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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 3 -

By Ron Jackson 

Domain Investors & Attorneys

Michael Berkens (TheDomains.com & MostWantedDomains.com)

We will kick off this section featuring Domain Investors and Attorneys with someone who is both. Michael Berkens, who was profiled in our July 2009 Cover Story, is one of the most successful domain investors in the industry. He also operates his own sales site at MostWantedDomains.com and writes a very popular and informative blog at TheDomains.com

As an attorney, it is not surprising that legal threats are among Michael's major concerns for 2010, as is how a pending merger between two Internet behemoths could effect domain owners.

Berkens said "I think the most significant concerns for domain investors in 2010 are:

The proposed Yahoo-Microsoft merger. What will the effect of this merger be on Yahoo which is one of the two upstream parking providers to domainers and how if any will it effect Google PPC prices paid by advertisers and the amount paid out to domainers?


 Michael Berkens
and TheDomains.com

Legal Issues: The Kentucky domain seizure case is still ongoing and the ramifications for domain owners are quite broad, if the Commonwealth somehow wins this case, you will see other jurisdictions be they states or even more local jurisdictions try to regulate the internet and domains.

In December the state of Utah proposed its own law which would attempt to regulate domain ownership. Look for additional states and local jurisdictions to attempt to regulate the Internet, especially if the Kentucky action is somehow ultimately upheld.

Both WIPO and UDRP administrators have proposed quick and cheap resolution methods which they would like to implement this year, which will only increase the amount of filings against domain holders and more domains taken away. As it stands today WIPO and UDRP decisions have little uniformity and decisions are becoming an ever increasingly just a crap shoot placing domains in jeopardy.

Also no one should forget that CADNA is still very actively pushing for additional federal legislation along the lines of the Snowe Bill, which will strengthen existing laws and possibly provide criminal penalties for violation

New TLDs. We still don’t truly know what the effect of 10’s or 100’s of new extensions will have on value and demand of current TLDs. We can all make our predictions, but until these new extensions are launched en mass, we can only guess and opine as to the outcome.

More troubling is we still do not know all of the possible “side effects” that the new rules ICANN is setting out for the new extension will have on all current extensions, as all registries, including existing ones, want to be treated the same.

Increased registration costs. VeriSign has already announced at 7% increase in registration and renewal fees for .coms  

starting on July 1. For those domainers who only keep domains which pay for themselves with PPC earnings, those earning will have to increase 7% just to break even. Those domainers who are heavily dependent on PPC revenue may renew less domains, especially if they do not have a good strategy for sales. Anytime costs increase and revenue does not follow, its troubling for an industry.  Look for more good domains to drop in 2010.

Apps, Tablets, NetBooks, Smartbooks, Facebook, Twitter and other new technology. In 2010 Apple will launch its new Tablet computer and other manufacturers will release a smaller version of Netbooks called Smartbooks.   These machines will be used less for direct navigation and more for accessing sites like Twitter and Facebook which themselves have a ton of applications, which may make direct navigation even less possible or desirable."

On the positive aside, Berkens added, "I think there is an opportunity in the new gTLDs as domain investors might want to consider getting involved, switching hats and investing in a registry or service provider. I do think some of the new gTLDs will be profitable on the registry level. There might also be opportunity from the registrant side. As always you need to keep your eyes open and consider all options."

"There is still a lot of money to be made by the company that figures out a solution to monetize hundreds of thousands of domains better than parking. There will be more higher quality domains dropping in 2010. Look for the trend of big dollar end user sales to continue in 2010."

Berkens closed by noting, "Domainers will continue to build out domains and the market will really pop when one of those are sold for HUGE money which I think will happen in 2010.

Rick Schwartz (T.R.A.F.F.I.C. Co-Founder & Domain Investor)

In 2010 T.R.A.F.F.I.C. Co-Founder and wildly successful domain investor Rick Schwartz remains what he was when we wrote a February 2004 Cover Story about him - the single most recognizable name in the domain business. That is due in equal parts to his business success and his colorful, no holds barred commentary on domain matters. As with almost all outspoken and opinionated people, Rick makes enemies as well as friends, but when it comes to business his advice over the years has proven to be too on target to ignore. 

Schwartz kicked off our interview with his take on what happened in 2009, comparing it to the .com bust of 2000. "During the last collapse of the dotcoms the enemy was the Internet and newspapers and merchants and others did everything they could to stop the tidal wave. They got about an 8-year stay of execution. That stay is over and like they say, “Beat ‘em or join them”…….Well they joined and social media to the degree we see has been the outcome. So what I am trying to say is that the collapse of 2009 drove the Internet to critical mass in every corner of the world and in every industry as well as individuals. It is now the chosen media. Before the TV has been the 

Rick Schwartz
"The Domain King"

center. NOW, TV is in the background not just for us, but for more and more each day. The more “Noise” the more folks want a soapbox to stand on and domains become in more demand. Once the money starts flowing in, and it is, all types of things happen during a rising tide. Even more when our tide is rising and most are stagnant at best," Schwartz said.

"I also think about how well domains held up in value as the value of actual real estate was hemorrhaging. The new vs. the old. Nothing will replace real estate, however as an investment, I certainly could make a very strong case for premium domain names. I qualify that by saying “Premium Domain Names” because those are the ones of investment quality over the long term. The ones that are solid and the ones that are safer IMO. I also believe there is investment quality at every level when you know the elements to look for. $1,000, $5,000, $10,000, $100,000 or higher regardless of what you hear otherwise. And even if you deal in other extensions, premium is still premium and crap is still crap," Schwartz said.

Looking ahead to 2010 Schwartz said, "2010 is going be a great year if you are a self sustaining entrepreneur and it is going to suck if you are looking for a job or don’t know how to spot opportunity and do business. Gaps like that are what creates opportunity and those that actually recognize opportunity will do very well this year. Opportunity is invisible to most. THAT is why it is an opportunity to begin with. You have to look for voids and holes in the fabric of society for the customer and if you fill that gap, voila. Not magic, not rocket science, then again it really is."

"I think the average person is just shortsighted. If you have a hen and a rooster, some would have 2 meals, others would eat for a lifetime. Which one are you?? We can both start with the same thing and both end with very different results. 8 out of 10 will eat the 2 birds right now. Half of those remaining won’t have the patience to wait. One will have the “Life of Riley” and no worries. What can I possibly say to persuade them if they can’t see the distinction in this simple example?," Schwartz asked.

"I have always said that I hope every new domainer succeeds. I also always say that your first domains are your most important purchases. So be deliberate and know what makes any domain on any level with any extension have great value while some have limited and in so many cases, no value."

"So I think 2010 will be only as good as your focus and the business acumen you have gathered until now. When we were kids we had report cards. 2010 is our true report card of life. 2010 will be a true test of all of our skills we have learned up until now."

"We had an economic Tsunami in 2008 and 2009. 2010 is the year we start coming out after the storm to see what can be done with what is left and build lots of new things. Just be on the alert for dangerous pitfalls as we are still a long way from an “All Clear” alert. Many of us did this in 2009 but it was much more uncertain. Hit or miss. Much riskier because of the fog we were in," Schwartz said.

"Lastly I could not end without mentioning T.R.A.F.F.I.C. and our deal with Rick Latona. Once again we will shake things up by going to every corner of the world in 2010 and beyond."

T.R.A.F.F.I.C. partners Rick Schwartz, Rick Latona and Howard Neu

"This is a 5-year licensing agreement that will evolve T.R.A.F.F.I.C. as we all evolve. The Las Vegas show (coming up Jan. 21-23, 2010) is going to be spectacular in both the differences as well as the staples. This deal once again sets the tone and agenda and Las Vegas will show the industry to the degree in which that is happening. Rick and his team have the energy and together we have a mutual vision that will soon be evident. T.R.A.F.F.I.C. means business. Always has, always will and that is why T.R.A.F.F.I.C. is so valuable to all of us and beyond. As we move into our 6th year we have a legacy that everyone reading this can be proud of and as we just celebrated our 5th anniversary, we have also guaranteed we will celebrate our 10th."

"Friendships are great and we have all made life long relationships. As the Internet evolves many of us will go into different orbits as projects and developments pull us away and in different directions. That is just what happens naturally as things unfold. But we will always know our roots and have a unique bond that few men or women will ever know," Schwartz concluded.

Frederick Schiwek (DomainInvest.lu)

Freddy Schiwek of Luxembourg based DomainInvest.lu is one of the best known investors on the domain conference circle. If someone is staging an auction or show, odds are Freddy will be there making wise investments and broadening his large circle of friends. Despite the downturn in the economy in 2009 it is a year that Schiwek will have reason to remember fondly. "We closed our €10 million funding in October 2009 and this brings us very much forward," Schiwek said. "I consider this as the major event for me personally or for Domain Invest."

"Generally speaking the 2-letter .de land rush in Germany might have been the major event for our industry, but there have been so many peaks. 2009 passed by so fast and it was so full of important happenings that I can not count them all. We meet very interesting people and important companies for our future. 2010 will be the first time when really we harvest from the earlier years," Schiwek said.

"Consolidation is still going on, Big Players will continue to acquire smaller players or simply push them off the market. Additionally I think we will see an connection in the domain market

Freddy Schiwek

 between Europe and the USA, due to the fact that Domain Sponsor opened their offices in Frankfurt, Germany. I remember that many German domainers tried their luck in the US Market for the first time when Sedo went to the USA. Asia and South America is still a very much untouched market, I expected some more signals from South America in 2009 but maybe because of the economical downturn it was so quiet. At least we see that they are active as they will have a domain conference in Punta del Este, Uruguay. I really look forward to a lot of busy conferences, let’s see where we will end up in 2010!," Schiwek said.  

Ari Goldberger (Attorney & Domain Entrepreneur)

Ari Goldberger, who was profiled in our June 2006 Cover Story, is one of the most successful domain attorneys in the history of the industry (his website is located at Esqwire.com). He has also been a successful entrepreneur, co-founding domain monetization company SmartName.com with Larry Fischer and later selling the firm to NameMedia.

Ari Goldberger

Goldberger told us, "The tremendous drop in PPC revenue was obviously a concerning trend in 2009. At the same time I sensed a strong resurgence in optimism concerning domain names as the web continues to become more intertwined with everyday life and commerce at the same time the importance of traditional media vehicles has declined. So, while PPC revenue might be down, the importance of Internet traffic, and thus domain names -- a source of traffic and a vehicle to generate and attract that traffic -- continues to rise. I believe Main Street and Madison Avenue are finally beginning to grasp these dynamics, and this has increased the perceived and real value of domain names. As more and more marketers wake up to this I believe the value of domain names will continue to rise into the future." 

"The continued growth of the Internet will continue to weaken traditional media and commerce outlets, forcing more newspapers, magazines and brick-and-mortar shops out of business," Goldberger added. "There really are few good reasons today to go to a store unless you need to touch, smell, taste or try 

something on. Once you know a product, the easiest way to get it is to, as the Yellow Pages used to say, let your fingers do the walking. There is also no good reason to read a dead un-linkable piece of paper to gain information. 2010, and the years to come, will see more and more consumers, and the transactions of their daily lives, on the Internet. All this certainly bodes well for domains, the real estate where these transactions take place."

Stevan Lieberman (Domain Attorney)

Stevan Lieberman is a top notch domain attorney based in Washington, D.C. (his firm's website is at APLegal.com). Lieberman, who is also a domain developer, recently joined the board of directors of the Internet Commerce Association as new member NameDrive.com's official representative. Here is his take on the year that just ended and what may be ahead in 2010.

"2009 was most definitely an interesting year. We saw a large number of corporations, Verizon, Microsoft & Costco to just mention a few, taking the scorched earth point of view and suing everyone they can, even individuals and entities that no longer owned the alleged infringing domain names. This of course led to a large number of confidential settlements, which it can be assumed, were all rather painful to those paying to end the law suits," Lieberman said.

"The other civil action, which comes to mind, is of course the ongoing debacle we all know of as Lead Networks. Criminally, the first person ever was charged for the theft of a domain name. From a political point of view there was the action in Kentucky, which thanks to the ICA ended favorably. Then there is of course the ongoing battle to keep ICANN & WIPO from further eroding domainers’ rights. What all of this points to is that domains and their value are coming more and more into the public eye and making their ownership / control of greater importance." 

Stevan Lieberman

"I expect the value of high-end domains to continue to rise and we will see more instances of large corporations arguing that they have exclusive rights to generic terms based on their trademark rights - no matter how the domain is being used or the location of the domain name owner. Entities such as NAF & WIPO will continue to back these large corporations point of view even though they have no basis for their allegations in law or fact. Unfortunately, the value of trademark domains will continue to rise and be profitable for, at the very least, a few more years," Lieberman predicted.

"We are also seeing the beginning of the rise of 3D technology and mobile domaining. Domain names will quickly begin to be used as location finders within both environments. The expansion of TLDs will be a boon to the domainer community and the general public. They will push the value of the high end domains further aloft while more lower end domains will not substantially lower the mid and low level domain values and will provide greater opportunity for the general public to use domains as digital markers both within the 2D & 3D and mobile environments. (PS: an example of a 3d environment is http://www.spoton3d.com and although we have yet to see a domain that resolves to a mobile platform, we will on the Nexus before the end of this year). I suspect 2010 Is going to be more interesting then 2009 by far," Lieberman concluded. 

Phil Corwin (Internet Commerce Association)

Phil Corwin, Legal Counsel
Internet Commerce Association

Several previous commentators have pointed out the serious threats to domain owner rights posed by over-reaching trademark interests, local government agencies who are attempting to claim jurisdiction over the Internet (Kentucky being a prominent example) and legal maneuvering by covetous parties who hope to weaken laws, change ICANN policies or take advantage of a lop-sided arbitration system so they can hijack domains they have no legal rights to. 

Washington, D.C. based attorney Phil Corwin is the Legal Counsel for the Internet Commerce Association, the industry trade group that has had considerable success in staving off both bad policy and legislation that could have collectively cost domain owners millions of dollars had the ICA not had him on the job fending off these ongoing threats. 

We will close this year's State of the Industry report with Corwin's assessment of what happened in 2009 and what lies ahead this year.

"In the public policy arena, the most significant and challenging event that the domain 

investment industry confronted in 2009 was the attempt by trademark interests to utilize ICANN’s process of setting the ground rules for new generic top level domains as a vehicle for imposing draconian and unbalanced rights protections mechanisms on new TLDs -- with the clear intent to then have those same unfair rules imposed on incumbent domains, including .com," Corwin said.

"Immediately upon learning of ICANN’s creation of the Implementation Recommendation Team (IRT), comprised of members hand-picked by the Intellectual Property Constituency, the Internet Commerce Association (ICA) vigorously protested that the IRT was operating in violation of ICANN Bylaws regarding balance and transparency, and we worked to open up the process. While we were able to present our views to the IRT at a public meeting in San Francisco it nonetheless produced several highly objectionable recommendations. The chief offender was its proposal for a Uniform Rapid Suspension (URS) mechanism that, in its original form, would have encouraged a massive increase in UDRP-type actions, violated domain registrants’ procedural and substantive due process rights, and lacked a meaningful appeals process as well as effective sanctions against complainant abuse."

"ICA reached out to a wide number of other participants in the ICANN community and, through our collective efforts, we convinced the ICANN Board that the URS and related proposals were major policy changes that needed to be considered in an extended process open to a broad range of interests. That resulted in creation of the Special Trademark Issues Recommendation Team (STI-RT), with ICA included in its working group," Corwin noted.

"The STI-RT’s final recommendations for the URS are far more balanced and protective of registrants’ legitimate rights than the original version. More importantly, the URS now provides specific “safe harbors” for ownership and monetization of a domain portfolio and for parked pages, declaring that these activities are not in themselves evidence of bad faith. These recommendations will be considered by ICANN’s Board soon and, assuming they are adopted, will establish imprtant policy markers that can be cited to renegade UDRP examiners, and can also be carried forward into a broader and badly needed UDRP policy reform process."

"The bottom line is that, faced with a major threat to domain owners’ rights, ICA successfully mobilized against an unfair process and a very dangerous proposal. In the end, many months of concerted effort paid off in a substantially revised proposal that is not only preserves registrant rights but strengthens them by setting forth important policy safe harbors that will benefit domainers over the long term," Corwin said.

"While reversing the IRT process and revising the URS initiative was our major victory in 2009, ICA efforts also helped prevent ICANN from ceding excessive control to governments over second level geo-names at new gTLDs. And legal briefs filed by ICA helped revive the CFIT lawsuit against VeriSign’s .com pricing, and urged the Kentucky Supreme Court to uphold its quashing of the Governor’s attempt to categorize domains as “gambling devices” that could be seized absent any due process."

With respect to 2010, Cowin said, "While we succeeded in curbing the URS proposal an even larger threat is now presented by the initiatives of the Czech Arbitration Court (CAC) and the World Intellectual Property Organization (WIPO) to create a low cost “fast track UDRP” through amendment of their Supplemental Rules. Again, ICA is vigorously protesting that these proposals are major policy initiatives that cannot be implemented through changes to Rules meant to address secondary administrative matters. These initiatives – which are substantively worse than the original URS - are clearly meant to encourage forum shopping by complainants, would lead to a significant increase in attempted reverse domain hijacking, and would also continue the worrisome trend of less uniformity in administration of the UDRP," Corwin said.

"While ICA’s job number one is to get ICANN to halt these initiatives in their tracks, our longer term goal is to get ICANN to initiate a policy development process for UDRP reform that results in fair and balanced changes that address abuses perpetrated against both rights holders and domain registrants, and that result in greater uniformity and predictability in UDRP administration."

"One key component of this effort must be placing accredited UDRP forums under uniform contracts with ICANN – in fact, it is incredible that WIPO and the other UDRP forums have no present contractual relationship with ICANN, leaving them free to propose abuse of their Supplemental Rules while providing ICANN with little in the way of sanctioning power other than withdrawal of accreditation. The potential for registrant abuse by the UDRP providers – as is demonstrated time and again by inexplicable and inconsistent UDRP decisions -- is simply too great to allow this situation to continue. So comprehensive UDRP reform is both a major challenge and opportunity going forward into the new year."

"Of course, ICANN is not the only decision forum playing a major role in the lives and fortunes of domain owners," Corwin observed. "We have not seen an initiative by trademark interests to change U.S. law to their benefit since the demise of the Snowe bill. But with Congress likely to complete action on major patent reform legislation in 2010 the decks will be cleared for consideration of new intellectual property legislation, and CADNA and others have openly stated their desire to see the Anticybersquatting Consumer Protection Act (ACPA) amended in a manner that makes it easier to obtain judgments against domain registrants, and that substantially increases civil money penalties while authorizing potential criminal sanctions. ICA remains at the ready to engage in any consideration of amendments to this critical statute that affects all .com, .net. and many other incumbent top level domains," Corwin said.

"As for legislative opportunities, ICA is exploring proactive initiatives that can be pursued for the benefit of domainers, including potential legislation to make domain theft a designated crime with serious consequences."

"Overall, while no new year is ever predictable, 2010 offers the opportunity to build on our successes of 2009 – as well as to increase recognition within the domain investment community of the important and effective role that is being played by ICA on its behalf. Hopefully, that understanding will result in greater support from the domain community for these efforts," Corwin said in closing.


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