is the fourth part in the series on the Domain Industry and it continues
directly on from the previously three. Even with the decline in traffic
revenues they have continued to underpin the entire domain industry since its
inception. Everyone from the registry through to the parking company are
dependent upon this steady relatively consistent stream of cash.
one bright spot during this time was that domain investors began to set more
realistic prices on their assets. This drastically improved the problem of
domain liquidity and injected more funds into the industry.
the industry downturn domain investors honestly believed that every domain they
owned was almost priceless….they were waiting for that magical pot of gold to
appear at the end of their domaining rainbow. I remember one prominent investor
publicly declaring that he automatically turned down all offers less than
the squeeze on returns really biting, investors were now looking for another
business model to help them out. This was the birth of the stock-turn model of
of this business model as more like the supermarket rather than the boutique
store. The supermarket has much lower margins but sells a greater volume of
goods. It survives on these margins because of the masses of people that
purchase through them….this was the problem that the domain industry needed to
join the stock-turn revolution, domainers had to realistically look at their
portfolio and then price the majority of their domains at around the $1500
mark. The goal was then to sell 1-2% of their portfolio each year. Like the
supermarket, this is effectively an eyeballs game. For the model to work
domainers needed to get their assets in front of as many people as possible who
are currently seeking to buy a domain name.
was a seismic shift for the industry and really illustrates the pressures that
domainers were under financially at that time. Domains that were once priced at
$200K were now being sold at 1% or less of that value. These were desperate
the entire domain value chain the end user eyeballs were all going to
registrars to find the domain for their business. For the first time,
registrars found themselves in the box seat to exploit this opportunity.
end-users went to purchase a domain name rather than saying that it was
unavailable a message would pop-up that the domain could be purchased for $1500
(as an example). A business wanting to secure their domain wouldn’t think twice
at paying 150 times the registration cost of the domain.
biggest challenge for this model to work was that domains that were registered
with one registrar needed a fast way to be transferred if another registrar
sold them. This was the birth of the multi-listing-services model that allowed
fast transfers of domains between registrars. The streamlining of the fast
transfer process has meant that consumers could now more easily purchase
domains that are owned by domain investors.
surprisingly, there was a huge rush to get into this space by many of the
registrars. Why sell a domain for $10 when you could sell the same domain for
$1500? The profitability of a registrar now had the potential to dramatically
increase. A virtuous cycle came into play as the major domain marketplaces
sought the valuable eyeballs provided by the registrars and matched them with
their existing marketplaces.
the interesting challenge. Everything, and I mean all domain sales hinge on
traffic. Whether the traffic is generated by a registrars brand (eg. Godaddy,
Afternic, Sedoetc) or from the domains themselves. If a consumer doesn’t know a
domain is available then they can’t purchase it.
decline in PPC rates impacted the sales market in two ways:
Less liquidity in the domain space for domain investors to purchase domains.
remember writing an article around 2008 about the fact that there were a number
of large domainers that were market makers. In other words these individuals
had amassed such a large amount of traffic revenue that they directly
influenced the price of domain sales. As an aside, in the then relatively
immature domain aftermarket, the prices dropped almost overnight when these
players stopped buying domains.
Less traffic as domains were dropped
second impact is somewhat hidden. What many people haven’t considered is that
the traffic domains would often be the conduits for potential buyers to the
domain marketplaces. To date, the domain marketplaces have received this
traffic for $0…..not a bad deal when you think about it.
example, the major marketplaces do not pay anything to a domain owner when a
buyer clicks on the “this domain maybe for sale” link. This makes sense,
because the domain owner wants the person to buy their domain. What is interesting
is that the buyer may go and then search the marketplace and purchase an
entirely different domain. The owner of the domain that generated the lead gets
paid nothing. In my opinion, this is an embalance in the industry that will
eventually be ironed out by an innovative company.
happened several years ago is that many of the marketplaces that are also tied
to parking platforms became desperate for the traffic that also generated
buyers. Domain parking was starting to be seen almost as a loss leader.
Suddenly traffic became valuable not for its PPC value but for the potential
buyers that it also brought.
series on the history of the domain industry will continue.
Gilmour has been in business for over 32 years and has both a BSC in
Electronics and Computer Science and an MBA. He was the former vice-chairman of
the Internet Industry Association in Australia and is in demand as a speaker at
Internet conferences the world over. He has also recently published his first
science fiction book, Battleframe.