“Are Geodomains Worth Less in Light of UDRP Decision?”

Elliot Silver
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9

Shortly after Mike Berkens posted his article about the Hayward.com UDRP decision going against the domain owner, I received an email asking me, “are Geodomains Worth Less in Light of the Hayward.com UDRP Decision“? In my opinion, the quick answer is that city .com names are almost certainly not worth less and some general (non-legal) feedback is below.

Just like almost every other dictionary word/term has a corresponding trademark owned by a company, geographic locations also share their meaning with companies that have marks. For instance, an apple is a fruit and a generic term, but Apple is also a trademarked brand owned by a computer company. In the case of Hayward.com, Hayward is a city in the state of California, but it is also a term used by a pool company.

If I owned Apple.com, I could certainly sell apple juice, apple pies, and apples. However, if I started selling computer parts, cell phones, or even music, Apple Computer would probably sue me or file a UDRP. Unfortunately for the owner of Hayward.com, when he parked it, the name allegedly had “links offering or leading to pages with links offering goods or services that are competitive with the goods and services offered by Complainant under its HAYWARD Trademark.”

In light of this alone, I really don’t think city .com domain name values are impacted. I can only think of a few that are parked right now, and for the most part, the parked domain names are only parked while awaiting development. I don’t think a lack of development should be construed as bad faith, although a number of UDRP cases have determined that non development and non use can be a strike against the domain owner.

In my opinion, this decision is poor since PPC pages can accidentally show advertising that may infringe on another company’s mark, but I don’t think that necessarily means it was done in bad faith. I know the owner owns other geodomain names, and I don’t believe he intended to monetize it based on another company’s trademark. I do think this case should make geodomain owners cognizant of the fact that parking can put their domain names at greater risk, but I don’t believe it impacts the value (just try buying some city .com names and see the responses you get if you send a low ball offer).

I would be remiss if I didn’t mention one thing that really bothers me in this decision. According to the discussion from the panelists:

Respondent purchased the domain name <hayward.com> for USD$20,000 and was attempting to sell it for at least USD$100,000.   These figures would seem to indicate that Respondent saw some value in this domain name for reasons other than its existence as the name of the city of Hayward, California – with a population of only about 150,000 people, according to the city’s website at http://user.govoutreach.com/hayward/faq.php?cid=10774 – and for purposes other than as a PPC parking page (which, in the normal course, would not be expected to earn a return to justify such a rich investment).

I paid a lot more than $20,000 for a smaller city .com domain name. In fact, I bought and/or sold 4 geodomain names for over $50,000 (two of them for significantly more) in the last 18 months. There is considerable value in geodomain names, especially when they are developed. My primary concern is that these UDRP panelists made an opinion that does not appear to be based on facts or public comparables.

Would I have paid $20,000 for Hayward.com for a city website? Probably. In fact, I sold a comparable California city .com domain name (just under 150,000 residents) for over $65,000. Similarly, my company owns Burbank.com and I previously turned down a cash offer of over $110,000 for it, and Burbank, California is a city with just over 100,000 residents.

I don’t see how UDRP panelists can say that the owner could not expect to return the rich investment of $20,000 for Hayward.com, and more importantly, I don’t think it’s appropriate for panelists to make valuation estimations. In this case, it seems to me that their valuation of city .com domain names is flawed.

Importance of Due Diligence When Buying a Domain Name

Elliot Silver
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1

When you have secured a deal to purchase a domain name, especially one that has significant value, you need to do your due diligence. The most important research you need to do is to ensure the domain name is owned by the party that you think owns it, and the second is to make sure traffic/PR/directory listings and all other promises can be met.

In my opinion, ensuring a domain name is owned by the person/company you believe owns it is the most important thing. Having a Domaintools account allows me to search the Whois history for a domain name. If you are ever unsure of whether a domain name is rightfully owned, you should contact the previous owner to confirm that the name was sold. Phone calls are generally the best way to confirm it, although having an email record is also important.

You can sometimes use the Whois information to make sure a domain name is able to be sold by the contact person. Because some companies use their web developer or tech support company (or person) as the contact, even though you are dealing with the contact email, that person may not have rights to sell the domain name. If you are unsure or have questions, visit the website and contact the company directly (by phone). You can also Google the registered owner and contact the company c-suite offices or the executive listed.

Verifying other things like stated traffic, page rank, inbound links, or other promises is also important. You can ask to test traffic on your servers for a week to try and confirm that it’s “real” traffic and not bot traffic. You can also use free traffic check services like Alexa or Compete. There are a variety of ways to check page rank (like the Google tool bar or   many websites that can be found by searching “page rank checker” in Google). Finally, inbound links can be checked on Yahoo’s Site Explorer.

Do your due diligence before buying a domain name. A few extra minutes of research can save you a lot of money.

Domain Auctions: Problems & Solutions – Part 1

Elliot Silver
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39

Most domain investors would probably agree that the results of live domain auctions have been pretty weak recently. Aside from a few strong sales that have taken place, most auctions haven’t produced the results people hoped to see. I’d like to discuss problems I see in part one and give my advice to improve live auctions going forward.

In no particular order, here are some of the reasons I believe domain auctions haven’t been successful recently.

  • Lower PPC payouts and poor economy affecting domain investors’ spending ability

For a few years, live domain auctions were dominated by some of the wealthiest domain investors. Many of these people and companies were spending money that they earned from PPC revenue. With payouts down across the board, there is less money to reinvest.

Likewise, with the economy in the tank, there is less financing available for domain buyers. People can’t refinance their homes or other property as easily, and ultimately it means less money to spend on domain names. In addition, people are more reluctant to spend money on domain investments, favoring a stronger liquid position to stay protected.

  • The same domain names continue to be offered for sale.

There are a limited amount of top quality domain names that are openly available for sale. Many domain investors don’t wish to list their names for sale in a public venue and/or don’t want to set a price for their prized assets. Domain names are on the market longer, and consequently, even good domain names are allowed to be placed in different live auctions with the hopes that someone bids. Oftentimes, these domain names don’t have lower reserves, and they just sit on the shelf like day old milk. At one time their inclusion made a splash. Now it’s just embarrassing to see the same names at the same prices being auctioned in different venues.

  • People have ridiculous sales expectations.

Let’s face it. Everyone thinks their names are hot shit. No matter how many times Monte or Rick will hammer their sellers asking for reserve price reductions, many people are reluctant to do so. Gone are the days when a bidding war will ensure a domain name sells for what it’s worth or more. People don’t want to lower their price to a point where one bid will lead to a very bad sale.

Domain owners have lost faith that buyers will show up, and they are unwilling to drop their reserve prices. Auction houses are either desperate to keep certain names in auction with the hopes of drawing some interest (while locking down exclusivity) or they are praying that the needy end user just happens to show up, with all senses lost after being hit in the head with a bag of money.

  • Long exclusivity periods.

People like myself like to sell domain names quickly. I buy as low as possible and sell as high as possible, as quickly as possible. If I have a $20,000 domain name, I can’t/won’t take a chance and lock it up for 60 days because I need to move my inventory to generate much of my income. If the name doesn’t sell, I can sell it on my own, but I am obligated to pay a 10-20% commission. Some people may opt to not honor an agreement, but that’s certainly a reputation killer if not a legal problem. With lower sales rates, it’s not a guarantee that a domain name will sell at auction and it’s more difficult to justify a long period of exclusivity.

On the other side of the business, auction houses need to lock down these domain names. They can’t afford to spend time and effort selling a domain name if the name isn’t committed to them. I know for a fact that the auction houses work hard to sell domain names before and after auctions, so it’s not fair to not commit.

  • Too many auctions and lists not revealed until just before the auction.

There are so many auctions these days that people wait until the last minute to decide where to submit their domain names. This causes domain auction houses to scramble at the last minute to find buyers. Domain buyers have very little time to review their lists. I know the first live auction happened when people simply put names up on a white board, but times have changed and more money goes into buying a domain name.

  • End user buyers aren’t showing up.

Perhaps this is due to the above issue where lists aren’t finalized until the last minute, but it doesn’t appear that end users are showing up as much as they should (has always been an issue). I know that the domain auctioneers spend time contacting potential buyers, especially when it comes to high ticket names, but as any domain investor knows, it’s tough to get end users to buy. They have to want a specific domain name at the offered price at the time that it’s auctioned.

In addition, end users may not trust domain auctioneers as much as they would trust other auction companies who are more well-known. This industry is still young, and end users may not be   familiar or comfortable bidding at a domain auction held by a company whom they’ve never heard about. The registration process (and maybe previously a fee at Traffic I think) could also be a deterrent. Further, Snapnames still doesn’t allow remote bidding from a Mac (unless it has Windows).

  • Cronyism and friendships can impact auctions

In the domain industry, there aren’t thousands of active investors. There might not even be several hundred – I really don’t know. Compared to other industries, this one is pretty small and there are a lot of people who are well acquainted with each other. Many auction participants are both buyers and sellers. Auction companies want to accommodate their best clients, and sometimes that means accepting domain names that shouldn’t be in auction – or should be priced lower.

  • Too many domain names in auctions.

There are far too many domain names accepted in the live auction, and even more in the silent auction. I know a 4 hour auction isn’t unusual in the car world, but with sales down, it seems to drag on forever. Likewise, it’s difficult for buyers to wade through thousands of silent/extended auction domain names. People don’t want to put low reserves on domain names that might get a couple of looks and maybe one bid.

  • Automatic entrance into silent/extended auction.

It seems that most domain names that are submitted to the live auction but don’t make it are relegated to the silent/extended auction. IMO, these auctions are stuffed with bad domain names, and it makes it difficult to find good ones at good prices. Truthfully, I barely even look at the extended/silent auctions, and I am sure others feel the same way. As a result, domain owners are reluctant to put low prices on domain names that might end up seen by just a few people.

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Ultimately, I think people really lack confidence in live domain auctions right now. As a result, there are lower quality domain names with higher than acceptable reserve prices. In an effort to stem the bleeding, more (lower quality) domain names are being auctioned in the hopes of a sale, and buyers and sellers are frustrated. I don’t think most of these issues are new, but they are exacerbated by other factors.

Tomorrow, I will post some of my suggestions for how to improve domain auctions, but I would like to hear what you think about the current problems with domain auctions.

FitnessTrainer.com: Why I Stopped Bidding & Some Buying Advice

Elliot Silver
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15

Fitness TrainerWhen I was looking at Snapnames the other day, I saw an auction for FitnessTrainer.com, and I placed a bid on it. The domain name went to auction on Thursday afternoon, and the auction continued for a couple of hours after its original close time, with 5 minute extensions following last minute bids. FitnessTrainer.com ended up selling for $20,888.

Had I won the domain name, my plan would have been to build it in a similar fashion to DogWalker.com and CatSitter.com. I opted to stop bidding for a couple of reasons. First, the price was more than I wanted to spend on a directory domain name right now. Second, and the reason I am writing this post, is because I wasn’t sure if enough people were called (and known as) fitness trainers.

When buying a great domain name like this, it’s important to dig deep into the numbers and actually think about the usage of the name. There are a lot more listings in Google for “personal trainer” than “fitness trainer,” and the Adwords keyword tool indicates that many more people perform searches for fitness trainers than personal trainers. When you are buying a domain name like this, think about the term and how it is used in every day by the people who will be visiting the site and/or advertising.

I still think FitnessTrainer.com is a solid name, but I couldn’t justify the price because so many people refer to fitness trainers as personal trainers. At the end of the day, there would still be great interest in the FitnessTrainer.com domain name and term, but my model wouldn’t have been able to justify the price.

Photo: http://www.flickr.com/photos/positivelyfit/ / CC BY-SA 2.0

Don’t Give Up a Deal Over Pennies

Elliot Silver
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3

It’s always important to get a great deal when trying to buy a domain name to flip, but if you like a name at a rough price range enough to consider buying it, don’t fret over a few percentage points. From experience, I hesitated on a deal that I now regret not making.

I recently tried to buy a domain name for several hundred dollars, and the negotiation came down to the owner wanting $100 more than I wanted to pay.   With escrow fees, it would have been less than a couple hundred dollars more, but I thought (and still think) the name is worth between $2-3,000 on a quick flip. I ended up walking away from the deal because I thought the seller would figure that having my cash would be better than keeping the domain name he hasn’t sold in 8+ years of ownership.

It’s needless to say, but I checked the Whois today (several weeks later) and the domain name has changed hands. Perhaps someone else saw that the price was lowered or maybe the owner became motivated to sell it. Whatever the case is, I am sure I couldn’t buy the name today without greatly overpaying. It’s my loss, but an important lesson for people who are privately buying domain names.

If you see value in a domain name, get the best price you can, but don’t fret over a couple of percentage points. If the domain name is worth what you think it’s worth, and you are fairly close to buying it but just can’t hammer out the exact deal you want, think about what happens if the owner sells it to someone else. If you’d regret it, you should probably jump on the name.

Domain names are one of a kind, unique assets. When they are sold to a developer, end user, or unmotivated seller, you will lose your chance to get a deal. If your gut says to buy it, don’t hesitate to pull the trigger, even if the deal isn’t perfect.

Adding Value to Domaining.com

Elliot Silver
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7

I emailed this to Francois yesterday but want to know your thoughts on this idea. I think a way to add value to Domaining.com is to allow people to post comments on articles, similar to a site like Drudge.com. IMO, the more people that come to Domaining.com to actually stay there, the better for generating revenue.

I know there are websites and bloggers who either don’t have a comment section or they simply don’t approve comments that they perceive as being negative. One reason I don’t generally post comments on other blogs is because I don’t want to write a well-thought out comment only to see it sit in the moderation queue or get deleted because the post’s author doesn’t like comments that aren’t in line with his/her thinking.

As mentioned in the past, I approve just about everything unless it’s threatening towards someone, is too vulgar to post, has obvious spam, or is otherwise derogatory.

This would add value to the Domaining.com website, and people would visit to see what others are really thinking about certain articles where comments are heavily moderated and/or censored.

The downside for Francois is that he would then have to become a comment moderator himself, which is something he may not wish to do. This doesn’t take a lot of time, but if people abuse the system and post hateful or incendiary comments that are just inappropriate, it could become time consuming and burdensome.

If the language barrier is an obstacle in getting advertisers, Francois might also be better served by hiring a sales rep who is fluent in English. There are plenty of people looking for work, and I am sure he could find a hungry sales representative who would work for commission.

Domaining.com drives somewhere between 8-14% of my traffic each month, and I appreciate that. As the old saying goes, what’s good for the goose is good for the gander.

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