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Perhaps
no company personifies the new wave better than Waltham,
Massachusetts based NameMedia. The roots of this
company actually date back to 1999 when Michael Mann (the
subject of a September 2003 Cover
Story in DN Journal) and Brian Taff
led a group that founded BuyDomains.com
to create a secondary market for premium domain names. In early
2005 BuyDomains was acquired by venture capital firm Highland
Capital Partners and private equity firm Summit Partners.
The company changed its name temporarily to YesDirect but
was re-christened as NameMedia last year with the launch of a
strategy to dramatically expand both their marketplace and media
businesses.
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Jeffrey
Bennett
NameMedia President and COO |
NameMedia’s
President and Chief Operating Officer, Jeffrey
Bennett led the joint effort with Highland Capital
and Summit Partners to acquire BuyDomains. We asked him
why they went after that specific asset. “Our investor
group was very interested in acquiring a beachhead of
targeted Internet traffic so that we would have a jump
start to building a new media business,"
Bennett said. "We believed that the domain segment
of the industry was a potentially good source of this
targeted traffic."
"BuyDomains
was one of several alternatives that we considered to
accomplish this goal. A key component was the quality of
the portfolio, strong financials and an ability to build
a sustainable company around the acquisition. We were
also drawn to BuyDomains due to the fact that their
efforts to build a media business was nascent. It was a blank
canvas that we could utilize to build a targeted
media business. Buying companies is easy, the hard work
is integrating them into a new strategy and with an
expanded team. BuyDomains has served as a solid
foundation for us to build NameMedia.” |
You
may have noticed that a lot of new web based companies use the
word “Media” in their name. There is a reason for
that. Countless readers and viewers are currently migrating from
traditional media to the Internet. Advertisers follow eyeballs
and they think in terms of media outlets that can put their
products and services in front of those eyeballs. By labeling
themselves as new media outlets, companies are positioning
themselves to harness the stampede of advertising dollars headed
toward the web.
One
thing that sets name NameMedia apart is that the word
“media” is more than just a name there. Some of their top
executives come from traditional media backgrounds but unlike
most of their peers, they are men who have seen the future
and decided to embrace inevitable change rather than resist it.
Chairman and CEO Kelly Conlin is leading the charge at
NameMedia and he is a perfect example of what I am talking
about. He has worked at both CNN and the New York
Times and his time in traditional media taught him some
valuable lessons that made it easier for him to recognize the
unlimited potential of the web when so many other media
executives missed it.
| “My
first start-up was CNN, where I was Chief Assignment
Editor in New York as the network was getting off
the ground in the early 80s," Conlin recalled. That
experience taught me how much value can be created by contrarian
thinking: most “experts” dismissed CNN’s
chances, the traditional networks looked askance at the
less-polished presentation, and the advertisers were
uncertain about how to get comfortable with adjacency to
breaking news. We all know how successfully that turned
out. That experience also taught me how much sheer work
it takes to build a successful new media property. To
engage an audience, to create compelling content, to
understand how to package information...all the elements
that need to be tested in real time, every hour and
every day to build an ever-improving product.”
“The
competition is for the consumer's time and attention, and
capturing and retaining that attention takes more than
generic development tools or automated content
creation," Conlin said. "That’s why we |
Kelly
Conlin
NameMedia Chairman and CEO |
| recruited
a team that has successfully launched hundreds of
media properties in dozens of countries. And
that’s also why we are focusing our development not on
thousands of websites, but on sites that we can devote
substantial resources to make world class."
"Take
Gardens.com
as an example. Three months ago that was a parked
page; today it has more than 50,000 pages of
original content and has tripled traffic. Our
roadmap over the next three months includes quadrupling
the content and adding features from the media sharing
community platform we have built. The team behind
gardens.com is committed to having the number one
gardening community on the web, and we are well on our
way. We couldn’t have that goal if our efforts were
diffused or we didn’t appreciate the commitment
required to build sites that have enduring value.” |
The
growth rate for online ad spending has been phenomenal, over
30% annually, and as the web continues to rise, many
traditional media outlets are suffering losses, especially
newspapers. Network TV ratings have also been falling as more
and more viewers now head for the web first. None of this has
come as a surprise to Conlin. “History tells us that advertising
follows consumer behavior, and that the specific always
drives out the general. Despite the impressive growth in
online advertising, the share of total media time consumers
spend online is still 3x greater than the amount of total
advertising spent online. So we have seen just the beginning
of the shift of advertising dollars from offline to online
media.”
Conlin
added, “The more targeted the media, the more value to
the advertiser. The fact that Google and Yahoo
have millions of dollars of demand for targeted traffic that they
can’t fulfill tells us that advertisers understand the
value of online leads—and the demand exceeds supply.
Therefore, owners of Direct Search traffic are in a strong
position as the value of and demand for targeted traffic
continues to increase.”
|
Brian
Carr
Name Media Senior VP and General
Manager of Direct Search Network |
Senior
VP Brian Carr, who is in charge of NameMedia’s
PPC operations and direct search network, is another top
executive who did time in traditional media before
deciding the future belonged to the Internet. “When I
left newspapers to work at a Florida internet
start-up 11 years ago, almost all my newspaper friends
snickered, saying the web was a fad and that I
was making a huge mistake," Carr said. "What I
kept telling them is that they may be in the newspaper
business, but they are in the information industry.
They didn’t listen.
That start-up became CBS SportsLine and went
public in 1998."
"Since
then we’ve seen classified ad revenue plummet
at newspapers, lost to companies such as eBay, Monster
and Craig’s List. So I got a little chuckle
when I read this quote on CNET on May 23rd:
"If all of the newspapers in America did not allow
Google to steal their content, how profitable would
Google be?" Sam Zell, the new owner of the Tribune
Company, asked reporters during a speech
at Stanford University last month (the Tribune
Company operates the Los Angeles Times and Chicago
Tribune.) Seems a decade after I left, |
| newspapers
are starting to get it. I’m afraid it’s too late
for many of them. For our data-driven ad units and
websites, it’s a great time.” |
While
NameMedia is committed to building out some of their best
properties they are certainly not going to abandon their
original core business – selling domains. Peter Lamson
is the Senior VP and General Manager of the company’s domain
marketplace which include both BuyDomains and the auction venue
they acquired last fall, Afternic.com.
Through their ActiveExchange program sellers can have
names appear simultaneously on both sites as well as dozens of
partner sites and that exposure has helped the company generate
an amazing number of completed sales each week as evidenced by
the results shown in our weekly domain
sales reports.
| Lamson
told us "The BuyDomains acquisition provided us
with a strong portfolio foundation."
"Since the acquisition, we have more than doubled
the size of the portfolio, which now stands at 750,000
domains, and we have expanded our business operations as
well, including expanding our sales force from 4 to 17
sales executives and expanding our distribution network
to 56 marketing partnerships enabling our geographic
sales coverage to reach 115 countries in 2006.
Tapping into global demand is a significant driver of
our average selling prices – the more demand for a
name, the higher the price a seller can expect to obtain
for their name."
"To
further enhance our growth, NameMedia was fortunate to
acquire Afternic in late 2006. Afternic augmented
BuyDomains direct sales model with a leading edge
marketplace and supporting sales tools, and our combined
entity has created a domain equivalent of real
estate’s MLS (Multiple Listing Service)."
Lamson
added, "Since our launch just three months ago more
than 2,000 members have joined the ActiveExchange,
listing more than 100,000 names. Our listing service
includes |
Peter
Lamson
Name Media Senior VP and
General Manager Domain Marketplace |
| promotion
on both Afternic and BuyDomains, plus promotion via 56
global 3rd party distribution partnerships – all
supported by the BuyDomains direct sales force and
aggressive direct marketing campaigns." |
"This
quarter the ActiveExchange domain listing service revenues are
tracking to north of $12,000,000 and more than 7,500
domains sold. This is accomplished with an SMB (small
to mid sized business) friendly
average selling price of $1,600."
| "This
is working because we are bringing needed liquidity to a
market that has been difficult for consumers, which is
exactly why our DLS (Domain Listing Service) platform is taking off. Positioning
a quality portfolio in front of a targeted global SMB audience and supported by the |
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|
largest
staff of domain sales professionals in the world best
serves the collective interests of domain buyers and
sellers. This strategy also has simplified the buying
process for SMB’s as they are able to meet their
domain procurement needs within a single destination.
Our sales velocity performance and continued
volume |
| growth
certainly supports this contention. And when I read
online forum comments where writers are surprised by the
sales price we have been able to obtain for a domain
name listed on our Domain Listing Service, I know that
our SMB buyer aggregation strategy is working,"
Lamson said. |
"Since
March of this year, we have expanded our SMB products solutions
beyond domain names and into broader business services.
The acquisition of a domain name by an SMB is merely the first
step in establishing an online presence for a growing
company. Our customers can now purchase domain related services
such as registration, hosting, email, and merchant accounts –
as well as business growth drivers such as SEO and SEM
assistance, logo design, payroll services, and legal services -
just to name a few. It is this type of broad based solution set
that the SMB market is demanding, and as the market leader, we
are providing. Our direct sales strategy, marketplace and 3rd
party distribution platforms will soon be bolstered by additional
sales channels launching this summer. We will be sharing
more about this in the coming weeks."
| It
is commonly believed that only 1-2% of the
average domain portfolio is turned over each year. That
slow turnover rate makes the sheer number of
transactions completed by BuyDomains stand out from the
crowd. We asked Lamson what individual domain owners
could do make more sales from their portfolios.
"In
comparison to other thriving markets, the domain
aftermarket does have a low percentage turnover
rate," Lamson said. “This is due to the relative
ease and low cost barrier to creating new inventory.
This means the first thing a domain seller needs to do
is set a clear sales objective. How quickly are
they looking to complete their |
Lamson
speaking at the 2006
T.R.A.F.F.I.C. Conference in Silicon Valley |
| sale?
What price are they hoping to achieve? Answers to these
initial questions should serve as the foundation for a
seller’s sales tactics. Selling a name quickly may
mean that achieving maximum valuation is not achievable.
Conversely, holding out for the absolute dream offer may
mean the seller may need to wait years before
successfully completing a transaction – if ever." |
"Sellers
also will need to decide if they wish to enlist the services of
a Domain Listing Service to sell their name on their behalf.
Selling a domain on their own will save the owner commission
dollars; however they will likely not be maximizing the exposure
their name receives - meaning the probability of sale may be
reduced. Professional sales representation may also assist in
maximizing sale price," Lamson said.
"Aside from rare exceptions such as high value generics, I
advise most domain owners to look for a sales solution that
offers the greatest end user reach and personal
assistance when needed. Putting your personal domain portfolio
in front of the largest possible targeted buyer audience is the
most effective thing you can do to attract buyers who need what
you have. Once a marketing partner has been determined, set a
reasonable price expectation. A quality domain name set a fair
price will sell much faster than industry averages if placed in
front of the right buyer."
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A
lot of people may not be aware that BuyDomains not only
sells domains but purchases them as well. Senior
VP and General Manager of Porfolio Management Hugh
O’Neill is in charge of that department and if you
are looking to sell to NameMedia, he told us some things
you should know. “Generally, we look to buy portfolios
which are expected to generate stable risk-adjusted
returns on investment well in excess of our hurdle
rate,” O’Neill said. To create the returns, the
desired portfolios must complement our resale and
advertising businesses. We have to extensively model and
analyze a portfolio within the context of our businesses
before we can tell if it is a good fit for them or not.
If it is a good fit, then we begin negotiating the
price." |
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"We
have developed a sophisticated (and proprietary) way of looking
at domains which complements our businesses well. Our buying
approach is not at all one dimensional. It synthesizes a number
of disciplines yet values human judgment and the unexpected.
Also, we are able to buy both smaller and larger portfolios, for
either advertising or resale. That gives us, and our customers,
added flexibility and opportunity."
O'Neill
said, "the best way for a seller to submit a portfolio is
to go to Sell Us Your Domains on www.buydomains.com
and fill out and submit a simple form, which will then be
reviewed by our acquisitions team. If interested in the names, a
member of the team will follow up with the seller
directly."
O’Neill’s
responsibilities also include managing “portfolio risk”. A
lot of domain owners don’t think about risks, so we wanted to
get O’Neill’s take on what risks owners of large domain
portfolio should think about.
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“There
are the standard legal, counterparty, and operational
risks. These can become more difficult to manage as a
portfolio grows. For example, you don’t want to buy
or own trademarked names, lose names because your
accounting system can’t track renewals, or have one of
your registrars or one of your buyers embezzling your
names. So you need robust systems, controls, and
policies in place to prevent those sorts of things. You
also need to retain experienced and talented staff
through attractive development and compensation."
"For
the financial risks, you need to ensure that the risks
you are taking in your investments are more than
compensated by the returns you are achieving. The ways
to ensure those returns and to keep the risks contained
are to make the correct buying decisions in the first
place, and to track your performance so you can not
only leverage successes but also quickly detect and
correct mistakes made. As your portfolio grows, the
amount of attention you devote to any single name
reduces while the complexity of your portfolio
increases. So you need better systems and approaches to
maximize the spread,” O'Neill said. |
The
other big piece of the corporate puzzle at NameMedia is domain
monetization which is Brian Carr’s bailiwick. NameMedia
has quickly built a diversified parking provider system with three
distinct brands; GoldKey,
ActiveAudience
and SmartName.
GoldKey and SmartName were acquisitions while ActiveAudience was
home grown. Carr told us why the company maintains three
separate PPC operations and how they differ from one another.
“One
of our 2006 strategic initiatives was to bring to affiliates the
optimization expertise and scale we use on our own platform of
more than 750,000 names. We performed an extensive analysis in
Q1 2006 to answer the question: Do we buy an existing company or
build one of our own? We did both. The March 2006
purchase of Goldkey accelerated our entry into the market and
provided the backend for our platforms, a great start."
"The
recent SmartName acquisition allows us to bring even more scale
to our feed provider and share the benefits of larger audience
and share. SmartName’s high-quality customer base is acutely
aware of what works and what doesn’t on their names, and
unlike our other platform customers, they usually aren’t
interested in actively buying and selling on a daily basis.
It’s much tougher to get an application accepted at SmartName.
Also, we’ve given the SmartName customers a choice of two
platforms now, since some wanted to remain on the SmartName
Classic system at www.SmartNameClassic.com,
which is the original code base. Others have opted to use the
platform that we’ve built at www.SmartName.com,
which includes the enhanced tools we use on our own domains and
other platforms. It’s their choice."
|
Brian
Carr speaking at 2007
T.R.A.F.F.I.C. West in Las Vegas |
"When
we bought Goldkey, we knew it had some
limitations," Carr said. "For example, Goldkey
had phenomenal domain optimization, but users had to
edit domains one at a time, not in batches of thousands
in a single portfolio. And there was no multivariate
testing of different templates and designs for a single
domain. So rather than disturb any of the Goldkey
customers or domains, we launched a copy of the code
with additional tools as ActiveAudience, a separate
product that was tested with our own names. And that’s
the key. We don’t put anything on our platform
that we haven’t tested and proven on our own names
first. We then opened up ActiveAudience to domain owners
of large portfolios of 100 names or more who clamored
for large-scale domain optimization and
management."
"We
kept Goldkey running in its original state for almost a
year, and then migrated users to our new system, where
there’s much more flexibility to optimize names. Today
Goldkey as a brand caters to the new domain name
owner, often someone with fewer than 100 names. |
| ActiveAudience
caters more to the active domain trader, someone
buying, selling and managing domains on a daily basis.
For example, there will be more integration with
BuyDomains and the ActiveExchange platform for buying
and selling domains," Carr said. |
Parking
has to be the most competitive sector in the domain
business as there are more separate entities involved in PPC
than any other aspect of the industry. Carr talked about the
challenges this hyper competitive landscape presents NameMedia
and how they are trying to differentiate their
monetization efforts from the competition.
"Right now there are three major challenges to any
Parking provider," Carr said:
1) Scale:
Successful parking companies must have enough scale to attract
lucrative deals from feed providers that can then be passed to
individual domain name owners. NameMedia certainly meets that
criteria with more than a million names under management,
helping us secure the lucrative deal terms that we then share
with our affiliates.
| 2)
Stability: We’ve all seen companies start
up and some reach scale, only to quickly lose customers,
money or suddenly start having late payments for domain
owners. Is the new parking company going to be around in
six months at the same higher pay rates? One company
offered 100% revenue share to customers. Sounds
great, but domain owners are smarter than that, since
it’s not a sustainable model, nor is there any mention
of what the company’s overall revenue share is. So 100%
of a low revenue share is still a low revenue share.
Another reason stability can be dicey is that often the
companies do not get paid until 45 days or so, and that
means a company has to “float” payments to domain
name owners while waiting to be paid themselves. Larger
companies can easily handle that cash flow. It’s clear
that NameMedia is here for the long-term, and continues
to make significant investments on a daily basis back
into the industry. |
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3) Innovation:
Established domain name owners know certain parking companies
that are very strong competitors, and we’re all watching each
other’s tests, new templates and announcements. That can only
help domain name owners make more money. In less than a year,
our platform alone has grown to more than 500 themes, 70 color
palettes, and 11 template choices, so that’s almost 400,000
different variations of what a domain can look like on our
system. And we’re adding new themes every day – everything
from Amish Country to Hip Hop to Dirt Racing, all requested by
customers. But that’s not enough. One way NameMedia is
different is that we test and optimize on our own domain names
prior to releasing innovations to our customers. That may sound
basic, but not all companies do it this way – we know from
past experience when unsuccessful “tests” were run on our
own domains when parked elsewhere years ago. That’s why
several innovations are still in their development stage at
NameMedia but have not been released, until we can ensure their
long-term profitability for our customers."
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We
couldn’t let Carr go without pinning him down on the
age old question of which converts better – plain
Jane landing pages or pages that look more like real
websites? “The reason this debate is still
raging is that in tests we’ve run, both sides are
right," Carr said. "Consider a generic name,
such as Photography.com. Are people coming to buy a
camera? Buy stock photos? Put up an online photo album?
Get reviews of lenses? The answer is all of these, and
more. So a site buildout makes perfect sense. Then
there’s the other side. Recently we had a parenting name
that was put on a “family” template. Seemed natural.
It looked great, but had a very low click-thru rate. A
click analysis showed that the legacy domain traffic was
looking for test scores. A simple keyword change to show
the right advertisers quadrupled click-thru rates
without adding any content.” |
As
you can see, NameMedia is a rapidly growing company with many
moving parts. With expectations that a public offering is
in their future, things are likely to get even busier in Waltham
in the months ahead. President Jeff Bennett is responsible for
day to day operations of the whole ball of wax. When I asked him
how he keeps it all together I was struck by how his response
– willingness to work 24/7 – mirrors the way so many
of the pioneering individual entrepreneurs in this space built
their businesses. The motto may not be “Never Sleep” but it
is pretty darn close.
"Our
business is run by the numbers – visits, phone calls, leads,
clicks, conversions, revenue and profit – and my role is to
ensure that everyone knows what the goals are and how we are
going to achieve them,” Bennett said. "My management
style is hands on and I set the tempo and keep everyone focused
on our goals. Our business is open all the time so I
drive the business seven days a week. It is the norm for
anyone on our team to get an email or a call at any hour
of the day any day of the week. This is not a one man band
though and I know full well from my experience that business is
a team sport and we need everyone in our company driving to
achieve our goals. We have set up our organization so that each
of our business units has a general manager that is responsible
for their own teams and profit/loss account."
Part
of the NameMedia team in front of their booth at T.R.A.F.F.I.C.
West 2007
(Left to right): Roger Collins, Kelly Conlin, Peter
Lamson,
Tom Murphy, Scott Briggs, Bryan Hilliard and Kirsten
Frederick
Bennett
concluded, "We have recruited very talented and experienced
managers and staff and this depth makes my job so much easier
and rewarding. I work very closely with our teams and I
also work to find synergies and growth opportunities across the
units for NameMedia as well. I also work very closely with our
executive team to chart expansion opportunities and the
management of our overall business. This organizational
structure allows us to effectively manage the many moving parts
of such a dynamic and fast growing business and position
NameMedia for sustained growth.”
Now
that we know how NameMedia was built and how it operates today -
about the only big question left is how high can they
fly?
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