| If the domain industry is the still the
Wild West as some say, domain development is the
Final Frontier and the stage of the game that promises
the biggest payoff of all. Building real businesses on high
quality domain names can free domain owners from the
whims of Google and Yahoo and open up direct
advertising opportunities that can make PPC and other forms
of |
| monetization used with undeveloped domains pale in
comparison.
This is something the Castello
Brothers, Michael and David (the
founders of Castello
Cities Internet Network) have known for a long
time. That's why they have been building out their premier
geo and generic domains like PalmSprings.com, Nashville.com
and Whisky.com one by one with spectacular results.
The home page of PalmSprings.com alone generates more than $1
million a year in revenue. Here is what they had to say
about the key events in the industry in 2010: |
The Castello Brothers - Michael (left) and David
Castello Cities Internet Network Inc.
|
Michael
Castello: "There were some great domain
sales in 2010 but I believe the most important trend was the
continued development of the Internet. This is an
ongoing process that will only grow as technology advances.
There is a difference between 2d domains and 3d domains and
I am not talking about a television experience. There are
domain names that give the visitor a virtual picture.
The difference between the virtual depth of a Nashville.com
and a name like Wash.com. Both great names but the
technological reach of Nashville.com will someday take visitors to a place that they will virtually visit. The
future goes hand in hand with these types of domains that
conjure up a mental image. Get your head around one now if
you can."
David Castello: The most
important trend, and one that impacts all domainers, is the
continuing migration of outside investors into our
industry. After the Crash of 2000, domains became the Rodney
Dangerfield of the investment world and every great sale
since then has been greeted with some degree of mixed
skepticism by those outside our industry. The sale of Sex.com
for $13 million (my vote for most significant event
of 2010) may be seen in the next few years as a turning
point because it quickly became headline news and was
too hard for people to simply write off as an anomaly –
especially in this economy. As more outside investors enter
our industry it will be a mixed blessing, but I believe the
positives will far outweigh the negatives. On the upside, we
will see sales prices unthought of in earlier years.
On the downside, there is always the possibility of
intrusive government regulation."
Looking
ahead to 2011, Michael and David had this to say:
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|
Michael
Castello: "We see more over-saturation
in our market. Facebook has reached it’s peak and
you may notice many members are now using it to further
their own businesses. It seems to be going from P2P
to B2B, getting more confusing and not as local
friendly as it used to be. I believe the internet will start
to fracture globally. We are starting to see powerful
entities putting their hands in the cookie jar. They
will expect greater controls and in doing so will cause
others to draw their own lines in the sand."
"2011
in my opinion will be one of the last years to purchase your
future ticket, your safe harbor. My suggestion to
fellow
|
| domainers is to focus on one or several great
domain names as opposed to building out hundreds of
mini-sites. The competition will be too great since many new
domain operators will be migrating from doing business on
Facebook to making the jump to site ownership and control.
2011 is a huge transitional year in my opinion." |
David Castello: "For
non-developers and those entering the industry, flipping
appears to have replaced parking as the revenue model du
jour. For developers such as the Castello Brothers, it is a
continuous evolution to modify/improve our own monetization
methods while constantly being on the lookout for those best
suited to partner with one of our undeveloped properties (we
recently signed an agreement with Bruce Marler to
develop and monetize Grape.com after observing his
unique success with Missouri.me)."
"The
incoming tsunami of new gTLDs will be a permanent
game changer and I’m glad that ICANN is taking the time to
get it as right as possible before launch. After the initial
shock waves (look for a plethora of dopey “Death of dotCom?”
articles in the mainstream media), the legacy TLDs and
ccTLDs will soar in value. Some of the new gTLDs will do
quite well (especially those in the early rounds), but
regardless – it’s going to open the floodgates to a lot
of new investments, press and newbies to our industry."
Chad
Folkening, Co-Founder, Domain
Holdings
Chad
Folkening, who was featured in our October 2010 Cover
Story, has a long, successful history in domain
acquisition and development. Chad just co-founded a new
development company (Domain Holdings) with John
Ferber, the man who sold Advertising.com to AOL
in a $435 million deal in 2004 and they are already
making big waves. Here's Chad's take on 2010:
"A
trend in the market in 2010 was visible with the older
investor and the investment community really truthfully
starting to respect the young entrepreneur for alternative
ideas. The impact on ROI and the ability to quickly
create enormous value has created a true platform for
entrepreneurship. Simple ideas executed well
create new millionaires and billionaires,
mostly under 35, and this trend in entrepreneurship
is very active in the younger generation. Thanks to Groupon,
FaceBook and Twitter, to name a few. Young,
successful entrepreneurs are nothing new, but the trend
among the younger generation is to start new businesses and
take a shot at creating something exciting and useful."
"Respect
for young entrepreneurs were truly fueled by Marc
Zuckerberg and other young |
Chad Folkening
Co-Founder, Domain Holdings |
| webpreneurs and the Angel and
Venture Capital market now considers not the age of the CEO
but the idea, size and execution, as the policy guideline.
I think this entrepreneurship trend has expanded in 2011 and
impacts how domain names are used or classified.
Domains, while barrier to entry is easy, is a true asset
class that continues to expand around the world
and this barrier to entry really drives more innovation,
value and supply-demand, created by technology and Internet
infrastructure. When I started in the domain space 15 years
ago, technology combined with domains had its end user
limitations. It was either hardware, software or
connectivity issues but now in today's market, the moon is
the limit to what can and will be created with today's
Internet infrastructure," Folkening said. |
"At Domain Holdings, we often compare a domain to a
piece of land that uses the newest technology to create
sustainable and scalable value. Apps, Social Media, Twitter,
etc. all play a part in helping create a potential value
movement in domains and technology and in 2011 are set to explode." "2010
felt a little like the dip in 2002-2004 where quality
domains were becoming available for good prices. I
think the low hanging fruit is a little higher and requires
more methodical planning and approach to monetizing a domain
asset. Now instead of buying and dropping the domain
on a PPC lander, it's now making the investor really
consider value creation strategies once the asset is
acquired so the appraisal metrics will change again soon."
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|
|
As
for the year ahead Chad said, "2011 is also seeing more
and more major portfolio owners working together to
create domain portfolio value. This openness and
collaboration creates significant value to the investors and
partners involved through the synergies and leveraging of
resources. Domain Holdings appreciates and respects
how fast technology and communication changes industries
and sees the opportunity of creating new Domain technology
that truly lifts the domain asset class up another
notch." |
Andrew
Miller, Co-Founder, Internet
Real Estate Group
As a Co-Founder of the Internet Real Estate Group
(featured in our Sept. 2005 Cover
Story), Andrew Miller has been involved
in buying and developing some of the best generic domains of
all time, including CreditCards.com, Computer.com,
Shop.com and Chocolate.com. With his
background I have made it a habit to call on Andrew for his
annual assessment of where the industry currently
stands.
|
|
"I have been honored to have had Ron Jackson
include me in this great issue for the past several years.
If one were to go back and read my input each January, it
probably would sometimes read like a broken record, but,
most certainly would be consistent," Andrew observed.
"Domain names are an evolving asset class and as much
as sometimes, it may seem we are in a mature space, which
started in 1994-1995 and is now 16 years old, I really still
see these assets as 16 years new. It is still an immature,
evolving, asset class."
"In 2010, I blogged at SimpleDomains.com
quite often about the noticeable trend I noticed about
dotcom domain names appearing in more and more large
corporation, Madison Avenue driven, prime time
advertisements. Some examples of many advertisements
I saw on TV in 2010 were Taco Bell’s DriveThroughDiet.com,
Domino’s PizzaTurnaround.com, John Hancock’s
FindTheAnswers.com, State Farm’s WhyAgent.com and
DiscountDoubleCheck.com, the Colombian Coffee industry’s
Whatsbehindthebest.com."
|
Andrew
Miller
Internet Real Estate Group |
|
"We also saw many companies use
dotcoms to promote causes. Examples included Kraft Foods
huddletofighthunger.com, American Cancer Society’s
compelling and moving ad, with the domain name
MoreBirthdays.com., Pepsi ads for a community giving back
program, RefreshEverything.com, and RethinkReform.com, a
website about healthcare reform. Notice these were .coms
, not .orgs." |
"I am aware my position on “other” TLDs is
not a popular one with many domainers, but, I ask all to do
a 2011 homework assignment. As you go about your daily
routines and travel by plane, train, or automobile, look
at advertisements in airports, on highway billboards;
read magazines, watch Prime Time television, the Super Bowl,
watch the commercials, watch the promotions during the
Broadcasts. I bet you will see, as always, 99% .COM,
to the tunes of billions of dollars of media. It is
part of the branding. So, if someone wants to buy
Chocolate.co and actually do something with it, market it,
advertise it, go for it as we will get all the traffic at
Chocolate.com. You see, .com is just conditioned as part of
the brand experience. It is Walmart.com, Target.com, NFL.com,
Superbowl.com, AmericanIdol.com, ABC.com, People.com,
EBAY.com, Amazon.com, Google.com. And in 2010, it branched
out to domains like I discuss above via large corporations."
|
|
As for 2011, Miller said, "The biggest challenge is
also the most significant opportunity. It is essential to
continue to educate the domain name asset holders and
pioneers, the “domainers”, to understand that parking
pages and platforms that are billed as creating keywords and
content relevant to a domain but in actuality, end up
delivering a website experience that is no better than
parking pages, are actually forcing domain asset
value down, to be viewed for their lowest level parking
revenue value rather than an asset that is worth its
weight in gold to brands like Kraft, State Farm, John
Hancock."
"I want to see domains valued by where the 80%
of their value is, which is in the value of the brand,
memorable nature of the address/URL, and search optimization
value for that keyword. This means that a category
|
| generic domain
name should be properly developed into a
website, or partnered, sold to a business
that can properly develop the domain name
into a valuable, rich website experience.
This is both the challenge and the
opportunity to change the value of this
asset class and the way it is acquired,
sold, and perceived. |
Morgan
Linton,
Linton
Investments Morgan
Linton hasn't been in the domain business as
long as the pioneers you hear so much about, but he has made
quite a splash since he entered the industry just a few
years ago. Morgan has written an ebook on domains, posted a
series of video interviews with industry leaders, developed
dozens of websites and freely shared information with his
loyal blog readers.
|
| Looking
back at 2010 Morgan said, "I think the biggest trend I
saw in the development and monetization space was the shift
of focus from PPC to CPA and Lead Generation. As
Domainers changed their focus from parking to development it
quickly became apparent that letting Google determine
how much you should be paid didn't always work out. As this
shift took place Domainers began to face some of the same
challenges Affiliate Marketers have experienced for years.
In the end those who developed beyond mini-sites found the
best success as their business grew through repeat visitors
and more consistent revenue."
"For the industry as a whole I
think the biggest trend was the shift from Parking to
Development. While this has been happening for years, 2010
is the year where many Domainer's Parking revenue dropped to
a point where owners had to develop their names into
profitable businesses in order to generate meaningful
revenue."
"In
2011 I think this industry will continue to see a major
shift from parking to development. As search engines
continue to give more focus to |
Morgan
Linton
Linton Investments |
| brands Domainers
will have to
embrace social media to reach a larger audience and
encourage more interactivity. The opportunity
is huge, every domain name can be a living breathing brand,
the challenge for many portfolio owners is
focusing on just a
few domains when they are used to trying to find a
solution for all of them. The days of
automated revenue are gone, now domain
names that become real businesses will see the
greatest returns and resale values. Portfolio
owners with traffic and revenue will have a
huge edge in 2011 as buyers will be looking
more and more for domains with real business
metrics behind them," Linton said.
|
Jothan
Frakes, Frakes
On a Plane
| I'm
going to close this year's State of the Industry Cover Story
with comments from Jothan Frakes, a guy whose
remarkably diverse industry background
cuts across all of the categories we have discussed,
as well as many we didn't. If you aren't already reading his
Frakes on a |
|
Jothan
Frakes
|
Plane blog, you should be because there
are very few people in the business who have the depth of
knowledge that Jothan does. Let's start with what he saw as
the most important developments in 2010:
"Three major things,"
Frakes said:
-
In 2010 there was a surge in the
private stock trading marketplace, where
shareholders of companies that
are not public can obtain some liquidity.
This drove some amazing (irrational) stock
valuations when extrapolating the per share sale price
against the overall number of shares.
This is driving a lot of the entrepreneurial
minded towards building out their domain ideas.
-
2010 saw
a lot of aggressive portfolio culling…
One would think logically that this often led to
shrinkage in the non-com GTLDs, and that this would have
reduced the registrations in non-com TLDs, but instead
the industry still saw expansion and growth in
registrations.
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-
I had the
privilege of announcing on Bob Parsons’ podcast
back in 2005 when the GoDaddy group took over the
#1 position from Network Solutions legacy
dominance – and later as they crossed the horizon of
30 million domain names.
In 2010 they crossed the past 40 million
registrations. That’s a growth of 10 million
domains in 5 years.
Wow!"
|
Looking ahead Frakes said, "New
TLDs could happen in 2011.
I think those of us cautiously optimistic about
this are closely watching for the March ICANN meeting in San
Francisco (where it is rumored Bill Clinton will be a
keynote speaker) to be the announcement of the final
version of the guidebook, with dates for when they’ll
shortly thereafter start to accept applications."
"I think it will happen, but I
also am slightly skeptical as the schedule has been jacked
around so much since 2008’s announcement that many of the
scarred, weary, (and broke) applicants who started at the
first of the announcements and trusted the dates – there
are many of them losing their faith in the process
with all of the protracted delays."
"With the San Francisco meeting
and its proximity to Silicon Valley, there’s an
opportunity for ICANN to move it forward.
I am aware of over 250 applications as I type
this."
".COM lovers – don’t be
scared … it will take a long time for folks to unlearn old
habits and re-learn new ones, so your portfolio won’t tank
overnight if these happen."
*****
Postscript
I want to thank all of the industry leaders that took time
out of their busy schedules to contribute to this year's
report. I feel certain that the knowledge you have so
generously shared will help drive continued growth in the
domain industry as entrepreneurs around the world come to
understand just how much the right domain can contribute to
their success online.
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