My question to Godaddy's CEO at NamesCon: Domain Liquidity for the industry

[Rob Monster]

Earlier this morning, I wake up to seeing a lovely comment from Shane Cultra on his blog:

To my eyes, that comment from Shane is actually pretty crazy. Ironically, many people told me unsolicited, that my question was the highlight of the Q&A. This is not the first time that Shane has spoken out of school against me with trash-talk and it probably won't be the last since it shamelessly drives up his page views for his affiliate site. I don't know if anyone has a video of the Q&A section of Aman's keynote but if so, would be great if someone would upload the actual video clip. I believe anyone who objectively reviews my question will find it to be rather selfless. It was a question about domain liquidity. There were 2 parts, and I believe they were reasonable and sincere.

Part 1: Domain Liquidity via Loans

As some folks know, Epik provides interest-free loans secured by domains. This is popular but we cannot lend to everyone in the amounts that everyone might like. Compared to Godaddy, we are a relatively small company without access to the vast pool of capital that Godaddy has access to. I asked if Godaddy would consider extending domain loans to its customers. The lending model is proven. Godaddy has the ability to scale it to a much greater degree. Rather than forcing Godaddy customers to abandon domains to their expiry stream, why not allow Godaddy customers with liquid names to borrow against their portfolio? It seems reasonable to me.


Part 2: Working with US Congress to make domain names a bankable asset.

I have also been a long-time believer in the potential for domain names to be a respected asset class. The challenge there is that the banking industry does not recognize domains as a bankable asset class. People can donate domains to non-profits and can get a write-down for their investment basis, but if you go to a bank and ask to borrow against a 3N.com, they have no idea what you are talking about. The House subcommittee on banking could engage here but we would need some lobbying power to make that happen.

For anyone who has ever studied the history of the housing market, the correlation between the availability of borrowing capacity and the prices of the associated asset is indisputable. When credit is available, asset prices go up. If domain owners could more methodically borrow against their domains at conventional banking rates rather than only from hard money pawnshops that dominate the landscape today, it would be a game-changer for making the pie bigger for everyone.

I will be interested to hear what folks have to say on this very reasonable topic about domain liquidity that can greatly impact the future of the industry.

 

[oldtimer]

Thanks.

I had a long call this afternoon with fellow Epik Board member @Braden Pollock about this topic. We have the domain name DomainEquity on the shelf since forever to be used for something in this category.

Braden had some great input which I will share here.

In short, Epik would be the guarantor on these peer to peer loans. If you are familiar with how US Small Business Administration loans work, the banks lend but the SBA backstops.

So, if there is a default, the lender is not left holding the drippy bag. The result is that a lender could get some risk-free return. If there is a default, Epik would handle the liquidation/settlement.

The amount of available backstop is set by Epik. So, if someone lends more than that, they are only protected up to the amount of the backstop. Some lenders might offer to lend more at a higher interest rate.

The interest and commission is pre-paid. For example:

- Net proceeds to borrower: $1,000

- Interest rate for 1 year: 10%:

- Commission for Epik: 2%

- Monthly repayment over 12 months: $83.33

As for use of proceeds, it can be cashed out.

As for domains, they would be at Epik held as collateral but in the borrower's Epik account.

If there is a default, the domains move into a managed account for orderly liquidation.

That is the initial thinking. The design team and engineers have yet to weight in on this topic, but I see a pretty clear path for getting this done. The successful launch of NameLiquidate.com shows what is possible.

Does there have to be any interactions or communications between the borrower and the lender or could this all be done automatically through Epik with each side only known to and interacting with Epik.

 

[oldtimer]

So someone has to pay $120 upfront,

How did you come up with the $120 upfront charges.

@Rob Monster , is that right, is there going to be an upfront charge to the borrower or is it all built into the monthly payments. And isn't the first payment going to be due a month later from when the loan was taken.

 

[Rob Monster]

Domains are truly assets. The Real Estate of the Internet.

Money is not an asset, it is imaginary - printed out of thin air, backed by blind confidence in its infinite creation.

All centralized currencies are by definition debt instruments only - valueless.

Could the industry mastermind a way to integrate decentralized currencies of value with domain assets to create a new class of liquidity without usury?

I think the industry could certainly tokenize domains. The folks at Contrib have done some of this as a co-investing topic, but they did not turn it into liquidity.

The project called Toki.com will eventually have a cryptocurrency -- the currency is called a ... Toki.

The main way Toki is earned into existence is by hosting a Toki server.

However, the Toki could be a go-to medium of exchange for liquidating domains.

Needs more thought but yes fiat currency is intrinsically worth as much as the paper it is printed on. That's true.

 

[DanSanchez]

And by the way, call off your dan sanchez watchdog who is trying to intimidate me on private message. Starts off nice, then gets mean. I owe you nothing dan sanchez. I can comment jsut like anyone else here!!!

Indeed you are free to comment, I reached out to you in an attempt to find out more about you. Its apparent you have no backbone as you remain anonymous and embattled for no apparent reason. Curious you said I was mean as you call me a dog for reaching out to you... quite a thin skin for a troll.

 

[ExploitOdds]

I think the industry could certainly tokenize domains. The folks at Contrib have done some of this as a co-investing topic, but they did not turn it into liquidity.

The project called Toki.com will eventually have a cryptocurrency -- the currency is called a ... Toki.

The main way Toki is earned into existence is by hosting a Toki server.

However, the Toki could be a go-to medium of exchange for liquidating domains.

Needs more thought but yes fiat currency is intrinsically worth as much as the paper it is printed on. That's true.

It is so interesting on a lot of levels. Admittedly I have just fired ones up mPuf!! So take what I say next with a grain of salt.


I’ve often wondered . . . About a lot of things

I’ve thought whoever controls distribution should dominate the world.

what are 10000 staples worth at the store? Like 10000 staples should hold some value. What about the free couches on Craigslist? Surely with all the homeless people in just the US, there is a value for the used couches.

so there is value to all of these seemingly worthless stuff. Giving it a value is tough to do. It can be monetized.
I think with domains we struggle to give value to something. Maybe not for those making money, but I know I struggle to properly valuate names.

if I came to you as the owner of love dot com I suspect I’d have no problems getting a 750k type of loan. I could see you evaluating it at say 2-3mil or 30 mil.
I think a name like Mica Corp dot com is worth about $5-15k. Mica is a mineral. It’s greenish. Corp would also follow an acronym from Mica. If my evaluation is correct my guess is you would lend $2k max, most likely $1k max, right?

I guess what I’m asking is what type of equity position does Epik want to be in when lending? I know I’d want my equity to be high if I were the one lending! Lol

 

[Bill Sweetman]

I was a little disappointed that the Q&A moderator would have happily cut me off as being the last question of the session but the crowd wanted my question and I asked it.

Rob, as the MC of that session, and for the record, I would not have been 'happy' to cut you or anyone off from asking a question however that session was already running overtime and it's the job of the MC to keep the session on time. I'm glad you got a chance to ask a question ... you have Aman to thank for that, in fact, since he was the one that wanted to take your question despite the session running into overtime.

 

[nothere]

In real life people can get loans against thier Realestate to buy stocks

In the digital world people should be able to get loans against thier domain names to buy crypto

They are millions and millions of houses sold in USA, each year. They are evaluated based on location, size, age, features, condition, access to infrastructure etc etc. In other words, banks have got that down, minus the crashes, since so many homes are sold at the same city, neighborhood etc.

On the other hand, domains are unique. Even great ones take time to sell for reasons we know and sometimes they don't sell for as much as we think they should. So, unless a lot of people bid on your loan, you are unlikely to get anywhere near what it may be the "fair" value. The lender takes a lot more risks with domains, given their uniqueness, so they have to leave room for that. The person making the loan has to calculate that the domain is essentially bought for that amount, even if doesn't happen 100% of the time.

 

[FlipperC]

How did you come up with the $120 upfront charges.

Rob said :

The interest and commission is pre-paid.

- Interest rate for 1 year: 10%:

- Commission for Epik: 2%

 

[Samer]

They are millions and millions of houses sold in USA, each year. They are evaluated based on location, size, age, features, condition, access to infrastructure etc etc. In other words, banks have got that down, minus the crashes, since so many homes are sold at the same city, neighborhood etc.

On the other hand, domains are unique. Even great ones take time to sell for reasons we know and sometimes they don't sell for as much as we think they should. So, unless a lot of people bid on your loan, you are unlikely to get anywhere near what it may be the "fair" value. The lender takes a lot more risks with domains, given their uniqueness, so they have to leave room for that.

there are millions and millions of domains sold each year, data not readily shared as much as tangible real estate. houses are also unique (only 1 in location, neighborhood etc) and they also may take a long time to sell, so the home owner keeps slashing prices until he unloads.

Samer

 

[oldtimer]

Rob said :

The interest and commission is pre-paid.

- Interest rate for 1 year: 10%:

- Commission for Epik: 2%

I guess we have to wait for Rob to answer, but I have never heard of anyone having to pay an upfront fee to get a loan. Most likely the interest and commission are going to be built into the monthly payments.

IMO

 

[nothere]

there are millions and millions of domains sold each year, data not readily shared as much as tangible real estate. houses are also unique (only 1 in location, neighborhood etc) and they also may take a long time to sell, so the home owner keeps slashing prices.

Houses are unique, but it makes virtually zero difference if I buy the 252 Long Lane house or the 254 one. It's also almost unheard of flipping homes for 10X the purchase price, like many do with domains, so home pricing is close to an exact science by now.

Now on domains: If Estibot valuations were the standard, you'd see people with money offering us, say, 75% of what Estibot values it, on the spot. Instead you get 5% offers from domainers hoping to resell them one day for 20X, to make up for loses, and for having all that money tied up.

 

[oldtimer]

there are millions and millions of domains sold each year, data not readily shared as much as tangible real estate. houses are also unique (only 1 in location, neighborhood etc) and they also may take a long time to sell, so the home owner keeps slashing prices until he unloads.

Samer

I assume that the loan amount will be around one third of the wholesale value of the domain, any more and the risks will not be able to be justified by the lender.

IMO

 

[Rob Monster]

Rob, as the MC of that session, and for the record, I would not have been 'happy' to cut you or anyone off from asking a question however that session was already running overtime and it's the job of the MC to keep the session on time. I'm glad you got a chance to ask a question ... you have Aman to thank for that, in fact, since he was the one that wanted to take your question despite the session running into overtime.

Yup, I know we we pretty much at time -- the preceding questions ran a bit long. So, thanks to you, Aman and Paul Nicks for letting me start the conversation. At the time, I did not anticipate it would end up leading to a popular thread on NP. For the record, I do think you did a great job as MC.

 

[wwwweb]

I thought this would be more of a platform where people would list their domains ie) ABC.com seeking $100,000 terms 8% annual interest, and epik would charge whatever there % on top, and people would pick, and choose the deal they wish to fund. If the borrower defaults, the loaner would have the option to claim the domain, or seek liquidity for it, another added epik service?

 

[equity78]

Rob, as the MC of that session, and for the record, I would not have been 'happy' to cut you or anyone off from asking a question however that session was already running overtime and it's the job of the MC to keep the session on time. I'm glad you got a chance to ask a question ... you have Aman to thank for that, in fact, since he was the one that wanted to take your question despite the session running into overtime.

So you were not offended by Rob's question Bill?

 

[oldtimer]

So you were not offended by Rob's question Bill?

Didn't he just say that he was glad to have been able to let Rob ask his question.

 

[Rob Monster]

I thought this would be more of a platform where people would list their domains ie) ABC.com seeking $100,000 terms 8% annual interest, and epik would charge whatever there % on top, and people would pick, and choose the deal they wish to fund. If the borrower defaults, the loaner would have the option to claim the domain, or seek liquidity for it, another added epik service?

I propose to display a maximum backstop. Lenders can decide how much they would lend and with what level of interest. The collateral assets will also be displayed so some borrowers may get purchase offers for domains that they were planning to use for collateral. That is of course perfectly fine so the interface should allow the prospective lenders to be able to communicate and make a purchase offer in lieu of a loan offer.

As for your "freestyle" scenario where borrower and lender independently agree to a lending arrangement without a guarantor, this would be similar to an escrow transaction where we would simply enforce the agreement between borrow and lender, and take a percentage of the borrowing proceeds for processing the transaction and protecting the collateral for the duration of borrowing term.

For awareness, we are looking into developing a freelancer marketplace called Get.Work. In this case, the freelancers that are listed are vetted by Epik, e.g. for logo design, SEO work, content writing, web development, etc. I mention this as parallel because I think the same model applies to lending. We would be curating/reviewing the lenders to prevent the scenario of future problems or conflicts.

I believe as a market-maker, we have a fiduciary duty to empower, but also to protect against fraud or other future problems or disappointments from counter-parties. If disputes arise, we'll try to mediate to get to a positive outcome, or at least clean up messes.

 

[equity78]

I propose to display a maximum backstop. Lenders can decide how much they would lend and with what level of interest. The collateral assets will also be displayed so some borrowers may get purchase offers for domains that they were planning to use for collateral. That is of course perfectly fine so the interface should allow the prospective lenders to be able to communicate and make a purchase offer in lieu of a loan offer.

As for your "freestyle" scenario where borrower and lender independently agree to a lending arrangement without a guarantor, this would be similar to an escrow transaction where we would simply enforce the agreement between borrow and lender, and take a percentage of the borrowing proceeds for processing the transaction and protecting the collateral for the duration of borrowing term.

For awareness, we are looking into developing a freelancer marketplace called Get.Work. In this case, the freelancers that are listed are vetted by Epik, e.g. for logo design, SEO work, content writing, web development, etc. I mention this as parallel because I think the same model applies to lending. We would be curating/reviewing the lenders to prevent the scenario of future problems or conflicts.

I believe as a market-maker, we have a fiduciary duty to empower, but also to protect against fraud or other future problems or disappointments from counter-parties. If disputes arise, we'll try to mediate to get to a positive outcome, or at least clean up messes.

Will you need to meet any new regulations Rob as a lender or will there be no new red tape or licensing?

 

[Rob Monster]

Will you need to meet any new regulations Rob as a lender or will there be no new red tape or licensing?

Legal will review the local legislation governing peer to peer lending. Worst case, the deals will be structured as sale and leaseback, which is what Domain Capital has been doing for years. Right now we are just defining the functional requirements so this input is great. If there are P2P lending experts here on NP, perhaps they might PM me. The project, assuming it kicks off, will need a Product Manager or General Manager

 

[Internet.Domains]

To create liquidity with an asset the best technology to date is blockchains. There are multiple ways that a domain asset could be collateralized for a loan. Here is one scenario:

* The domain asset could be evaluated and have a wholesale price put on by the distributing source.

* The asset would be pegged with a token on the blockchain with a 1-1 ratio based on the wholesale price.

* The tokens would be put on an exchange to allow fast, secure and open transfer of ownership.

* Token holders could lock up tokens in a vault as collateral for a loan with a liquidation price set at a %.

*The loan could be paid back at anytime to unlock the vault and allow for the tokens to be exchanged.

* Tokens are pegged at the wholesale price and when the domain sells at retail value the pool increases, but the amount of distributed tokens remains the same, thus increasing the token price.

*Tokens are bought back and closed out at a higher price than originally purchased.

What does a blockchain offer that conventional asset management can't?

* Liquidity
* Loans for fractional investors
* Custodianship

If domains are to be considered as an asset they should be put on the blockchain.

 

[oldtimer]

The main thing about this loan program is that someone has to allocate substantial amount of money to finance a loan on a domain name that they might not be able to sell quickly if it leads to a foreclosure, if Epik is not willing or able to do this for larger loans and is going to outsource it to individual lenders that might imply that there is too much risk involved in getting liquidity for most domains unless the percentage of the loan compare to the perceived value of the domain is so low that makes it practically into a fire sale scenario. (a fraction of the wholesale value).

IMO

 

[Rob Monster]

The main thing about this loan program is that someone has to allocate substantial amount of money to finance a loan on a domain name that they might not be able to sell quickly if it leads to a foreclosure, if Epik is not willing or able to do this for larger loans and is going to outsource it to individual lenders that might imply that there is too much risk involved in getting liquidity for most domains unless the percentage of the loan compare to the perceived value of the domain is so low that makes it practically into a fire sale scenario. (a fraction of the wholesale value).

IMO

Actually, it is mostly a question of scale and opportunity cost.

As you can see, Epik completed 4 acquisitions in 2019 and incubated 7 new brands from the ground up, while launching many new features and funding aggressive incentives for the domainer community. This was done with almost no equity dilution and de minimis debt, all the while funding loans to customers and a large amount of registry auto-renews. We got a lot done with high capital efficiency.

So, now let's say the market appetite in 2020 for domain-collateralized debt with good collateral at 10% interest is $50 million. The banks won't give us $50 million and equity dilution to fund this empowerment project would be decretive to shareholder value and frankly unjustified. So we need about $50 million in yield-seeking liquidity.

In the meantime, the US banks are paying depositors about 1% on time deposits. That's rather garbage. If we can give depositors 10% yield through a peer to peer exchange, while helping borrowers cut their cost of capital from 15-30% to 10%, well that is just very full of win. The only question is how many folks want 10% of low risk return with a primary counterparty and at least one guarantor.

Anyway, I think we might run the experiment. As with escrow where we can do it for zero commission, we can also afford to make zero on domain lending if it means that domain holders secure borrowing capacity that they can use responsibly to either extend their runway, or capitalize on low risk opportunities. Epik will toll the exit when someone sells or leases a domain to an end-user, but otherwise is just a low-cost facilitator.

 

[Rob Monster]

What's the over-under on the haters getting to 50/50 on this poll?

Maybe a representative from the group can summarize the top 5 reasons why this thread is stupid so the rest of us can make sure to not post stupid threads in the future. Thanks!

 

[JB Lions]

What's the over-under on the haters getting to 50/50 on this poll?

Show attachment 144067

Maybe a representative from the group can summarize the top 5 reasons why this thread is stupid so the rest of us can make sure to not post stupid threads in the future. Thanks!

Next time you make a poll, make it public in the sense you can see who voted for what. There is an option for that when you make a poll.

I have to point this out tho:

Well, it explains the rising tide of anonymous votes for "This thread is stupid". Duly noted on the ballot stuffing operation.

2/3 of Epik employees voted in this poll - https://www.namepros.com/threads/best-lander-amongst-three.1155301/page-3

A poll you won by 6 votes, if you include the 20 employees that voted.

I think all polls should be like that, so you can see who voted for what.

Right now it's 55 - 36.

What if you had 20 employees in that 55, subtract that, you have 35, less than 36. Who knows.

------
Just took a look, check this box off next time - Display votes publicly

 

[oldtimer]

I haven't voted either way as this needs to be explored further to see if it is a viable enough idea to scale. It might work okay for smaller loans, but when you get into five or six figure loans then lenders might consider it as a gamble hoping to get a valuable domain at a fraction of the cost through loan defaults and once a few people start losing their valuable domains it will put a negative light on the whole program.

IMO