The current state of the market

It’s late May in the year 2008. Where the hell are we? Well, let’s break down a recent conversation I had with Ron Jackson, the esteemed editor of dnjournal.com which is the only must-read domain news website out there, in my opinion. While emails that I send normally read from bottom to top, I’ve reversed the order to make it an easier blog read. After the email exchange I’ll have a few more comments. Maybe Ron will stop by to continue the discussion.

On a side note, my sister, and other old timers on the internet, I’m talking about the peeps that were emailing in the 80s, still put replies on the bottom of messages and it annoys the piss out of me. They know we’ve figured out a better way 15 years ago yet they persist. Enough digressing.

To: Ron Jackson
Subject: Shreveport.com
Sold at 70,000

…. sorry for brevity and/or typos. written from pda phone.

Rick Latona

To: Rick Latona
Sent: 5/27/2008 4:17 PM
Subject: RE: Shreveport.com
Congrats - thanks for the info!

Ron

To: DNJournal.com
Subject: RE: Shreveport.com
Buyer got a real bargain on that one. I could hardly give it away. How was
the auction last week? Seems frenzy is over as I predicted and you argued
with me about months ago.

…. sorry for brevity and/or typos. written from pda phone.

Rick Latona

To: Rick Latona
Sent: 5/27/2008 4:54 PM
Subject: RE: Shreveport.com
Auction total was lower than usual - $2.55 million, but a higher percentage
of names sold (6 at six figures ) than last time out. Most felt more would
have sold but the reserves were too high. I gave a luncheon update on the
latest date we have from domain aftermarket sales (covering the 2nd quarter
to date). Total sales were up again over the same period last year despite
the general economy being in the doldrums - so I was and still am right

The growth rate has slowed in this quarter though, first 6 weeks of  2Q-2008
just 2% above same period last year - but the economy was much healthier
then.

Ron

Very interesting indeed Ron. All I keep seeing as I read your response time and again is this part, ” but a higher percentage of names sold (6 at six figures ) than last time out”. I’ve had countless conversation with other major players whom all point out that Kevin Ham, Xedoc and some of the other bigger players have stopped bidding on what they call “trophy names”. So if the bottom has fallen out on the 1-3 million dollar deals but increased on the middle and lower ground to still put up a 2% growth rate than things are much better than I thought.

After all, wouldn’t all those huge dollar sales last year screw up the averages? Isn’t a market with much more middle and low dollar sales a much healthier market? Are we seeing more of a correcting than a recession? Could it be that I have been somewhat glum because I wasn’t looking at the picture properly? I hate writers who ask a ton of questions in a row to get their point across so that was the last of them.

I think what’s really happening is that the pool of buyers that can and will buy premium names is increasing, thus the demand is increasing. So I’m starting to think that this might actually be the calm before the storm. If our market size is increasing then inevitably those huge sales will return except this time, in a more healthy and less frenzy induced atmosphere.

What makes a domain sellable, part 4

Revenue, makes a domain sellable but tread carefully or you can get burned. For the buyers I have this one strong piece of advice. Unless the name has other intrinsic qualities i.e., has legs or is some obvious category killer, you can lose your ass. Today I’ll look at ways it helps and focus on ways it hurts.

People often talk about selling domains on a multiple of revenue. Heck, I do it myself often. However, there is a time and place for that. More often than not, you can get hurt by getting greedy while hunting income streams.

The most obvious thing to be worried about is the falling amount you can earn per click. There have been countless articles written about it so I won’t go into great detail here other than to point out that with increasing technology to thwart off click-arbitrage and monitor conversion ratios for your advertisers to make sure they are happy, Google, Yahoo and others are paying out less per click every year. What does that mean to a guy who paid 10 times earnings for a name 2 years ago? Well, he isn’t happy.

Unforeseen events are a real bitch. Take for example 4 or 5 years ago when the United States threatened media companies for taking money from gaming companies. Suddenly those holding domains with terms like Poker, Slots, Blackjack, etc saw their earnings drop by 70-90%! Yahoo and the others would now only advertise the .net free versions  and clearly the gaming companies wanted to pay far less per click because they had to double wash the traffic. Surfers would go to the free version only to be later sold to go to the pay version. That had to crush conversion ratios. I’d give you more unforeseen examples but I’m tired and they are unforeseen.

Piggybacking other’s trademarks is simply bad business. FreeCreditCheck.com and CreditCheck.com sold for $3 million last year at a Moniker auction. I was there at the time and if my memory serves me correctly the buyer paid around 8 times earnings for the name. Now no one in the audience including the buyer thought there was any reason earnings were so high other than freecreditreport.com’s constant barrage of advertising. The name is clear from going down in a lawsuit but I certainly wouldn’t want to be caught holding the bag if something happened in year 4. This is a big dollar example but we’ve all seen this happen on smaller scales time and again. There are just too many other ways to double your money in 8 years to mess with things like that. Do yourself a favor and go for 4x or better multiples if you are going to play in the dangerous piggybacking arena. To the sellers, if someone offers you 8x on one of these, take it. Let’s not forget that falling PPC rates have probably affected this deal negatively as well.

Here’s some good news. Some names with high search traffic have low type-in traffic. I develop most of my names. I rarely park. Most of the times I put up very simple sites like you’d see on Makati.com. Yet that name did nearly nothing parked and is now a consistent earner for me due to it’s number 3 spot on Google. This tells you that buying on parking revenue alone for something that could obtain good Google rankings is a wonderful thing. 

If a name has other redeeming qualities and is priced at 10-20 times earnings it is both sellable and buyable. I sell GEO names all the time in that price range and they sell fast for a good reason. Those earnings should be the least they ever earn. You only need a few advertisers or better search results to pump those numbers up.

One last point I’d like to make is that some of the biggest names in the business, whom I won’t mention to avoid a political backlash, have mostly non-sellable names in their portfolio. You’ve probably heard of the guys I’m thinking about. They’ve spent years buying drop names with traffic and they’ve gotten great returns but the retail value of their portfolio is hardly what you would expect. Hell, a recent front page article on dnjournal.com focused on one of the most famous domainers in the world and of the 9 names he mentioned he wants to develop I had sold him 3 of them. This is a guy we know owns hundreds of thousands of names. He’s done well, his way works and I’m not knocking him but buying names that earn money that aren’t sellable isn’t the business pratice I preach here on my site.

The bottom line is that domains with revenue that have legs, are exciting and have obvious usesare very damn sellable. Everything else is slightly less sellable and some of them are downright dangerous.

I’m proud to report that I’m alive and kicking

Yes, I haven’t sent out a daily email or updated this blog in about a week. Guilty as charged. There was, after all, a convention about domains down in Orlando. Not that I was there, mind you. I took the opportunity to do absolutely nothing.

Here in the States we’ve also had Memorial Day weekend which only compounded my laziness.

I guess I must be doing something right, though. I’ve received about twenty emails asking me if I was ok. I replied to most of them, but not all of them. After all, I was trying to do nothing.

I do have some good news to report. I shot my best golf game of my life this morning. Brandon Abbey, president of Escrow.com sent me Ben Hogan’s 5 Golf Lessons. I never thought I could learn a sport by reading about it but I’ve already read it twice and I’ve been practicing everything in it, over and over.

The holiday is over now so expect a flurry of deals and maybe even a few relevent posts.

I’m proud to report that I’m alive and kicking

Yes, I haven’t sent out a daily email or updated this blog in about a week. Guilty as charged. There was, after all, a convention about domains down in Orlando. Not that I was there, mind you. I took the opportunity to do absolutely nothing.

Here in the States we’ve also had Memorial Day weekend which only compounded my laziness.

I guess I must be doing something right, though. I’ve received about twenty emails asking me if I was ok. I replied to most of them, but not all of them. After all, I was trying to do nothing.

I do have some good news to report. I shot my best golf game of my life this morning. Brandon Abbey, president of Escrow.com sent me Ben Hogan’s 5 Golf Lessons. I never thought I could learn a sport by reading about it but I’ve already read it twice and I’ve been practicing everything in it, over and over.

The holiday is over now so expect a flurry of deals and maybe even a few relevent posts.

What makes a domain sellable, part 3

For part three of this installment let’s use a phrase that I hear so often in business circles. Does it have legs?

For those of you that have English as your second language, you probably haven’t heard this phrase very often. It means that when your site is up and running, it’ll keep on running further and further. It implies that it can continue to get bigger and more profitable as time goes on.

Recently I sold sanssouci.com for only $3900. I had originally thought it would do more. It’s a suburb of Sydney, French for “carefree” and the palace of Frederick the Great near Berlin. I’ve actually been there. Crazy dude wanted Roman ruins in his backyard so he went and built his own. Funny thing is that now those fake ruins are antiques because it was so long ago. Anyway, back on topic, the name doesn’t have any legs. I should have known better. That’s why I didn’t really make anything on it. How much can you make off such a name if you owned it? I ended up selling it for its true market value.

SkiResorts.com on the other hand I sold (via Moniker to give credit where credit is due) for $850,000. Just think. If you charged various resorts $10,000 a year to be listed on the site you would only need 100 customers to do $1,000,000 dollars in revenue per year! This goes back to my first post in this series which was about “the obvious use of the name“.

A friend of mine runs Divorce.com. Any rookie domainer would agree that is a great name but how great is it? Well, how many divorce lawyers are out there which might pay 1000 a year to be listed? My guess is greater than 3,000 could be talked into signing up. That would be 3 million a year in revenue! That my friend, is legs.

So now that we have looked at the obvious use of the name and its emotional curb appeal, make sure that you can accurately guage how big the oportunity could be. How long those legs really are. Don’t fool yourself either. I’m sure those 3,000 divorce lawyers are only a fraction of the 10,000 or more divorce lawyers out there practicing law. I’m equally sure that it would be hard to get more than 1000 dollars for them to list.

Be realistic.

What makes a domain sellable part 2

It isn’t easy to appraise a domain. When someone asks me if I want to buy a name, I often reply simply with “I’ll pass”. Inevitably, they’ll send me back an email asking my why I’m passing. Well, that’s an impossible question to answer. Perhaps, in the future, I can point them to this series I’m writing on what makes a domain sellable.

It takes a holistic approach.

In my last entry on the subject of what makes a domain sellable I went on about the obvious use of the domain being the most important thing.  In this entry, I’m going to rant about something even less tangible. It’s whether or not the name is exciting. Boring names are not sellable.

How does one define what makes a name exciting? I’m not sure it is possible but I’ll try and give some examples that will help.

One thing that sure makes it easier to sell a name for good money is emotion. Most of the time when I sell a GEO name, for instance, I end up selling it to someone from the city, state or country or from a neighboring place. At a minimum they’ll usually have an intimate knowledge of the place. Heck, I even paid a fortune for Buckhead.com a while back because I live here. Fortunately I sold it for even more money because someone else had an even higher emotional attachment to it.

Clearly it is tough to anticipate if buyers will have that emotion but I think some names should have points taken away if they are simply boring. Let’s take my typical guinea pig name Aquaphobia.com. On hindsight, this is a pretty lame domain. Sure it has value and one day it’ll sell but it will sell in the low x,xxx range. It simply isn’t exciting enough for someone to step out and pay well for it.

Very often we see names sell for way more than they are worth because they have an exciting appeal to them. Guy.com for 1 million dollars? Sure there are a lot of guys out there and at a glance it looks like a super-premium but seriously folks, one million?

The bitch of it is that I keep reading over what I’ve typed here and I can’t think of good examples or a good way to say it. We really are talking about an impossible thing to define. I hate to say, “you’ll know it when you see it” but that’s just the way it is.

Perhaps you can compare it to “curb appeal” in the real estate world. Some houses just show better than others. How does your domain look from the curb?

I know I  haven’t put down enough to give you guys any real insight. Hopefully you’ll just think about it more often.

How to become a scratch golfer

I’m a bad golfer. Ok, I’m a terrible golfer. What sucks is that I have tried so hard. I take the lessons, I get out and play, but I still suck.

So what’s a guy to do? Well, I suppose I’m the kind of guy that takes things to the extreme.

This past weekend I went looking for a golf cottage. My goal was nothing less than a house with a driving range in the backyard. Well, I found one. It’s a modest home with four master bedrooms, a game room, a movie theater, etc. Yes, I’m being sarcastic.

Don’t get me wrong, I haven’t committed to this house. The cost is enough to make a grown man cry. Damn, I sure want it though.

Did I mention it comes with memberships to 6 courses, a marina on a large lake, the clubhouse and it is only 90 minutes from my home in Buckhead?

Maybe if I do buy it my daughters will grow up to be billionaire lady golfers. That could justify the price!

Read more

What makes a domain sellable?

Many articles have been written about how to value a domain name. This is not one of those articles.

I sell domains so I’m much more concerned with what names people want to buy and what they’ll pay then I am about their true value. What I mean by that is, I’m not one of those guys that thinks that every domain is priceless or needs to have a huge price tag on it. I try very hard to be realistic when putting numbers on them.

I have one question that I ask myself that is more important to me than any other question. What sort of website would be put on the name? When buyers buy a name from me, more often than not they want the name because they have some sort of vision for it. What’s the obvious vision?

GEO names like SanJuan.com or SimiValley.com are easy to sell because that question is easy to answer. Other names that have obvious business models are directory names. What I refer to as directory names are the category killers like gastoenterologists.com or skiresorts.com. Those names are simple. Build a site and charge companies to be listed on the directory. In that way, I suppose most GEO names are directories themselves like what I”ve done with Baja.com.

Product names can be tricky. I generally look for things that are small enough to ship cheaply. There is a reason that cameras.com is worth so much money and furniture.com went bankrupt. It’s not easy to ship furniture. Pets.com went under back in the day because nobody would pay shipping on a 100 pound bag of dog food.

The whole LL.com and LLL.com market like AZ.com or PSJ.com doesn’t make any sense to me. That’s a straight up confession. I deal in them all the time because they have value and people buy them but I would never buy one myself to develop. They don’t answer my fundamental question. What would you do with it? Clearly AZ.com should be about Arizona but it makes no sense that it sold for that much money. Arizona isn’t a keyword in the name and Google rankings will be hard to obtain.

Speaking of Google rankings, get them. It’s worth the effort. Sites with great SERPs (Search Engine Result Pages) make more money and sell for more money. If you think you are going to want to sell your name I highly suggest you develop it and go for those rankings. You’ll make less than you would parking it for a while but in time it’ll catch up and your name will have a greater resale value.

Revenue helps. Ok, that was an understatement. I find that it isn’t uncommon to get 20 times earnings on a name. The irony is that the higher the earnings, the lower the multiple. That’s mainly because there are fewer buyers at high price points. A name that earns 10,000 dollars or more per year is more likely to sell at a 10 times multiple. Sin names like adult and gaming domains are more likely to sell at a 7-8 times multiple. Sure, there are obvious exceptions like porn.com selling for over 9 million on 600,000 a year in earnings but I can only speak from my personal experiences. Don’t get me wrong, you often don’t need any revenue but it certainly helps.

The .com is still the undisputed king but great cctlds can sell well, especially .co.uk and .de names. In fact, I’m buying if you want to send me some. Just don’t send me .mobi names. They aren’t sellable dispite the sales reports. I firmly believe they are in a bubble and I’m not going to be stuck holding the bag.

I’m going to add to this post over the weekend because there is so much to say on the subject. For now I just wanted to get my initial thoughts out there.

Free T.R.A.F.F.I.C. ticket

This is just a quick post to help out my friend Sahar. He’s giving away a free entry to the TRAFFIC convention in Orlando.

 

http://www.dnzoom.com/blog/events/traffic-orlando-domain-conference-free-ticket-drawing/

Looking for Spanish writers

I need about a dozen  Spanish writers for building out 1000 mini-sites on these .com.mx domains. Hit me up if you qualify and are looking for work.

Next Page »