, domains come out stronger and more important than before. In 1997/1998, Real Names and its massive investment capital was going to put domain names out of business. They even stated so in a full page Wall Street Journal ad. The result for 
Real Names and their plan for keywords replacing domains was bankruptcy. We are in a new world, where technology changes and evolves faster than any time in history. Facebook can go from inception to 350 million users in a few years. It is my belief that domain names will benefit from all these changes but we need to look ahead and keep our head up," Miller said.

"In 2009, we saw a massive trend with the rise of Facebook, Iphone, and their respective Apps. The new “bubble” is the mad rush to create these apps and profit from them. But when you step back, what one quickly sees is that there are only a handful of stand alone Apps on the Iphone and in Facebook (mainly the leading casual games makers like Zynga) that are making real money. The rest are lost, much like most websites, in the masses, ranked 228th in the entertainment category or only seen by a few hundred people on Facebook. While I am a huge believer in Facebook, and believe any viable business needs to figure out how to reach their part of Facebook’s massive, global, audience, I also believe that we will see a trend back outside the walls of Facebook and Iphone, back to the web, the Internet."

"The mad rush to build these Apps and go for quick money is a natural reaction to something so new and powerful, just as there was in 1998 with the Internet. But as large as Facebook is, it is a big walled garden, and it is dwarfed by the Internet and Mobile as a whole. I expect we will see a shift back outside the walled garden. I believe it makes more sense to build a solid foundation online, mobile friendly, and then bring that inside Facebook, not the other way around. The challenge in 2010 is how to balance and succeed within all the fast paced innovations, and changes, and to remember the core of it all is still the Internet, with domains guiding the users to where they want to go directly or via Google and other major search engines," Miller concluded.

Michael Mann (Washington VC)

WashingtonVC Founder Michael Mann is the only person to date to have been featured in two DN Journal Cover Stories - in August 2003 and in September 2007. Mann founded the popular domain aftermarket platform BuyDomains.com then went on to sell the company to NameMedia. With his next venture, Washington VC, he switched his focus to developing prime generic domains like Software.com, Phone.com, and SEO.com. Mann is also well known for his charitable work with Grassroots.org.

Mann said that 2009 once again proved one old adage. ".Com is still king," Mann declared. "Alt TLDs and new entrants still don't and won't deliver much profits and aren't worth the time and investment. Domains are not dead. The best ones need killer web sites following best practices (incentivized/viral/social) like those at http://InternetApplications.com/,  http://MakeMillions.com/ and models like those at http://MikeMann.com/ and http://Aux.com/ If you are complacent you should beware of (aftermarket sales platform) DomainMarket.com coming from behind after 3 years off."

Michael Mann
WashingtonVC Founder

Looking ahead to 2010, Mann said you need to be aware that "Selling names on the secondary market is extremely illiquid and difficult, and buyers tend to be well educated, poor, and a pain in the tail. Landing page PPC deals aren't so great as they used to be. All suggesting rough roads ahead and requisite caution. Although following real best practices should help you overcome the risk just fine," Mann said.

Howard Neu (Domain Developer, Attorney & T.R.A.F.F.I.C. Co_Founder) 

Howard Neu, who was the subject of our April 2009 Cover Story, can't be pigeonholed in any one category. He is probably best known as a Co-Founder (with Rick Schwartz) of the pioneering T.R.A.F.F.I.C. domain conference and as a noted domain attorney. However, these days he is spending most of his time on domain development which prompted me to put him in this category rather than on the next page among his fellow attorneys and domain investors. As a guy who wears three hats, Neu appropriately had three responses to my questions about what constituted the most important events or trends of 2009.

Howard Neu

"As a Domain Defense Litigator, I was very fortunate to win all of my UDRP cases in 2009 including one that broke new ground in ccTLD litigation for dot me," Neu said. "Although it generally appears that the trademark industry has a choke hold on WIPO and NAF; in my research, it appears to me that when Domainers answer Complaints with intelligent well-thought-out Responses, they usually receive favorable rulings from the panelists. Of course, there are always good panelists and those who could care less about the domain industry in general and domainers in particular. I think that the efforts of Phil Corwin and John Berryhill and others who represent the domain industry at ICANN have gone a long way in giving the industry a professional face and credibility, and may have, to some extent, thereby influenced the UDRP Panelists to be professional in their decisions," Neu said.

"As the co-founder and Chief Operating Officer of World Association of Domain Name Developers, Inc., I want to thank Rick Latona for having the foresight and plain old guts to agree to take the ball and run with it to bring 

T.R.A.F.F.I.C. to the next level as a worldwide source of networking and Domainer information. Not only were the two 2009 T.R.A.F.F.I.C. Conferences that Rick Schwartz and I put together in Silicon Valley and New York successful in spite of the down economy, but the T.R.A.F.F.I.C. ccTLD Conference in Amsterdam put on by the Latona Group, was the catalyst for keeping T.R.A.F.F.I.C. as the Gold Standard of domain Conferences. This broadened the industry and paved the way for our new agreement with Latona that will spread the Domain message around the world," Neu said.

"As a Domain Investor, 2009 shed a whole new light on the future of the Domain Industry by forcing me and others to look very seriously into alternatives for obtaining income from our domains. To that end, I have been extremely fortunate in teaming up with Danny Pryor and his Rodan Media Group in developing a number of domains into active (and hopefully ultimately successful) web sites. The first was the Lottery Result Network through the portal http://AmericanLotteryResults.com. We developed Lottery Result sites for every state in the U.S. and have linked them to the portal site. With the TINBU feed of direct lottery results for each state, we now have the premier network for those who play some form of the lottery ever day," Neu said.

"We then went on to develop MalpracticeAttorneys.com with attorney listings by geographical area and specialty including Dental, Accounting, Nursing, Pharmacy, Real Estate, and, of course, Legal and Medical Malpractice with a daily blog to keep folks up-to-date on what is happening in these areas. Next came NonfictionBooks.com, GiftCardsForTheHolidays.com, H1N1FluVaccines.com and our biggest venture to date, The Fidelity Funding Network which includes InvestingFunds.com with a video each day from the Wall Street Journal and other sources."

"By the time this article comes out, our second portion of the Fidelity Funding Network will be live - BestDomainsWebSite.com, where we have made it extremely easy to both buy and sell domains by Credit Card or Paypal through a Shopping Cart at BIN or below prices. For the first time, Domainers can sell their domains without all the hassle that is involved in auctions and other listing services. Further, domains can be purchased by simply putting them in a shopping cart and as soon as the domain is transferred to the Buyer, the funds are released to the Seller," Neu said.

Neu has turned his attention to
developing his domains.

With the respect to the New Year, Neu said, "Everybody seems to think that 2010 is going to be a better year economically than we have suffered through in 2009.  However, unfortunately, I see more of the same.  The present U.S. Administration has been making one economic mistake after another, and until we get a new Congress and Executive, I don't see any changes in the wind.  The rest of the world is hopeful due to advances in China, India, Australia and Japan that can continue to boost the U.S. Dollar. On that basis, I see 2010 as follows:

Howard Neu & wife Barbara in Las Vegas
during the Jan. 2010 T.R.A.F.F.I.C. Conference

1. From the legal perspective, things can be going from bad to worse for Domainers with the adoption of the URS as a speedy way for trademark holders to run roughshod over our domains.  Particularly if the Domainer has a history of losing UDRP cases or not Responding to them.  The burden of proof will shift from the Complainant who has had to prove that the Domain was registered and used in Bad Faith, to the Respondent who will have to prove that the domain was NOT registered in Bad Faith, nor is it being used in Bad Faith by trading on Complainant’s trademark or reputation.  WIPO is also considering changing its Supplemental Rules to allow more ease for Complainants to succeed.

2.  There will be 6 (count 'em, 6) T.R.A.F.F.I.C. shows in 2010 of which Rick Schwartz and I are directly involved with the October 2010 show at the beautiful Loew's South Beach Hotel in the heart of the Art Deco South Beach in October and Hong Kong in December. This brings

T.R.A.F.F.I.C. around the world for District of South Miami Beach. The year starts with Las Vegas in January, Milan, Italy in March, Dublin, Ireland in June, Vancouver, British Columbia in August, the first time ever and makes the World Association of Domain Name Developers really a global effort to connect and communicate with domainers around the world.

3.  In spite of the drastic cuts in income from PPC, this will continue to be the prime source of income for domainers, particularly those with large portfolios who could not begin to develop web sites.  There will be more folks looking into SEO and SEM in order to maximize their monetization, but the big trend carried over from 2009 will be development.  I recently acquired SkiLodge.com and with my large portfolio of ski lodges and ski resorts, will be developing this area of interest and activity.


Coming up on Page 3: Domain Investors & Attorneys

Featuring exclusive commentary from:

  • Michael Berkens
    and TheDomains.com)

  • Rick Schwartz
    ("The Domain King")

  • Frederick Schiwek

  • Ari Goldberger
    (Domain Attorney & Entrepreneur)

  • Stevan Lieberman
    (Domain Attorney & Entrepreneur)

  • Phil Corwin, Legal Counsel
    (Internet Commerce Association)

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