Merlin Kauffman is another new contributor to this report. Merlin is one of several young
guys who have had tremendous success in this business
despite entering the field well after the pioneers had swept up
most of the great domains in the 1990s. Merlin has been
among those who proved, and continue to prove, that there
are still major opportunities and room for growth in this
business for individual investors.
"2010 was a year of tremendous
growth for myself as an individual investor and also a year
of tremendous maturation for the domain industry as a whole,
spurred primarily by the ascent of alternative monetization
methods, such as 0 click redirections, direct affiliate
relationships with major end users, and co-development
partnerships," Kauffman said.
"My business strategy has become
much more creative in 2010, as I have begun to
leverage my domain portfolio through co-development
with leaders in specific vertical markets; for instance, I
and have partnered with one of the largest players in the
personal data services industry for them to develop a
comprehensive people and background check search engine. I
own a winning name, they have a winning development strategy
and now the traffic is skyrocketing
- and we're both winners."
"Another newly adopted strategy
for me is to stop selling names, and whenever
possible, lease names out with the option to buy and
become a partial owner of the company which is leasing the
domain. I entered a partnership with a San Francisco based
startup this year,
| leveraging my domain iLoan.com
in a deal like this. The key to these successes was
co-operation and being realistic - many people pass up
strategic partnerships like this because they overvalue
their domains, waiting for a million dollar offer. We need
to start building stable businesses today with
reliable partners, and stop dreaming of a day that will most
likely never come."
"Looking ahead to 2011, I think
that there are more opportunities than ever before -
however, I think there are two challenges which still stand
in between most domainers and these opportunities - these
challenges are greed and overoptimistic valuation of
your own domains. Domainers tend to think their $10,000
domains are worth $100,000, and their $100,000 domains
are worth $1 million. If we keep thinking like this,
we may never take money off the table from many
domains. In 2011, it's time to become realistic, and
realize that it is better to partner with someone to develop
a site that you later sell for $2 million, which you
split and end up with $1 million of, than it is to wait for
a $200,000 offer which may or may not ever come. Most
domainers simply do not have a development skill set, or the
patience and dedication to stick by a single project for
months on end; this is why it is important to partner with
companies and individuals who are passionate and dedicated.
May 2011 be a prosperous and abundant year for everyone!"
While Larry Fischer is a new contributor to our
State of the Industry Cover Story this year, he is one of
the most seasoned investors in the domain industry. Larry, who
blogs at DirectNavigation.com, has has a hand in
buying and selling many premier generic domains and, with Ari
Goldberger, was also a co-founder of SmartName,
the monetization company they later sold to NameMedia.
"I found 2010 to be a very
interesting year," Fischer said. " The economy
improved, stock prices went up and so did domain prices.
A few years back, VC-backed companies were looking to do
domain acquisition deals based only on multiples
of PPC revenue. Today, that no longer seems the case.
More and more generics are selling based on brand value
alone, and at greater amounts than they have in many years.
I am aware and have participated in a number of 6 and 7
figure domain deals over the past 12 months. Unfortunately,
most of the larger domain sales go unreported due to NDAs."
"Another hot growth area that
emerged last year was local search. Many search
outlets, Google being the largest and most
| see the local search market as the next big
playing field. Daily group deal buying sites are part of the
local search mix. It was reported that Google recently
offered $5-6 billion for local coupon site Groupon
(which was turned down). Expect to see an explosion of these
types of sites, which promote localized deals."
"For 2011, I predict that generic
domain sales and prices will continue to be strong.
Many of us in the industry will be focused on the new
TLDs. I am sure there is plenty of money to be made in
this arena. However the price of admission is 6 figures just
to bid on an extension. I think some of the larger
companies will be buying their company name as a TLD. Others
will be buying industry keywords such as .Insurance.
I would not be surprised if Quinstreet ends up owning
.Insurance as they have invested heavily in strong insurance
related generic keyword domains in the past. Of course some
groups will be buying these TLDs to operate registries to
offer the registration of second-level domains and with the
opportunity to reap additional profits from the sale or
auction of the best domains within a TLD at premium prices,"
No discussion about domain sales and monetization
from an individual investor's point of view would be
complete without hearing from the Domain King, T.R.A.F.F.I.C.
conference Co-Founder Rick Schwartz. The negotiating
skills he has demonstrated in completing numerous six and
seven figure sales, including Candy.com at $3
million, are legendary.
In looking back at the key events of
2010 Schwartz said "I think there were many of them
last year. We can start with Facebook and Social
Media. That is a game changer. Everyone is now in
the game or about to be. This was an easy entry for business
and a way to get up to speed in a quick fashion. Facebook
and Twitter icons are everywhere, but while some think that
is a bad thing for domains I strongly believe the
opposite. At the end of the day folks want to drive
traffic to their domain name. Their website. Their
business. The domain name corresponds with a brand for
the older established businesses. For newer
businesses. The domain is the entire enchilada. Their name,
their brand, their product their identity, their location.
"Next is the way Main Street embraced
online sales for Christmas. Compare that with a few
years back when they spent all their money online scaring
everyone about this or that. They finally BEGAN to
understand how to use the Internet to HELP their physical
store and for the first time we watched the physical store
drive traffic to their website and their website driving
traffic to the physical store. Hallelujah!! They are getting
it. How do I know? Because they are passing markers on
the highway that prove they are all on course of where they
should be. Just 10 years slower than they should have
been!. That’s one slow bus folks," Schwartz laughed.
Looking ahead to 2011 Schwartz said,
"The challenges I see are mostly from within the
Industry and within us as individuals. That said I
think 2011 will be a fantastic year but it may need a
few months to rev up. I would say once we get past April
15th, we will see a very aggressive business climate
return. I don’t know if it will be sustained or just an
oasis in a desert with some more bad years to come. The mood
is good, but the numbers are still painting a different
picture. Lots of fragile areas throughout the economy and
"I do see a very robust year
for domain sales. BIG sales will happen. A lot of them.
The time is ripe for big deals. My only suggestion is
don’t sell a domain for $500 when they (the buyer)
had a $500,000 budget. And I still predict that Ron
Jackson will report a record breaking year for domain
sales. Even a stopped clock is right twice a day. So I am
bound to be right eventually!"
"The bottom line is that business
will now invest a lot of money online. What they have
learned in 2009 and 2010 allows them to comfortably earmark
more and more funds to our sector and less and less to other
sectors. As far as I am concerned, the real Internet race
starts right now," Schwartz said.
Neu, Co-Founder, T.R.A.F.F.I.C.
T.R.A.F.F.I.C. Co-Founder Howard
Neu wears multiple industry hats. In addition to
staging T.R.A.F.F.I.C. conferences with Rick Schwartz, he is
a noted domain attorney as well as a domain investor and
developer. So, as you might expect, Howard's comments on the
past year and what lies ahead takes all of those areas into
domain sales and monetization Neu said, "It seems that
there are more "structured" transfers of domains
than ever before with Leasing being the most popular,
but also % of revenue generated has replaced cash up
front in a number of large sales. Also, there have
been a number of payouts over 12 or 24 months with the
Seller hanging on to ownership or, in the alternative, a 3rd
party escrow agent (such as me) holds the domain in escrow
until all payments are made."
to the terrible downturn in payouts by PPC companies,
most Domain Investors have sought other monetizing
solutions, some of which are good (depending upon the
domains) and some not so good. Alternative companies
like Epik, WhyPark, SmartName,
and ParkLogic have picked up the slack, though a
number of the results have not proven as bright as they
a key legal issue for domain owners, UDRP
disputes, Neu had this to say: "Insofar as UDRP
proceedings are concerned, the Doctrine
of Laches seems to have caught on this year and
though no decisions have been made in favor of Respondents
based SOLELY on that Doctrine, it was mentioned a number of
times in cases where the Complainant dragged its feet in
filing the action and the Panels found other reasons to deny
ahead to 2011 Neu said, "With GoDaddy promoting .CO
at the Super Bowl, with ICANN having Bill
Clinton as its Keynote Speaker in San Francisco, with new
gTLDs coming out and with Domain auctions in a state
of flux, I believe that 2011 will be an exciting year
and profitable for many who take advantage of the trends
that develop. From a multitude of Domain conferences
in 2010, there are only 3 big conferences in 2011: DomainFest
in February, Domain Roundtable in March and T.R.A.F.F.I.C.
once again in sunny South Florida in October. There is
therefore a threefold opportunity to do business
internationally and improve income streams through the
networking provided at each conference."
Keating, Attorney (Renova
Paul Keating of Renova Ltd.
is one of the domain industry's most well known and
respected domain attorneys. For insight into the key legal
issues domain owners need to be aware of you couldn't ask
for a better source.
largest worries for the space are the continued shrinkage
of the rights of domain owners," Keating said.
"We have seen the following in 2010: (a)
continued aggressive behavior by the IP lobby; (b)
aggressive enforcement by governmental agencies (domain
seizures and the like); and (c) the continued pro-tm lobby
in the ADR providers relative to UDRP matters.
The TM lobby has now joined with the larger IP lobby and
they continue to push legislation “suggestions” to
governments throughout the world. The recent
aggressive behavior of governmental agencies has been
astounding in both breadth and lack of legal foundation.
An example is the seizure by Homeland Security of
hundreds of domain names based upon legal claims/evidence
that can only be said to be questionable at best.
The TM attorneys have gotten in on the act by obtaining
“injunctions” that require the turn-over of domain
continuation of the pro-tm lobby in the
| ADR provider context
can be seen in UDRP decisions such as Jappy
v. Satoshi in which a 3-member panel recently
resuscitated the Octogen decision after the panel in Natternmann
v. Sanofi-Aventis rejected it (with the author of
of the above will get much worse for domainers,"
Keating predicted. "The industry really needs to start standing
up and voicing its concern. I and others
try our best to “right the wrongs” when we see them.
For example, I am funding the appeal in the Parvi.org
matter. I know others (Nat Cohen)
have also pitched in regularly to litigate or fund
litigation. However, this is no longer something that
can be left to a few of the more vocal individuals in the
IP lobby doesn’t remember (or recognize) the benefits they
have obtained. I still remember the pre-UDRP
days when disputes were resolved in formal (and expensive)
litigation. Not being satisfied with the UDRP they
clamored for the “express” UDRP (which they do not seem
to use). They forget that the UDRP has essentially
granted them global trademark rights even though
their “rights” are inherently national. They
continually complain about the cost of enforcement and
continue to seek more automated results that are founded
upon the presumption that their “rights” are
paramount. They forget that trademarks are an
exception to the language of the 1st amendment. They
seem to amplify the phrase that “no good deed goes
| there is nothing that is enough.
Without a balancing force we may well see 2011
develop into a continuing erosion of the rights of
the domain side, I see an unfortunate trend of service
providers trying to carve out their own exclusive niche.
Examples of this can be found in the recent 2010 actions of GoDaddy
to restrict access to their WHOIS and filing a patent
application relative to obvious innovations to a system long
in place and long relied upon by everyone. It seems
that everyone will soon be taking cues from the IP lobby and
the Internet is at risk of becoming ever-more restrictive,"
Goldberger, Attorney (ESQWire.com)
heard it said of some people that they are so well known
they need no introduction. In the domain industry, such is
the case with Ari Goldberger (the subject of our June
Story). As an attorney who has won countless key
decisions for domain owners threatened with the loss of a
valuable asset, Ari has earned his reputation as one of the
very best in his business. Here's Ari's take on the key
industry trends from a legal standpoint.
an attorney I continue to see increases in UDRP case
filings," Goldberger said. "I believe this is a
good sign for domainers because it demonstrates the value
and importance of domains. Many of the cases are a
direct result of the continuing growth of Internet commerce
– domain names being the door to the marketplace.
For example, I am seeing more UDRPs brought because the
alleged offending domain name has a high or higher Google
ranking than the trademark owner. It’s cheaper to
file a UDRP, grab the high-ranking web site than pay someone
to search engine optimize it. I am also seeing an
increase in UDRP cases brought because infringing PPC ads
have appeared on parked domain web pages.
Domainers should be aware of what ads are showing up
on their domains."
the flip-side I have also seen increased recognition by UDRP
panels that PPC parking sites constitute bona fide and
lawful use of domain names. In addition to the legal
trends I have seen continued high-level interest in premium
domain names by end-users and recognition of their high
values with very large offers. This is a good news for
domainers who are, otherwise, seeing greatly reduced PPC
payments over the past couple years."
respect to the prospects for 2011 Goldberger noted, "In
2010 domainers saw across-the-board decreases in PPC
revenue. This opens the door for alternative
monetization solutions in 2011 as reduced PPC revenues lower
the opportunity costs of other opportunities which may not
have made economic sense when the PPC money was better.
Improved domain name monetization applications can have a
positive effect on all domain names, raising their
profile among consumers and end-users alike."
for the legal trends, I believe that the increase in new
TLDs will fuel additional domain name disputes as
stakeholders move to protect their brands in an ever-growing
namescape. While not directly related to domain names, I
also see an increase in legal issues associated with
Internet personal communications. Identity theft,
privacy, defamation, cyber-harassment, and fraud are but a
few of the legal issues that will continue to increase as
more and more commerce and discourse moves online,"