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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

By Ron Jackson

DN Journal celebrated its 10th anniversary on January 1, 2013 and every January since our 1st anniversary year in 2004 we have kicked off the new year with a special  State of the Industry overview. For 2013 with have once again brought together a select group of domain business leaders and asked them what they considered to be the most important developments in the past year as well as what key trends they expect to see shaping this ever changing industry in 2013.

15 well-known company founders, executives, investors, developers and attorneys responded to our invitation to share their thoughts with you. As always, this year's panel includes a blend of proven experts that we have called on in the past and new contributors who bring their fresh perspectives to the mix. 

You will hear from successful individual domain investors, developers and 

Predictions image from Bigstock

business operators  including Rick Schwartz, Ian Andrew, Chad Folkening, Morgan Linton, Andrew Miller, Braden Pollock and Paul Goldstone, as well leading corporate founders and executives Paul Stahura (Donuts Inc.), Debra Domeyer (Oversee,net),  Jason Miner (NameMedia), Simonetta Batteiger (Sedo), Jason Boshoff (DomainHoldings) and Tessa Holcomb, plus  attorney/entrepreneurs Ari Goldberger and Howard Neu. That's an all star line up in anyone's book, so without further adieu, let's get started! 

Paul Stahura, Co-Founder, Donuts Inc. 

There is little debate about what the most talked about issue of the past year has been - ICANN's new gTLD program that is expected to produce 1,900 new domain extensions with the first of those likely arriving before this year is out. Obviously, the influx of that many new TLDs will have major ramifications for the domain business, so to kick off this year's State of the Industry Cover Story we called on one of the biggest players in the new gTLD arena, Donuts Inc. Co-Founder Paul Stahura. Donuts.co attracted $100 million in venture capital to use in bids to run hundreds of new TLDs. Donuts is led by a team of industry veterans who all have impressive track records. Stahura, who founded popular registrar eNom.com (and eventually sold it to Demand Media) is one of the most respective pioneers in our space.

Paul Stahura
Donuts Inc. Co-Founder

"The most significant trend in 2012, obviously, is the approach of new gTLDs," Stahura began. "In reality, it's not a trend limited to 2012 - the program has been developing for more than seven years now - but the past year has been one of intensified activity as they approach reality. In 2012, we saw the realization on the parts of those not intimately involved in our industry (at least so far) in understanding the new kinds of value a gTLD can bring. Brand applicants, for example, realized that a brand that perpetually presents itself to consumers at the right of the dot can be a very powerful marketing tool, and they correctly decided not to pass up an opportunity to secure such an asset," Stahura said.

"Our company, Donuts Inc., made an assertive move by applying for 307 new gTLDs. I have long believed in the benefits of Internet namespace expansion - we're going to see new options for specificity and branding that we've never seen before, though the potential has always existed. Our team decided a broad and ambitious plan was the right way to go, and we're more than ready to get started," Stahura said.

"You will see new gTLDs enter the root in 2013. We've seen new names before, but not at the scale we will when the gates open later this year. There will be a time - a relatively short one, when you think about the reach and lifespan of the Internet - where users will need to adapt to so many naming options coming at them at one time. But after a period of transition, the utility of new gTLDs will be readily apparent as registrants more precisely present the goods and services they're trying to market, and users can better find the information and data they're looking for," Stahura predicted.

"We anticipate there will be an interesting change in mainstream marketing as well, as brands tag their advertising and marketing efforts with new web addresses, and brands tell consumers where on the web they can find specific product information," Stahura added.

"Internationalized domain names - IDNs - will be the first names released into the root and will be dramatically impactful," Stahura added. "As I mentioned, we've seen new names like IDNs before, but not at this volume. The result obviously will be increased adoption of Internet usage in other parts of the world, and that's a very good thing economically."

"The wave of change brought by new gTLDs won't stop in 2013. It will take at least a couple of years for all the new TLDs to flow into the root, and some additional time to gain traction. The Donuts TLDs are interesting and useful for both registrants and end users, and we're gearing up for launch," Stahura concluded.

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

While companies involved in launching new gTLDs are optimistic about how their extensions will be received, many veteran domain investors are not convinced that any number of new gTLDs will change .com's current dominance of  mind share among the web surfing public. Domain pioneer Rick Schwartz, who co-founded the industry's ground breaking T.R.A.F.F.I.C. conference, is one of the skeptics but he also acknowledged that new gTLDs have already had an impact on the marketplace. 

Rick Schwartz

"2012 was a year that focused on fear and survival," Schwartz said. ".whatevers and many .com owners being fearful of their values going down so it made for an incredible aftermarket. Mr. “Circumstance” showed up in 2012 and Mr. “Circumstance” won’t be departing in 2013. Incredible domain names are available in the marketplace and this could be the last time we see that until the next crash. Circumstance is the driving factor."  

"I hope they have unlimited .whatevers," Schwartz continued. Let these guys go into the registrar business and make a killing. Nothing to do with “Domain Investors”.  I only see opportunity and feel sorry for those that see a threat. Expansion is not a threat. Expansion is just exactly the opposite and I have proof."  

"Does .travel make my .com more or less valuable? Does .xxx make my .com more or less valuable? Does .mobi make my .com more or less valuable? Every time they come out with another .whocares, my .com has only gotten more meaningful, more important, more valuable. Thanks for the added targeted traffic that I can sell back to .whoever or use myself to tap into the same market if I choose. In most cases I am already the same market. So it just

fuels my growth and at the same time, that leak, is stunting their growth. That produces a “Circumstance”, Schwartz said.

"What can be proven beyond a shadow of a doubt is that when ANYONE builds a great success on a non .com, the .com owner does very well in a number of ways and the non .com owner is leaking valuable business," Schwartz declared. "The ONLY way to do it and be fully successful is start with a .com domain they already own and THEN use any .whatever they choose. Then at least the leak goes back to them and therefore there is no leak. Now they can promote the .whatever, stand out and not worry. THAT is the way that is smart and could be effective. So there is a way.  But few do that," Schwartz said.  

"Nothing would make me happier than a new .com to do this all over againnow that I am armed with years of knowledge. So I don’t see a threat in any form whatsoever. I just see opportunity because BILLIONS of dollars are coming into our tiny little industry. The focus of the media is now on us. It does not matter the form. Eventually they will figure it out because water runs downhill," Schwartz added. 

"What they are attempting to do is going to be most difficult to achieve and with as many as 20 new extensions PER WEEK, will make it all the more difficult. What would it have looked like if .mobi, .travel, .xxx, .co, .info, .me, .biz, .tv, .us, .eu all came out on the same day? And that is only 10 extensions. After a few weeks of that nonsense they will be tripping all over themselves and they will have created pure confusion!"  

"I hope many of them are winners and we all have the chance to participate in another gold rush. I am not out to rain on anyone’s parade and I wish each and every one of them the best of luck. They are bringing a lot of money and attention to our space and nothing bad about that. Nothing bad about a race of over 1,000 trying to duplicate the greatest opportunity mankind has ever seen. Trying to duplicate OUR land, diamond mines and oil wells. Pretty cool. That only validates what we have done and anything, including a huge success, will necessarily mean our properties will skyrocket in value and in demand. This is a no lose proposition and I am amazed by the number of domain investors that are fearful."

"All I can say is the future looks very bright for our sector no matter which way the wind blows. Now that does not mean I won’t take the opportunity to say that I believe domain leasing has come of age and it has the power and potential to change the landscape of things over the next 3 years and that I along with Danny Welsh plan to lead that parade with JointVentures.com."  

Pumping money image 
from Bigstock

"Leasing IS the future and it was the future the day I started investing in domains. The only challenge was trying to figure out how to survive that 20 year period when leasing would become an acceptable alternative. Although I have leased a number of adult domains between 1998-2003 and made many millions doing so, mainstream has been much more reluctant until recently. The time is now right. I see the new extensions as being the catalyst for this to happen. It will be the reason why leasing will become widespread.  Just watch how the industry changes into this direction and it is cool to be in the forefront once again. Timing IS everything," Schwartz concluded.

Simonetta Batteiger, Head of Product Management, Sedo.com

For over a decade, Sedo.com has been a major player in both the domain aftermarket and domain parking. The company's Head of Product Management, Simonetta Batteiger, comment on that. "New vendors have started up, some older vendors have become less relevant or ceased to exist (for example, think of Parked.com, who silently went out of business)," Ms. Batteiger noted. "At Sedo - to name just a few things - we have revamped our parking statistics to make them more user-friendly. We have also improved our domain listing process and rebuilt sections of our domain management systems to provide domain investors with the tools they need to monetize their domain assets."

"As domain investors are looking for ways to optimize returns on their portfolios, we see them become more focused on paying the right price for their domain purchases. The times of highly speculative purchasing are gone and domain investors carefully analyze which domain assets to purchase in a marketplace vs. the various other acquisition channels available. To this end we have created an opportunity to purchase low-priced assets through our Last Chance Auctions and we are focusing in 2013 on additional tools to help domain investors make smart purchasing choices," Ms. Batteiger said.

Simonetta Batteiger
Head of Product Management

On the sell side, Ms. Batteiger said a moved to fixed prices (rather than Make an Offer) are helping more owners close sales. "End users want to know the price of a name while having the information available that they need to make a purchasing decision," Simonetta said. "We improved our pricing algorithm to help sellers set better prices on their domain assets."

"Also, end users often buy a name through their registrar, which is why we expanded our SedoMLS network into a global registrar distribution network of more than 80 partners. This has resulted in significant growth of domain sales in 2012 and we will continue to expand this in 2013. The revamp of our website to target end user buyers (this has launched in Germany already) is making it easier for first time domain buyers to understand why they should purchase the right domain name for their business and why that domain name costs more than a low registration fee," she added. 

Like others, Ms. Batteiger thinks the impending arrival of new gTLDs impacted the aftermarket in 2012. "The industry is preparing for a major shift with the arrival of the new gTLDs in 2013.

This may be one of the reasons speculative purchases of very high value domain names have been slower in 2012 than in previous years," she said. "We’re still seeing very nice sales in the super premium segment; at the same time, buyers are a lot more focused on a good business case behind their purchase and less likely to speculatively purchase a premium name. Registries and registrars around the world are preparing for the launch of the new gTLDs. Some fantastic new investment opportunities will become available in 2013, and Sedo will be working with lots of new gTLD applicants to help them promote their sunrise, landrush and premium domain properties."

"The new gTLDs are going to bring lots of 

new inventory and opportunity to the domain market.  We will see very creative new ways to use domain names in some of these new extensions. This in turn should bring increased focus to the domain name topic around the world. Attention that is very welcome, as it will help further educate end users on the value of a good name for their online presence."

"We will likely also see some impact on existing TLDs, however at this point we don’t expect a major shift from existing extensions such as .com/.net/.org. These are primary extensions in use by businesses around the world; no serious business will give up the name of their successful online presence."

Ms. Batteiger expects to see one other major trend in 2013 - more consolidation. "We have already seen consolidation in the past few years and I believe we will continue to see companies in our space merge, be acquired and also potentially go out of business," she said. "It’s nice to know Sedo is in a strong financial position, backed by United Internet Group." 

"Here at Sedo, we have a solid roadmap of improvements and new projects planned to make it easier for domain investors to manage, monetize and trade their portfolios. There will be additional and better tools for sellers. At the same time we will focus on getting even more end user buyers into our marketplace to help sell more names. Watch out for a constant flow of exciting product enhancements throughout the year. 2013 will be an exciting year for everyone in the domain industry!"

Ian Andrew, Founder, DotcomAgency.com

Englands's Ian Andrew, an industry veteran who founded DotcomAgency.com, a sales venue with a long record of success, gave us the view from the other side of the pond, starting with new gTLDs. "They have received varying degrees of press coverage which I think is generally good for the awareness of our space," Andrew said. However, it also continues to drain industry funds that would, I believe, have otherwise been partly used in aftermarket purchasing. Therefore there has been less trade buying of generic dotcom domains in 2012."

"The Nominet announcement of its intention to launch .uk has had the immediate effect of freezing aftermarket sales of generic .co.uk names. If Nominet presses ahead with this it will cause enormous consumer confusion as the .co.uk extension is firmly entrenched in the minds of Britons. The .co.uk extension is used by roughly half of British businesses that have an internet presence (A 2010 analysis that we undertook showed that of the top 100 UK brands – 51% used .com and 49% used .co.uk as their primary web address)," Andrew said.

"We have reduced the prices of our small (300) inventory of .co.uk names by 50% across the board. The proposal is absurd and if implemented will cause widespread uncertainty for UK businesses using .co.uk and confusion for the public. In my opinion this consumer confusion will significantly strengthen the use of the established brand of dotcom for building businesses in the UK," Andrew predicted.  

"Retail (end user) sales of generic dotcom names has remained largely constant with a slight uplift for us toward the end of the year. No clear trend is showing itself as to which 

Ian Andrew

category of domain names is selling more than others. The only exception is short pure number dotcom names which are the closest types of names to being like a commodity. For instance, right now, there is a consistent demand for 3 digit number dotcoms. Of these, the lowest quality type includes the digit “4”– we can sell ANY name of this type for $10,000 to at least 4 buyers, however at $12,000 there is universal resistance. (NB Number dotcoms without a “4” have a higher value.) Apparently Chinese buyers see short number dotcoms (2 to 4 digits mainly) as a globally traded asset class that you don’t have to smuggle out in your luggage!," Andrew said.

Looking ahead to 2013 Andrew noted, "As some of the new generic gTLDs roll out there will initially be a significant flurry of activity in the best generic versions. Some domainers will probably be buying to flip quickly. There will be short term money to be made from these early gTLDs, but probably only by those at the top of the “tree”. In the medium and longer term we can not see the vast majority of names with these extensions being anything other than a liability (renewal fees and little liquidity)," Andrew said.

.Com image from Bigstock

"I could be wrong, however history with the existing alternative gTLDs seems to tell the story. Of course there may be exceptions but I wouldn’t like to guess which ones may retain some value. At the end of the day it is hard to see people building businesses on these names without owning the matching dotcom. (The same 2010 analysis we undertook with the UK brands we also applied to the top 100 Global brands and found that 100% used dotcom). Our belief is matched by our investment in generic dotcom names with just over 30,000 currently in our portfolio. The consumer confusion caused by the influx (outflux?) of new generic gTLDs will only serve to strengthen the established dotcom standard," Andrew predicted.  

"I see that generic dotcom prices are relatively low right now with some real bargains appearing specifically noted in the 5 figure range, if I had a spare million or two, I know what I would be buying in 2013." 

"I also see a gap in the market for a new marketplace specifically for end users that doesn’t overwhelm interested parties with thousands of domains – with varying extensions, qualities and unrealistic pricing. To this end we are just finalizing a complete revamp of Dotcom Agency in partnership with an industry leading marketplace to simply sell exclusively dotcom names – and not just our own, as the site currently stands. More on this soon."

Andrew closed with an observation on domain development. "It is difficult for us to see how it pays to invest in website development right now. However we do it anyway! These include games and free website utilities like our latest one - www.DeadLinkChecker.com. It is going to be an interesting year and we will probably be a little more vocal than we have been so far!," Andrew smiled.

Ari Goldberger, Attorney and Founder at ESQwire.com

Noted domain attorney and entrepreneur Ari Goldberger has played a role in multiple facets of the domain industry. In addition to having won several landmark legal cases, he has established successful companies like domain monetization platform SmartName.com, that was later sold to NameMedia. Like others Ari agreed that "The most significant event of 2012 was the launch of ICANN’s much awaited, new gTLD application process."

"While I have always said “dotcom is king,” and continue to believe it is the commanding TLD brand, the hundreds of millions of dollars invested by Internet lions like Google and Amazon speak volumes to the potential for these new creatures," Goldberger opined. "To understand the significance of the program, think about this figure - ICANN has amassed a “war chest” of $350 million from application fees alone.  At the very least, if anyone thought that Smartphones, Apps and search were making domains and URLs obsolete - and that they might not be around in ten years - Google, the king of search, appears bullish on the new domains."

Ari Goldberger

On another topic, Goldberger said, "PPC continued its decline in 2012.  But, despite the drop in PPC revenue, domain name sales were strong in 2012, as quality domains continued to be needed by mature Internet players, as well as new companies sprouting up every day. I am aware of several unreported private deals and offers in the 7-figure range."

"As the economy improves in 2013, and the Internet continues to grow, we can expect the value of domains to continue to increase. What’s clear, however, is that domainers cannot see things as business as usual.  In order to extract maximum value from their portfolios, domainers will need to develop the full potential of their domains, or sell, lease or partner with those who can do it. I am working with a team to develop a number of premium domains, and I can say development is as difficult and unpredictable as parking was easy and reliable in the heyday. I believe the rewards are there, and see development as a major trend for 2013.  I expect to see various industry players competing to develop and partner with premium domain name owners, just as parking companies fought it out in the past," Goldberger said.

"As for legal, the gTLD space has the potential to create lots of conflict between domain owners and trademark holders in the coming months. With the addition of URS (Uniform Rapid Suspension System) to the UDRP, we are likely to see an uptick in domain disputes.  As of 2013, domain name disputes have pretty much stabilized, and we have a solid body of law, from which trademark owners and domain owners can draw to provide guidance as we move forward into the new gTLD frontier," Goldberger concluded.

Coming up on Page 2 

You'll hear from some of the industry's top entrepreneurs and corporate executives as our annual State of the Industry survey continues with exclusive commentary from:

  • Chad Folkening GlobalVentures.com 

  • Jason Boshoff DomainHoldings.com

  • Debra Domeyer Oversee.net

  • Jason Miner NameMedia.com

  • Tessa Holcomb DomainAdvisors.com

 On deck - Chad Folkening



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