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.

 

[trelgor]

Watched it. Lol.

 

[StartupsBrandsCom]

Hi, to add some of findings in my experience,
Domaining, except of the high valued sales, could not be compared to estate, as the jargon used by many, and yes domains are business assets surely, but mentioning that

we would need some lobbying power to make that happen

- bankable asset,
could actually bring other trending as is the case with most modernly developing trades/industries through competition and further into market over-regulation as in news Tell ICANN what you think of their plan to raise the price of .com

 

[Rob Monster]

The feel good Domainer story of the day happens to be a domain loan case study.

A client who is here on NamePros borrowed against some of his domains a couple of years ago. He actually defaulted after a year but we let grace run, trusting that his ship would eventually come in.

Fast forward to February 10, 2020. He secured a confirmed deal to sell a 2-word brandable for $100K, which sets him nicely beyond clearing the debt.

The $10K non-refundable deposit was received today. The balance is due within 60 days.

So, yes, he shot the moon., Looking ahead, I imagine he will be once again soon be a domain buyer now, only this time with a more refined eye for what to buy and what not to buy.

This would be a Domain Loan success story and a turnaround story as well. There are a bunch of those now. Liquidity at the right time can make all the difference.

 

[bmugford]

The feel good Domainer story of the day happens to be a domain loan case study.

A client who is here on NamePros borrowed against some of his domains a couple of years ago. He actually defaulted after a year but we let grace run, trusting that his ship would eventually come in.

Fast forward to February 10, 2020. He secured a confirmed deal to sell a 2-word brandable for $100K, which sets him nicely beyond clearing the debt.

The $10K non-refundable deposit was received today. The balance is due within 60 days.

So, yes, he shot the moon., Looking ahead, I imagine he will be once again soon be a domain buyer now, only this time with a more refined eye for what to buy and what not to buy.

This would be a Domain Loan success story and a turnaround story as well. There are a bunch of those now. Liquidity at the right time can make all the difference.

That is a good story, but that type of thing is just anecdotal and not empirical.
It is a one off story with limited details.

Let's talk specifics... What were the actual loan terms?

The outcome could have been far different without that sale. You could end up eventually losing your domains and/or pile up debt.

Brad

 

[Rob Monster]

That is a good story, but that type of thing is just anecdotal and not empirical.
It is a one off story with limited details.

Let's talk specifics... What were the actual loan terms?

The outcome could have been far different without that sale. You could end up eventually losing your domains and/or pile up debt.

Brad

The loan amount was $2000

The loan was interest-free.

The loan was secured by domains in the client's domain portfolio.

And in this case, not foreclosing on the loan led to a life-changing outcome.

I call it a success story. You can call it something else if you like.

 

[bmugford]

I call it a success story. You can call it something else if you like.

I am sure there was some person who took a line of credit on their house to buy bitcoin at $200.
That is a success story also.

Another person might have done the same thing at $20K then taken a massive loss.

Let's not pretend like there are not risks when it comes to debt.

Brad

 

[Rob Monster]

I am sure there was some person who took a line of credit on their house to buy bitcoin at $200.
That is a success story also.

Another person might have done the same thing at $20K then taken a massive loss.

Let's not pretend like there are not risks when it comes to debt.

Brad

So, here's the deal:

- The guy was about to lose his portfolio.

- The loan was secured just by the domains.

In short, we carried the water on his renewals so he could not lose his portfolio.

This is a success story. Full stop. All upside, no downside.

 

[bmugford]

So, here's the deal:

- The guy was about to lose his portfolio.

- The loan was secured just by the domains.

In short, we carried the water on his renewals so he could not lose his portfolio.

This is a success story. Full stop. All upside, no downside.

What do you want a pat on the back or something?

Surely, you valued the collateral at more than the loan price.
Surely, at some point you would have seized the domains if he was not able to pay the loan back.

In this case the outcome was good. That is not going to be the same in every case involving debt.

Brad

 

[trelgor]

I think domainmarket and hugedomains-like bulk strategy could serve as reference points for a plan. What if the system was pooled? A shoot the moon strategy for names with few, but not 100% incredible sales chance, could create a profit that in that case can be distributed among the loan holders. At the point where the choice is between losing your investment or having a shot at getting something, what is preferred? If one believes in an overall market rise in both capitalization and frequency, it could be worthwhile.

90% of startups fail. Mostly because the idea was stupid in the first place. But sometimes because they ran out of money. ”Sometimes” can be good enough if we are talking domain names.

 

[Samer]

I am sure there was some person who took a line of credit on their house to buy bitcoin at $200.
That is a success story also.

Another person might have done the same thing at $20K then taken a massive loss.

Let's not pretend like there are not risks when it comes to debt.

Brad

depends on your appetite for risk -/reward.

sometime planets align, everything clicks, luck.

Bitcoin at $10K, still high. story of redemption, not scorn. we learn from the negatives to propel us forward. Why let the past define us?

Samer

 

[Rob Monster]

What do you want a pat on the back or something?

Surely, you valued the collateral at more than the loan price.
Surely, at some point you would have seized the domains if he was not able to pay the loan back.

Brad

I care about empowering humanity to not lose their wealth. If that is not patently obvious to you then you might consider having a few extra hours with your head on a pillow rather than being on NP at 3 am ET!

The point of this thread was to make a case that Godaddy can do this exact same thing on a much larger scale than any other company in the domain industry.

If our goal was to foreclose on the borrower, we could have done that a year ago. That was not the goal. The goal was to bridge him to the other side. We did that. Others could do it too but AFAIK they don't..

With that as context, let's make a big distinction about debt. There are a few major types out there:

1. Nasty kick your ass debt with UCC filings. This is often "loan to own" debt where if you default on it, you can expect to lose a lot of assets. This is like playing with dynamite. You better know what you are doing.

2. Bank debt from reputable banks and lenders. This is often relationship-based where a default is very much to be avoided, and a default may go through forbearance in order to avoid a write-down.

3. Non-recourse debt secured just by the assets.

I am talking about case #3.

As for Godaddy, it seems to me that by doing a partnership deal with Kabbage, they are currently enabling something between 1 and 2.

My point is they don't need to. They KNOW the value of the domains that a customer holds. They could do non-recourse lending against the portfolio without providing domain-specific appraisals.

It would be empowerment, and that would be cool.

 

[oldtimer]

I think the fact that Rob was willing to extend the time for the loan is what made all the difference.

IMO

 

[bmugford]

I care about empowering humanity to not lose their wealth. If that is not patently obvious to you then you might consider having a few extra hours with your head on a pillow rather than being on NP at 3 am ET!

The point of this thread was to make a case that Godaddy can do this exact same thing on a much larger scale than any other company in the domain industry.

If our goal was to foreclose on the borrower, we could have done that a year ago. That was not the goal. The goal was to bridge him to the other side. We did that. Others could do it too but AFAIK they don't..

With that as context, let's make a big distinction about debt. There are a few major types out there:

1. Nasty kick your ass debt with UCC filings. This is often "loan to own" debt where if you default on it, you can expect to lose a lot of assets. This is like playing with dynamite. You better know what you are doing.

2. Bank debt from reputable banks and lenders. This is often relationship-based where a default is very much to be avoided, and a default may go through forbearance in order to avoid a write-down.

3. Non-recourse debt secured just by the assets.

I am talking about case #3.

As for Godaddy, it seems to me that by doing a partnership deal with Kabbage, they are currently enabling something between 1 and 2.

My point is they don't need to. They KNOW the value of the domains that a customer holds. They could do non-recourse lending against the portfolio without providing domain-specific appraisals.

It would be empowerment, and that would be cool.

What you are describing sounds more like charity than a business proposition.

You really expect GoDaddy, a multi-billion dollar publicly traded corporation, to make these type of loans?
It would make absolutely no business sense.

As a much smaller, privately held company, you can do as you please. But it seems rather silly in my view to expect GoDaddy to do the same.

Brad

 

[bmugford]

My point is they don't need to. They KNOW the value of the domains that a customer holds.

Value is far too subjective for anyone to "know" the value of a domain.

Brad

 

[Rob Monster]

What you are describing sounds more like charity than a business proposition.

You really expect GoDaddy, a multi-billion dollar publicly traded corporation, to make these type of loans?
It would make absolutely no business sense.

As a much smaller, privately held company, you can do as you please. But it seems rather silly in my view to expect GoDaddy to do the same.

Brad

It is far from charity. It pays to do good. That's the point.

Do the math:

- We'll collect a 9% commission on a $100K sale in brokerage fees alone.

- The customer will pay off his loan so we get our cash back.

- The customer will re-invest a portion into his domain portfolio -- probably a bit smarter too.

- The customer will be our customer forever with loyalty that cannot be bought. We are friends for life.


Anyone registrar do this and I think they should. Godaddy can appoint a Chief Credit Officer and develop software to manage the underwriting process. We did it but they can do it bigger. It would be cool.

 

[bmugford]

It is far from charity. It pays to do good. That's the point.

Do the math:

- We'll collect a 9% commission on a $100K sale in brokerage fees alone.

- The customer will pay off his loan so we get our cash back.

- The customer will re-invest a portion into his domain portfolio -- probably a bit smarter too.

- The customer will be our customer forever with loyalty that cannot be bought. We are friends for life.

Anyone can do this and I think they should. Godaddy can appoint a Chief Credit Officer and develop software to manage the underwriting process. We did it but they can do it bigger. It would be cool.

Now do the math if the seller had not made that sale.

What were you going to do if he simply could not pay back the loan?
Were you going to seize his domain(s) or just eat the loss?

Again..anecdotal vs empirical. We have a sample size of 1.

Brad

 

[wwwweb]

It is far from charity. It pays to do good. That's the point.

Do the math:

- We'll collect a 9% commission on a $100K sale in brokerage fees alone.

- The customer will pay off his loan so we get our cash back.

- The customer will re-invest a portion into his domain portfolio -- probably a bit smarter too.

- The customer will be our customer forever with loyalty that cannot be bought. We are friends for life.


Anyone registrar do this and I think they should. Godaddy can appoint a Chief Credit Officer and develop software to manage the underwriting process. We did it but they can do it bigger. It would be cool.

Godaddy has not been able to add a balance system to their platform for years. Lots of overseas users lose their auction wins because they can’t wire large payments in 36 hours. Baby steps with them. They are never going to loan money because all their buyers who use their appraisal system will be distraught when they can’t even get 5 cents on the dollar for their appraised domains.

 

[Rob Monster]

Now do the math if the seller had not made that sale.

What were you going to do if he simply could not pay back the loan?
Were you going to take his domain or just eat the loss?

Again..anecdotal vs empirical. We have a sample size of 1.

Brad

If he had defaulted, the domains would have ended up going through the expiry stream. We were not lending more and a bunch of domains did go through expiry during the year of post-default grace period.

The sample size is larger, but I am sharing a specific anecdote. Most of the turn-around cases don't really want any publicity. This happens to be a timely success story.

I hope it inspires other registrars to think about introduce non-recourse lending as part of their offering because it would empower a bunch of folks and my experience is that it makes the pie bigger.

 

[bmugford]

Godaddy has not been able to add a balance system to their On my way! from for years. Lots of overseas users lose their auction wins because they can’t wire large payments in 36 hours. Baby steps with them. They are never going to loan money because all their buyers who use their appraisal system will be distraught when they can’t even get 5 cents on the dollar for their appraised domains.

I agree. Their system leaves a lot to be desired.
It is almost impossible for them to really make any major changes.

Brad

 

[bmugford]

If he had defaulted, the domains would have ended up going through the expiry stream. We were not lending more and a bunch of domains did go through expiry during the year of post-default grace period.

The sample size is larger, but I am sharing a specific anecdote. Most of the turn-around cases don't really want any publicity. This happens to be a timely success story.

I hope it inspires other registrars to think about introduce non-recourse lending as part of their offering because it would empower a bunch of folks and my experience is that it makes the pie bigger.

On the $2K loan, how much value did you put on the collateral?

Also what type of domains are we talking about? 4L .COM, 2 word .COM, single word NET/ORG, new extensions, etc.

I would love to talk specifics. It is more helpful that just giving a single example with limited details.

Brad

 

[Rob Monster]

Godaddy has not been able to add a balance system to their On my way! from for years. Lots of overseas users lose their auction wins because they can’t wire large payments in 36 hours. Baby steps with them. They are never going to loan money because all their buyers who use their appraisal system will be distraught when they can’t even get 5 cents on the dollar for their appraised domains.

I think you underestimate Aman. If he is sincere about empowerment, and lifting up people in places like India where many folks live on $100 per month, then I think he will experiment.

I believe that Aman has a rare opportunity to be the Grameen Bank of the Digital Age. He will secure his place in digital history, and it could be an enormous catalyst for prosperity.

I have seen the impact with my own eyes to not know for 100% sure that the impact is transformative. We need this type of empowerment program and we need it at scale, and worldwide.

It can be done. It should be done. It will be done. The only question is who will do it. Epik has started. Our next move is to add peer to peer lending to attempt to scale it responsibly.

So, wish us luck, but also let's keep hoping that Aman will bring true empowerment, and not just serve up a bunch of DIY tools with a heads-I-win-tails-you-lose economic model that has dominated Godaddy for years.

 

[oldtimer]

If he had defaulted, the domains would have ended up going through the expiry stream. We were not lending more and a bunch of domains did go through expiry during the year of post-default grace period.

Didn't I hear you say in the thread earlier that you only sell the portion of the domains that is enough to pay back the loan and let the customer keep the rest of his portfolio. That's true philanthropy and empowerment.

 

[Rob Monster]

Didn't I hear you say in the thread earlier that you only sell the portion of the domains that is enough to pay back the loan and let the customer keep the rest of his portfolio. That's true philanthropy and empowerment.

Yes, that is what we have done.

We are not contractually limited to that, but that is our practice. We have made life-long friends by applying a "Do unto others" test when it comes to extending credit and settling customer loans in an orderly way. On balance, it has worked out.

Back in 2007, I adopted the term "Enlightened Capitalist". I have no idea why I did but that was my LinkedIn. My thesis was that it would be possible to "To do well by doing good and do good while doing well". It has been a journey to figure out how to do it, but I am increasingly sure it can be done.

Although my thinking evolved, I kept the term:

https://www.linkedin.com/in/enlightenedcapitalist/

More recently, I have used the term "Co-Creating Abundance". It is a similar idea. In short, I challenge people who perpetuate a scarcity mindset that causes people to hoard opportunities and resources when in fact love, knowledge and ideas are all free and infinite. As such, there is no need to hoard them.

The big challenge is CAPITAL. People need money to make money. They may not need a lot but it is almost impossible to bootstrap from absolutely nothing. So, this is where free education, empowerment grants, and interest-free, non-recourse loans can fill a critical void.

 

[oldtimer]

Back in 2007, I adopted the term "Enlightened Capitalist". I have no idea why I did but that was my LinkedIn. My thesis was that it would be possible to "To do well by doing good and do good while doing well". It has been a journey to figure out how to do it, but I am increasingly sure it can be done.

I like "Divine Capitalist" better.

One that puts God above all earthly treasures, and uses his wealth and power to serve humanity.

By the way the .com is available.

IMO

 

[Rob Monster]

I like "Divine Capitalist" better.

Actually, I would much sooner re-brand to Servant Capitalist.