Domain Industry News

Adapting to the Changing Internet Landscape

Back from a short trip to the beach. I’ve been reading quite a bit on the new vanity TLDs, and the best conclusion I can come to is that nobody really knows for certain how things will play out. Neither the people who are vociferously stating that .com will always be king (myself included), nor those who are saying that new extensions will cause major sweeping changes to the Internet, really know for sure whether their opinions will be accurate.
What is for sure is that some people will take a big financial risk with these new extensions and some people will remain on the sidelines. In five years, there will be some obvious winners and there will be some obvious losers, but the answers will not be seen over night. I am eagerly observing from the sidelines for now, observing what my friends are doing, getting ready to make changes to my business model if they are necessary. Change is essential to growth, and being able to adapt to industry changes is fundamental.
The domain industry has changed quite a bit, even in the five years that I’ve been involved in the industry. The one constant thing is that the people who are able to adapt to the changes and work within the new parameters are those who are successful. While my thinking about .com may be inaccurate, I (and others) will still manage to do well if we are able to notice changes quickly, and are able to adapt to these changes rapidly. Just because I didn’t buy my first domain names in 1995 doesn’t mean that I wasn’t able to be successful. I found the industry later than many, but I learned as much as I could, took some risks and the rest is history.
It is great to see all the dialog about the new extensions on domain forums, blogs, and other news outlets. We are at a time of major change in the domain industry and in the history of the Internet. If you are reading this blog and other domain resources, it is likely that you realize how important this time is for all of us. Pay attention to the things going on in the industry, watch the industry veterans and media companies to learn about their plans, and invest wisely. You don’t have to be a trendsetter to make money, but you have to be able to adapt to the changes to avoid becoming obsolete.

Traveling South Today

I will be traveling south on business today. Back tomorrow.

Props to Andrew Allemann at DomainNameWire.com

Because Ron Jackson does such a great job reporting domain industry news on DNJournal.com, I think one of the most under-recognized people in the domain industry is Andrew Allemann of DomainNameWire.com. Andrew has been reporting domain industry news since 2005, and he is always the source of great domain information. I’ve met Andrew once in person and had a few phone and email conversations in the past year or so, and I wanted to take a second to give him props. DomainNameWire.com is one of the first domain news outlets I read in the morning, and I appreciate Andrew’s coverage and dedication to the industry.

Thought Convergence Acquires Name Intelligence

Thought Convergence, parent company of domain monetization leader TrafficZ, recently announced the acquisition of Name Intelligence, parent company of DomainTools. In a press release issued this morning, the deal was announced, although the price was not revealed. On Jay Westerdal’s blog, Jay added:

“We are going to have more resources at our disposal now to focus on bigger projects, the synergies in this deal were awesome. I would not have signed onto the deal unless it allowed DomainTools to better serve the entire Domain Ecosystem. I will be joining the board of Though Convergence and look forward to working with the entire team in both LA and Seattle. The integrity of our DomainTools data is not in jeopardy with this deal and DomainTools website will remain as a trusted third party to everyone regardless of their affiliations.”

It should be added that DomainNameNews.com first reported that a deal had been reached a couple of weeks ago, although it was publicly announced this morning.

Why Companies Are Selling Domain Names

I have seen various blog posts and forum commentary discussing the recent listing of large quantities of domain names by various domain companies and individuals. I can’t speak on behalf of anyone else, but it looks like many domain owners are in the midst of evaluating their portfolios. Companies and individuals have been sifting through their portfolios, choosing names for development, names that are earning their keep in PPC revenue, and trying to sell the other names that aren’t performing well and have little intrinsic value to them.
In the past several months and years, many companies and individuals made large portfolio acquisitions. When a portfolio of thousands of domain names is purchased, there is relatively little control over what is included in addition to the gems of the portfolio. Oftentimes a domain owner will include swaths of unprofitable names in a domain sale, as it will help increase the overall sales price of the portfolio. As these domain names come up for renewal, the buyer has to make a business decision about whether to keep the underperforming names, let them expire, or try to sell them.
A domain owner needs to decide if an underperforming name is worth keeping, as it could be worth quite a bit if developed. There are many fantastic generic domain names that are parked, but they don’t generate a ton of revenue because traffic is light. When there is tremendous competition for certain keywords, parked pages might not yield significant traffic if there aren’t links or type in traffic, but the name might be strong nonetheless. For some companies, a valuable domain name on paper isn’t as valuable as cash in the bank. Therefore, selling these domain names is the best option – especially for second tier names that might be great for a smaller portfolio.
With the cost of full-scale development being expensive, it makes sense to be picky about which names get developed. Some names (like typos) get great traffic and generate revenue, but would be silly to develop. In this case, it’s better to keep them parked and possibly list them for sale at a generous revenue multiple. The worse case scenario is that a link is created on a respected website (like Afternic), which could be of passive value to the name.
With tremendous uncertainty in the domain market as well as world economic markets, many domain owners have been using this time to evaluate their holdings. If a domain name wouldn’t be good for development, doesn’t generate PPC revenue, costs $7.00 per year to renew and may possibly be a legal liability, there really isn’t a reason to list names for sale. One person’s junk could be another’s treasure. I think it is a great move to sell names that aren’t worth the expense.

State of the Domain Industry

DNJournal is reporting that Q1 2008 sales blew away Q1 2007 sales in terms of average sale price and dollar amount of domain sales. This is good news for the domain industry and would indicate that the domain economy is in good shape. A few weeks ago, I was one of the people who stated that the domain industry was in the midst of a slowdown. I still feel that way today, despite the positive news.
I believe that it is more difficult to sell second tier domain names than it was just a few months ago. I am not talking about names like NewHampshireCheapInsuranceQuotes.com or something crazy like that. I am talking about very good names that aren’t top tier names like Funding.com or Widgets.com. From my experience, people aren’t spending as much on the second tier names than they were previously. If the name doesn’t fit into someone’s development plans or doesn’t make strong PPC, many buyers are reluctant to spend the money on these names.
I have also found that there are less buyers now than there were a few months ago. Unless a domain name is on the market at a great price, it is likely to not sell without a strong price drop. Many people (myself included) are focusing on developing their domain names rather than acquiring domain names. Sure people are buying names if the prices are great, but I see less people spending large sums on good domain names, focusing on what they have rather than new acquisitions.
One source of high value sales is on the drop auctions. As great as the value of these auctions seem, there aren’t a ton of people spending big bucks on these auctions. If 2 or 3 of the high value bidders decided to buy less dropped domain names, we would see a huge drop in sale prices. As they say, all it takes is two people to make an auction. If one bidder drops out, the result will be a significantly lower sales price.
Although I still believe we are in the midst of a market slowdown, I am bullish on the longterm prospects of the domain industry. I continue to buy domain names for development, but I think it’s important to maintain a strong cash position.

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