Rick Schwartz Discusses Leakage

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It is generally assumed that operators of websites on non .com domain names will lose some traffic to the .com domain name. Even savvy Internet users can accidentally navigate to a brand matching .com domain name instead of the correct domain name. Depending on how the .com is being used, lost traffic can either be a relatively minor issue to a big problem.

A couple of days ago, Rick Schwartz shared some data involving one of his .com domain names where a non .com TLD is being used by another entity:

Rick has the domain name parked with pay per click advertising, and the domain name reportedly earned $12,000 with 250,000 visits. That’s a lot of traffic.

One major issue beyond traffic is lost email. I have no idea if that would be an issue in this situation, but misdirected email can be a major issue. This is particularly troublesome for companies that compete with the .com domain name. I always think about the counterparty who told me his startup (on a .CO domain name) was having major email issues because I owned the .com. Needless to say, within a few months of acquiring my .com domain name they raised a ~$50 million round of funding.

I think it is becoming much more acceptable for companies to use non .com domain names. In fact, TechCrunch wrote about .XYZ domain names yesterday. Savvy users who are accustomed to reviewing long wallet addresses are more likely to pay attention to the domain name extension. For many businesses though, utilizing a non-.com domain name can lead to a significant amount of traffic leakage.

About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has closed eight figures in deals. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest. Reach out to Elliot: Twitter | Facebook | LinkedIn

12 COMMENTS

  1. There are multiple factors to consider when discussing “email leakage” or “traffic leakage”.

    1. It is unethical to set up catch-all emails to read messages not intended for you

    2. It is unethical (and should lose you the domain) to use any details about emails received as a pitch to potential buyers of the domain

    3. It is equivalent to opening mail in your mailbox that is addressed to the previous owner, or a piece of mail that was intended for your neighbor that ended up in your box. Just because you have access to (and control of) a mailbox, it doesn’t give you the right to open every piece of mail that arrives there.

    4. There are different types of people who are mistyping domains/emails. Some of those folks are careless and would mistype a one word .com let alone a .co or a new G, so owning the perfect .com wouldn’t save that traffic. Admittedly, there are also some names that people will continue to mistype and may be a poor choice by the business to brand on such a name.

    5. Just because Schwartz is able to make 12k or 25k from traffic he seems to admit is intended for another single business (which is ethically questionable and a little strange that he would boast about it, unless it’s to pressure the intended business to pay up, again unethical) this doesn’t mean that the $12k or $25k is the value of the lost business. The lost business could be more or less. Analysis of where the traffic is all type in, or link clicks, what is the bounce rate? How optimized for a link click escape is the landing page? Do the links/ads on the page match the industry of the other business he believes they are trying to visit? Or are the links/ads high value and unrelated to the other business? Obviously if I have an e-commerce website for coffee, I’m trying to convert visitors to customers to buy a coffee machine or whatever, I’m not stuffing the page with adult links, or whatever to make a quick 20 cents.

    6. To continue the example, if I’m selling coffee and my brand is koffie.com I may only be making $150-300k a year. Most businesses do not make millions each year. So in this revenue range, does it make any sense for Koffie to buy coffee.com to avoid traffic or email leakage? Probably not. Those readers who jump to the argument of “Well, if he had coffee.com then he’d make a lot more than $300k/year” nothing is guaranteed maybe he can scale to that without coffee.com or maybe he has a bad business model that would fail ragrdless of the domain name.

    7. Here’s the napkin math on #6. Koffie.com would have to pay $3m (let’s say, but maybe more) for coffee.com. That means either tying up $3m of capital for a business that may be making $150-300k per year. And let’s look at the opportunity cost on the 3 mil (or the interest on servicing the debt) – at a modest 5% that’s $150,000 the business is out each year, 3 grand a week, for what? To save some emails from going missing?? From people who most likely are poor spellers? To get a “perfect” match domain that is soul-less – Koffie vs. coffee. One is a brand, one is a valuable domain name but has no heart.

    Better still build a brand, focus on making the best coffee or selling the best dongle and offering the best service and the customers will come. When they love your business and brand, they’ll remember it.

    Domainers being in this space always stare, mouths open at a great domain name and how it was a bargain at $1mil or whatever the price, but you cannot ignore the opportunity cost of buying a domain name for $1mil. At 5% that $1mil domain name is actually costing you $50,000 per year, in fact increasing with compounding) …. forever.

    Yet people complain about a premium new G costing $50 per year or $200 per year, when a $1m .com domain is actually costing you $1,000 per week ($50k per year forever) because of the opportunity cost of tying up that cash.

    Obviously this isn’t something Schwartz, or most domainers will say to companies in their sales pitch. They’ll just talk about traffic and email leakage! Give me a break.

    Steadily companies are figuring this out.

    Note: In fairness and playing devil’s advocate owning coffee.com may be a solid appreciating asset, but there is a risk of unnecessary financial pressure of owning the domain on a business. Most people get into business because they have a passion around the problem they’re solving. Not to create an unnecessary financial burden.

    • “Traffic leakage” is only the one of many reasons to buy a seven-figure generic dotCOM and it’s fairly near the bottom of the totem pole. I spoke to Hotels.com after they paid $5 million to rebrand from HotelReservationNetwork.com who was already hugely successful when they made the jump. I asked them point blank if it was worth it. They said, “We experienced an immediate 19% jump in revenue. You tell me.”

      • David – I agree with everything you said.

        But consider:

        1. iFlirt isn’t a generic and probably isn’t seven figures.

        2. The value of generics is a different issue to discussing leakage on a brandable.

        3. For the issue you brought up, Hotel Reservation Network owning hotels.com is definitely a smart move for them and more lucrative for them than, say Hilton (or another chain), buying hotels.com. Hilton trade off their brand, hotels.com became the brand for HRN – hotels.com becoming a descriptor for what they do – and being the definitive place to book.

        4. Of course they would get a boost in revenue. They spent $5million for something. And to acknowledge the cost of tying up $5million at 5%pa, that would be an ongoing minimum cost of $250,000 per year. Which still may be worth it for them, but it is an invisible cost to owning a high value domain that no one talks about…. yet new G haters will talk all day long about a new G costing $200/year to renew!

        I respect your points though.

  2. Just for clarification for some that remain clueless and unfairly BIAS…………

    Both domains have been owned by me for many MANY years.
    Both of the domains have been parked for many MANY years.

    It was not like I went after the .com knowing they have an INFERIOR .Whatever. Maybe some here do that.

    I did NOTHING unethical or wrong nor have I EVER contacted anyone about a potential sale or I would have mentioned the extention!!

    I am the beneficiary of CIRCUMSTANCE and questionable business decisions OTHERS made.
    I don’t get their email either, So just baseless insinuations by folks with an agenda.

    That’s LIFE and some need to get one !!! Live and learn! If it’s possible w/o bias and worse.

    And I am being 100% PUBLIC and TRANSPARENT about it!!

    Now I am sure someone will complain about my CAPS! :-)))

    Happy New Years!!

    • Happy New Year, Rick! I’ve missed you.

      I never said you went through their emails, but Elliot brought up lost emails and usually someone will mention setting up a catch-all to “sample” emails and activity on a domain. What do you think about this, is it unethical?

      Above you said, “I did NOTHING unethical or wrong nor have I EVER contacted anyone about a potential sale or I would have mentioned the extention!!”
      ^ Well you were talking about your iflirt website weren’t you? The domain is in your tweet. Googling “iFlirt” brings up a website that uses the plural. Are they who you are talking about? Maybe you’re getting the traffic from multiple sites – I only found the plural on a .com with my quick search. If you’re talking about a new G using iflirt in their name, and you benefitting, then I don’t think that your 12k haul is from them in whole – which may make it less unethical – congrats.

      It doesn’t matter if it is this company or another, but you are stating that you have benefitted $12k from their traffic and that it has cost “them” (singular, gender neutral). This is what you said in your tweet:

      “250,000 went to MY iFlirt .COM in 2021. Made ME $12,000.
      How much did it COST them?”

      If folks pause and think about it, there is something questionable about boasting of their leakage for your financial gain, when you seem to believe that the leak is coming from one particular website. It is unethical and depending on what you have on the landing page you have to be careful about trademark infringement and the more serious infraction of passing off.

      Re: superiority – superior comes at a price, inferior comes at a cost saving. Sometimes superior isn’t worth it no matter how much a seller points to traffic leakage.

      p.s. Personally I don’t think you used enough CAPS in you post above. You do YOU!

  3. Some of Matt’s assertions are nonsense, sorry to have to be that blunt. One must be careful about creating morals and ethics which do not exist and are not from God. For example, there can be legitimate reasons (especially for users not for resale) to set up email catchalls. It is not your fault if you discover later the domain was used for email before and start getting some because of that. I have experienced that myself, including for some I bought somewhat recently and now use. And I have done nothing unethical with any such emails that arrive. Furthermore, and perhaps not many in domain investing can relate to this, when you’ve worked in both federal and regional government before, had a security clearance, and your very job was to be entrusted with sensitive personal and business information, it’s not the big deal that one might think it is to people with life experience like that. If you are trustworthy with it, then you know you are, God knows you are, God knows that you know you are, and you know that God knows you are, you know that He knows that you know that He knows you are, and so forth.

    • Don’t apologize for bluntness. It’s the best way.

      However, you haven’t said which of my assertions are nonsense and which aren’t. Would be useful to have that info.

      Also:
      1. I didn’t say catchall emails are bad or unethical.
      2. I didn’t bring God into this.

      Maybe give it another read. And again, I welcome logical criticism and feedback from any domain/IP experts/attorneys as well as ethics professors.

  4. “It is unethical and depending on what you have on the landing page you have to be careful about trademark infringement and the more serious infraction of passing off.”

    First, who are you to judge ethics?

    Second, Rick’s senior rights to the domain name (by his earlier domain registration date) trump the other company’s trademark rights (by their later trademark registration date), so there is no need for him to worry about trademark infringement. He will win in court every time as the judge in the court will deem his rights to be lawful, and yes, ethical.

    • I cannot judge ethics? Andre, that’s just silly. Open your eyes and look around. The whole world is messed up because of hypocrisy and the moral standards or beliefs people claim to have while their behavior does not conform. Start reflecting on yourself and then work through business, government, law enforcement and politicians. Then call it out. Or don’t because “who are you to judge ethics?”.

      Your second point is just wrong based on what I said. I’m not simply talking about a UDRP where his date of initial registration supersedes the other parties first use/trademark – if the only risk was UDRP, then yes he’d of course win, but there are other risks I mentioned. These risks are not necessarily connected to those dates, that are risks outside of UDRP.

      Let me give you an example, start to finish, of what I am talking about here:
      1. I register the domain name ifart.com but just have a landing page with ads on there, I don’t otherwise use the domain name and the traffic would be low because no one is typing it in and no other companies are using that brand.
      2. 5 years later the traffic jumps and I’m making $12k per year out of the blue.
      3. I search the term in Google and I see that there seems to be developed websites/businesses using the brand “iFart” or “iFarts” on the domains ifarts.com and ifart.site
      4. I could keep my mouth closed and enjoy the extra $ that have gone from $0 to $12k not based on my efforts, but the work of one or two other sites, building their businesses… or I could Tweet and comment about how they are idiots and they are leaking traffic! (Why would someone do this?)
      5. #4 could open me up to some risk because I would be acknowledging that I’m benefitting from at least one other companies brand – comments of “leakage” imply that the traffic and $ are undeserved and that folks are arriving at my website in error. Saying this #6 is where the real risk is at:
      6. Now that it has been established I am fully aware that there are 250,000 visitors arriving at my site (many in error, generating $12k due to the leakage), IF there is anything on my site (iFart.com) that relates at all to what is on iFarts.com or iFart.site, IF the colors on the site are similar, IF there is any similarity in logos, IF I start selling any similar products… then there is not only a risk of trademark infringement but also the more serious infraction of “passing off” which involves an element of knowingly, benefitting from confused customers believing you are a website or business that you are not.

      I am not saying that Schwartz is doing this. He likely would never lose a UDRP because of his dates, he likely will not be considered as infringing (or passing off), but he is opening himself up to risk because he seems to be boasting of gaining $12k from 250,000 confused visitors and he has a domain that has no evidence of trade/commerce, so it isn’t a trademark (if we are talking about his iflirt.com). Whereas from a quick search iFlirts.com and iflirt.site have some level of trade providing them some level of registered/unregistered trademark protection) although both sites don’t look like they have a lot of traffic and one site looks absolutely terrible. I don’t think either of these sites even have $10k to buy a different domain, and I doubt that they are leaking 250,000 visitors a year.

      While I don’t claim to be an expert in this field, I do have registered trademarks in multiple countries as well as patents and have gone through the steps of incorporating in multiple countries so have some experience.

      If there are any trademark/domain name attorneys/experts who can comment to my logic above about the risk of talking about gaining from another site’s leakage then I am happy to learn.

  5. Yes, most savvy internet users will be remember the new gTLD, but guess what? The vast majority of the general public is not internet savvy. We see this constantly with our generic and geo dotCOM domains. I’ve lost count of how may times we’ve been threatened legally with some type of infringement only to discover their client was referring to the non dotCOM version of our name and defaulted to ours when trying to recall the brand.

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