Blogs about the domain industry and the various players and companies within it.

Domaining Europe Presentation

Domaining Europe Presentation

I had the absolute pleasure of presenting a session on Domain Monetisation at Domaining Europe yesterday. A lot of people asked if I could upload the presention to my blog....so here it is!

Click to Download the Domain Monetisation Presentation

Domaining Europe has been outstanding so far and I'm really looking forward to heading back down to meet new people, do some business an make new friends!

Escrow.com

 

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TNW and Domaining Europe

TNW and Domaining Europe

The clock is ticking until on Saturday I jump on yet another aircraft to travel to Europe and the other side of the world. I must admit that other than the 24-hour journey, I’m really looking forward to this trip as I’ll get a chance to catch-up with all of the European ParkLogic clients and friends.

Escrow.com

So what takes me to Europe? As well as a whole heap of meetings I’m heading to Amsterdam to attend TNW (The Next Web). The best way to think of TNW is that it’s the TED conference for technology. I hope to come away exhilarated and really excited about some of the great ideas and business models being presented.

ParkLogic is sponsoring Domaining Europe and it’s the second conference I’ll be attending. I’ve always wanted to go to Domaining Europe and it was great that Dietmar, the convener, decided to move it from Valencia to The Hague….which is just down the road from Amsterdam. I have the privilege of speaking on monetisation and being on a panel…..I’ll make sure that the session is lively and interesting!

If you’re attending Domaining Europe or TNW then please don’t hesitate to reach out to me so that we can schedule some time together. My schedule usually fills up pretty quickly so please contact me ASAP. I would particularly like to meet with any domain investors that monetise their traffic.

In the meantime, I would like to wish everyone safe journeys.

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Problems With The Domain Industry

Problems With The Domain Industry

I published an article about ChiP (Chinese Premium) domains yesterday and received a really interesting comment from a reader that I would like to unpack. For a start I would like to thank them for the effort they took in writing the comment as it’s clear they are really passionate about domains.

Escrow.com

As the comment is public, here is what they wrote:

Your advice to sell is terrible advice. And then you offer to help CHIP owners liquidate. Four-letter .com prices are positioned to move up substantially in the coming years and you recommend getting out now. You obviously needed a better translator on your China trip. SELLING CHIPS NOW AT LIQUIDATION PRICES IS TERRIBLE ADVICE. PLEASE DON'T HEED.

Yes, my advice may be terrible for a subset of the domain community that is wanting to hold their domains in perpetuity but here’s the thing. The whole point of having an asset is either it produces dividends in the form of an income stream (eg. Monetisation) or you sell the asset for more than you paid for it (ie. capital gain).

If you always believe the price of the asset will increase and you have no need of additional cash, then logically you should hold the asset. The assumptions underpinning this strategy is that domains will be used forever and that there aren’t any market cycles that you can take advantage of.

It’s all about managing risk and everyone has a different risk profile. For example, a number of years ago I sold my traffic portfolio at the peak of the market for a crazy multiple, waited a couple of years and then bought back in at a fraction of the cost. I was managing my risk, taking some cash off the table and watching the market.

If you are running a business, then at some point in time you will sell the asset and crystalise the capital gain. If you plan on selling in the way distant future, then you essentially are saying you have an infinite appetite for risk.

One of the major aspects of risk management is diversification by taking the money off the table and then investing it elsewhere. Everyone is different. Some take the cash and invest it in the stock market while others invest it in personal relationships by having a family holiday. Wherever you choose to invest is your own business.

There is the other issue of cost of capital. What does it cost you to have cash working for you elsewhere versus leaving it in the current asset? If you want to invest in a business and don’t have the cash then it could be you end up borrowing funds…..what is the cost of this capital versus selling the domains now? These are all questions that can only be answered on an individual basis.

Which brings me to the current market cycle. All the data indicates that we have tipped over the peak of a Chinese driven market cycle. Domains I sold in December last year I can now pick up for around 70% of their sale price. Over the last twelve months the Shanghai Composite Index (see below) continues to decline which correlates with what is happening in the domain space.

Shanghai Composite Index

 

 

This does not mean that selling ChiP domains is a bad deal now. Yes, you may have received a better deal last year but in six months’ time it’s likely the market will completely cool off and you find yourself playing the really long-term hold game. Is this something that everyone wants to do? Of course not. Some will hold and some will sell based upon their own circumstances.

Let’s flip this around. If the reader who commented believes that selling ChiP domains at “liquidation prices” (for the record, they aren’t liquidation prices) is terrible advice then they must be a massive buyer of the domains themselves. They have a belief that over the years the domains will massively increase in value and therefore they should logically purchase them. What does this do? It pushes the prices of the domains up as there is more demand and reducing supply.

Now if the commenter is saying everyone is mad for selling and they are not buying then they are either being economically irrational or they themselves don’t have the cash to take advantage of the cheap opportunity.

This brings me to my final point. The lack of liquidity in the domain market as investors buy-in to the perpetual hold model is frightening. This mode of thinking drives some domain investors to reject $1,000 deals for stock-turn domains in the belief that one day they will get $20,000 for them. In comes the massive supply of new gTLD options for buyers and suddenly the potential $20,000 deal is fifty plus years away…..that’s a long-term hold.

The purpose of indicating that my company, ParkLogic has buyers of ChiP domains was an effort to solve the liquidity problem for those people that wished to manage their risk. We’ve already moved a lot of ChiP domains and continue to do so as everyone has a different risk profile.

Never forget that cash provides flexibility to take advantage of other opportunities. As an example, the other day I came across a fantastic business that was looking for investment. I’m now a shareholder and it’s rapidly moving forward….

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Michael 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.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

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Domainers Meet Dubai a Great Success!

Domainers Meet Dubai a Great Success!

Congratulations are in order to all of the organisers of Domainers Meet in Dubai. The conference concluded yesterday and I know that a lot of business will be conducted as a result. This good news is that there are plans in place already to run the conference next year.

From the moment I stepped off the plane at the enormous Dubai international airport I could feel the incredible surge of energy of a city and a country going places. It's hard to imagine that just forty years earlier and I would have been welcomed by sand dunes.....instead a bustling metropolis of amazing skyscrapers and spectacular architecture greeted me.

The tallest building in the world, the Burj Khalifa, stands out as a shimmering spire surrounded by an oasis of a manmade lake that contains dancing fountains which make the ones in front of the Belagio look tiny. Everything about Dubai speaks of grandeur and an amazing vision towards the future.

Likewise, Domainers Meeting is backed by a team that really believes in not just the physical expansion of Dubai but also the virtual. This theme constantly came through in the conference. It's clear that Dubai plans on applying the same amount of energy to domains and the Internet as it has to carving out the remarkable city in the physical.

I had the privilege of being the opening speaker and it was somewhat daunting as I stood looking across at the attendees. Why was this the case? Because I was standing in the sand dunes of the virtual Dubai and the people before me were eager to turn the sand into virtual gold. They were hungry to learn and apply the same levels of enthusiasm to domain names that they have applied to everywhere around us.

Many domain luminaries shared their experience including but not limited to: Braden Pollock (LBDN), Tessa Holcomb (Igloo), Rob Monster (Epik), Rolf Larsen (.GLOBAL), Francesco Cetraro (.CLOUD), Daliah Saper (Attorney), plus a lot of others....it was jammed pack from early morning until late evening. A real highlight for me was hearing from Munir Badr who spoke on the state of the domain/internet industry in the UAE.

In many respects the Dubai Domainers Meeting had a very similar feel to DomainFest Asia. They both were not large events but you could feel the drive to break new ground in every conversation.....and I had the privilege of being on the ground for both events.

I'm already hearing rumblings about how much bigger DomainFest Asia will be this September and I wouldn't be surprised if the next Domainers Meeting in Dubai is considerably larger than the first. For those of you that were considering attending Domainers Meeting and made the decision to not go you really missed out on a special event. I would highly recommend that you decide to attend next year.

So once again, congratulations are in order to the entire team that put on the Dubai Domainers Meeting! See you next year :-)

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Michael 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.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

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Part 3 - How A Decline in the Chinese Economy Will Impact Domains

Part 3 - How A Decline in the Chinese Economy Will Impact Domains

This is the third part in a series that examines domains and the Chinese economy. The first two parts can be viewd by clicking on the following links: Part 1      Part 2

The biggest concern with a Chinese economic downturn is the impact that it will have on the rest of the world. As companies reduce spending and hunker down during the economic storm domain valuations will be the recipient of a perfect storm of less demand and massively greater supply courtesy of the new gTLDs.

Escrow.com

If you are considering an offer right now on a domain, then my advice would be to take it, as I believe we will be heading into some rough water over the next couple of years. I’ve never regretted having cash in the bank and if I’m right, then there’s going to be some real bargains available in the not too distant future.

The biggest concern for me is the value of domain traffic in a financial crisis. Users will still have value but I’m concerned whether the value will be fully realised by domain investors in a downturn.

The Global Financial Crisis (GFC) taught us that although domain traffic is valuable (businesses need customers) the position of domain investors in the domain ecosystem is currently quite weak. As the dominant advertising partner, Google is likely to try and take a greater share of the reduced volume of advertising dollars in a difficult market.

This strategy worked in the past because there was excess margin between what Google pays out and second tier advertising exchanges. We are seeing that this is not necessarily the case in every market vertical. Domain investors that leave all of their domains with a single company or try and move them manually between monetisation companies will achieve sub-optimal results.

The challenge for domain investors is to diversify revenue sources so that they are not all coming from a single company. A recent article on the “hidden value of optimisation” clearly showed how optimising across multiple revenue sources effectively hedges against turbulent economic times. In the case of the article it illustrated the cross-rate differential between the Euro and $US as an example.

I’m constantly looking at macro-economic factors that may impact ParkLogic clients and then devise ways to help mitigate any downside risk while increasing the benefits from any potential upside opportunities. It’s what keeps the team awake at night as we dive into not just domain data but data that may impact the value that underpins our client’s assets.

To finalise this series, here is a list of actions that you may wish to consider implementing:

  • Finalise all active domain transactions.
  • Review the prices of all of your domains with an eye to reducing them.
  • Ensure all of your domains have buy it now prices on them.
  • Get all of your domains into each of the active market places.
  • Actively reach out to end users of your domains to market them.
  • Setup a webpage with all of your domains listed and their prices. All “for sale” links on parked pages should point to this webpage. If a potential buyer clicks on one of the domains then it may route through to one of the market places to handle the negotiation etc. This will mean that all of the traffic from potential buyers will be routed through to your domain list and not used to potentially sell someone else’s domain.
  • Outsource all of your domain management (especially for traffic) to a company that actively reduces revenue risk.
  • Do not buy any domains unless you can see a clearly defined exit.
  • Close any developmental projects that have a time horizon greater than 2 months.

I hope that you found the series on domaining and China interesting and thought provoking. I'm looking forward to DomainFest in Hong Kong to test out some of my hypothesis.

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Michael 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.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

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