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With Economic Uncertainty Everywhere Andrew Rosener Details the Impact on Domains and Why The Best is Yet to Come 

By Ron Jackson
with Andrew Rosener

Editor's note: I recently got together with MediaOptions.com Founder Andrew Rosener for a Zoom interview so I could learn everything I could about his life (business and personal) for a DN Journal Cover Story profile. After connecting with Andrew at his home in Lisbon, Portugal, we wound up talking non-stop for three hours in a discussion that felt more like 30 minutes. Time really does fly when you're having fun - but even more so when you are getting valuable insight into what makes one of the world's top domain brokers tick along with some astute business analysis that our readers can benefit from.

In the end I wound up with two Cover Stories. That happened because, in addition to hearing Andrew's life story, there was one more thing I wanted to ask him about. With all of the current uncertainty in the global economy and questions about how domains will fare in this climate, I wanted to know what his thoughts were on that. He has a remarkable understanding of both the overall economy and domain industry prospects (the latter having been earned from his  personal involvement in so many of those ultra high end sales that never get publicly reported due to NDAs). That's why I called on him to comment for the May 2020 Cover Story we did in the middle of the Covid 19 pandemic about how top brokers thought the contagion would affect the industry. Andrew had been the first one I saw report that, contrary to expectations, business had started booming again after months in a deep freeze of uncertainty sown by Covid.

Andrew Rosener
Founder, MediaOptions

At the 2019 NamesCon Global conference in Las Vegas where he won his first of four consecutive Escrow.com Awards as the world's #1 domain broker on their platform (based on total $ volume of sales).

So, now finding ourselves at another crossroads created by war, inflation, a crypto crash, bank defaults, etc. it was fortuitous that I already had Andrew on the phone. His analysis of the situation was so timely I decided we needed to get those comments out to readers right away (with this Cover Story being the result). The less time sensitive (but no less interesting) personal profile will follow as our next Cover Story in May. So, having set the stage, I will step back and hand the baton off to Andrew.

Andrew Rosener: I want to break this out in two parts. I think it's important that we separate the macro from the domain name industry fundamentals. So from a macro perspective, I do not think that we're out of the woods. I think that we have probably one big, really deep economic leg down to come. It's going to be really painful. But I don't think that it'll be particularly long lived. I think it'll be short but sharp. (Editor's note: Just days after we spoke, the sharp pain Rosener predicted became a reality when the Silicon Valley Bank collapsed in just 48 hours after a bank run that also toppled Signature Bank less than 24 hours later. The SVB collapse was the second biggest bank failure in American history).

With respect to domains, at Media Options, in 2022 we had the worst second half in the history of the company and Q3 2022 was the worst quarter that we had ever had. Then Q4 was worse than that, so I was quite pessimistic coming into 2023. But January was a shockingly good month and February 2023 was a record month. So we've had an incredibly bullish and exciting start to 2023 and I'm cautiously optimistic for but I think we are going to run into some major financial headwinds.  

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I always tell people there are three buckets of buyers for domain names in the high value, ultra premium .com market ($100,000 and up) that is our bread and butter. In that sphere, there are venture-backed startups, private equity and multinational Fortune 1000 type companies that are launching a new product or service. At the end of 2022, venture capital, which is the largest bucket, completely slammed the brakes. They were going to their portfolio companies and saying, "Look, you need to constrain cash. You need to get a 12, 18 or 24 month runway. You need to lay off employees" - it was all about conserve cash and cut costs. 

Private equity - that bucket is even uglier. Private equity has been under tremendous amounts of consolidation. They've been passing hot potatoes from one firm to the next and with each incremental pass of the potato, there were these incremental write-ups so that they would look good to their LPs (limited partners). It was like a game of musical chairs. That worked for a long time because they had off-ramps. The off-ramp was going public and the SPAC market. Plus, the IPO market was one of the most robust markets since the dot-com bubble. That window closed. There are no more SPACs happening for the most part, and the IPO market has chilled to Antarctic temperatures. Without an off ramp in the private equity market, you're seeing a lot of distressed debt, that I think could end up being the trigger for the

Image from Bigstock

next big economic cataclysm. A lot of unhappy LPs, who thought they were making a lot of money on paper, are now realizing that they're never going to get any gains out of that which explains why they're not buying domains or deploying more capital. 

Image from Bigstock

Now look at bucket #3 with the Fortune 1000 multinationals and it's exactly the same thing as the VC world. Stockholders and board members demanded cost cutting, people are being laid off by the tens of thousands and nobody is going to stick their neck out and say, I know we just fired 10,000 people but maybe we should buy this domain name for a million dollars, right?

So basically all three of those doors slammed shut but they can only shut the door for so long. Ultimately,  these are businesses - their objective in life is to grow and, as the saying goes, you're either growing or you're dying. So, I think that as a result of cost cutting and pull back on spending in Q3 and Q4 of 2022, balance sheets were getting written down for

the first time with of that is being expressed now with a rebound in Q1 2023. I don't think that's sustainable but you have to make hay while the sun shines.

There still so much uncertainty.  I think it really is going to come down to China and Russia and do we end up in a protracted war that destabilizes the two poles? If that's the case and there's decreasing levels of commerce happening between the West and the East, that's just not good for business. It's going to be a depressed economic environment if we can't find a resolution, which I'm becoming increasingly less optimistic about.

When the situation is resolved, I think that we'll see a tremendous rebound that will probably be bigger and longer than most people anticipate. I think that inflation is going to be stickier than most people expect and interest rates will also remain higher than most think. I believe a lot of things will lead to a totally different paradigm than we've been in for the last decade, which was low interest rates, loose money. While it seems counterintuitive, historically we've seen higher interest rates and a tighter monetary environment leads to better investments. Better investments lead to bigger more successful companies. More successful companies lead to bigger domain purchases. So, while I am cautious about the short to mid-term, I'm pretty bullish about where we'll be, let's say 18 to 24 months from now. 

Now, all of that is the macro picture. The domain name fundamental picture, I would argue, has never been stronger. I don't think there has ever been more reasons to buy a premium domain name, more education, more opportunity or more willing participants than there is today. I've spent every day for the last 13 or 14 years is making contact with some of the most successful, powerful entrepreneurs, investors and operators on the planet and I've been able see trends in the way that their thinking changes. If we take a snapshot of what does a domain buyer look like, that has changed over time. Now, successful entrepreneurs tend to understand why they should own their exact brand match .com domain name. They have a long term vision and know that vision requires investment in their brand. They understand that if they're a digital business, the digital version of their brand is the most important asset the company owns

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These entrepreneurs, most of whom have already built other successful businesses, are in a very good position now too.  In the current environment where engineers are being laid off,  they can actually get good talent without having to compete for them with Google, Facebook, etc. These founders start with a great domain name and a high probability of success because they're going to have less competition in an economic environment where the most money goes to the best companies, which is opposite of what's happened over the last 10 years. 

I also think that the use cases for domain names are going to expand in the next five to ten years in ways that were unimaginable just a few years ago. I think that we're going to see an integration of Cryptosphere or Web3 or whatever you want to call it with legacy domain names. We're going to see more adoption from large corporations utilizing domain names for identity products and  payment products. These are inherent things that can be done in the legacy DNS system. It doesn't require a web3 domain name, but very few people are taking advantage of it. There's GPS utility, Internet of Things utilities where some of these AIs and robots that are connected to the internet are going to be identified through domain names and controlled through domain names remotely. 

I think there's a tremendous number of use cases  that are going to emerge over the next five years that are going to drive the next massive wave of domain name value. With that will come new people in the speculation market and new people at the end user level. I think that what is clear is the speed at which premium .com domain names are decreasing in number and increasing in value. That will lead to people expanding into some of the the other TLDs, which I think we're starting to see the early innings of now.

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I used to stay awake at night thinking about what's going to replace domains? You know, is it apps? Is it social media? Is it web 3 domains? What I've come to understand - and credit to Rick Schwartz that he has understood this for more than 20 years - is that domain names aren't going to go away in my lifetime. This is layer one of the tech stack for the entire digital universe and we are not going to go build web 3 or web 5 on a new tech stack. That's not going to happen. We're going to take the existing internet and we're going to add a new interoperability layer just like we did from web 1 to web 2 and from from Web2 to Web3, it's all the same web. It's just with new tools and interoperability utilizing new protocols. But at the bottom of that stack, in every instance, and for every instance in the foreseeable future, are domain names - and premium .com domain names are going to remain the shiny object on the hill for that layer of the tech stack.  

*****

 

 

 
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