Seven Mile, Uncategorized

The World Changes But Domain Names Stay The Same

Hello again and happy summer holidays (July 4^th, 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.