So I’ve had time now to digest and summarize my thoughts on the new vanity top level domain extensions that ICANN has decided to soon allow. Yes, I’m also supporting David Castello’s coined terminology “vTLDs”.

The quick and dirty answer of mine is that they are a bum deal for speculators but a great opportunity for entreprenuers. In otherwords, I will be applying for a few of them.

I think the smart money is to go after small niche markets. Let’s take for example a potential .nyc in the New York market. Say about 200 grand is spent on ICANN fees, software, support and a first year’s small, grass-roots marketing campaign.

You would need 6667 regististrations to break even at a $29.99 price point per year.

I have to think you could bump into a couple thousand of those just from big companies protecting their brands. So the work is 1/3rd done for you. After that you just need to have a team of kids go to concerts in the park and colleges and pimp vanity domains to individuals. Give them free email addresses, etc and you have a better than excellent chance of clearing that 6667 required registrations.

In time, a market like that could get up to 50,000+ registrations with relative ease, I would think. That’s cash flow.

So far I’ve identified 20 niches I will be going after. My plan is essentially to create a network of partnerships so it’s not just me applying for 20 niches. If ICANN gets 20 applications from the same company they will most likely only grant one of them, I’m guessing. So, my plan is to submit each application in conjunction with other individuals and companies.

There you go. I’m an open book. There are few secrets on this blog.

If you have an idea for a vTLD, contact me and we’ll try to work something out. I’m actively seeking partners with the right goods and ideas. I have the cash but I won’t want to put up all the money so don’t hit me up if that’s your idea. If you want to invest in the domain business along with me and have something to bring to the table where together we can make it work, let’s talk.

I’m not sure why I keep making so many mistakes in my daily newsletters. Just yesterday I made two.

I told my audience that on jp.net I can no confirm that this name does 5 dollars a day on Sedo. What does that mean? It looks like I’m saying I can’t confirm when in fact I can. Well, the name sold anyway, fortunately.

I also listed NewRochelle.com for the first time. I told everyone that it is on Long Island when in fact it’s just outside the Bronx. It’s a suburb of New York City.

Maybe I should have stayed in high school after all. The day before I spelled BusinessSupplies.com as busnesssupplies.com. Shoot, I make mistakes at least a few times a week.

If it was one of my employees butchering emails that went out to all of my customers I’d freak out on them. Yet here I am the guilty party.

It sucks because I proof read them over and over but I still miss stuff. It’s not like there is a ton of content on those emails to review!

Hopefully in a few days I’ll be launching SouthLakeTahoe.com. There is a temporary site up there now but it’s not good enough.

I’m a little more excited about this one than most GEO names. It is an actually city for one thing but what really gets me thinking good thoughts are the numerous hotels, cabins for rent, time shares and potential advertisers there. Talk about a tourist destination!

I’ll be keeping this one for a while and not selling it. Hopefully I’ll have it in the top 3 listings on Google within a month.

If any of you actually live in that area and are looking for a job, hit me up.

I get asked a lot what names I’ve sold recently. Very often people ask me not to announce it so a huge chunk of the real list below is missing from this post. Looking at them now, combined they would make a nice portfolio. So here’s about half the names I’ve sold in the first five or six months of the year.

206.com- seattle
208.com- idaho
209.com- CA
213.com- Los Angeles
214.com- Dallas
215.com- Philadelphia
312.com- Chicago
408.com- San Jose
510.com- Oakland-
513.com- Cincinnati
602.com- Phoenix
610.com- Penn
619.com- San Diego
703.com- VA/ Arlington… 
704.com- Charlotte, NC
707.com- Napa Valley, CA
714.com- Orange County
805.com- CA
860.com- Ct
916.com- Sacramento
Actors.com
Directors.com
FollyBeach.com
Lilburn.com
Nis.com
Our.com
Screenwriters.com
Via.com
Waterloo.com
cny.com
uaa.com
Medics.com
DebtCollectors.com
MountZion.com
ilu.com
dfl.com
Racetracks.com
Enschede.com
mcminnville.com
newberg.com
Piranhas.com
Alabaster.com
Wield.com
LakeView.com
fireinsurance.com
GroupTherapy.com
LakeLosAngeles.com
SaintAugustine.com
CTR.com
PieceofMind.com
lovespark.com
EuropeanArt.com
Beagles.net
SkiResorts.com
Stcatharines.com
elcampo.com
Sororities.net
Fargo.net
croydon.com
plums.com
HardwareStores.com
Evelynne.com
WebDesigners.net
Daryl.com
midwestcity.com
seafoodrestaurants.com
siegen.com
FrenchTutor.com
SpanishTutor.com
Mankato.com
digitalvideos.com
Judo.net
SimiValley.com
Gadsden.com
Burien.com
Mukilteo.com
Treinta.com
ClactononSea.com
SansSouci.com
Trusts.com/livingtrusts.com
dependentcare.com
RealEstateOffices.com
Johnnie.com
SummerSide.com
BridgNorth.com
TrailerParks.net
fastfoodrestaurants.com
Terrebonne.com
Shreveport.com
Bossier.com
Metalband.com
WoodyPoint.com
Coeds.net
LeewardIslands.com
Hayes.net

While I made a promise to myself to never regurgitate press releases and only blog when I had something I wanted to talk about, I must chime in on the GEO domain conversation which my peers are having.

I suppose I’m more bullish than Sahar and more bearish than SimplyGEO and Elliot Silver.

Many domainers, myself included, value city dot com names by population. For example, poor U.S. cities have a minimum valuation of 10-25 cents per citizen and simply can’t fall below that amount. Wealthier cities and cities with tourism can sell for 10 times as much. However, this is meant to be a guideline, not the rule. Let’s look at a few examples.

The town of Edisto Beach doesn’t even have 1000 citizens. Yet, edistobeach.com with stellar search engine rankings generates over 50 dollars a day in AdSense revenue. At just ten times earnings the name is worth $182,500. Not bad considering I bought this name for $50,000 only two weeks ago and the current design is just terrible. At the moment it isn’t for sale because my guys are working on a better design and we will be signing up some new advertisers.

In the same breath I’d agree with Sahar that the upside potential of EdistoBeach.com is limited. Or to put it another way, it doesn’t have long legs.

An even better example would be MyrtleBeach.com. The owners of that site are quick to tell you that they generate over a million dollars a year in revenue off that city of 28,000. They can do that because there are so many hotels and even more timeshare units. They’ve managed to land over 1000 advertisers paying 3000 dollars per year. Clearly it isn’t just population but the number of potential advertisers that can determine how long those legs can be.

Everything I’m saying is also based on yesterday’s metrics. Now we have a glimce at tomorrow’s possibilities. Dr Ham recently launched his beta version of Vancouver.com. Not only is his site incredibly polished looking (yes I’ve forwarded the link to my designers) but he can do a few things that regular folk like us can’t do. Most notably if you look at the image I placed in the start of this article you’ll see that he doesn’t have anything that says those ads are pay-per-click. Missing are “Ads by Google” or “Yahoo Publisher Network”. I’m sure it is due to his relationship with Yahoo or possibly he’s using a 3rd tier PPC provider. The user will surely think those ads are part of navigation so his click-through-ratio will be through the roof. It’s a great design but I’m still looking for ground-breaking stuff on his site which I haven’t found yet. Most of it is actually very normal. I would suggest to him that he ad more text to the home page for search engine optimization reasons.

I think Sahar’s real point is that sites like funeralhomes.com can make more money if they could sign up funeral homes around the world and I’d agree with him on this point. That doesn’t mean that great GEO names aren’t great names that can make a lot of money. To me, it’s just about having a balanced portfolio and they are a critical component.

There is really a lot to say on this subject so maybe this will be part 1 of another series of articles. There are cctlds like Tijuana.com.mx and foreign cites like ChristChurch.com which to me fall into a different yet still valuable categories.

I will say this. I think GEO names are easier to make profitable. It’s realitively easy to get high search engine rankings and a whole lot easier to land advertisers.

When I was younger, GTE used to have a commercial for their Yellow Pages that featured a fictional character named Bob. Bob owned a store called Bob’s Rug. In the story he’s asked why he doesn’t advertise in the GTE Yellow Pages and his answer was, “I can’t advertise in the Yellow Pages. If I did, someone might buy my rug”. I always loved that commercial.

I tell this story often. It’s my answer to the reason why there are so many domainers that won’t sell their name no matter what you offer them. If you buy it from them, they won’t have it anymore. You’d be buying their rug.

I have never-ending faith in my ability to continue replacing my assets. I start companies, I sell them. I buy domains, I sell them. I have zero fear of selling any asset because I don’t suffer from Bob’s Rug Syndrome.

Take the owner of America.com. He won’t take less than a million dollars for that name. It appears he wants twenty million dollars for it. Does he honestly think he’d get that much? This country isn’t even called America. In fact, there isn’t anywhere called America. The United States of America is in North America. To not sell it is just foolish.

Now you might even suffer from this disease. You might think your name is priceless or worth twenty million. Ask yourself, how much money could even be made with the name if all the stars were aligned. Does this owner think a travel company could earn more than twenty million dollars off of America.com? Of course they couldn’t. My country’s government would also never buy this name for that kind of money. It isn’t even their name.

He’ll never sell this name until he begins to seek a cure to his Bob’s Rug Syndrome. And what harm has he done to himself and his family by turning down high six-figure offers? I’m sure he could have eliminated significant debt, started another business or more.

Bob’s Rug Syndrome is a terrible disease that affects tens of thousands of domainers. It causes them to turn down huge offers, often a large multiple of the true domain’s value, out of fear of being able to replicate their success. If you think you may suffer from this disease, please seek help immediately.

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.

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.

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.

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.