Is it Too Late to Buy Domain Names?

My first time attending a live domain auction was in 2006 at the fall TRAFFIC conference in Miami. It was really an amazing experience. After the first few minutes getting over the “wow” effect of seeing all those folks seated with wireless laptops, bidding paddles and the auctioneer calling prices, I got down to bidding. I decided to get on the plane home to Cayman after "cameras.com" crossed the block and sold for 1.5million (I was too cheap for my own good and didn't win). As we exited [rear], I looked at the faces of all those folks servicing the event. The hostesses, waiters, doormen and security -- they were all awestruck, staring at the big screen and auctioneer. The looks on their faces said: "Can this really be happening?"  All that money changing hands for the rights to a domain name?

I left the building, hopped into my limo to the private field, got on my plane and within 21 minutes of placing my last bid the wheels were up, flying over the Westin, home for Cayman. As I looked out at all the people in cars surrounding the hotel and at the sprawl surrounding the city, I couldn't help but think to myself how early we all are.  Nobody knows about this.  What would all those people outside the building have thought if they could see in like those folks servicing the event?  What would happen if you took a Superbowl commercial and broadcast two minutes of that TRAFFIC auction for all the hard-working world to see?  How would that change the way people think about domain names? The hair on the back of my neck stood up.

There were just a few hundred people in that room who understood why prices on certain names were higher than others; why these names were being bid on at all!  How is that going to change in the years ahead as more information comes to more people?  How are names going to be more important as the next generation starts building websites and as the curtain gets pulled back to reveal the flimsyness of traditional ways to generate traffic (seo, arbitrage, traffic purchase and assorted bags of smoke).

Tonight I got this note from a friend who works around the industry,  (but not directly in it) who also had a "wow moment" recently:

"I hope you don't mind me asking some basic questions for personal reasons, but you [are one of] the most successful individual domainers out there. I've been thinking, especially since the LV Traffic event, that I should start investing in DNs [Domain Names] and build a portfolio. For one thing, it would help me in my work XXXXXXXXXXX, as I would understand XXXXXXXXXXXXXX  on a visceral level. But also, I think I'd be foolish to ignore this investment opportunity -- back in the late 1970s an architect friend of mine took me on a tour of the then-seedy South Beach section of Miami when you could pick up real estate there for a paltry sum, and I didn't, and I don't want to make that mistake with virtual real estate.

My thought is to start out with some secondary domain other than .Com, as I don't want to make the investment [in] a decent .Com address until I've come up on the learning curve. I'm thinking from all I've read and heard from guys like you and Ron Jackson that .US has good upside potential, but I'd welcome your thoughts on that and whether you'd suggest a different TLD to start with.

So my questions are:

1)What's the best way to search for available DNs without having someone else grab it for tasting?

2) Who is a reasonably priced but trustworthy registrar?

3)Which parking service does the best job of placing relevant PPC ads and giving a decent revenue split?

4)Is there some other important question I've neglected to ask?"

The individual who wrote that above is probably the last person I ever expected to write those words. Not because I don't think this person is clever or driven (on the contrary this person is both), just because the individual doesn't fit the traditional 'domainer mold'.  We are going to see so much more of this in the years ahead. People who don't fit the mold coming in to stake their claim. Different businesses will be born selling domain insurance,  providing auction services, management of traffic,  development services, legal services, consulting (and this is by no means an exhaustive list).

My first piece of advice would be to rest easy. South Beach didn't transform overnight. The opportunities will roll out very easily and predictably to those who keep a cool head and understand that the maturation of the industry will take time. Be prepared to act and act diligently (not franticly). I have often compared this entire industry to a slow pitch straight down the middle.

My specific answers to this individual and to any others who care to listen are:

1) Use domaintools.com or betterwhois.com to check for available domain names.

2) Tucows, 'Domain Direct' product is a good (large registrar), so is Bulkregister/Enom.com. These registrars now hold back expiring name inventory for their own media efforts,  however they are large and well funded enough that they don't need to scarf your good names away and make management prohibitive for you. Make sure to leave your name on whois (do not use whois privacy). Take a screenshot of whois at domaintools.com or betterwhois.com so you have evidence of your registration and pay your renewals ahead by several (5-10 ) years. Keep renewing each passing year even though you have already advance renewed to the max (that way you will always be ten years out).

3) Domain Sponsor is one of the most popular services for a reason. Start there and then experiment with all the parking services.  Each name may perform differently at competing monetization services..  Test, test, test.

4)  Follow the money.

The number one biggest thing that most people starting in the domain business fail to look for is cash flow. Money coming in through 'traffic' or 'sales' is the heart of the domain industry.  If you are buying a domain name in a name space other than .com you may as well be digging for gold with a broken shovel. The only .us names I would buy are epic names like usa.us .. mail.us.. (things that people may actually type into their address bar).  Can you speculate in .us names and make money?  Absolutely yes.  But it is easier in .com. I presume Ron of DNjournal does well in .US because it is a sideline to his wonderful DNjournal.com enterprise.  He has a market leading media property who’s cash flow he leverages to experiment in a fine CCtld.

Buy a name like rumcakes.com privately (or via auction) for several thousand dollars and set up a rudimentary parking program or business offering (the service that the name describes).  Then use the profits from 'that' enterprise to double-down on something else that interests you.

When I was 22 I went to LA for six months to try my hand at writing monologue jokes. I wasn't very funny and when I got home, my town looked totally different to me (new businesses, buildings, restaurants).  My friends saw no difference at all. I was disengaged so I viewed things through a different optic. Remain engaged/persistent when things seem difficult or boring and you will thrive the most as the opportunities rain down like pennies from heaven! Pursue something that generally interests you.  If you are not interested and are 'only' doing it for the money, it will be hard to stay the course and remain motivated.

I wish you best of luck new domainer ...  You are still early!   Swing for the fences  :))

Comments

[Drewbert]

>When I was 22 I went to LA for six months to try my hand at writing monologue jokes. I wasn't very funny

Must. Resist. Posting. Obvious. Joke.

But seriously...

If your friend wants to get in closer to the bottom, but doesn't have the big cash, maybe he should look at taking a punt in the IDN market?

The Arabic equivalent of [download].com went for $2500 at auction this week. That's awfully cheap for something that will be a money tree in a few years time.

***FS*** Excellent observation Drew.. and if great IDNs are that cheap maybe even I will have a punt.. Right after I have a 'pint' .. for courage you know.

[Yanni]

*******************************
The Arabic equivalent of [download].com went for $2500 at auction this week. That's awfully cheap for something that will be a money tree in a few years time.
*******************************

That's only because I LET you have it.

I as being nice so we can do that other deal eventually ;)

[Edwin Hayward]

While I know my experience will not "translate" piecemeal across other locales, it's still interesting (and potentially relevant) to look at how the Japanese domain market has been evolving in the last couple of years, in terms of how the wider business community (outside the domainers, who already know all about domains) is responding to the domain challenge.

One trend: more and more ads on TV, in trains, in magazines etc. are suggesting search keywords for people to type in to find the company. They present a "search box" (black rectangle) with a search word or phrase in it, and a little "Search" button next to it. They figured it's easier for their audience to remember a Japanese keyword than an ASCII domain name. IDNs will change that, but that's a topic for a different post.

More significantly, there's a huge rise in the number of companies using their own domains in ads. This may sound very Jonnie-come-lately to folks in the US, but even a couple of years ago, the predominant URL you were likely to see on an offline ad was something along the lines of www4.server.isp.jp/~company/page/ rather than www.domain.jp.

Now, these kinds of "junk" URLs are in the minority... though there are still large companies and large campaigns that seem happy to spend $10,000s to $1,000,000s on ads yet can't/won't/don't know they should fork over $10 for a unique domain name.

Five years ago, from memory, perhaps 1/3 of offline ads had URLs. Now perhaps 80%-90% do, and those that don't are either clear branding ads by large companies, or they've "made do" with one of the fake search boxes I described above.

The secondary market here is still weak, but clearly picking up slowly in line with the dawning realisation that owning a decent, simple domain name will keep paying dividends every second of every minute of every hour of every day of every week of every month of every year, especially if you're advertising outside the Web itself.

[IDNebook.com]

To get a visual idea of what Edwin is speaking of in regards to the companies advertising how to utilize search boxes to find their websites check out this video.

http://www.youtube.com/watch?v=oVuFOjF0d5I

[Rob Sequin]

Frank,

Another great post. When are you going to start charging tuition?

I come to class everyday and learn so much I feel like I should be paying tuition.

Seriously. If you don't want to charge for this great site, put up a paypal donate button and give the money to charity or something.

[Craig C]

Why do you say "Make sure to leave your name on whois (do not use whois privacy)."

***FS*** Your names are with a registrar.. said registrar has a change in business philosophy, or starts to go sideways, or goes public, or changes management. Management says this name is not yours.. rather the 'fine print' in the new terms and conditions reads: "You assign all rights in the name to the registrar" Without the whois you have less proof of ownership.

[RonJackson]

I just wanted to comment on this quote from Frank's "Is It Too Late to Buy Domain Names" post:

"Can you speculate in .us names and make money? Absolutely yes. But it is easier in .com. I presume Ron of DNjournal does well in .US because it is a sideline to his wonderful DNjournal.com enterprise. He has a market leading media property who’s cash flow he leverages to experiment in a fine CCtld."

I don't think I have discussed this specific topic with Frank, but seeing his very accurate assessment in this passage is further evidence to me that he is psychic :-)

With people increasingly looking for local products and services on the internet I do like the prospects for all ccTLDs that represent major world economies. .de and .co.uk are already well established of course. .US has a long way to go to catch up with them, but I am seeing a slow steady build for the American extension. I think my investments in .us have been profitable because I have concentrated (as Frank suggested) on words or terms that exactly define a whole category of highly commercial goods or services or on geo domains (like Reno.us). Even so, as Frank surmised, the profits at this stage are not large enough to provide a sole source of income. It is part of an overall strategy, made possible from cash flow from a developed .com property, to build positions in various sectors that I think have good future potential. If you are just starting out, it would not be prudent to ignore what an overwhelmingly popular brand .com has become - it literally means "internet" to most people, so it gives you a big leg up on success. Some new research from Matt Bentley at Sedo showed that 73% of the dollar volume from all reported aftermarket sales in 2006 came from .com domains. I think there is a lot of potential in some other areas (especially first world ccTLDs), but unless you are already independently wealthy you have to remember that potential doesn't pay today's rent and grocery bills!

[Jamie]

OK, I guess it is better to ask a dumb question than to not ask it, so..

What methodology do you suggest a beginner use in analyzing generic domain names?

***FS*** There are no dumb questions.. well hardly any :) Look for names in the broader context of what they represent and in correct tense. Go to Google and search for that. Think: overture apart etc etc.. Edwin posted an interesting set of tools and instructions previously.. use the blog search find that comment and utilize those tools ;)