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The World Changes But Domain Names Stay The Same

The World Changes But Domain Names Stay The Same

Hello again and happy summer holidays (July 4th, Bastille Day, Canada Day) to all my friends.

There’s been a great deal of change in the world since I wrote my last blog post.  By way of a rewind, my blog became pretty popular for a time and it became all consuming, so I had to stop.  I plan to write again, but this time I’ll post less frequently and as much as I’d like to – I’ll hold myself back from fielding and responding to comments.

When I began blogging there was only Rick Schwartz’s private chat-board that spoke candidly and honestly about opaque aspects of the domain name business.  Today you have so many domain related outlets that a monthly update will surely be more than anyone wants or needs to hear from a fellow like me.

We reconnect where I left off –  On vacation.  In Europe this time, several years later. Today I was in traffic in Lausanne as a guy sped by on his Piaggio and I had that moment of realization that this happens every single day, regardless of whether I am here or not.  Very much the same way the domain business does. That adage about living in interesting times has never been truer.  Since my last post we’ve had a financial crisis – it’s still going on really, just temporarily papered over with new money creation, which will ultimately cause another crisis at some point soon.  We’ve had a new President in the US (yes it’s been that long since I posted), new leaders in Canada, Australia and the UK.  A true changing of the guard. Oh!.. and the 25 year anniversary of the .com domain extension.

While nothing lasts forever, .com has had about as good a run as any product, service or thing can have. If you look at the last 25 years or the last 3 for that matter you could have made no better investment than to buy the right domain name and hold it for development, resale or traffic monetization. In the last few years there have been many domain registrants who came out of nowhere and created thriving development businesses. There have been folks who orbited the domain space and did not do well a few years ago, who have finally found their groove now – and there are established players who have taken a tumble, a dressing down.  Dollar for dollar, there are few business which are open to any comer, with any personal or educational background where such an individual can thrive so brilliantly, as they can in the domain name business. That has not changed.

So what of the people who don’t make it in the domain name business? Why doesn’t everyone win?  Whenever I go to social gathering, eventually someone comes out of the woodwork after a glass of wine or two, to admit they have tried their hand at recreational domaining. “I just couldn’t get any traffic to reallyaveragename.com” or “After 6 months of working with terribledomainname.org I just gave up”..  or worse yet, “I just registered thispatternname-2, thispatternname-3, 4, 5, 6 and it’s only a  matter of time before a big company comes knocking to buy them!”. There is an art to the domain name business that you either come to learn, or you don’t.  It’s not about computers and science.  As I’ve said before; we are all in the human behavior business, and there are few domain names in existence, just a few million across all extensions, which are good enough to provide their owner a tactical advantage when selling products and services on the Web.  My absence from blogging and reflection about the domain name business over the last few years has sealed my conviction in that belief.

If you are going to get into the domain name business, you need to get the best names. The best names are not always the most obvious but they are ALWAYS in demand whether the economy is good or bad. The price of these names keeps rising as more people learn about them. If you don’t know what names are good, then ask somebody who does, take a straw poll.  Jon Peters was a successful producer who never read anything.  He couldn’t focus so he had others read for him. That didn’t stop him from becoming one of the most prolific producers of all time.  You don’t need to know what a good domain name is to be a successful domain registrant.  You need to understand people and how they think. If you don’t know what constitutes a good name, ask your friends or family.

It may be hard to believe, but around the time of my last post, there were still people who seriously questioned the long term utility of domain names. I had private equity guys approach me with the most serious suggestion that I start registering Twitter handles! To turn your back on domain names is to turn your back on the Internet.  Today many of the Web 2.0 folks who built great social networking apps, without a website to sell them on, are swallowing hard and buying the generic name they chose for their application.  Every site which Google indexes is built on a domain name, so if you want to be in charge of the future of your web-based business, you better own the URL that’s indexed. I have met more than one long-faced Facebook developer who has a learned respect for keeping their distance from the gravity of the orb they revolve around; which would swallow and neuter their business if it could.

It is no secret that I like domain names and I have a great many of them.  In the last few years, I sold a handful of them each year, mostly to a clutch of repeat purchasers.  Dealing with people and negotiating with different personalities in regard to individual names is difficult and painstaking when you’ve been talking to web-interfaces for 10 years.  But I am amazed to this day how few people understand how to value the intellectual property of a domain name.  People will think nothing of blowing $50,000 on a new BMW, Benz or Lexus, but a better domain name, which can lighten their load and place the wind at their back is seldom viewed as a value at 50k – even though it is less likely to depreciate!  “I can get another name at Godaddy for 10 bucks” is the popular refrain.  “Yes you can sir, and the meaningless name you invent today will likely seal your fate to work 10 times as hard, for 3 times as long.” The best domain names are priceless in terms of saving your most valuable commodity of all – time. Unfortunately it’s difficult to quantify exactly how much more you will make, or the lifetime economic value you will inherit by buying a good domain name.

Google didn’t need a good name…  Neither did Yahoo! …  Amazon doesn’t even use their name as the generic thing it describes – and what the heck is an eBay?  All these sites grew and thrived without a generic or descriptive name.  To be fair they did so in a different time.  A time when money flowed differently, when the Web was new and shiny, or they had a killer application as a foundation. The unknowable is how much more successful these companies would have been with a better name. Perhaps the lack of a good name forced them to work even harder, and eBay would have coasted on their laurels with a name like Auction.com.  It’s simply unknowable conjecture to speculate what might have been – and what if?  But commonsensically we all know what feels right, and what feels good. We have all been programmed as people through television, education and marketing – We just know that a free music site called FreeMusic.com will always have burn-down value to somebody. If a company tries and fails at that name, there will always be somebody waiting in the wings to re-do, to re-up, to try again to build on that great name.  Napster.com will always be a hollow echo of its former self. Trying to live down its past and explain its utility.  Human behavior will go there looking for the glory-days of what was, or the train wreck that happened there.

For years I was scared spitless that I would wake up one morning and everybody and his uncle would understand these simple truisms.  All the good names would be gone and I’d be out of luck getting any more good ones.  While “the good ones” have indeed thinned out, very few people – just a small percentage of the business populace seem to understand the economic benefit that can flow to you by picking a better name.  While that populace is coming around faster, the fact that so few still understand the economics of domain names, is probably the most surprising change since my last post.  It also gives me the most hope for continued prosperity and opportunity in this space.

In the years ahead I predict things in the broader economy will get much, much harder and much more competitive.  More young people with stars in their eyes, willing to work three times as hard for the dime you and I are too proud or lazy to pick up.  Many of us will have great difficulties in business due to macro-economic changes in the broader economy, but domain names will continue to go up in relative value, driven by the learning curve of people acquiring knowledge, by growth of the Web internationally and by general education re: the value proposition of a better name. If not for the deflationary effects of further economic crises and currency devaluations which lie ahead, real prices of domain names would be seen to skyrocket dramatically. The fact that prices of names are strong in economic times as challenging as these is a great tell. I saw many of these negative economic changes coming a few years ago, and if my crystal ball isn’t lying, then I suspect we’ll all be very grateful with the moderate, stable price gains in good domain names which lie ahead. Let me state that there has been no deflation in “good” domain names.  Traffic is down, PPC is down, prices are up, double or more in some cases – flat in Gold terms. The increases driven by the growth of the web, business grasping that several good names on the balance sheet can’t hurt, the search for alternative asset classes to invest in (anything but paper money) and collective scarcity of “the good ones”.

All this may seem somewhat self-serving.  A part of the domain establishment who has sold a name or two,  talking about the differences between good and bad ones and the drivers of growth in the niche in which he works …  but I don’t own all the good ones.  Many of you reading this do.  Some of you bought names from me, some of you beat me to the good ones on drops. Many of you just got there first, so many years ago.  God bless you all.  In the years ahead your names will put you in a better position than you could have imagined when you began your journey. Your position may not earn you any love from the jealous latecomers who will follow on, but you will always have this colleagues nod of respect.

This entry was posted by frankschilling on Saturday, July 3rd, 2010 at 1:03 PM and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.


22 Comments

  1. [...] This post was mentioned on Twitter by Mark Fulton, David Bleaman and others. David Bleaman said: RT @BrianNull: looks like Frank Schilling published his first post in quite awhile: http://bit.ly/dlOuOq [...]

  2. Altaf says:

    A great post of all time detailing full picture what will come value of generic .com names. I am buying good drops after doing a lot of research. Will it pay me off the efforts ? Thanks regards, Altaf

  3. joseph says:

    hi Frank very interesting posts


    any search-term no matter how far down the long-tail

    but what about if it doesn’t produce any paid click thrus ?

    and how low re search queries would you go?

    kind regards,
    joseph

  4. Joe Plummer says:

    Great to see you bring up the “money creation” issue and how it’s only papering over the world’s economic problems. The current crisis, as I’m sure you know, stems from the Federal Reserve and our so-called “monetary system.” (The banking elite “create the money and the debt,” and we pay the price.) For those who don’t understand how the scam works, there is a short / free book available online (Google: Meet The System.)

  5. LS Morgan says:

    Sweet Jesus… A new Frank Schilling blog post.
    Someone call hell and see if it’s frozen.

    Sincerely:

    - A Newcomer With Stars In His Eyes Willing To Work Three Times Harder For The Dimes You’re All Unwilling To Pick Up

  6. ForumNDD says:

    Hello Frank,

    Nice to see you alive & posting :)
    Gave me matter of thoughts !!

  7. Great post Frank and spot on as usual. Great to see you blogging again!

  8. Great to see you blogging again Frank. Your perspective on the space is second to none.

    I’m often left wondering what the coming strategies will be for the few that own so many good names, like yourself and others I’ve met personally. Will they sell domains here and there, hold them for development, develop, lease to buy . . . endless options and maybe it’s just my desire to see a “trend” appear among them so I can put my talents to work investing and building properties out in tandem with the best of the best portfolio owners.

    He who holds the .com holds the power, no question. The Twitter handle thing is almost laughable. I know guys with all those generic names and Twitter just takes them away whenever they desire, citing any number of asinine reasons. It’s their property.

  9. Seb says:

    We missed you Frank !
    Welcome back.

  10. Robert says:

    Some market segments like “adult” have collapsed. Thus, excellent names such as tits.com are unable to sell at any (low) price. Value is not in the eye of the beholder but in the potential for monetization and at present, any content offered in the adult market has been and is being stolen and republished for free. A trend that has been going on since the advent of youporn in 2006 and has only intensified. Stolen content prior to the tube dominance also affected adult (p2p, torrents, rapidshare, forums and alt groups) but tubbing was the last nail. Equally, type-in traffic would be of no value here.

    Sure that name can still be tube’d and turned into a residual money making machine through ads. But the amount earned will hardly justify even a moderate price, perhaps even a very low ball price.

    All this can change, one day perhaps, if market dynamics change. But investing in such name hoping that something someday will happen that will make that name the gold mine it was supposed to be would be akin to gambling.

    In a nutshell, anyone buying any domain would look at the potential of recouping its investment and some. And for some -a few- “excellent names” the roi may not be there.

  11. Snoopy says:

    The domain market in 2010 is nothing like what it was a few years ago so I don’t agree with the idea that it has done well over the last few years. I think it has under performed most market such as stocks or realestate. Then again the domain industry is one of massive booms and massive busts without much in between so the whole thing probably shouldn’t be that much of a surprise in hindsight.

    End user sales are still somewhat strong but it wasn’t enduser sales that lifted the market it its heights in 2006-2007, it was trading between domainers +massive inflows of VC capital. Now days if you are looking to sell it will probably be at half the price (or less) of times gone by for high quality names. Lower quality names and the falls are much larger. Having said that the market probably did need a pretty big pullback.

    In a large part I think this is all due to the substantial fall in PPC revenue. If there is 50% less money in the system obviously values need to take a hit. I think there is also a lot of diversification out of the domain industry going on, which has been a trend for a couple of years. This is both in terms of PPC revenue not being reinvested like it was in the past plus alot more selling, especially people and companies talking about “non core domains” and the like.

  12. Great comments once again but I’m going to disagree with you on development power of a brandable. You can look to recent examples of successes like Twitter.com. While you can easily say it’s a dictionary word it’s more like Tide for detergent. It’s more similar to Amazon in nature than FreeMusic.com. Twitter is not InstantUpdate.com. I think you’d be hard pressed to find any zero to hundred million examples with generic terms. Your comparison to Napster.com and FreeMusic.com I don’t agree with either. They both suffer from bad pasts. Developers have choices in domains and while someone would want the traffic either of them brings neither would regain it’s reputation. With the options available why go with a domain with baggage?

    You’re a great domainer not a great developer. You have a slanted opinion but one many of us hold in high regard. Glad to see another great blog post from you.

  13. domain says:

    finally frank back in the saddle prepared to drop a few pearls of wisdom..we have all waited so long.frank you were sorely missed and welcomed back again…
    on to biz you have a portfolio of over 400k domains and were earning over 20 million a yr several yrs ago..domainers need your updated position.with the fall of ppc are you developing/leasing/or just selling domains?we also need further descriptions of what constitutes a valuable domain most quality domains get 100-150 clicks per month you stated good domains can get as low as 30 uniques per month we need updated info on this subject.
    we also need more specific info on how to spot a valuable domain all 2 word domains are registered what about 3 or 4 word long tail domains? whats you take?
    looking forward to your future postings..once a month probably won’t be enough….

  14. Graham says:

    Robert >>> “Thus, excellent names such as tits.com are unable to sell at any (low) price”

    Never underestimate a good pair of tits!

    http://siteanalytics.compete.com/tits.com+boobs.com/

    Unique visitors: 67,050

    This is a great name for guys looking for soft porn, regardless what tube sites are doing. Wait until everyone has 40 inch touch screens!!

  15. The Resurection! Excellent sermon. The truth will set the real domainers free.

  16. Forecaster says:

    Hi Frank,

    Nice to see you back. Can’t stop remembering Arnold’s statement in Terminator ” I will be back.”

    Excellent post with good insights. Would be happy to know your views on few of the emerging trends:

    1) It took .ca more than 5 years to gain acceptance. Same is the case with co.uk. Now, there is another sleeping giant waking up – .in from India

    What is your view on this cctld which is from a billion population country, one of the 2 countries showing positive and more than 8% GDP after China in the world, has the highest English speaking population in Asia.

    Recent 3G auctions and Wimax, LTE auctions (Broadband Wireless Auctions) garnered close to US $25billion for the Government. The winning companies in these auctions have set a broadband target of 150 million subscribers by 2012 from the present 10 million. Even the mobile sales crossed more than 500 million and show no signs of relenting (As per reports now every Second Indian owns a cellphone)

    2) Your views on domain sales demand for recent trends like:
    A) Group buying
    B) Mobile Ads
    C) Social Media
    D) Lcation based services
    E) Mobile Payments

    Recent article in Mashable.com has more insights on the above sunrise trends…

    http://mashable.com/2010/07/05/5-social-media-trends/

    Thanks & Regards

  17. David says:

    It has been said that Frank believes as low as 30-visits a month qualifies as a good domain. I fully agree with that but believe many domainers and the pubic do not really understand that and wrongly believe only high traffic names have good value. They do not always seem to appreciate how hard it is to get consistent natural traffic as steady as just one typein a day on average.

    Long tail domains of 3, 4, 5 or more keywords are capable of delivering 30-visits or more per month and that traffic is also top quality since it is so highly targeted. Unfortunately, PPC is very low and PPC provider’s and advertisers apparently do not realize the value of the natural traffic the keywrod(s) name generates.

  18. Michael says:

    Hi Frank, what you fail to mention is that when a company like ebay or google is created, that neologism is more powerful than the original category-defining domain that would have been suitable for it.

  19. Dirk says:

    Great post (after a long wait).
    I agree with the freeMusic.com vs. Napster swipe. Descriptive names garner more trust from users, evidenced by ascent of Facebook. What will Faebook be in five years? Likely a “Face Book”. What about Yahoo, what are they, anyway? Bebo.com? Boo.com? What is Orkut, it sounds like the Russian term for cockroach?! Would I like to tell my new acquaintance to find me on Orkut? Rather not. Facebook? Fine. Buzz? There’s only one Buzz and his last name is Lightyear. Wave? Sorry, I like Heavy Metal.
    The value of good, snappy, nice-sounding, aesthetically pleasing when written down, savvy, descriptive names will rise sharply over the next few ecades. Again, the car analogy is fitting: Where will that BMW be in ten years? Likely in the Orkut.

  20. Tom says:

    The evolution of new technologies and the unending flow of new inventions and ideas continues unabated. World events, politics, technological advances, human relations…they are all dynamic and constantly changing. This alone will support the domaining industry far into the future.

  21. Rod Aries says:

    Domains, Traffic & the Corporatization of Search Results.

    Before the “beginning,” there were corporations. Ads on TV, full page ads in the Yellow Pages, newspapers and magazines. Everyone knew the big guys – ATT, State Farm, Bank of America…

    Then the internet came into being. So in this “new beginning” (umm, about 1997-1999), there was net… It was fair to one and all. Little guys went toe-to-toe with the big guys and won. I had sites producing $10k-50k/month in very, very, very competitive niche fields.

    It was a time when someone like YourFavoriteCarInsuranceCompany.com could create a site and then rank first for car insurance. All was good for the little guys who toiled in obscurity. The playing field was level allowing the little guy to compete against the big guys. Little guys everywhere rejoiced.

    Then Google figured out what people were searching for and what the users wanted in their results – i.e., the bigger players. So now GEICO, Progressive and maybe a single keyword rich url CarInsurance.com, assuming it is active with great content, rank at the top of the heap. Now, the little guys have faded back into obscurity again.

    While not apparent at the time, this corporatization of search results would soon become the model for all keyword searches.

    The Google Mayday update seems to have caused a few major changes, especially impacting PPC landing pages for domain owners:

    1) Most PPC landing companies (and the domainers who use them) have seen their revenue go down, some report by as much as 50%+. It was pretty easy for Google to look at the DNS and determine if it was a parking page.
    2) Matt Cutts indicating that the searches for long tail traffic keywords, will now favor sites that have greater value (high content, high inbound links, high recognition, visitor utility, quality off site links). You don’t need a secret-agent decoder ring to understand that this generally means results from bigger companies. They have bigger sites, tend to get links, etc.

    So, the Mayday update means the corporatization of search results will now pervade into almost every search.

    Furthermore, this will impact domain holders in two ways:
    1) They will be willing to pay less for dropped domains at auctions, since it will be much harder to recover the investment via PPC revenues.
    2) The overall portfolio valuation have decreased due to less revenue being generated.

    So, the internet is going into its first cycle, much like short, short skirts, then long skirts, then short, short skirts. As you know, everything old, becomes new.

    So here is what is new. We are going back to, before the beginning – big companies will again outrank little companies.

    This corporatization of search results will continue with the other major search engines and continue to decrease the revenue and valuation of domain holders.

    There are some strategies to fight this, but that is for another post…

    rod

  22. [...] even bigger deals over the years. Frank Schilling has a nice post recently which explains… “The World Changes But Domain Names Stay The Same” and he’s so [...]