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Managing Your Domain Business

Subscribe to Elliot's BlogIn order to weather this economic storm, I have been spending most of my time and some of my money on developing and re-developing my websites. I believe it’s become very risky to invest in some lower to mid-priced domain names with the hopes of quickly flipping them, so instead of buying a $3,000 name with the hopes of selling it for $5,000, I am now spending that money on developing my sites (such as Burbank, Lowell, Secaucus and TropicalBirds). Yes it most certainly can still be done obviously, but it is more difficult.
I believe businesses will always need to advertise, and Internet advertising is a trackable way to advertise. Advertisers can determine campaign ROIs and adjust   advertising expenses based on this. My sites will offer affordable advertising opportunities, that will be more economical than Google Adwords campaigns in most cases – or at least that’s the idea. The more advertisers that sign up and create custom landing pages within Burbank.com, the greater the traffic will grow and more value all advertisers will receive.
At this time, especially given the tax burden faced by most domain owners who consider their domain assets inventory, it isn’t wise to spend a ton of money on domain names that may or may not sell quickly. I am fortunate to not have registered a considerable amount of new domain names, so I don’t have to make the renew or drop decision, but I know there are plenty of people out there who are doing that right now. While it might not feel good to have to do this, I believe it will lead to a trimmer and more agile company.
It’s tough out there right now, and every decision you make could have a major impact on your company’s bottom line and/or its ability to survive. For me, developing strong advertising venues via development is hopefully a way that will allow my business to survive and ultimately thrive once the economy is more stable. Perhaps you need to look at your domain assets to see how you can better stay afloat.

Creating a Succession Plan

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Subscribe to Elliot's BlogI spent much of yesterday afternoon at a chemotherapy center with my Aunt, which made me think about a few things, including my own mortality. While I am thankful to be healthy, life changing events can happen at almost any time. Being a domain investor/developer puts me in a position that is different from many others, and I think we need to think about a succession plan should unexpected something happen.
The most important thing is to make sure a loved one (wife, child, brother, parent…etc) or other trusted person knows about your business. They should know details such as registrars, domain holdings, passwords, email accounts, forums, parking companies, partners, clients, bank accounts and other details. If something happens to you, it’s important that someone trusted knows what to do with your business. Here are some things I recommend:
Let your trusted person know which registrars you use, the account numbers, and the passwords (kept in a safe and secure location). If you have an Account Manager at the registrar, the trusted person should have your AM’s email address to make sure domains are paid up and accessible if liquidation is necessary.
For those of you who develop your domain names, a trusted person should know what agreements you have in place with advertisers – or at least know where to find your agreements. While advertisers and partners will be understanding if something happens, money is money, and they will eventually expect to have their agreements honored or their payments refunded.
For those of you who rely mostly on PPC, a trusted person should know the contacts at your parking company. You will want to make sure your revenue continues to be paid regularly.
Your important domain contacts, clients, forum login names, and other industry accounts should be known to your trusted person. If liquidation is necessary, you’d want the names to sell for the most money possible, so it’s important that the trusted person know where to sell them.
Your sales and tax records are important things that your trusted person will need to know where to find. The government will still expect to be paid based on your sales from that year no matter what happens to you.
I am sure you will want your trusted person to take over your business or to liquidate your domain names, and they will need to know how to do so. For those of you who have full fledged businesses with strong PPC earnings or developed website earnings, the business should probably be maintained or sold – rather than just the domain names being liquidated. When deciding, you should take your trusted person’s interest in the business into consideration. If you would want your domain names to be sold, you should let your trusted person know what names you own, which are most valuable, and how to sell them.
While your business isn’t the most important thing that someone will be thinking about if something should happen to you, it is important that someone know what to do in the event of an unexpected life changing event.

Selling a Domain Name for $1 Million

Subscribe to Elliot's BlogI was thinking about the disconnect between domain owners and end users today and trying to think of ways to bridge the gap. While it may be a bit of an unrelated tangent my mind went on, I came to a simple but accurate conclusion about selling a domain name for a lot of money.
The only way you can sell a domain name for $1 million is by walking away from $500,000. It’s a simple statement, but I believe it’s true.
Several years ago, I was playing Double Down video poker on a cruise. If you’d win a hand, the game would show 5 cards. One card would automatically flip for the player and the player had to choose the game’s card. If you win you get a certain payout, and if you lost, you would lose everything you had earned. Every time you got it right, your winnings would double. You could either double again or collect your winnings.
The long of it is that I won $1,200 by doing this several times, and when I stopped and got 3 buckets full of quarters (and a Jackpot t-shirt). Instead of thinking about how cool it was to win, I only could think about what could have been if I hadn’t stopped. A couple hours later I was playing and had winnings of $1,600 by doing the same thing – only to lose at $3,200.
Point of this is, you never know what you can ultimately get for a domain name if a buyer is motivated enough to buy it. It takes guts to turn down a $500,000 offer, but you won’t get a million dollars for your domain name if you don’t walk away from $500,000.

Domain Investors Face Liquidity Problems

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Subscribe to Elliot's BlogAny way you look at it, the economic situation is impacting nearly all domain investors. Less PPC and somewhat lower sales means even less revenue for the many in the industry. Without these two revenue streams being at full strength, it’s getting more difficult for domain investors to pay bills. Since you can’t pay your bills with domain names, liquidity problems are something that many domain investors are facing.
If this is the case for you, there are at least two viabile options – both of which involve using your domain names as leverage. Domain Capital and Digipawn are two companies that are willing to give loans to many domain owners with their domain names as leverage. These companies are domain experts, and they are able to value your domain names for lending purposes.
If you are in need of a loan, visit these companies’ websites or drop me a note and I will send you an introductory email.   I don’t work for either company, nor do I receive a commission for referrals.

Part Two: So What is a Click Really Worth?

Subscribe to Elliot's BlogWith apologies for stealing Mike’s title, I wanted to show another example of the great point he made (and one that many others have also been saying). The main reason why I am developing some of my websites is because I want to generate the most revenue per visitor.   I believe there are 4 levels of doing this – the top 3 of which can only be harnessed by developing a domain name rather than parking.

  1. Selling your product or service to visitor
  2. Selling another company’s product or service and earning a commission
  3. Selling advertising space directly to a company who sells that product or service
  4. PPC advertising

While I was reading Mike’s post about what a click is worth, I received the following email from one of my developed websites:

Hotel Name: Doubletree Hotel
Note: There may be a time delay for this reservation to be reflected in the property’s reservation system.
Map/Driving Directions Local Weather

Reservation Details
Check-in date:: Friday, October 10, 2008 Check-in time: 1500
Check-out date: Sunday, October 12, 2008 Check-out time: 1200
Number of rooms: 1
Number of nights: 2
Number of adults: 2
Room description: 2 Double Beds Non Smoking Non Refundable
Rate Information
Room #1
Rate type:
Rate breakdown: 134.10 USD for Friday, October 10, 2008
134.10 USD for Saturday, October 11, 2008
Total rate: 268.20
Taxes and fees: 42.90
Total (1 Room): 311.10
Payment Information: $311.10 USD charged to your credit card to secure this special rate. This amount includes room rate, tax recovery charges and applicable service fees and extra person charges, if any. Hotel rates are based on double occupancy unless otherwise noted. Charges for extra persons and / or children may apply and will be due directly to the hotel at the time of check-out.

It can be very difficult (if not impossible) for a domain investor to build and manage a completely separate company on one of his domain names (see Bobbleheads.com as a great example of a business run by a domain investor). A business owner needs to be passionate about his industry, and running a business takes a tremendous amount of time and effort.
However, there are happy mediums between running a full business and operating a pay per click website. Mike illustrated how a click that would have earned him $1.00 turned into a $300 sale. Likewise, my hotel reservation would have yielded a $1.00 click, but now I made 10-20x that on the sale. While obviously the conversion rate needs to be 10% or higher for this particular sale to make sense, most of my hotel reservations yield greater returns.
Depending on the product or service our sites promote, we really could be giving away the house when we park domain names.

Structuring Domain Deals With Long Term Considerations

Subscribe to Elliot's BlogI’ve heard a lot of mixed views about structuring deals that don’t require 100% payment upfront. Instead, the owner typically receives a payment upon closing and either a profit share or structured payments over time, depending on the success of the company who buys the name. If you can afford to wait to be paid, I think these types of deals are fantastic.
When I was at AIG (accident insurance sold via direct mail, phone and web), many of our deals were structured to benefit the marketing partner more on the back-end in exchange for concessions on the front end.   Our partners knew our group’s track record, the LTV of customers, and they knew a back-end deal could be more lucrative. This allowed our group to spend more on testing and helped our current P&L. Only if the campaigns were successful would we have to pay a greater share of the long term revenue.
For domain deals, I think this could work in the same way. The caveats, of course, are that the buyer has a track record of successful Internet companies and that you retain control of the domain name if the business fails. While the upfront profit may be less, the back-end potential should be set up to be far greater than if someone would pay all cash. Doing a deal like this really requires you to not need the cash upfront, but it could be beneficial if structured correctly.
Many of the largest domain companies and domain venture capital companies have been successfully structuring their deals with less cash upfront and greater back-end considerations. If someone with a proven track record and a solid deal were to approach me, I would strongly consider a mutually beneficial deal structured in this manner.

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