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March 25, 2014

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The State of the Industry January 2012: 15 Industry Experts On 2011's Most Important Trends and Their Forecast for the Year Ahead

Page 2 - Domain Investors & Developers

By Ron Jackson 

Rick Schwartz, Co-Founder, T.R.A.F.F.I.C.  

Rick Schwartz, AKA "The Domain King" may be best known these days as the Co-Founder (along with Howard Neu) of the popular T.R.A.F.F.I.C. domain conference but the colorful and often controversial South Florida based entrepreneur was enjoying major success in domains long before T.R.A.F.F.I.C. staged the first major domain conference back in 2004. The industry pioneer has made several landmark seven-figure sales and is a master negotiator who has also managed to retain an equity interest in several of the businesses that have been built on names he sold. Outspoken as always, here is Rick's take on 2011 and the year to come.

Rick Schwartz: I think by far the biggest thing to happen in 2011 for many domainers was Frank Schilling opening up his own parking company, InternetTraffic.com and operating as a quasi co-operative in the way they work and taking the “Cream of the Crop” domains and their traffic away from the more established companies. In a way that disrupted things and we are still seeing the fallout. From my own experience and those I have talked to, payouts more than doubled overnight. Draw your own conclusions. For me it validated what I have been saying for years about how are “Partners” were taking the LIONS SHARE of OUR earnings.  

Rick Schwartz

I am hoping that Google is learning a significant amount of new things based on a higher quality of domains and the traffic they actually produce. The days of spamming search engines trying to get more traffic to a domain name are over. The “Trickery” phase  of domain “Traffic” is done and that allows payouts to keep rising as the economy improves.  

The next thing would be the Overstock.com and O.co debacle which they seem to be repeating in 2012 with the same mistake. Let me be 100% clear. It’s not that you can’t use or brand 

Image: digitalart / FreeDigitalPhotos.net

another extension. You can do that. BUT…….You MUST own the .com counterpart. It’s just that simple.  One without the other is a costly mistake. I don’t care if is is .co, .net,  .xxx.  Whether intended or not. The more success, the more costly that MISTAKE will be and continue to be.  It’s just about learning from “Other People’s Mistakes” and not paying the same price to learn what they did.  They can either “Overpay” now….or they can wait and overpay 100x or more. THEY control that. They will just kick themselves every morning or they can remain ignorant. Doing it as this point, is malpractice in my book. Inexcusable.  If they ever knew how much business they were pissing away, they would certainly understand my comment. But ignorance can be a wonderful thing. I guess.  

As for 2012, there is a glut of domains on the market. That drives prices down and when the mortgage is due, you don’t worry about that. You just liquidate what you can and what you must if you are in that position. Often times that will take your best domains away as they are the ones in demand. But that is what makes a market and that is why I think 2012 will be a pretty decent year overall. Lots of deals will be made. Just as they were in 2011.  Things are heating up.  

I think no matter what you do or what profession you are in and maybe even no matter where you are, the U.S. Presidential Race will be driving a lot of things. Election years as a rule are usually very good years financially. Lots of business being done and 2012 should be no exception. 

With the new gTLD’s in the news it is driving domain names right smack into the mainstream in a very big way. I see it as a bullet train coming through.  The dotcom counterparts are going to go through the roof. But gTLD’s are getting some heavy scrutiny and who knows if they will even see the light of day.  It may be a very rocky road. If any true independent organization looked at it, they would see it is nothing but a big money grab by mostly ICANN folks past and present that have their fingerprints all over it.  They have the responsibility for looking out for the interests of the public and sadly they have only looked at their own interests for the most part.  I have lost count on how many “Second comings” of dot com have hit the market in the past 25 years.  The list is long and maybe will just get much longer. If .TV, which would be a natural, is still breaking out after 
so many years,  I think that indicates the uphill climb for .whatever. So from a “Domain Investment” standpoint I don’t see much. From a registrar point of view, they just get to print more money so there won’t be any opponents from that quarter.  

We are going from a well defined type of “Interstate Superhighway” to a basically unregulated and not well thought out road system with no stop signs, intersections or exits. It may fail.  And if it succeeds, it will fail because of all the unforeseen pitfalls let alone the pitfalls that have been identified and yet to be addressed. That is why the word “Clusterf*ck” comes to mind.  

Is it a good thing? I want to be on record with “No.“  It is set up to benefit insiders and registrars at the expense of everyone else and frankly, it is shameful and will only bring confusion and needless expense on many levels plus all those pitfalls and unintended consequences.  

They are about to unleash a mess.  A costly one on may levels and that is why you see so much pushback. There is absolutely no shortage of viable domain names. An infinite supply of .coms alone. What there is a shortage of is cash and ethics in the guys that dreamt this all up. You have heard of the bridge to nowhere. This is the bridge to everywhere but goes nowhere unless there is meaningful and needed content and even then, they are going to have significant blowback. Not from me. From their own customers and those unforeseen or ignored pitfalls.  Confusion on steroids.  

That all said, I will never fight progress because even if the progress they TRY to create goes in the wrong direction, the public and business will reject it. I will take financial advantage of whatever eventually happens.  I’ll deal with the reality on the ground whichever way it goes. Opportunity comes in many forms. Some are very short term and most are not visible to the naked eye. Edsels have more value today than they did in 1959.  

.Com defines the net like 800 defines a toll free phone number. You can come out with 100 Toll Free extensions, but it will take 1 or 2 generations or more before the 800 number moniker even starts to go away.  

Image: Salvatore Vuono / FreeDigitalPhotos.net

Lastly, I think Lead Gen will basically replace the minisite and is a much better more useful, much more viable model when adding qualified traffic. Selling customers is what the net is all about. Transporting those customers to the right place. Then getting paid an APPROPRIATE and scalable  amount for that lead.  Some leads may be worth a penny. Some leads may be worth  hundreds or thousands. It depends what you are selling and it was my original premise when getting into the domain business in 1995-1996. I say so right on eRealestate.com: “The value of a visitor is directly proportionate to the product or service you are selling.”  

So FINALLY the net has figured it out. What was obvious in 1995-1996 finally becomes a reality in 2011-2012. All those WASTED sales!  

Bottom line, I think 2012-2013 is going to be a fantastic time for domainers and those positioned well that don’t wake up having to have a fire sale everyday.  This is the start of domaining, the beginning point. It took a recession and the survival to unleash the future we are about to see.  

The Castello Brothers, CCIN.com

Brothers Michael Castello and David Castello of Castello Cities Internet Network, are giants in the geodomain space (owners of Nashville.com, PalmSprings.com, Acapulco.com and many others) and also hold many premium .com generic domains including Whisky.com, Bullion.com and Daycare.com). Development has always separated Michael and David from the pack. Most of their marquee domains have been developed into profitable business websites. With their warm personalities and willingness to share the keys to their success many consider them to be the best ambassadors the industry could have. Here is how what they felt were the key trends in 2011 and what they expect in 2012.

Michael Castello

Michael Castello: In 2011 we witnessed ICANN’s final push to launch the new gTLDs. It has taken quite a while from its inception in 2006. There has been so much push-back for a lot of reasons, especially trademark holders and those who believe it could seriously weaken the DNS root. While I believe ICANN will find a new revenue stream, it raises the question of why we need thousands of new gTLDs when those that have been approved in the past had only marginal success.  

In my opinion, ICANN is trying to manage a marketing quagmire with the new gTLDs. They've bet the house trying to prove that they can be independent, and vested their credibility in approving and releasing them. They will eventually accomplish it, but at what cost? They and so many others will be struggling to provide stability. They will have no room to do much else over the next few years. Domain names are concept driven, and the majority of the public understands .com as “the Internet”, just as 1-800 means “toll-free”. That is simple, and drives impulse traffic directly from the consumer to you.    

Of course, it being 2012, I can’t help but comment on the supposed end of the world! What the Maya may have foreseen is the 

move from the industrial revolution into the virtual revolution. I deal with a lot of small businesses and families, in small-town America and around the world. It amazes me how they are beginning to understand the importance of “owning” their identity in a world that is becoming vastly redundant and over saturated.

It is one thing to use YouTube, Facebook, or iCloud to make life easier, but in the end you don’t own your virtual identity – they do! An understanding is evolving, that a domain name or email brand can give you independence from ever-growing monopolies. Today, you can forward your domain name to your Facebook page, or point your email brand to your Google Mail account. We could all be using IP addresses instead, but a memorable domain name is what matters in the name game. That is the reason the domain name system was created. It can be as simple as Nashville.com or KathysNailSalon.es. In their respective markets, they are memorable addresses. If you own a memorable name, the future is yours.

David Castello: I don’t have much to say about 2011 because much of my perspective was limited from behind a DW drum set! (Editor's Note: David, a professional drummer, relocated to Nashville last summer to back a very talented up and coming new signer/songwriter, Bree, that I think you will be hearing a lot about in 2012).

I do have a 2012 prediction I’d like to share though. From 2012 thru 2014 our industry news will be overshadowed by the forthcoming tsunami of new TLDs.  This will prove to be the most significant era in the domain name industry since 1998 thru 2000.   And in many ways, we will have gone full circle.  Though the vast majority of new TLDs will be dismal failures, particularly for speculators, a few may succeed (though none will touch the popularity of any of the legacy TLDs and most of the ccTLDs).  Regardless, the most important element here will be the millions of new people, businesses and investors who will become introduced to our industry.  And in our industry, as in any industry, the more the merrier

David Castello recording at the 
House of Blues Nashville's Studio D
(January 2012)

Look for 2012 to feature numerous “Death of dotCom?” stories.  Successful veterans in this business will easily recognize this to be the false echo inside the trough before the wave, but it will ring loudly – much as it did in 2001.   2013 will feature the actual releases followed by countless advertisements, sponsorships and launch parties for each new TLD (think dotCo and DotXXX multiplied by five hundred).  2014 will be the year of registration renewals, the dust will settle, the scales will fall from the public’s eyes and the largest reality check in our industry will occur.   My recommendation is to simply stock lots of popcorn and enjoy the ride.  There will never be another like it and those legacy TLD and premium ccTLD owners who held fast and ignored the siren’s call will awaken to see the sun rise brighter on their values than at any time in our history.  

Michael Mann, MikeMann.com

You can't pigeon hole Michael Mann. Yes, he is a domain investor/developer but so much more than that. He was founder of BuyDomains.com, an enormously successful aftermarket sales platform that he sold to NameMedia (he now has a new sales site at DomainMarket.com). He is a principal in a premier portfolio of developed .com domains including Phone.com and SEO.com, he has written a book  - Make Millions & Make Change! - and he has given millions of dollars to charity through his Grassroots.org. Here is what he had to say.

Michael Mann

Michael Mann: The persistent drop in random PPC values plagues the industry, as well as broke potential domain buyers due to government induced economic problems for those small businesses and entrepreneurs. This however places more domains on the market at lower prices, perpetuating the thin market with huge spreads, leaving opportunity for today's investors to capitalize when people realize the truly excellent value to their companies of contextual keyword .com domains at ever increasing FMV.  

New TLDs and ccTLDs and another year confirm that .com will keep being king whenever weird stuff happens like new tlds and ideas, then real premium .Coms will always be the "flight to quality" and keep going up in value, good for ecommerce or investing.  

As far as people saying the phone/mobile/search/other bs will replace the web, yes and no, its all growing like wildfire, and irrespective anyone building a great app with a cool name (tens of thousands) will need the .com 

to go with it too, unless they want to make irrecoverable expensive marketing mistakes by missing their perfect Internet name and good investment.  

For 2012 - more building sites and apps and completely new ideas. Scientific A/B and other testing of each aspect of the site, domain, marketing, conversion, advertising, etc will give us better guidance how to dynamically deliver higher converting landing pages in a world of low PPC and broke potential domain buyers.

Michael Berkens, TheDomains.com, MostWantedDomains.com and RightOfTheDot.com

Michael Berkens is a man of many talents. The veteran domain investor is an attorney, he writes one of the industry's most widely read blogs at TheDomains.com, he runs his own aftermarket sales platform at MostWantedDomains.com and he co-founded a new gTLD consultancy with another industry pioneer, Monte Cahn, at RightOfTheDot.com. Michael and his vivacious wife Judi have been fixtures at domain conferences around the world for years and you would be hard pressed to find anyone who knows the ins and outs of the business better than Michael. Here are his thoughts on the year we are coming out of and the one ae are heading into.

Michael Berkens

Michael Berkens: No doubt, the biggest development is the new gTLD program which will bring a huge spotlight on the domain industry in general.  You will see hundreds of brands applying to run their own right of the dot extension as well hundreds of generic extensions, as entrepreneurs, companies from inside the domain world, even domainers as investors in applicants for generic extensions. There will be a tremendous amount of stories leading up to the close of the application period (April 12, 2012) which runs only 90 days and after.

I think domain sales will continue to grow and the brick and mortar world continues it march onto the net all around the world. There are going to be a lot of challenges to the industry falling under the larger category of regulation, including SOPA and other bills that might try to replace it, a move for more trademark protection in Congress, expansion of a URS type of system to existing domain extensions like .com. Also, the  Verisign contract is up for renewal in 2012 which may cause a lot of these issues to be on the table.

Coming up on Page 3: Global Views & New Perspectives 

Next you will hear from industry leaders based in Australia, Europe, Canada and the U.S., including new perspectives from four first-time contributors to our annual State of the Industry report.

Featuring exclusive commentary from:

  • Gregg McNair

  • Jan Barta

  • Bill Sweetman

  • Jodi Chamberlain

  • Paul Goldstone

Image: chawalitpix / FreeDigitalPhotos.net


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