A regular commenter Troy, left the following on my blog this morning and I felt it was worthy of it’s own post. It was in response to my article “Domains are a Tailwind”
How many “big” domainers can we count that have created successful businesses on major premium domains? I am not talking about businesses that cater to other domainers like Latona used to do, I am talking about a nationwide business that has seen great success?
Two I can think of are Bobbleheads.com and AmericanFlags.com.
Can anyone else think of other examples?
Many domainers are really prideful in many ways. They have this idea that 90% of the success of an online business is in the domain name and 10% is in the business plan. Truth of the matter is at least 90% is in the business plan and at most 10% is in the domain, no matter how loud Rick S shouts at times.
Lets be honest here. The most successful domain “investors” are salesmen, nothing more and nothing less. Being a salesman can be a great way to make money and live in the world, but you won’t change the world as a salesman, only innovators change the world. Domainer’s are not innovators. They want nothing to change online, but the truth is things have changed, are changing and will change more in the future.
Online one thing is valuable… the speed of thought.
In 1995 the Rick Schwartz’s of the world had the speed of thought on their side. They saw where the internet was going before anyone else did and it made them rich. In 2011 Rick Schwartz no longer has the speed of thought on his side, the internet is changing and it will leave him and his domains behind. Rick knows this, they both do. That is why domains are being sold now that have been held for years.
A good domain will never be priceless, but it will certainly go down in value over the next few years as they bring fewer and fewer type ins and have a smaller influence on branding.
I know this comment started as one thought and moved to another… the only thread holding the two ideas together is that the average domainer today (averagely successful) has no idea how to make money online but they think for some reason that they are holding all the cards with their “premium” domains. When the flips stop being so easy (as I am finding) it will be time to shit or get off the pot. Either build something innovative or shut up, but stop telling the rest of the world that they don’t “get it”.
Michael and I, along with Scott Day (Digimedia) have done it many times over. You can also add imost of the major Geo owners like Dan Pulcrano, Skip Hoagland, Fred Mercaldo, etc.
David,
Absolutely. You are probably the best example of domain investor turning his assets into full fledged businesses. Excellent point about the Geos as well. It seems that any of the domains that don’t involve physical products tend to be “easier” to convert, but by no means am I claiming it to be easy.
PS:
“A good domain will never be priceless, but it will certainly go down in value over the next few years as they bring fewer and fewer type ins and have a smaller influence on branding.”
Couldn’t disagree with you more. Have you worked a major Generic or Geo yourself? If you have you would know this not to be true. You would depend on type-in traffic only if you were parking. However, a developed major Generic or Geo dotCom has instant brand recall value. Someone who visits our Nashville.com or Whisky.com never has to search or try to remember the brand again. There’s the real value and it will only increase in the future. Watch what happens when the tsunami of gTLDs enters the field. By the Spring of 2014 you will see single word Generic and Geo dotComs going for prices we’d never thought possible.
“It seems that any of the domains that don’t involve physical products tend to be “easier” to convert, but by no means am I claiming it to be easy.”
True to an extent, but they both have their difficulties. With a popular Geo, you can put up a bunch of affiliate deals, but you will never make real money like we with PalmSprings.com. That takes selling static advertising – and nothing is more difficult.
With a product, you have to sell to the masses by youself. Longer ramp up, but Scott is now doing well with his Jerky.com.
@DavidCastello: Have you guys ever thought about upping the game on your geo.com’s as far as inside-in marketing? I realize the more lucrative affiliate types are in hotels and travel, but “local marketing” is on absolute fire right now and you guys with your geo.com’s have a very credible shot at possibly grabbing a taste of this.
(addendum to the above- When I say “local marketing”, I mean above and beyond just banners and ads, but I’m sure you probably know where I’m heading…)
Where do I start. Troy you have a lot of misperceptions about the business. I will try to clear those up. Castello is right on the money but he doesn’t go far enough. So allow me to give you some fruit for thought.
People don’t see me as a domainer because they see domainer as someone who buys domains based on search volume and cpc and flips them to other domainers. They see the web as a medium where people search for things and buy them.
I run an ad agency and got into domains after recognizing the value of domain names in advertising. This is the simplest application of a great domain and is an easy sell because it’s viewed as a revenue generator versus a cost. This is not about navigation, search or type-ins or even anything to do with the web itself.
Look around you- ads are everywhere- billboards, trucks, uniforms, on products, packaging on the radio and TV, on banners flown at sporting and charity events even in your face at the gas pump. How many of these ads do you connect with? Take action on or even remember where to go if you wanted to?
Bottom line 90% of billions of dollars in ad investments is thrown down the toilet. A premium, easy to understand domain name can change the game. Consider many big brands pay $1 million for a famous actor to voice over their spot. Morgan Freeman, Donald Sutherland, Tom Hanks and George Clooney among them. The trick is though you may not recognize the person behind the voice, the voice is familiar, like a friend talking to you. It conveys trust. But to what result when the same money will buy a voice calling you to action on a name you don’t remember versus one you can’t forget. On the $3 million 30 second Super Bowl ad w/their voice you only need the landing page for a couple of weeks. A domain pays for itself even when used for two weeks.
When David walks in and says “I’m from Palm Springs.com” he has instant credibility and they take the meeting. When David puts the logo on coffee cup sleeves that are given out around town, the name has clout. So too when he takes an ad in the tour guides every hotel guest has in their room. Imagine the name on the top of cabs in the city. This is not about tourists going there, but it makes advertisers want to be part of the page.
As an example I had an opportunity to partner with Rick Schwartz to pitch Colds.com. The prospect was a key venture backer who was not getting they results needed. Their product was magic bullet that solved the problem of every catching a cold every time they flew. It worked and spread by word of mouth. But the product’s name was the same as an airline who got all their traffic, and the substitute domain name they had to go with because the airline owned their name, has dashes and words that made no sense.
We prepared a case on PPT as if we were going to trial in court. We showed a comparison of what their billboards look like now and the makeover possible using Colds.com. A picture was worth a thousand words. We then showed this billboard reduced to a tray table ad and security bin ad that people see at the exact point of concern. We also showed their Adwords ads, and how this 3 line classified ad with a customer quote and colds.com as the third line
would improve ctr by 2000%. We then show screen shots of their representation in search. Because they had a flash site the ad they bought at the top of the page had no content- only a copyright mark with the legal name of the company. We showed how Google read their name as airline industry so that’s where they were listed. Meanwhile all of the competitors were eating their lunch being at the right place when this brand left the goal post totally unattended. Further they bought ads they were mapped to editorial but their ads appeared in local papers next to stories about aviation, while they were absent from editorials covering the problem of germ spread on airlines. They were mentioned in the article, but the competitors ad was right there. In short, their name was killing the company. And this name, which defined the problem and mapped to related editorial could have been a game changer. The deal never happened because of legal issues the company was facing and a restructuring.
But there are thousands of lost opportunities out there where a great domain can close sales. I am not sure why no one is addressing this, especially Google or the Networks who could bundle these names with campaigns and deliver better results.
A couple of other points. There are many other domainers who have built profitable business. All the bloggers for a start, Elliots Dog Walker, Francois, and the people I cover on my blog who take just one domain and build a community that develops it into a business. Examples, MySpace which sold for $500 million all created by its visitors. Plenty of Fish. The 21-year old I wrote about today who sold myyearbook.com for $100 million. $10 million treehugger blog, and $350 million Huffington Post that merely aggregate content of others. $50 million for Perez Hilton again just pirated content on a free blogger blog. The kid who blogged about the shit his dad says and got a deal with CBS.
In all of these cases there is a common ingredient that domainers overlook. Lifetime customer value. This properties have value because of the brand built, the number of subscribers. Bill Kara’s success story is in this vein. So too are the most successful businesses on the web Amazon, Apple and Zappos who reach out to their customer base by emails with offers that drive them back.
Since you mentioned Rick Schwartz he the most shinning example of building several profitable businesses online. One with the same formula as the success stories above- create a community of interest and let the community build its own content. In the first five years of Rick’s board over $1 million in domains were sold peer-to-peer and he asked nothing in return. Had anyone of those names sold on the same day for the same price on Sedo you’d pay 15% commission and all they did was throw it on a list and hope for the best. By contrast Rick’s board showcased the domains, engaged members to comment and influenced the sale. In the last 5 years of Rick’s board he started to take a fee on sales. I estimate he grossed $500K from this. I’d say that’s pretty incredible for a guy a domain and a template. The community led to Traffic showing again that it’s not just about . Traffic is a multi-million business which has enabled billions of dollars in business to be closed by its participants. The brand value is upwards of $10 million. I don’t think many GEO sites can claim that.
Rick is also in the most profitable business online- sex. He offers a partner with content a powerful domain to warp it around, turns the site over to them and earns $35 per sign up. Porn subscriptions run $19-30 month and many people I know get it on the credit card and just pay monthly like a utility- five even ten years off that $35 click. Rick earns millions from these clicks and his partners earn tens of millions. The credit card processor even earns millions. But Troy, you don’t know this side of Rick. You see domains sitting that you think have less value as navigation habits change. But what navigation changes when millions have a subscription to a porn site and get an email with link when new films are posted?
Glass half empty or full?
Owen,
You are not wrong but you are using people that merely have Internet businesses not domain investor. In no way did Perez Hilton, Plenty of Fish, or Treehugger buy and sell domains or have a portfolio. They are site builders. Content creators that built businesses with no regard to the domain. If anything they prove that domains have little to no value and it’s more about the content. While I don’t agree with that, most of the stories and sites you mention are in the category. MySpace? Not exactly a category killer. And Elliot has done a great job with developing his domains but he would be the first to admit that it has been a HUGE learning curve in the transition from blogging and flipping domains to creating a successful online business. Again, thank you for the comment. It certainly supports the fact there are many more domain investors that run successful online businesses than most realize. Myself include. I have been educated.
And you have George Pickering, Colin Pape, Jay Lohman, Braden Pollock, Ian Lapouch, Rob Grant and many more that are running multi-million businesses on their domains.
“Michael and I, along with Scott Day (Digimedia) have done it many times over. You can also add imost of the major Geo owners like Dan Pulcrano, Skip Hoagland, Fred Mercaldo, etc.”
It’s true that you and Michael have David. We can add you both to the list. Skip Hoaglad has as well, we can add him to the list (Skip got his start in magazines if I am not mistaken, means he is not a “domainer” in my book, he is a businessman). I don’t know enough about Boulevards to determine how profitable it is are or not. I would imagine very profitable with so many killer Geo’s but I have also heard rumors that they are over mortgaged and we have seen that happen before (SanDiego.com). I assume Fred’s business is quite profitable but haven’t heard any numbers to back it it (I realize it is not his job to “prove” a successful business).
I think my point was lost to most.
I was not saying that there are no successful “domainers”. I admit there are. My point is that most “domainers” that are successful are really just businessmen and businesswomen. They understand how to take $1 and turn it into $1.10, that’s the key to business. The only way most “domainers” know how to do that is to flip the domain. That is not being an innovator or creator, that is being a salesman.
There is nothing wrong with being a salesman, but we have to admit that that is all most “domainers” are.
My biggest issue with the domain world are the members that are running around telling everyone how the world just doesn’t “get it”. Those that feel that having a keyword domain is the make it or break it test to making money online. While there are owners of keyword domains that make money online, the most profitable companies don’t even need keyword domains.
Could not agree with Mr.Castello or Mr.Frager more!
I have been selling used tires since 1982 in 1997 when we registered usedtire.com and usedtires.com. We did not know what we had bought,we had a website built and from that day forward the traffic/business has not stopped calls 24 hours a day and emails from qualified buyers,aside from our employees our domains are
the single greatest asset my business has.
For me these Domains are Priceless
Howie,
Your comment actually supports the comment and original article. Your were a business person and bought a domain. The comment and my article stated that more success has been achieved by people that start businesses and acquire the category killing domain to go with it. You are a prime example. Thank you for the comment.
“However, a developed major Generic or Geo dotCom has instant brand recall value. Someone who visits our Nashville.com or Whisky.com never has to search or try to remember the brand again.”
I agree with you here. Don’t assume that I think Nashville.com is worthless, I don’t. On the contrary I think it is a very distinctive brand and I think it will always give you a leg up on the competition.
My point is that type ins are decreasing each year with the evolution of the internet. Some browsers don’t even utilize a URL bar. This pattern is only going to get worse.
I believe in time the greatest value in a domain name will be it’s branding power and I don’t underestimate that value. I own a few myself that I feel have great branding power. My point is that in five-years I would be very surprised if Candy.com would sell for 3 million again.
You don’t really need to brand “Candy.com” like you need to brand “Nashville.com”. Candy.com sells OTHER COMPANIES PRODUCTS so what is there to brand? We sell the best Hershey’s Kisses? We sell the best Snickers bars? People will eventually stop typing “Candy.com” in the URL bar and Google will eventually discount the value of a domain so that it will have a minimal influence the search engines (some claim this has already happened). In the end the major value of Candy.com will be the branding value, but when you sell a product that is sold by hundreds of other retailers then branding on a domain is not as important.
What are you trying to convince me of Owen?
That domains have value?
Have I ever argued otherwise?
I appreciate the time you went to in your response but I suggest that you try to understand what I am saying more. I agree that domains have value. My point was that the domain is only a fraction of what is required for a successful online business.
Show me a poorly run business on a good domain and I will show you a business that is probably going to be OUT OF BUSINESS in time. SanDiego.com, Sex.com and many others show this is the case.
On the flip side, PalmSprings.com is a great domain name, but I am convinced that if David and Michael had put in all the time, effort and money over the last decade into branding PalmSprings.org that they have put into PalmSprings.com they would still have a profitable business. Perhaps not as profitable, but they still would have a workable business because in the end the value is what is on the site, what is in the business plan, not what domain it is on. That is just a small part of the whole.
This is my point.
Don’t underestimate the value of a good business plan and lots of effort, don’t overestimate the value of a keyword domain.
Troy,
I totally get what you are saying about innovation. But if you own a piece of land it may not pay to build houses until there are roads, schools, sewers, water etc.
The web is on the cusp of becoming a broadcast medium. Every domain will be a broadcast station of equal opportunity to CNN. This was Rick’s vision if you read his site. A total transformation is about to take place. Suddenly domains are TV shows, home shopping, infomercials, concerts, live chats with ceos and others. These sites will be fronted by celebrities, supported by huge advertising plays. Many sites will lead to offline businesses where people will meet and play. Would you sell a domain today that would cost a fortune to build a print medium site on when you knew in a year that domain could be worth what CNN is.
Yes taking print magazines and morphing them to the web is a brilliant business. It’s what everyone in print is trying to do. Take a look at this example of what a guy did morphing print to web as far back as 2000:
http://fragerfactor.blogspot.com/2009/10/flashack-american-home-guides-com.html
acquired for $30 million in 2005 http://www.family-source.com/cache/762841/idx/0
A huge GEO success story here without a GEO name. Check their site.
Colin Pape with ShopCity has 8000 domains appraised at $60 million. He is getting $250-500K per domain for local territory rights and technology platform license from publishers seeking to move online. Plus a share of all the revenue. His approach like George Pickering, Jay Lohman and Braden Pollock was to acquire domains that were synergistically related with a central theme. Then you could scale the cost of one build across thousands of sites. That’s domainer innovation.
Lastly the idea that domains with great business potential are sitting around being wasted or ruined with dumb parking.
Dumb parking is an innovative business success in its own right. By intention Google sweeps this under the rug bundling it as a line item with other traffic sources. As a result the advertisers have no clue how much specific sites are contributing to their business. And your stats can’t be audited so you have no idea who is behind the nos passing through your site. But don’t confuse all that with the truth.
I may not be the guy with a billion portfolio but I do have one of the greatest success stories in all of parking. Domainers, even the big ones, average $27 a year per domain in revenue. It covers the renewal and pays 300% return. My ONE parked domain however averages $15K a year. All from a cost of $70 plus another $1000 to carry it for ten years. I’ve been paid for over a million clicks sent to major brands who have grown significantly over the past five years. Regardless of who the parking company is or template the same 2-3 brands have been the top ads consistently. I reckon that I’ve sent 250K clicks to this brand- referrals of lifetime customers. This brand states publically that a lifetime value of a customer based on # of orders and referrals is around $2K per year. $20K over 10 years and $5 billion for all 250K over 20 years. That’s quite a return on a click even though totally invisible to the participants.
So a domain perceived as sitting doing nothing has put $5 billion on the balance sheet of just one advertiser. I’d call that smart business. Plus the domain has earned $100K for me, $100K for the parking company and probably another $200K for the feed plus whatever they learn about the visitor that can be monetized elsewhere.
You’d have to have $500K cash in an IRA to make that kind of return. And it’s very unstable. So domains are being used to build personal and business wealth in ways that would blow your mind if anyone ever saw the real stats (which may be soon at the anti trust case).
My only problem with this is that if you had $100K to hand to a guy for pressing a button- wouldn’t that guy and his competitors be treating you royally. Thanking you.
Just look at how many billions Google is making from ads. That’s one hell of a business from domains sitting around being wasted.
OK… that’s enough.
Let me clarify-
1) In 2011 the greatest value of a generic domain is application in advertising. No innovation, business plan or site needed. The domain is an advertisement. Tear down your billboard and replace it with a clear generic domain and your business will fly.
2) I brought up non-domainers to agree with Troy’s point but also to suggest that domainers might want to reexamine their path to riches online. Anyone reading this can create a site with their own two hands as my example shows. All of your energy then needs to be devoted to building traffic and subscriber base. A community of interest is the highest paying return of any of the models online. How little time did it take Bill Kara to acquire cooking games then grow to 300,000 members to become $6 million richer on his $350K domain investment. That’s impressive!
3) If you have never read my ebook- do so. It was ahead of its time when I wrote it 12 years ago, but read it now and you’ll understand what a domain can do. The very first page is almost exactly what Troy argued.
http://frager.us/old2/DomainSuccess_051108.pdf (edit: allowing self promotion due to the fact Owen has provided some great content for discussion, rare case for me to allow links in a comment so don’t get any ideas 🙂
@LS Morgan
Yes, look for a huge annoucement concerning the Castello Brothers in the next 90 days.
@Owen
Great story about Colds.com
@Troy
I would not have put any effort into PalmSprings.org for any amount of money. Life’s too short 🙂
A great domain name will not guarantee success but it certainly makes the job easier. The thing that it won’t overcome is a bad business plan and bad execution. I’ve been there in one of my previous ventures that had a great name, but had a bad business plan and worse execution. Lesson was learned.
One of the greatest benefits I’ve seen with developing using a great domain name is the instant credibility you have when contacting potential advertisers, customers and strategic relationships. That is often priceless.
The name isn’t everything but in my opinion is a huge component of developing a successful online business.
Domain investing is fine, but you significantly improve your chances of being successful by having a plan. You said it yourself – businessmen with a business plan that know how to execute that plan are successful. Hobbyists that throw money at the shiny new toy in the window may have fun but they rarely are financially successful. You have domainers that fall into both categories.
What’s important to understand is, Domainers have the luxury of failure… they have an embarrassment of riches. They have domains coming out their ears. That may seem like they don’t have a good plan, but if they are smart, they do. They may seem like they have lots of sites that don’t ever get anywhere. It’s okay! Their plan is just different than someone who’s focused on building a single website.
The question you have to ask yourself is, would you rather be the “businessman” in your example that puts all their eggs into a single basket.. a single concept.. a single domain name with all the risk that carries… or a domain investor that hedges their investments across dozens or hundreds of markets. The individual investments don’t need to earn 6 or 7 figures a year in revenue to be successfully. If you do it right, you have a whole stable of properties that may generate small amounts of revenue individually, but in aggregate provide a passive and significant income and that by in large grow in value as technology grows.
Now, if you don’t have a revenue model for the domains you own… if you don’t have a plan for your domain investing… then it’s certainly risky (read, a money pit). It’s a lot like a hoarder who thinks that someday someone will drive up and pay them top dollar for that rusted ford in the garage. If that ford is a 63 shelby, then there is a hell of a lot of value there to sit on… but there are a lot of pieces of junk sitting in people’s garages, too. Without a plan, expect to be disappointed as you are far more likely to own a pinto.
Be smart. Invest wisely. Have a plan. Execute it. You’ll be fine!
Thanks for including the link Shane. Reading that think about Apple, they do every single suggestion in there.
I wouldn’t worry about Rick Schwartz. Guy is making $10 million a year without laying a finger on anything. He doesn’t want to be running a business. Instead he’s in Europe, on first class cruises having drinks by the pool at anyone of several vacation homes. Eating lunch and dinner out daily at the best restaurants. Buying condos for his mother and family. Collecting art and watches. What’s wrong with that domain strategy. He gets offers, he turns them down, he sees 2-3 people interested in a domain and knows only one can have it and eventually they will lose too much by not having it and will close a deal. By waiting the prices are only going up. If in 20 years he still holds them, they will become collectibles one of a kind relics of a bygone but important era. I can see collectors paying 20-45 million at auction just because rich guys want to own the only one in the world of anything because they can.
Unless you follow the model of the folks I showcased above (and another I found that I’ll paste below) building a web business requires IT talent, legal talent, accounting talent, management talent, a biz dev guy and a dedicated person on social media. Marketing and advertising are essential and you need a USP unique selling proposition for why to buy with you when there are so many better known brands. Most domainers aren’t suited to this.
But buying up a bunch of names with no plans or prospects doesn’t make sense either. So if you have the answer, let me know.
Bankaholic sells for $15 million, you can buy The Inquisitr for $5 million if you like
Bankaholic, a one person blog covering the finance sector has been acquired by financial information service provider Bankrate for $15 million.
The sale was said to have been completed prior to the latest crisis on Wall Street, and $2.5 million of the $15 million is set aside as an earnout over the next 12 months.
Darren Rowse at Problogger delivers the understatement of the year, saying in a post that “it’s a fairly decent sale for Mr Wu.” Mark Rizzn Hopkins at Mashable points to numbers showing that the financial vertical is high paying ad wise, with some clicks getting low double figures.
You would presume the site was making good money by the sales price, but nothing else about the site stacks up. Traffic isn’t brilliant, matched by irregular posting at best. Quantcast shows 156,000 uniques on 263,000 visits, Compete puts the unique number at 300,000. The site has an Alexa ranking of 42,168. Since September 14, there has been only 9 posts to the site, and comments vary from a few through to the highest at 20.
Without knowing all the actual details (well, the revenue mostly), it’s had to definitely say that this blog was over priced, but the amount paid for it is staggering, and I’m surprised others aren’t saying the same thing. This wasn’t a blog network, or mega-blog with a team of writers; instead it’s a one man blog running a mix of Adsense units and affiliate offers!
I want in! Anyone interested in buying The Inquisitr for $5 million, drop me a line, I may be negotiable on the price. Our revenue is heading up, and our traffic is similar to Bankaholic…coupled with the fact that advertising in finance is about to tank, where as we reach out to a more broader market
Yes, look for a huge announcement concerning the Castello Brothers in the next 90 days.
————–
Going ‘that route’ has the potential to be hugely worth it if it catches locally. If it doesn’t catch, it won’t cost much to try.
Personally speaking, we’re about float a beta on a newer module that will allow a ‘certain type’ of tight focus marketing. It involves a lot of phone calls, setting stuff up with vendors, figuring out the economics of it all, but it’s a newer concept (albeit kissing-cousin to what’s out there). Starting small to see how it works. If it goes, it will be very scalable, very quickly, across a range of web properties.
To start with, ours will probably involve arbitraging the difference in between paid search/SMM traffic and what advertisers are willing to pay directly to a services provider who’s offering brand awareness on the bang-on domain for their industry or niche.
Weeeeeeeeeeeeeeeeeeeee. Fun stuff.
Rick is my idol I don’t care what you guys say about him. Can someone assess my inventory over at my website to see any potential for some sale? Thank you. 😉
wow! Comments are better than the post! Thanks, very informative.
It’s the BRAND that counts – not the domain. That’s why we are concentrating on developing websites that have a BRAND and a business point to them…..
“By the Spring of 2014 you will see single word Generic and Geo dotComs going for prices we’d never thought possible.”
So you’re buying them all up now right ? 🙂