Domains

The domain name business is very different today than it was in the 90s, 2000, or even 2005. It is very possible that a shift in value away from domain names is underway (but there is still incredible value to be found by people who understand traffic value and excel at marketing.)

Why is a domain name worth anything? Because a domain name, specifically from a recognizable extension, is an internet address — a destination — that consumers understand. I know that I can type in whatever I am looking for .com and find it. Unfortunately for domainers the tide has begun to shift, both as major traffic players begin to wage a war on direct navigation and as major brands shift to alternative internet communication streams (how many of Zynga’s 200 million+ active users do you think have actually visited zynga.com?)

One thing the top domain name investors got right was understanding that this business is about traffic. Quality, targeted, internet traffic delivers many billions of dollars in value every single year. Capturing even a small portion of that flow easily results in a multimillion dollar cash flow. It would seem that a mere 5 years ago the majority of internet entrepreneurs had substantial difficulty understanding this.

From my observations there is no shortage of D list domain names priced in the high five figure and six figure price range. A D list domain name is a domain name in which the end buyer has to add immense value in order to come out ahead. Often an individual marketplace can only support a handful of serious contenders while there may be hundreds or thousands of D list domain names for sale.

D list domain names require an end user to utilize additional ad dollars and know how in order to leverage the value out of the domain name (generally that means spending millions of dollars on advertising over the course of a year or two.)

Unlike the D list, generic domain names produce a value stream on their own. As of today, search engines still disproportionately value generic keyword domain names over many other factors. Not only does this mean free organic search traffic (with a little SEO effort) it also means an edge over competitors in the pay per click marketplace thanks to a higher ad clickthrough rate. The same can not be said of D list domain names.

To me, the domain name marketplace resembles a landscape that was once overflowing with natural resources that has now been ravaged bare. The sharp eye can still find a few remnants of value but the novice is overwhelmed by hucksters marketing worthless rocks as gold. As for the real gems, on occasion they surface, such as at auction (Moniker’s are fairly good.)

So what is your domain worth? If its a single word or phrase found in the dictionary, probably a fair amount. Anything else, and its probably not worth a whole lot on its own.

The business model of the traditional domainer is crumbling. Google and now Microsoft control how much money you make from parked pay per click revenues. Google and Microsoft control how many people get to your domain name through the web browser (and Firefox and Apple and at an increasing rate your telecom provider, more on them at another time.) Google and Microsoft control the marketplace for how you receive traffic through the search engines.

Microsoft’s takeover of Yahoo’s search has an extraordinary implication to domainers. The companies that control the platform visitors use to get to your website now control how much money you make from your parked domain. Don’t want to let these companies monetize your traffic? Then why should they send their valuable visitors to you at all?

By the way, I’m spending more money on domain names than I ever have before. Why? Because I understand how to extract their value. If you don’t, I would suggest learning how. Personally I prefer the environment we have now. The harder things are, the more they change, the better off I am because its that much harder for everyone else. Adaptive learners thrive in this environment because new opportunities appear (and vanish) daily.

Big companies rarely have reason to use whois privacy on their domain names. Thousands of webmasters who work out of their homes feel otherwise. Sometimes the reasons are innocuous as avoiding whois harvested junk mail and telemarketers; other times the reasons are far more serious, such as death threats and stalkers.

Some web site developers own hundreds, or even thousands of websites. Old projects are often left forgotten beyond monthly checks from advertising networks.

There is a big downside to hiding your domain name contact info: what if someone wants to purchase your web site? For sole web site publishers, leaving a few thousand dollars on the table is more than worth it for remaining distraction free. However, would you feel the same way if it was tens of thousands of dollars or even hundreds of thousands?

My recommendation — keep your whois information hidden, but leave an open contact email on every site. At the very least, register your domain names under a corporation (or corporations) and not your personal home address.

The “hot” topic of the website development industry right now is the mobile web. Last week Google announced that they would be releasing a mobile operating system, Android. Adwords advertisers noticed this timed nicely with Google’s expiration of free mobile advertising.

Weeks earlier, a TRAFFIC domain name auction set records with .mobi domain names climbing into the six figures. However, controversy quickly followed with personal accusations flying within the domain name community.

From a web site owner’s perspective — mobile web site access is important. Conversion and revenue numbers aside, millions of people do and will continue to access the internet through their personal mobile phones years into the future. However, this alone is hardly a case for investing money in a new domain name extension.

Consider this:

#1 Web sites can automatically detect what platform a visitor is accessing the site through. Go to facebook.com on your phone, you end up at m.facebook.com. Its hassle-free to the end user.

#2 Big brands do not need to spend money or dilute their dot com/net/org/edu by promoting, and explaining their .mobi. Just like a social networking site, domain name extensions become successful when lots of people use them and recognize them. There is a local restaurant that uses .ws, everyone asks what it is — they do not even know its a web site address.

#3 The distinction between mobile browsing and desktop browsing has already blurred. My smart phone has a fully functional web browser, and runs both Opera Mobile and Internet Explorer. The iPhone’s web browser is an excellent example of this (YouTube video.) Additional advancements in Ultra-Mobile Computing (UMPC, for short) make the desktop experience truly portable. In the long term, users will not settle for crippled internet access.

Those pushing the pro’s of the .mobi point out that some big companies are buying and promoting the extension. Domainers today are hoping to bank on the same corporate spending wave that left them with understood and recognizable dot coms after the late 90′s tech bubble deflated.

If the corporate world catches on, and you see .mobi domain names being promoted everywhere offline and on, it might be worth catching a ride. Sure you’ll end up paying a premium, but in this business time is often far more valuable than money.

A month ago I ran a small advertising experiment where I displayed a non-hyperlinked URL. In order for someone to visit the particular site they have to enter the URL by hand (or copy & paste it.)

I am left with some interesting statistics. Out of 4,092 visits, 3,870 were direct visits. The user typed the domain name in the browser’s location field. However, 116 of them, or 2.83%, arrived from search engines. All search engine visits are for the site’s full domain names. This includes domain.com, www.domain.com, and http://www.domain.com, along with a few typos.

Worthless info?

Here is another one. “webpublishingblog.com” and variations only show up twice for the past month’s stats. However, a bunch of other “domain.com”‘s are scattered throughout the search traffic data. One of the top search keywords for WebPublishingBlog is plentyoffish.com (due to an interview I did with owner Markus Frind back when no one believed he had a real web site.)

You can draw a few conclusions from this. First, domain names matter a lot whether you are doing paid search or organic search engine optimization. You want your users to find you for your own domain name, and your competitions!

Second, there is a war going on with direct navigation. Toolbars are driving large volumes of visitors who, rather than use the browser’s navigation field, are using the toolbar’s search field. The two largest players here are Google and Ask.com. Considering Ask.com gets their PPC feed from Google, this is all about Google. Microsoft has a home field advantage when it comes to typos, directing Internet Explorer typo traffic straight to their search engine.

Google has a balancing act to play. Google must make as much money as possible while delivering the most relevant results so that one day they themselves don’t become irrelevant. Sometimes they get it wrong.

Finally, this puts domain name parkers at a massive disadvantage. Why? Because they are missing out on all that free organic traffic. When someone goes to Google and types in shoe.com shoes.com ends up being the winner. Domainers are figuring this out (what took them so long?) Be prepared for a lot more search competition when yourkeyword.com swaps PPC parking for content.

How do you visitors find you? No matter what type of web business you are in, the search engines are cashing in on a chunk of your business. You can’t escape it.

Millions of internet domain names sit on pages full of ads. To the novice, it appears like a waste. Doesn’t a great one word domain name deserve a real website?

The pros and cons of each are pretty straightforward to the experienced internet entrepreneur. Parking is quick & easy, development requires a big time & capital investment. Parking has a higher revenue per unique visitor thanks to 100% of the content being ads (and PPC payouts that far surpass Adsense & YPN), developed sites have lower earnings per visitor because of traffic leaks and abandonment. Parked domains miss out on organic search traffic, links, and word of mouth, while developed sites receive both.

When switching from a parked page to a developed web site you will typically see a revenue drop off. It is going to take time for the curve to move upwards and surpass your pre-development revenues.

Here is where the problem comes in: time. The cost to park a domain name is almost non-existent. Relative to this, development requires a staggering amount of time and/or money (e.g. 15 minutes verse perhaps thousands of hours.)

To add to all of this, the values of premium domain names have decoupled with the name’s earnings*. What this means is doubling the earnings by developing may have no impact on its value (if and when you choose to sell.) That is a strong statement, but it is quite true. Because of this decoupling domain investment has become more about the selling price than what the domain earns in PPC revenues. If a big corporation comes along and wants to drop 7 figures for your generic name, the developed site will be “demolished” without a second thought.

The value of a premium domain name may far outweigh that of its developed content. That means your developed site needs to add substantial value standing on its own to be really be worth it. This is far from a hard rule, based on your own personal needs (cashflow now) as well as the domain name and niche’s.

Developed web sites are not a passive investment. That is a myth. Without fresh content and links your traffic volume will erode. You’ve built a full site, there is still have lots of work to do.

Is there a short cut? From what I understand, Demand Media is attempting to roll out a content platform across their gigantic domain name portfolio. It might be kind of like a combination of Wikipedia and a social network. This is an approach that allows for mass scale, critical if you want to rapidly develop a large group of domain names.

Alternatively you could hire a team of employees to manage & update a group of developed names. This eliminates redundancies and maximizes your capital investment, much like how Jason Calacanis paid writers to author content across multiple Weblogs Inc blogs. No reason to have a full unique team for each developed domain.

What if you have a single, valuable generic domain name, no capital, and nothing else to do but develop it?

If you really like the niche and can stomach working on the site day after day for at least a year, go ahead. To maximize your revenue avoid Adsense, go to direct ad sales and/or selling products. Learn absolutely everything you can about that market — who buys, who sells, who spends the advertising dollars. To build backlinks set up a blog and make it the best in the niche.

To sum this up in one sentence: parking is better than a half-assed attempt at development (but that doesn’t mean you shouldn’t test domain parking alternatives.)

*trademark and typo domain names tend to still be priced by their earnings, for obvious reasons.

Another Moniker.com domain name auction is coming up, at T.R.A.F.F.I.C. Miami the second week of October. I was looking through Moniker’s published list of domains for auction, and there are some good ones. Here is a list of those with opening bids at $100,000 and above:

900.com $100,001 – $250,000
allergydrugs.com $100,001 – $250,000
audit.com $100,001 – $250,000
bad.com $250,001 – $500,000
banners.com $250,001 – $500,000
base.com $500,001 – $750,000
biker.com $250,001 – $500,000
bloodtest.com $100,001 – $250,000
bourbon.com $250,001 – $500,000
carshopping.com $100,001 – $250,000
cellphone.net $100,001 – $250,000
choppers.com $500,001 – $750,000
communication.com $100,001 – $250,000
computer.com $1MM – $5MM
consumerelectronics.com $100,001 – $250,000
contraceptives.com $250,001 – $500,000
copiers.com $250,001 – $500,000
courts.com $250,001 – $500,000
cowboys.com $250,001 – $500,000
crosswordpuzzles.com $100,001 – $250,000
crude.com $750,001 – $1MM
crush.com $100,001 – $250,000
cups.com $100,001 – $250,000
debit.com $100,001 – $250,000
decongestants.com $250,001 – $500,000
deli.com $100,001 – $250,000
diagnosis.com $250,001 – $500,000
disease.com $750,001 – $1MM
eel.com $100,001 – $250,000
elections.com $750,001 – $1MM
estate.com $500,001 – $750,000
ethanol.com $750,001 – $1MM
fantasysports.com $5MM and up
fiesta.com $750,001 – $1MM
finances.com $250,001 – $500,000
floridahousing.com $100,001 – $250,000
gasprices.com $100,001 – $250,000
germanwines.com $100,001 – $250,000
grapes.com $100,001 – $250,000
greekisles.com $100,001 – $250,000
hangar.com $250,001 – $500,000
happybirthday.com $1MM – $5MM
happyendingsmassage.com $250,001 – $500,000
healthinsurancecompanies.com $100,001 – $250,000
hobbyshops.com $100,001 – $250,000
house.net $100,001 – $250,000
hy.com $100,001 – $250,000
individuals.com $1MM – $5MM
internetserviceproviders.com $100,001 – $250,000
introduction.com $100,001 – $250,000
investment.com $750,001 – $1MM
leatherfurniture.com $100,001 – $250,000
localmovies.com $100,001 – $250,000
mangos.com $100,001 – $250,000
martialarts.com $250,001 – $500,000
mayores.com $100,001 – $250,000
miniaturegolf.com $100,001 – $250,000
movietheatres.com $500,001 – $750,000
necklace.com $250,001 – $500,000
newyorkrealty.com $100,001 – $250,000
opinions.com $1MM – $5MM
outdoor.com $100,001 – $250,000
personalcomputers.com $750,001 – $1MM
photographers.com $750,001 – $1MM
planet.com $500,001 – $750,000
podiatrists.com $100,001 – $250,000
polls.com $1MM – $5MM
program.com $1MM – $5MM
qr.com $100,001 – $250,000
racehorses.com $250,001 – $500,000
racetracks.com $100,001 – $250,000
reincarnation.com $100,001 – $250,000
release.com $250,001 – $500,000
reserve.com $250,001 – $500,000
sciencefiction.com $250,001 – $500,000
scubadiver.com $100,001 – $250,000
singlesonline.com $250,001 – $500,000
sportinggoods.com $250,001 – $500,000
sportsplex.com $100,001 – $250,000
stockquotes.com $1MM – $5MM
taboo.tv $100,001 – $250,000
tasks.com $100,001 – $250,000
taxes.com $1MM – $5MM
technology.org $100,001 – $250,000
toast.com $100,001 – $250,000
tortillas.com $250,001 – $500,000
urology.com $1MM – $5MM
videodownloads.com $100,001 – $250,000
websiteoptimisation.com $100,001 – $250,000
weightreduction.com $100,001 – $250,000
whiskey.com $250,001 – $500,000
wir.com $100,001 – $250,000
wirelessphone.com $500,001 – $750,000
xmas.com $250,001 – $500,000

The full list includes over 3,900 domains. Some good, some bad.

The first Moniker auction in New York City saw many bids rejected, totaling in the millions. There is some speculation that domain name owners could put trying to inflate valuations by having buddies bid their names up with no intention of buying. Considering its a regular practice in other industries (e.g., selling cars on eBay) this is probably not a wildly unrealistic conjecture.

That being said, there are some great domain names up for auction. All of the big domain name buyers are watching and participating in the Moniker auctions. If you are interested in unloading some of your inventory, this is the place to do it. If you are looking to pick up some names, download Moniker’s list and take a look. If you have experience and success in the domain’s niche market its very possible you could earn the cost of the domain back in a year and then sell it for a profit.

Frank Schilling delivered the keynote speech at August’s Domain Roundtable in Seattle. Great example how on entrepreneur laid the groundwork for a multi-million dollar empire while dot com speculators were losing everything.

Frank points out that one of the problems domainers face is flying under the traffic radar since traffic is spread out across a massive portfolio of domains. He is considering consolidating the traffic to a single domain & brand so others take notice. If Facebook is worth over a billion dollars with an audience of 30 million who buy nothing, what is an audience of 30 million super targeted & converting worth? Readers, here is the next internet billionaire.

Watch the full video of the speech with Q&A at DomainRoundtable. Frank Schilling has a great blog thats updated obsessively when he isn’t on vacation.

I have warned my readers about this multiple times.. an increasing number of domain name registrars are now more interested in you losing your domain names than keeping them.

Here is another interesting article, this time a press release from a company that runs the DomainSponsor parking program. They have launched a new product targeted to “hosting companies, registrars, registries, and ISPs.”

via Oversee.net “…Jothan Frakes will represent Oversee’s DomainSponsor in a HostingCon workshop, Turning Customer Abandonment and Loss Into a New Source of Revenue. The workshop is designed to communicate the value of a largely untapped revenue stream for hosting companies, registrars, registries, and ISPs. The panel will examine specifically how hosting companies can turn “under construction” and error pages into new revenue.”

Coming soon: your domain registrar and/or web host monetizing your traffic.

Despite no longer being an ICANN acredited reseller Registerfly is still sending out renewal notices. I have recieved comments in older posts from people complaining about renewing names and nothing happening. I recieved a Registerfly domain renewal notice by e-mail earlier this month along with a handful back in May.

GoDaddy has now taken over Registerfly’s registrations. My names with whois protection were transfered over successfully. I am not a huge fan of GoDaddy, but they definately get the job done. As an added plus, they aren’t owned by a company who wants to steal your domains (more on this later in the week.)

Your website’s domain name your site’s identity and property. Losing a domain name is like trying to haul your home around in the back of a pick up truck. I suggest using the utmost care when selecting a domain name registrar.

(hmm, maybe I need a new category — BS)

There is a *must read* interview with Frank Schilling over at SEOBook (If you are wondering why the hell you should care, Frank’s domain portfolio rakes in $20 million a year.) This guy knows domain names and he puts his money where his mouth is. This quote stuck out to me — “if you build the world’s biggest ceiling fan company at fanhub.com and then you want to acquire ceilingfans.com .. it is going to get much more expensive as time goes by. Names like those are going to be worth millions one day, so the time to acquire them is when they seem cheapest and unimportant to you.”

Even if you don’t share the same .com optimism you may want to consider holding on to those names that get type-ins. $4,000 today might be a fraction of what you can get 10 years from now.

Frank is posts a lot on his blog. Here is another good quote from today — “In 5 -10 years the largest commercial registrants (domain-name based media companies) will probably be the retail registrars themselves. Like a casino in charge of the count room, the house always wins.” Why? To grab dropped domain names.

Consider this: Registerfly sucked for years. Their user interface was buggy. Domain names users renewed didn’t review. Their customer service was all but useless in the 12 months proceeding their execution by ICANN. Registerfly was a reseller for eNom. eNom was purchased by Demand Media. One of the domains I lost in the Registerfly mess is currently sitting on a parked PPC page with registrant data resolving to eNom. That was a single domain. Now imagine this on a very large scale.

So what do you need to know? Good domain names will probably be worth more than you think and sometimes it is in your domain registrar’s best interest for you domain renewals to fail.

Have a good weekend.