I’ve known GK for several years, and he has always been one to impart great advice when asked. Although I can’t reveal GK’s name because of other business interests, you can trust me when I say he is one of the “original” domain investors who is respected by all who know him.
GK and his partner purchased their first domain in late 1997 and have been mostly buying and sometimes selling names ever since. He has seen the domain channel’s growth pretty much from its infancy. He has been around several of the earliest of domain gatherings, including attending the very first TRAFFIC show, the first DomainFest show and the legendary gathering known as the Deanfest in 2002.
GK was the very first domain owner to ever win the bid and purchase a name at an official live domain auction at TRAFFIC Del Rey Beach, FL in 2005. He has been on a speaker’s panel at two TRAFFIC shows and lists his favorite domaining moment as attendance in 2008 at TRAFFIC Down Under in Australia.
ES: How have your domain investment and monetization strategies changed over the last 5 years?
GK: A lot. In the last five years, parking revenue, Adsense revenue and the revenue from some of our sponsors have been cut by more than half. We have had to adapt. Rules that applied in the past are changing all the time.
You have to see this Internet and the businesses it has helped create as a very Darwinian type of food chain. The small fish eat the plankton. The medium sized fish eat the small fish. The larger, predatory fish eat the medium fish. And the sharks and whales eat pretty much anything they want. If you think of the domain owners as the small and (for bigger sized portfolio owners) medium sized fish, the plankton as the domains and their traffic and the predators out there trying to gobble them up and gain control of them, you can see how it is a battle to survive. There really is a group of larger, predatory entities out there that want what the domain owners have, and I think part of the battle for a domain owner today is in keeping the predators away from what you’ve got.
We have had to change parking companies several times recently due to the parking companies’ failure to adapt fast enough in the changing world. While the Internet had gone to web 2.0 and beyond, many of the parking companies were doing the boring, old version of Parking 1.0 to death. Adapt or die. Luckily, there are some companies that have finally figured out the need to try out newer and more creative ways of re-inventing Parking 2.0.
Likewise, we have had to find new sponsors, newer ways to monetize. Just as the domain market within the Internet has grown more mature, the sponsors out there have more and more realized that the Internet was a superior means to sell and deliver product, and they have a newfound respect for what can be gained by website owners that can help sell their products. We are trying to adapt to the changes and do what it takes to take advantage of our traffic.
WE are also selling more names now. We used to rarely sell anything. It just seemed like we were owners of raw (virtual) land and we wanted to be part of the growth of the land and didn’t want to be like the people who sold things well before they appreciated in value. We wanted to build things on that land. And we are working on developing some of our names. But now, as the Internet, and the domain market has matured, we are listening to and responding to more offers on some of those properties. It’s all part of adapting. Sometimes, you are a buyer, sometimes you are a seller. But always you have to be an adaptive creature of your environment.
ES: What’s the best piece of advice you’ve received in respect to growing your business, and how did it help you?
GK – The best advice I ever received about this business came way back in 1997. Think about the time. It was an Internet that was still wearing diapers. Peyton Manning was still in college. There was no Facebook. Zuckerberg was just starting to pop his first zits as a teenager. Google wasn’t around yet either. The domain name for Google was registered that year, the company incorporating the following year.
The powerful Internet titans of today, Apple and Amazon, were fledgling companies that were stumbling around, trying to make a profit. Network Solutions was the only game in town to register a domain name, and it had to be for $70 for two years worth of commitment to the name. There were only the four extensions of .com, .net, .org and.edu at the time. There was no recognizable monetization for any domain names unless it was for porn. There was a LOT of uncertainty whether or not this Internet thing was going to be successful, certainly nothing that hinted at the worldwide online acceptance of today.
The person giving the best advice I ever got was Rick Schwartz, then known through his nickname at the time, The Webfather. He did not know he gave me the advice. He was simply on a public chatboard at the time trying to tell all who would listen that the Internet, and these things called domains, were going to be the next big thing. That they would be like virtual pieces of real estate. I knew real estate pretty well.
The idea of being like those people who got a chance to buy “raw land” in areas BEFORE they grew big was very intriguing. I listened to what he had to say at every opportunity and thought his message was pretty smart. I think the message finally hit home in late 1997 when my partner, who was also simultaneously “discovering domains,” and I talked about it and decided we shouldn’t just talk about it, we should do it. So, we started investing in this “raw land” (a key move was not just thinking about doing it, but actually doing it). Again, this was a very speculative, risky thing at the time, given the circumstances, but it was also something that my partner and I believed was the smart thing to do.
I’ve always believed in the adage that there’s a strong correlation between risk and reward. If something is really obvious and easy and there is no risk involved, then everyone would be doing it and there wouldn’t be much of a reward. But, if you are zigging while everyone else is zagging, you might find that you amongst the few who are onto something, and from that you get a better payoff.
My partner and I made the decision not just to try and buy “some” names, but to try and buy as many good domain names as possible. We realized that it was a very unique point in time, similar to when our parents were growing up, when they had a chance to buy real estate at ridiculously low prices. But we figured it was not going to last forever and that we had to act quickly. I believe the decision was the correct one, as the best names we got were around this time, and I know I probably would not have been as bullish without hearing those proclamations from The Webfather.
ES: How do you valuate domain names when it comes to buying and selling?
GK – My partner and I were both into the field of real estate appraisal before we entered the domain investing business, so valuating domains came pretty easy. What do comparable names go for? How can you buy low and sell higher? Obviously, the idea is to buy a name for as little as possible, but of course, the seller wants to sell for as much as possible, so the buy/sell dynamic creates a market value that should be easy to follow if you just look for the comparables. The domain investing world follows a lot of real estate principles and also the basic fundamentals of business too. The laws of supply and demand definitely apply here. If there is demand for a name amongst a lot of people who think it is a good name, and YOU are the one who controls the supply (you own the name), then there will be a great demand for the name and you will profit from it accordingly.
But too many people get caught up in the “excitement” of buying domains speculatively because they hear the success stories about these great windfalls made from the sale of a single domain name and they get carried away and buy way too many names. I think the smartest thing you should do is to make each purchase of a name have to stand on its own merits as either a good idea/good investment or a bad idea/bad investment. It is very much a “game” where the person who exercises the best judgment and makes the best decisions “wins.”
ES: What do you look for when you hand register domain names, and do you think there’s still money to be made today on hand registrations?
GK – Yes, I think there can be money made from hand registrations today. Domain names are still based on language and language is constantly changing enough to provide new words and phrases that all have the potential to be really valuable as domain names with a .com at the end of them.
I remember hearing on early chatboards some arguments between people over the merits of misspelled names, with the consensus saying things like the plural using the letter “Z” (the BoyZ in the Hood spelling) was worthless. That sure turned around. Sometimes, the plural using the letter “Z” out-performs the usual correct spellings with the letter “S” in type in traffic statistics.
Lots of new words or phrases enter into the public consciousness all the time, and being the first one to nab that phrase or word as a domain name is a good hand reg strategy. The biggest drawback, though, is doing too much speculating on made-up names that end up having zero value at all and you rack up large renewal bills that put you out of business. Quality is much more important than quantity.
I would say I don’t do a lot of hand registering of names now, since we have so many names as it is. If something interesting comes into my mind as a name that might have potential, I will look up the Whois and see if that word combo or name is available and grab that name if it is. It is funny to find that those names that I think might be good are inevitably already registered, and usually by someone I know. It is amazing to me to see all of the people out there now wanting to be a part of the domain investing business today compared to the late 90’s.
ES: A lot of people would say that it was so much easier buying good domains many years ago as compared to now. Given that they are concerned with how to make a living in the domain industry now, what advice would you give to newer entrants into the domain industry circa 2012?
GK – First off, I do think I was lucky to be at the right place at the “right time,” the early stages of the domain aspect of the Internet. Kind of the same way I think my parents were lucky to be around the opportunities in the real estate world back when house prices were very inexpensive. It is up to each person to make the best of their opportunities when they get them. I am not of the school, however, to think anyone should be entitled to anything domainwise just because they are starting out now in this business.
Just like in all aspects of business and society, I think there are ways to make your own breaks and create your own opportunities. Who is to say that something isn’t happening right now that might be the next, new, massive opportunity everyone is looking for? Like Aps. It is a fast moving Internet world now, with the potential of a year’s worth of growth being compressed into month’s worth of time. You just don’t know what is going to happen in the next ten years or so. Maybe by then it will be Domain Investing 9.0.
Back to today. One of the first things a person thinking about making a living in the domain world should do is to become a total expert on all things Internet. There will always be demand for people who are experts in anything, particularly something as immense as the Internet. Learn how to create websites. There are many who own domains who either want to have website work done for them or are even open to becoming partners with the right experts.
Be smart. It’s a game where the smart person finds ways to make things work out. Maybe being smart means NOT buying expensive domains now. It is still a business model where success is based upon your typical business principles of providing goods and services, the laws of supply and demand, and buying low and selling higher.
If someone still wants to be in the buying/selling of domain names for profit, they have to come to the realization that they are a little late in the .com portion of the game. Most all of the good names are already in someone’s possession and for those names that drop, there is a ton of competition for the good names. It is still like the real estate model in a way, though, because there still are opportunities to buy names below market value and then to go out and resell them at or above market value for profit. .Com names are more like buying prime real estate near or in the heart of the big city, though. A good name is still like being in a good location.
The other extensions that are coming out would be similar to the .com days of the late 1990’s, except those extensions are probably going to end up being like the raw land in the middle of the desert that no one is ever going to develop. For that model, the idea really has to be to buy low and sell higher to some other sucker that thinks they can sell it to someone else for even higher. Kind of like the biggest fish eating the smallest fish in reverse. You don’t want to be the biggest, greediest buyer, who pays too much for an “iffy” domain, thinking you will sell it for still higher, but in actuality. finding that you are “stuck with it,” as no one wants to buy it anymore. That person ends up at the bottom of the domain food chain and often ends up broke.
My one piece of “best advice” to a newcomer, then, is to FIND OUT WHAT CONSTITUTES A GOOD DOMAIN NAME before you go on your buying spree. I’ve seen a lot of people get intoxicated with the idea of getting rich off of domains, and then blowing all their money on crappy domains that no one else besides yourself thinks is worth anything. Do NOT go out and buy too many names until you are certain you know the difference between a good name and a bad name. Ask questions. Learn from others. Do research. Be smart. Use trial and error, and always be watching your budget. That’s the hard part, but it is the most important part.
A lot of people from the old days used to say over and over that the key is in finding that one, first successful domain name or making that first successful sale. Then, once you find out the success formula, you do it again, again and again. Kind of like “rinse, lather and repeat.”