The MediaWizard’s Blog | mwzd.com

In all this hype and hoopla of new gTLDs being proposed by ICANN one major issue was completely overshadowed - that of domain tasting. ICANN has addressed it in this meeting and measures recommended to prevent it from taking place.

Domain tasting is the practice of registering domain names and ‘tasting’ the traffic before registering or dropping them. This is mostly done by the bigger players in the industry like registrars and drop services though some registrars do allow registrants to take benefit from this policy.

It is estimated that at any given time 20 million domains are being tasted by various individuals and companies on the web. This is done by manipulating the AGP or additional grace period provided by ICANN. With this being put to a halt, the whole economy of the domain world will be given a jolt with the surfeit of names that will drop starting from the 1st of July 2008.

What ICANN has done is that its put a ceiling on the number of allowable deletions per registrar at a max of 50 or 10% of new registrations. And a fee of $0.20c on domains deleted above that. This will change two things - the economy of the domain tasting business - 20c x 20 million = 4million dollars, every five days, certain to put a dent. Another thing this will change is that tasting will go completely out of the hand of registrants into the hands of registrars, why would they want to share their 10% quota?

This is, all in all, a good thing for the internet and also for domainers who stay on the ethical side and do not indulge in this practice at all. Now if only ICANN could remove the 10% allowance too, it would level the playing field entirely.

GNSO Recommendation on Domain Tasting
Whereas, ICANN community stakeholders are increasingly concerned about domain tasting, which is the practice of using the add grace period (AGP) to register domain names in bulk in order to test their profitability.

Whereas, on 17 April 2008, the GNSO Council approved, by a Supermajority vote, a motion to prohibit any gTLD operator that has implemented an AGP from offering a refund for any domain name deleted during the AGP that exceeds 10% of its net new registrations in that month, or fifty domain names, whichever is greater.

Whereas, on 25 April 2008, the GNSO Council forwarded its formal “Report to the ICANN Board - Recommendation for Domain Tasting” which outlines the full text of the motion and the full context and procedural history of this proceeding.

Whereas, the Board is also considering the Proposed FY 09 Operating Plan and Budget which includes (at the encouragement of the GNSO Council) a proposal similar to the GNSO policy recommendation to expand the applicability of the ICANN transaction fee in order to limit domain tasting.

Resolved (2008.06.26.06), the Board adopts the GNSO policy recommendation on domain tasting, and directs staff to implement the policy following appropriate comment and notice periods on the implementation documents.

ICANN’s Paris conference has thrown up some interesting ideas and questions, chief among them has been the possibility of introducing thousands of new TLDs on a pay and play basis. This BBC News Story has the crux of the issue.

What they’re essentially saying is that anyone willing to fork out between $39,000 - $390,000 for a TLD could possibly buy their own! What this means is that if I had the money and the inclination - I could buy and promote .mwzd (not really, merely an example ) and Coke could get .coke and Ebay could get .ebay, ad nauseam.

My first reaction was probably what every developer thinks - “Wow, thats great! it will future proof the web for a trillion trillion trillion names, just like iPv6 is doing versus iPv4. You want a good domain name, get it in one of the new TLDs instead of springing millions for an aftermarket name.”

But when you see this from a domainers perspective - its a clarion call. Would domain values tumble? Will all extensions become worthless? What will happen to parking income? Who would buy our precious names? Will the aftermarket crash? What will we do? I’ll try and answer these questions based on my knowledge and experience.

1. Would domain values tumble?

Not that I can see, when there are too many players in any field, the 80:20 rule comes into effect. In advertising and marketing one of the first things you learn is the 80:20 rule - 20% of your clients will generate 80% of your business and vice versa. For your clients - 20% of their brands will generate 80% of their turnover, and vice versa. For the average individual - 20% of his investments will give 80% of the returns and vice versa.

That is why people try to get into the top 20% for any field - those are the guys who make 80% of the revenue, quite simple. Once in this league the company’s aim is to raise the bar so high that most people wouldn’t think of entering the field without substantial funding and experience, but then thats another blog post.

Which essentially means established TLDs will continue to do well in the near future… say for the next few generations at least. Till this generation and probably the next will have come and gone.

2. Will all extensions become worthless?

No. Simply launching a new extension does not guarantee success, much like launching a new brand of soap does not guarantee sales. After all brand value does count, a whole lot, thats what domainers have been saying all along. .Travel only increased the value of Travel.com or even Travel.mobi - why would it be otherwise?

.Com still has the most recall and probably will for the forseeable future, too many people have invested too much money in it for it to be otherwise. Likewise any other existing TLDs that have substantial development. All the other TLDs launched for the next 50 years, combined, probably would not match the investments various stakeholders have put into existing TLDs - its just simple economics really.

People will tell you ‘Oh, if thousands of TLDs are launched, .com will go up and .mobi will go down” - this is nothing but hogwash, it is best taken with pinch of salt. If .com continues to go up due to a global acceptance, so will the ccTLDs and other gTLDs like .mobi, .pro and even .travel over a brand new TLD.

3. What will happen to parking income?

Aside from the fact that parking income is its at its lowest and the smart money is already moving to development, parking as we know it is going to morph into instant development platforms.

Companies like WhyPark, GridParking, EVO, and even BANS are already showing the path forward, not to mention 100,000s of ‘white label affiliate sites’ floating around the internet. Even existing parking companies have realised content is king, without which you can just about kiss your long term traffic goodbye. Parked has a method to add content, Bodis does too… eventually all the others will as well.

4. Who would buy our domain names?

Domains are like real estate. Only the biggest players even bother owning their own. Restaurants lease the space because they make more money from selling food. The landlord rents it out because he makes more from multiple properties. Microsoft has its own facilities because it needs it due to the thousands of local employees who will permanently be located there.

The simile here is that while some people will launch their own TLDs as a viable business, an end user would always prefer a good domain in a known extension. He wants to make money from his venture, his primary motive will never be to popularise the TLD itself.

Its relatively easier to become a Domain Name Registrar today, however currently ICANN only lists about 944 Accredited Registrars. Not every domain owner or even portfolio holder is interested, or able to, launch their own registrar inspite of the fact that some companies hold hundreds of thousands of domain names.

5. Will the aftermarket crash?

Because of reasons outlined above, not at all. In fact I’ll go the other extreme and say - the aftermarket is going to be thriving like never before. Volumes and price points will continue to rise for those extensions that have already carved a niche for themselves in the popular mindscape.

Plus the aftermarket will grow exponentially in sheer numbers - more TLDs means more sales, maybe not in the short term, but eventually, as more and more of the ever increasing six plus billion inhabitants of the planet come online.

6. What will we do?

If you’re not developing, you’re already missing the boat. I would use “dead in the water” as a long term perspective of your portfolio. All the big guys have been saying this for the longest of times. They have also been busy going about doing exactly that with their portfolios. It not only generates a higher return short term, it also enhances the value of domains themselves.

Rick Latona has written a great series of articles on his site entitled “What makes a domain name sellable“. Its a very interesting, straightforward insight into the mind of one of the most successful domain sellers out there. His approach is hard core business minded which is perfect for this trade, which can lead people astray at times.

It’s a four part article that lays it out -

Part 1 -

I have one question that I ask myself that is more important to me than any other question. What sort of website would be put on the name? When buyers buy a name from me, more often than not they want the name because they have some sort of vision for it. What’s the obvious vision?

1. What’s the brand value of the domain, as in, would you start a business based on that name?

Part 2 -

It isn’t easy to appraise a domain. When someone asks me if I want to buy a name, I often reply simply with “I’ll pass”. Inevitably, they’ll send me back an email asking my why I’m passing. Well, that’s an impossible question to answer.
…
Perhaps you can compare it to “curb appeal” in the real estate world. Some houses just show better than others. How does your domain look from the curb?

2. Does it have recall value? Does it have appeal. Can you brand it to make it extra special?

Part 3 -

Does it have legs?

3. Well, does it? :p Possibilities is whats being discussed here. Keeping in key with my own thoughts mentioned in The LLLL.com Conundrum

Part 4 -

Revenue, makes a domain sellable but tread carefully or you can get burned. For the buyers I have this one strong piece of advice. Unless the name has other intrinsic qualities i.e., has legs or is some obvious category killer, you can lose your ass.

4. Revenue is important, but is it realistic or just a smoke and mirrors short term play… thats the crunch factor.

All in all, well worth a read.

Unknown to me, since I was somewhere between San Francisco and Icheon at the time, a deal went down on the 15th of May that will shape the future of the web considerably.

CBS acquired C|Net for $1.6 Billion. This deal is totally sweet if you ask a domainer, it includes domains such as TV.COM, News.com, Radio.com, Upload.com, Future.com, Chat.com, Com.com, Computers.com, Browser.com, Auctions.com, Builder.com, Events.com, Marketplace.com, Store.com, Tunes.com, Online.com, Gaming.com, Buying.com, Search.Com, Help.com, Downloads.com, MP3.Com and valuable web properties such as ZDNet.com, GameSpot.com, Chow.com among a few hundred others.

CBS already has an online distribution network that reaches 82% of all online audiences through over 300 web properties. This acquisition will make it one of the dominant players online competing with the likes of G!, Y! and MSN. Its truly an Web 2.0 defining moment, one that augurs the advent of the mega media conglomerates, again, but much smarter this time around.

Read more -

• Sahar has three blog posts about it, kind of underlines the importance of this.
• Washington Post
• SE Journal
• Ecommerce Times

Just back from a major vacation stateside. Promise a lot more goodies soon. For now - an Introduction to an exclusive Short Domain Marketplace for Domainers. Approval is only possible for people with 50 or more domains so it keeps it private.

The site is started by Reece Berg, who many of you know and read (check my blogroll for a link to his blog).

Ok, enough suspense - head on over to BQB.COM and signup (use ‘mwzd’ - without the quotes - as a ‘referrer’, might win me some brownie points and even their promo )

There are quite a few approaches to domains and domaining that domainers take. Its like the stock market or real estate market to a certain extent, everyone has their own strategy and most of them pay well for their proponents. I’ve pretty much seen most of the types and will try and enumerate them to enable you to follow what you’d rather be doing.

The Investor
These are the sharpest of them all. Buy good quality when prices are low, hold long term, sell high. These guys hold onto assets, maybe even develop them, ensure that they’re hot and in demand when the market is totally ripe, then sell them. The advantages of emulating this type is that you can afford to sell 1% of your portfolio each year and still manage to pull in the major bucks. The downside is renewals, unless your portfolio generates enough revenue, this cost needs to be factored in. People like Frank Schilling, Rick Schwartz, Sahar Sarid, Adam Dicker, Michael Goldman and probably most of the other big ticket guys will be found in this group.

The Flipper
These guys live to make a fast buck and sometimes the ‘buck’ can be a hundred thousand dollars or more on great buys. They know exactly which domain they can sell and to whom and for how much. If they can buy domains that they can sell immediately (1hr to 3 months) for higher valuation, they’re very liable to take the deal. This kind can be equated to the floor traders of yore. They’re fast, nimble and never hold large portfolios, in fact some only have the one domain they want to sell, right now, before moving on the next big deal. There is a lot of money to be made this way too, however its short term, here and now. So if you don’t sell, you don’t churn. I’ve seen some huge success stories in this lot too, Derek Giordano and Reece Berg are top of the mind here.

The Developer
Theres one more breed of domainer who makes money by doing something with their properties, hand regs, niche domains and the type. They take the domain, develop it, add content, do seo, market it and voila, eventually these low value domains become decent value properties. So $20 on a domain + $500 developing could easily lead to a sale, a few months down the line, in the $5000 range. Guys who do this have substantial skills in development, seo and promotion, without which this is just not possible. You could outsource development but then that could also kill your profit margins here. Guys who do this with some success include Adrian Allen and Lord Brar.

The Builder
A lot of people build websites on domains for their own selves. They are not looking to sell the sites or even would even with good offers, simply because the sites normally create more opportunities than can be equated into the bottomline as credit. These type of domainers are actually a major credit and can be found among all the types listed above. Top names that come to mind include Justin Allen and Tan Tran.

The Monetizer
These guys are only interested in the traffic revenues. They’re happiest buying domains that get traffic and make money via parking or similar. In fact some of the biggest deals in the past have included portfolios of well known monetizers. Now of course this particular breed has been overrun by big time players with hundreds of millions of dollars invested and go under the guise of ‘media companies’. This is probably the holy grail of domaining, whats better than pointing a domain to an automatic page and let clicks get you revenues? Kevin Ham, Yun Ye, NameMedia, DemandMedia and others fit into this group, as they do elsewhere but a vast majority of their revenues probably come from this.

The Broker
Usually unsung, rarely known and generally dealing on the QT are the domain brokers. These guys have a huge network of contacts and know whats moving, how and when. I don’t really have much experience with these type of people but Rick Latona is instant recall.

The Provider
A lot of domainers have some skill which is monetize-able and fairly useful for the non-developers. This can be writing, design, hosting or a wide variety of web development and promotion activities. I know this is not exactly domaining but I know enough people who do this to make money for domains. Popular people include Peter Mark and Leland Fiegel.

There are a few more kinds but I’d rather not go there right now, but if you’re interested in knowing drop me a comment and i may put them up in a different post.

This of course is by no means a complete list of the type of domainers out there. I hope that people whose names have been mentioned do not take umbrage at being categorized, I’m just trying to get a recall factor in by name dropping.

I’m sure all of them would have certain activities in other categories. I can see myself in about 3 too.