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August 17, 2016

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The State of the Industry January 2013: 15 Industry Experts Analyze 2012's Most Significant Events and Predict What's Ahead in 2013 
Page 2

By Ron Jackson

Chad Folkening,  Global Ventures and Domain Holdings

Chad Folkening

To no one's surprise, Chad Folkening was elected to the T.R.A.F.F.I.C. Domain Hall of Fame in 2012. In addition to his many years as a successful domain investor Chad has founded or co-founded such innovative companies at Global Ventures and Domain Holdings. Folkening viewed 2012 as a very good year for both domains and the Internet at large. 

"I think the true nature and capabilities of the Internet really came to the forefront this year," Folkening said. "A pure form of web-based functionality and connectivity, with cloud and tablet usage, created great user experiences and business productivity performances.  With Google Drive, GMail, Dropbox and other programs, being anywhere, anytime through cloud and connectivity really planted its base in 2012.  This plays right into the domain space with the nature of the DNS system and brand identity.  Domains are not just for us humans to remember the location of the data, they are platforms to build a business and these technologies that really took hold in 2012 increase the value asset potential for domains."

"The other event/trend in 2012 was the new TLD situation and the cause/effects that has had on the industry.  This put pressure on domain owners just sitting on premium domain assets with no real execution strategy and really opened up the opportunities to acquire great assets with more supply coming to market at good prices. I don’t think as many domains would be available without the new TLD’s opening up likely in 2014. I still think there will be some issues and delays in the launch," Folkening said.. 

"I remember back in 1998, before ICANN existed, the government wanted to consider offering more TLDs and surprisingly I was one of only a handful of people to voice input in person with Ira Magaziner at the White House.  Here we are 15 years later and .com still has so much global market penetration over any TLD right of the dot and that will continue growing in international appeal.  Change is constant and evolving has to be in anyone's plan. I like to play where the markets are established and think there will be a third upswing in domain values again for premium .com assets mainly because of international buying patterns and the supply/demand." Folkening predicted.

"Information, personalization and business model structuring will be the driving force of value creation for domains in 2013.  The challenge will be how to best utilize and optimize the inflow and outflow of data.  RTB, Real Time Bidding marketplaces will get better and quality domain traffic will see an increase in revenues while arb and other traffic bump techniques will become harder and harder to earn money as a domain flow through channel. Most systems bundle good traffic to offset bad traffic and now individual domains will be independent letting the market determine the true value of the traffic to the targeted domain," Folkening said.

"We'll see the 800 pound gorilla, Google, put tighter rules on its publishers and force many domainers to implement new models for their domain assets. System requirements and policies continue to be put in 

Web traffic image from Bigstock

place to filter traffic and quality domains with traffic will see RTB systems make more aggressive plays into the quality traffic sources. Conversions count and are rewarded but the true value in a domain is its structure to streamline  business formation and operations while getting similar physical real estate benefits and tax distribution value. I call this the eCorp business model and domains are the perfect asset to execute a blended technology, real estate model."

"2013 will be another great year for the domain industry and land owners are in good shape if they have the right strategy, partners and business model" Folkening concluded.

Jason Boshoff, CEO, Domain Holdings

Jason Boshoff is the CEO of Domain Holdings, the domain sales, monetization and development company co-founded by Chad Folkening and John Ferber (Ferber previously built and sold Advertising.com to AOL for $495 million). While Folkening gave us an overview of the current domain and Internet space, Boshoff zeroed in on what is happening in the domain aftermarket and monetization arenas, starting with domain brokerage.

Jason Boshoff
CEO, DomainHoldings

"Fixed pricing of assets drove a larger volume of transactions in the premium inventory market," Boshoff noted. "Sellers proved more willing to contract with brokers and pre-price inventory. Confidence in minimum price expectations enabled brokers to attract and engage the end-user market, where there was significant demand. This coupled with more formal sales contracts and better transaction processes made it easier for major companies and brands to participate in this market. Domain Holdings witnessed sellers being more open to negotiations and an overall desire to maximize returns through divestment."

"We feel the unknowns in 2012 associated with the gTLD applications and capital gains changes pushed many inventory holders and speculators to move toward realizing liquidity. End-users were buying more; wholesalers were selling more and participating heavily in the drop catch and auction markets where there is a high volume of large margin opportunities at sub $10,000 transaction sizes," Boshoff said. "Revenue generating assets were in demand, particularly portfolios that sold at multiples of 17-28 months. Confidentiality was a major

requirement and all seven-figure transactions of which DH was witness were protected by confidentiality clauses. There also proved to be significant demand and aftermarket activity for developed revenue generating assets with multiples in the 24-48 months range."

Boshoff added, "Q4-2012 saw an average transaction size of $56,636 (***excluding 7 figure transactions) stemming from ~28 divestments per month, where a divestment might include multiple premium assets. This number does not realize long-term revenue for lease options and financed deals with future earnings not accruing within this date range."

Turning to domain monetization, Boshoff noted, "Disintermediation, cooperation and innovation were the most obvious trends witnessed from our vantage point in 2012. Domain traffic and its credibility as a whole continues to devalue, mostly because of fraud and poor arbitrage practices, however innovation of a few players in the space has led to better long-term solutions and service offerings. Quality traffic continues to find good homes in companies like Frank Schilling's Internet Traffic, Parking Crew and Rook Media, with experienced operators like John Smrekar, Nico Zeifang and Ash Rahimi respectively meeting compliance to our valuable upstream providers."

"Innovation is driving increased earnings and significantly more opportunity than was typically associated with parking solutions of the past. A new market has emerged where all traffic - premium or low quality, when scored, optimized and matched - has a home as part of the larger ecosystem. Domain operators that did not adapt to compete in this ecosystem fell behind or are closing their doors," Boshoff observed.

"To service all qualities and volumes of supply, many operators are cooperating by arbitraging traffic amongst each other, expanding possible coverage through multiple sources of demand. This allowed these operators to grow supply horizontally, as well as outside of direct navigation and domain traffic. Demand side 

PPC image from Bigstock

expansion (outside of traditional geographies, the domain channels and typical XML feeds) grew significantly, which is the reason “parking revenues” have not suffered a more obvious decline," Boshoff added.

"Yield management and quality management became more important, forward looking operators invested more resources on engineers, technology as well as customer service staff to meet the needs of more intelligent and sophisticated supply side operators and publishers," Boshoff concluded.

Debra Domeyer, CEO, Oversee.net

Debra Domeyer
CEO, Oversee.net

Oversee.net's portfolio of companies includes one of the pioneers of domain monetization - DomainSponsor.com. Oversee also produces the annual Webfest Global conference, with the next edition coming up February 5-7, 2013 in Santa Monica, California. Oversee's personable CEO and Board member Debra Domeyer told us, "As we began 2012, competition was strong in the domain space with players using increasingly aggressive tactics to move customers to their platforms.  During 2012, we strengthened our core domain business, expanded our online web business, hired new talent in areas like mobile, and continued in our investments in technology.  Oversee.net used it as an opportunity to do more for its customers by continuing its investment in technology and optimization.  And, as a result, we experienced the strongest results in our space that we've seen in over 3 years," Domeyer said. "Parking will always be an important part of the diverse set of alternative monetization options that we offer to our publisher clients.

"The move by ICANN into the new gTLD program 

resulted in a lot of announcements and jockeying in 2012," Ms. Domeyer continued. "I expect there will be continued jockeying through 2013 as new gTLDs get firmed up. This is already resulting in a lot of competition for the aftermarket buy/sell."

"Alternative monetization, another key area of opportunity, was website build-out. We are fully engaged in online web businesses. Our owned and operated consumer businesses in the travel, consumer finance, and shopping verticals are great examples of the value of e-commerce sites in providing new sources of revenue. Online web businesses are a substantial financial component of Oversee as evidenced by our many web properties including ShopWiki.com, Compare.com, Creditcards.org and Airportparking.com. These businesses gave us unique insights into what kind of traffic advertisers want, how they want to measure it, and how to get it—data which is invaluable as we “discover” alternate forms of monetization.  With these businesses, we continue to demonstrate our ability to grow alternative monetization for ourselves, domainers and our business partners," Ms. Domeyer said,

"Then there is a whole suite of accelerator services that accrue to these websites. This investment in build-outs yield additional benefits in traffic acquisition, conversion data, email marketing, and lead gen among others. These moves have positioned Oversee for a very positive 2013."

"At Oversee.net, mobile is a key trend for us and has impacted our business strategy for 2013," Debra continued. "Mobile traffic is growing incrementally and we see as much as 25% of our traffic being mobile. Our goal is to work with domain owners and mobile business partners to identify their mobile traffic by device type and expand mobile monetization for direct navigation traffic. In the next few weeks, we will be announcing a new mobile app to increase revenue streams."

"Understanding and monetizing mobile traffic will provide a quick revenue boost for publishers. Mobile will remake the roster of industries and segments that the Internet and mobile devices are currently in the process of re-imagining,” according to TechCrunch’s reporting on the Internet Trends Year-End Report, presented by Mary Meeker,  partner at Kleiner Perkins."

"We are building out a comprehensive mobile strategy including new apps, responsive web and apps in support of our consumer brands, and a set of monetization products for our publishers.  By helping our publishers understand and work with this new technology, we’ll bring added value and help them to increase their payouts," Ms. Domeyer said.

With respected to domain sales Ms. Domeyer said, "We believe the aftermarket will improve in 2013. We continue to be an active and aggressive buyer of domains and our owned and operated portfolio is one of the largest in the industry. Having our own portfolio gives us the added advantage of being able to test our alternate monetization technologies in a real-world technology environment. We can immediately see if a new optimization technology works."

Brand image from Bigstock

"Another trend in the aftermarket is the recognition that a domain name is more than just a domain. It can be a powerful brand. People are beginning to understand that the right domain name has many advantages in promoting both a business and making it memorable. Witness the sale of the domain, SnapChat.com, which is now being built into an explosive new business as well as our purchase of the domain AirportParking.com as a major domain brand for our web travel business."

"Utilizing the right domain names in our portfolio as brands to build out new online businesses is a great opportunity for us. As I mentioned, our consumer businesses are successful in three key verticals: retail, travel and financial services. We expect these to continue their growth and add niche sites to capture more consumers, adding to the value we provide to advertisers.  Our focus is on 

marketplaces that disrupt legacy businesses, compelling consumer products, "push commerce", social collaboration, mobile innovation, and local opportunities," Domeyer said, adding "We are building a suite of accelerator services to speed up our development including traffic acquisition, monetization, data, and infrastructure services."

In closing she added, "The Webfest Global conference is just a week away. It’s a great way to start the New  Year- network, learn and have fun. The agenda has compelling content with topics that range from new gTLDs, alternate monetization strategies, and negotiating a fair domain price to SEO strategies and traffic acquisition using PPC, Affiliate and Social Media. And we have a full day devoted to mobile: Discussions will focus on engaging and converting mobile users to acquiring mobile users on a restricted budget. Don’t miss dinner under the Space Shuttle Endeavour or the Magic Castle Farewell Dinner Party. There are many exciting initiatives in motion which means that 2013 will be a significant year of growth for Oversee!"

 Jason Miner, Chief Operating Officer, NameMedia

NameMedia's domain sales platform Afternic.com is a household names in the domain industry. The company's COO, Jason Miner told us, "One of the milestones of significance for NameMedia this year was surpassing the half-billion dollar mark in domain transactions that we have enabled as both buyers and sellers. Given the accelerating pace of the industry, we think it's reasonable to set our sights now at the billion dollar milestone—a number that few would have imagined possible when this company and its predecessor BuyDomains got its start over 10 years ago," Miner said.

"While we continue to be active domain buyers—we've always believed that having one of the largest portfolios gives you the best opportunity to understand and capitalize on industry changes—we are also proud that the fastest growing part of our business is generating revenue for other domain investors that use the Afternic platform. A key trend that has driven that growth is the added interest in and awareness of the secondary domain market to a broader class of potential buyers. That was what drove us this year to launch a new platform: NameFind.com, which enables someone looking for a new company name—a key target market for the domain secondary market—to see available domains in the primary market, the secondary market and all the social networks at one time on one site," Miner said.

"This is also what has led more than 100 registrar resellers to adopt the Afternic syndication platform to put secondary market domains right alongside primary names in the purchase path. This means that more than 80 million people looking for domains each month can see relevant names from the secondary market. We believe this level of exposure will not only increase the sales velocity of secondary domains, but expand the supply of available 

Jason Miner
COO, NameMedia

names as more and more people understand and participate in selling through the secondary market. This makes the market truly mainstream, going well beyond the historically insular number of participants—and gives us confidence that that billion dollar goal is within reach. "

"Another trend we noted was the misconception that the market is binary: that is, either you sell your names through someone landing on your domain and clicking through to a sales link and a personalized negotiation, or you sell your names through a distributed platform like Afternic. The misconception is not only that you have to pick one way or the other, but also that the latter approach commoditizes your opportunity and results in lowball offers that aren't worth chasing. This misses the bigger picture: as any market matures, it segments. We've never made the mistaken assumption that only one approach is appropriate for a market of this size and diversity. To use NameMedia as the example: our sales team day-in and day-out deals with buyers who arrive via sales link to domains in the network and require education and persuasion—skillful salesmanship—to close the sale. At the same time, we tested fixing a discount price with the domains on our new DirectDomains.com platform this year and saw a triple-digit increase in sales velocity with only a modest decrease in average selling price." Miner said.

"The point is, some buyers will indeed find your name through a direct type-in. But many more buyers will go to a registrar looking for a name and be introduced to the secondary market through suggestions of names that are relevant to their search. To expect to scale your domain sales solely through direct type-in traffic is akin to relying on PPC revenue from type-in traffic. We know how that turned out!!," Miner noted.

Tessa Holcomb, President, DomainAdvisors

Tessa Holcomb
President, DomainAdvisors.com

DomainAdvisors.com has emerged as one of the domain industry's top brokerage firms under the direction of company Founder and President Tessa Holcomb. Ms. Holcomb said, "The buzz of the new gTLDs surfacing in mainstream media has definitely helped to increase general awareness about domains and online marketing trends in general. Just last week, on the local news, I heard the reporter referring to Google searches increasing for the term, “flu” during the current epidemic. For domain brokers, this is a very positive shift as such references in our sales pitches, although common, are, more often than not, associated with a lot explanations and hand holding while we walked someone through the importance of factors like Google search volume / trends, CPC, organic placement, etc. The result of this exposure just means more of the decision makers, whether branding agencies, marketing managers, CMOs or CEOs are finally putting two and two together and seeing how the right domain really does matter," Ms. Holcomb said.

"In addition to a great year for premium domain sales, another positive outcome of this awareness was a significant increase in the acquisitions market in 2012, which I feel is a direct result of this “newfound knowledge” 

and the quest to find the perfect domain for their business. In the past, more buyers seemed to satisfy themselves with an inferior name that was easier to acquire. In the last 12-18 months, business leaders seem to be much less willing to settle and significantly more aggressive in their spending. This, combined with some of the biggest portfolio owners being more willing to negotiate, created the perfect storm for domain brokers who were ready, able and willing to a) get a seller to respond, b) endure intense negotiations and c) get the deal done!"

"If the first few weeks of 2013 are a sign of what’s to come, I’m predicting another strong year for both premium .com domain sales and acquisitions with even a larger number remaining private. We will also see larger companies acquiring names to add to their arsenals for future use, or even as a defensive measure, not necessarily based on an immediate need. I also see a strengthening market for additional TLDs including .org and .net domain sales. And, while the highly anticipated launch of new gTLDs this year will definitely stir things up a bit, I don’t see this having a significant impact on six and seven figure .com sales, which make up the majority of DomainAdvisors revenue," Ms. Holcomb said.

"We can also count on seeing more gTLD consultanty firms who are capitalizing on the opportunity to work with applicants to develop strategic business plans, marketing objectives and sales strategies. However, because a lot of these firms are made up of non-industry professionals, I anticipate opportunities for companies and individuals, with proven successes within the domain industry, as applicants look to them for guidance."

"I also feel that Demand Media’s acquisition of Name.com set the stage for a year of strategic partnerships, collaboration and additional acquisitions. There are so many great companies and amazing people in our industry, each with unique strengths and offerings and I foresee another year of working, together with our partners, to bring several mutually beneficial opportunities to fruition. The DomainAdvisors approach is based on the trusted relationship of our brokers and their clients with our strategy being to maximize the combined experience, contacts and expertise of everyone on our team to help them realize their goals. I wish everyone the best of luck in realizing your own goals in 2013!," Tessa said in closing.  

Coming up on Page 3:

You will hear from a well-known domain industry entrepreneur, a developer of top tier generic domains, a leader in alternative monetization, a noted domain attorney and an industry pioneer who has founded multiple domain business services. Continue for exclusive commentary from:

  • Morgan Linton
     Linton Investments

  • Andrew Miller
    Digital Entrepreneur

  • Braden Pollock
    Legal Brand Marketing

  • Howard Neu
    T.R.A.F.F.I.C. & NeuLaw.com

  • Paul Goldstone
    DomainIt.com & Others

On deck - Morgan Linton


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