Domain Auctions: Heady Days

[dochlaggie]

Domain Auctions: Heady Days

Domain name industry booming with multimillion-dollar sales, but is it sustainable?
June 25, 2007

By Leah Messinger



If hefty domain name prices are any indication, the dot-com resurgence may be headed for another bust.



Just take a look at last week’s live auction sale by domain name broker Moniker. On Friday at the Traffic conference in New York, Moniker beat its record for the largest sale of a single domain name at live auction. That sale went to Creditcheck.com, which took in a cool $3 million. When the day was done, Pompano Beach, Florida-based Moniker had raked in $10.9 million for brokering 115 names.



The rising attendance at these popular events suggests heated interest in the promise of riches from dot-com domains.



"Good domain names are appreciating faster than equities and real estate—by a lot,” said Fair Winds Partners co-founder and Internet consultant Joshua Bourne. He said there’s growing attendance of venture capitalists and private equity companies at the auctions.



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Amid the digital land grab was Moniker-brokered Seniors.com, which bagged $1.8 million, and Lick.com, which went for $60,000. VintageMotorcycles.com attracted $14,000 and Jewishdeli.com snagged $9,000. But many of the highest-priced domain names are privately sold, such as last year’s big-ticket sales: Diamond.com and Vodka.com, which earned $7.5 million and $3 million, respectively.



And it appears a new record may be in the works. Business.com, which sold for a then-unprecedented $7.5 million in 1999, could sell again soon for as much as $400 million, according to The Wall Street Journal.



Yet the industry doesn’t seem to be flinching or recalling its institutional memories of last cycle’s digital crash. According to Moniker CEO Monte Cahn, approximately half of the buyers at the auctions purchases highly coveted domain names to build online businesses. The other half of the buyers uses the domain names as a platform for online advertising.



Domain name owners can make money from these so-called parked web pages by signing up for Google AdSense or Yahoo Search Marketing. These ad programs place links on web sites based on keywords chosen by the domain owners. Web site owners and Google or Yahoo then split the revenue generated when visitors to the sites click on the advertising links.



Verisign estimates that the average amount paid per user click on an online ad in the first quarter of 2007 was $1.46. Terms such as “home equity loan” bring in more than $24 per click.



And the industry stands to grow even more, said Mr. Bourne.



He added that the increasing use of the Internet by a greater number of people broadens the audience base for online ads. Mobile Internet users, a growing demographic, also see a greater percentage of online ads, since they often type web site names directly into their browsers, said Mr. Bourne.



Direct navigation—typing a URL into a browser—is the main way Internet users end up on a parked ad page. That’s because many Internet users frustrated by unsuccessful web searches key in generic names such as hotels.com, in hopes of finding a faster route to their desired search topics.



The finally tally from the recent Moniker auction may eventually double as the silent auction portion of the event, which ends June 27, is expected to bring in between $3 million and $10 million, said Mr. Cahn.

From http://www.redherring.com

 

[Spade]

I read this article, and although they raised the question, can domain prices be sustained, they didnt bother to answer it. The issue here is simple, why are domains valueable? Online revenue is growing and expanding every year. Business are clamouring to be on the web and get their market share. Its not just a fad or unstable market. How many billions of dollars are spent online each year? The web is not going to be falling apart anytime soon.... so Unless online business somehow stops, I dont see the domain market, crashing that easily.

 

[VURG]

Didn't know that about "home equity loan".

Even home----equity----loan.org is registered.

I don't expect that to get much type in traffic?

 

[danielr]

In the past (in the last .com bust) ... domain parking and PPC did not exist yet. Traffic and conversions were not an issue.

The total advertising dollar spent in todays world is less than 8 percent on the internet which is expect to climb to 35 % in the next 5 years. If you have converting domains (especially in a category of a high demand) you can expect a great increase in PPC.

What else can you also expect to see in the future of domains?

Trademark issues!

If you have a really high traffic name, even if its a parked page. then you should acquire other extensions and trademark the domain.

I forsee the traffic / PPC becoming battle of infringements as PPC continues to grow.

For example, I turned down an offer on B a n k O f S A . com . So they acquire the .net and develope a site. Then they TradeMark the name. Then if I have PPC ads with their trademark (which i will make sure I block any adds going to bankofsa.net) then they can easily have an infringement case against me. I see more of this happening in the future.

 

[cache]

would'nt cheaper to buy the domain from you than spending the money
to trademark and use the .net?

In the past (in the last .com bust) ... domain parking and PPC did not exist yet. Traffic and conversions were not an issue.

The total advertising dollar spent in todays world is less than 8 percent on the internet which is expect to climb to 35 % in the next 5 years. If you have converting domains (especially in a category of a high demand) you can expect a great increase in PPC.

What else can you also expect to see in the future of domains?

Trademark issues!

If you have a really high traffic name, even if its a parked page. then you should acquire other extensions and trademark the domain.

I forsee the traffic / PPC becoming battle of infringements as PPC continues to grow.

For example, I turned down an offer on B a n k O f S A . com . So they acquire the .net and develope a site. Then they TradeMark the name. Then if I have PPC ads with their trademark (which i will make sure I block any adds going to bankofsa.net) then they can easily have an infringement case against me. I see more of this happening in the future.

 

[Ronald Regging]

This article seemed to be all over the place but had no real point. Many people cite the dot com bust of 99-00, but they fail to realize that it had nothing to do with domains. People weren't questioning the value of domain names, even though the prices did take a hit. The real issue was about stockholders investing millions and millions of dollars in upstart web businesses who weren't operating on any real business model, and thusly, were not generating profits.

Times have changed a lot since then and businesses are finding more and more ways to monetize on the net. Not only that, but most of them have solid business models.
You can't even begin to compare the dot com bust to current selling prices for domains, because they are completely unrelated.

IMO domains are currently undervalued as most people seem to value them based on PPC revenue. I've said this a few times, but with the prices of advertising on the rise, and the prices of PPC payouts falling, there needs to be a shift in the domain valuation process. People need to start valuating domains based on the savings on advertising, rather than as the revenue generated from advertising. As the gap between the two grows even wider, I think this will be the eventual turn the industry will take.

 

[DNabc]

I've read many domain disputes and mostly win when prove that they didn't registered the domain in bad faith, in a confusing way, or with the intent of selling it to the complainant.

 

[namethreads.com]

In the past (in the last .com bust) ... domain parking and PPC did not exist yet. Traffic and conversions were not an issue.

The total advertising dollar spent in todays world is less than 8 percent on the internet which is expect to climb to 35 % in the next 5 years. If you have converting domains (especially in a category of a high demand) you can expect a great increase in PPC.

What else can you also expect to see in the future of domains?

Trademark issues!

If you have a really high traffic name, even if its a parked page. then you should acquire other extensions and trademark the domain.

I forsee the traffic / PPC becoming battle of infringements as PPC continues to grow.

For example, I turned down an offer on B a n k O f S A . com . So they acquire the .net and develope a site. Then they TradeMark the name. Then if I have PPC ads with their trademark (which i will make sure I block any adds going to bankofsa.net) then they can easily have an infringement case against me. I see more of this happening in the future.

Daniel,

SInce you regged the domain before the trademark was applied for and before they set up their site, I think they'd have no chance to get your domain. However, if you sold it to someone else, for the purpose of domain disputes, the date of sale counts as the date of registration, so a subsequent owner might have trouble.