Domain Sales is Overdue for a Shake-up – Part 2

The brokerage model needs to change.

In the previous article in this serious I took aim at the two major marketplaces of Sedo and Godaddy/Afternic. I then proposed a business model that solved the problem of the marketplaces being full of bad domains that must reduce the likelihood of sales transactions for potential buyers. You can read more about this hear: Part 1

I now want to propose a business model to help unclog the domain brokerage arm of the aftermarket.

Escrow.com

From a high-level perspective, the state of the domain aftermarket is as follows:
1.    Massive over-supply of domains – courtesy of the new gTLDs.
2.    Same demand.
3.    Anyone can put a shingle out and say they are a broker.

The vast majority of “brokers” aren’t brokers at all but are really “order takers”. What they do is take on lots of domains and then respond to inbound queries. These “order takers” just do what every serious domain investor does, with one exception, they didn’t pay for the domain they’re selling. So who do you think is more likely to sell the domain? The investor or the “order taker”? I’ll leave this up to you to work out.

On the flip-side of the coin there are the REALLY good brokers that know how to sell and pitch domains to prospective sellers and these people get the job done. They are worth their weight in gold and on the whole do an outstanding job for their clients.

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Domain Sales is Overdue for a Shake-up – Part 1

Marketplaces need an overhaul.

In this article I’m going to propose an idea that could be very unpopular amongst domain speculators but wildly popular amongst domain investors. Yes, there is a difference between those two camps and it’s this difference that needs to be highlighted.

Escrow.com

If we are to look at the domain aftermarket, there are really two major and a host of second tier (not second rate) marketplaces. If I was running either Afternic/Godaddy or Sedo I would look at two things:
1.    How I could remove the garbage domains from my marketplace.
2.    How I could make more money from brokerage.

The garbage domain problem is a real issue. When a person searches for a domain they are often presented a host a trash that covers the real gems that should be highlighted. How would I solve this problem? Easy, tax the domains.

I would charge some nominal fee per month per domain (eg. $0.10 per domain) with a minimum subscription of say, $50/month, to have your domains in the marketplace. All those with good domains will happily pay the fee and the speculated trash gets washed out. There could be a sliding scale depending upon volume, but I don’t think this is even necessary.

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2018 - The Year That Was...

The year that was and the year ahead!

At this time of year, I like to spend some time reflecting on the state of the domain industry and in particular what I’ve been up to the past twelve months. Let me say from the outset that I’ve seen a LOT of changes take place and from my perspective most of them have been good.

Escrow.com

Development
At the end of 2017 I wrote about a project that I was working on that took domain development to a whole new level. Internally we now refer to this project as “Sites” and it’s now integrated into the main ParkLogic core systems.

Along the developmental journey there were a number of critical factors that needed to be resolved. Without revealing too much, amongst many other things, “Sites” now contains:

  1. A flexible templating system to display landers that is very different compared to any of the currently available platforms (eg. Word Press, Joomla etc.). Widgets can be placed anywhere on the page and they both display information to the user AND also pass data back to the traffic quality system.
  2. A quality system that used both web and behavioural analytics to determine the quality of the traffic being received by a domain. Each and every piece of traffic is scored appropriately, and this score is aggregated at the domain and account levels.
  3. A reporting system that produces actionable reports based upon analytics at a dashboard, domain and traffic level.
  4. A fully configurable API so that any data can be pulled from any “Sites” server and then analysed by either “Sites” customers or the ParkLogic team.
  5. A back-end administrative interface that provides the necessary data for managing massive numbers of instances of “Sites” as well as assisting in determining more optimal monetisation solutions.

At the moment “Sites” processes around five million queries per day and in 2019 we see it continuing to grow as we focus our analytical skills upon it. It’s been quite a journey since its inception and it’s definitely not over yet….not by a long shot. When you control the page there’s a HUGE amount that is possible and this innovation will flow on as a direct benefit to ParkLogic clients.

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How to Turn a Profit with Domains

Planning for profit

Over the last few years I’ve watched many domain investors throw money at some pretty crazy ideas and invest in nonsensical domains. Some of these investors have already completely burnt their cash and have exited the industry.

I’ve also watched the quite diligent investors that have methodically planned how they are going to get a return on their investment….and they’re making money hand over fist!

Escrow.com

The secret to any business really isn’t a secret at all but it does require a sustained level of tenacity and diligence. Everything in business starts with a plan and the end point of the plan should ultimately be how the business is going to be sustainable and turn a profit.

When I look at investing in domains it’s exactly the same thing. You need a plan. If you don’t have a plan, then you are very likely about to burn through some of your kids’ inheritance.

Let’s get down to the basics. If you have a reasonable sized domain portfolio, I can almost guarantee that 20% of the domains should be monetised for their traffic. This will provide an immediate cashflow that will at the very least help out with renewals or you may find yourself in the enviable situation of turning over an immediate profit.

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Gambling on Domains

Are you gambling on domains?

I must admit that I’ve never really understood the business model underpinning domain sales. I know that in this article I may rain on your parade and for that I’m sorry….but please help me out in getting over some of my possibly faulty logic

Escrow.com

The state of the market for domain names is that it has fallen from a peak growth of 11.7% in 2015 to 1.2% in 2017. The 2015 peak was spurred on by two factors:
•    The Chinese domain boom
•    Greater release of new gTLDs

When you begin to drill down into the data it becomes even more interesting. For instance, .COM grew by 6.4% in 2015 and is growing by 2.8% in 2017. The legacy TLDs (eg. org, net etc) grew by 1.5% in 2015 and slipped backwards by -1.9%. The surprise was the ccTLDs (country codes). In 2015 they were growing by 14% while in 2017 they are beating .COM out with a growth rate of 3.9%. I must admit that I love ccTLDs and have made a lot of money from them over the years.

The sorry tale is the new TLDs. After exploding out of the blocks in 2015 with a growth of 196% they are now contracting by 14.6%. Many have stated that this is not surprising as speculators leave the market but when you consider that over 50% of the domains are parked then you’ve got to ask what’s actually happening. The simple answer is some of the extensions (eg. XYZ) are experiencing massive drops which is influencing the numbers overall…..so no panic here for the truly good extensions.

Ignoring the decline in the new TLDs the overall growth in the market is around 4.8% or approximately 9 million more domains from 2016 to 2017. This is an important number as it represents the demand side of the market and should dynamically influence the sale price of domains.

The other curve is a little frightening…..the supply curve. Since the new TLDs were released, the market has been swamped with a massive level of supply. This is not the early days of the Internet where there was .COM, the CC’s and a few others. We are now in an environment where the supply is so large that it MUST impact the sales price.

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Recent Comments
mgilmour
I based this roughly on overall market share. Yes, many domains are sold privately but I think not as many as people would have yo... Read More
11 October 2018
mgilmour
Many thanks for the extensive comment! My understanding was the $150m was the revenue line to GoDaddy not the net revenue. Maybe I... Read More
11 October 2018
mgilmour
Thanks for the correction of .tk.....I forgot to take them into consideration. What is for sure is the domain market is mature and... Read More
11 October 2018
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