Frederick Schiwek, the CEO of Domain Invest, has asked if I’d write about him selling a number of top domains from their very large portfolio. I don’t normally do this but decided to make an exception for Freddy and here’s why.

I first met Freddy well over a decade ago at a Traffic conference being held at the Venetian Hotel, Las Vegas. Some of you may remember those conferences. the domain industry was jumping and over 700 people paid top dollar to attend the conference....and party all night long. It just so happens that Freddy and I bumped into each other at the end of one of the sessions.

You know it’s providence when you have an Australian and a German (who works out of Luxembourg) meet at a conference in Las Vegas, America. A few things immediately struck me about Freddy; he was old school and understood the basic Internet building blocks, his enthusiasm was infectious, and he had an insatiable drive to learn.

In this series of articles, I’m endeavouring to identify some of the big issues the domain industry needs to tackle through innovation. For the last number of years, the industry has largely been stagnant in many of the business models being employed by investors and I believe it’s time for this to change.

In the previous article I looked at a couple of innovations for selling “stock item domains” and in this article, I’ll trying and provide some thoughts around selling “high value domains”.

The new gTLD domain extensions have created a scenario where we have a massive supply of domains. Regardless of your feelings about new gTLDs, having the same overall demand and a massive supply will tend to depress prices by providing additional options.

Just think about this for a minute. If you are a marketing director of a big company and someone offers you a .com domain for $500K or a new gTLD for $10, which would you take? They could essentially spend an additional $500K in marketing efforts and be in a net neutral position. Many marketing directors would believe their marketing efforts (ie. their smarts) are making the domain popular and not the other way around.

So what are the domain industry’s really big issues? What should we be driving innovatively to solve and what issues are way beyond the scope of short term solutions?

When I think about the really big issues in the domain industry I find that I’m forced to reflect on the four primary business models associated with domains:

1.       Selling domains like stock items
2.       Selling high value domains
3.       Traffic monetisation
4.       Development

Selling domains as stock items is all about increasing the sales turnover of low value domains (sub $2K) in your portfolio. This is similar to a supermarket which operates on low margins wanting to increase the throughput of products being sold.

When you look at the incumbents in this market they have all been trying to increase the demand. This has largely been achieved through increasing the breadth of their distribution networks (ie. Registrars) so their inventory is exposed to a larger audience.

I see a number of innovations that centre on pricing that can be explored in this market and I will discuss two of them in this article. To date, the feedback from domain marketplaces has been that if a domain is priced it’s more likely to sell. This seems to make sense as buyers like to know what they are about to pay for domain rather than “make and enquiry”.

I was crunching some numbers today on the domain sales market and a number of things just didn’t add up for me. It would appear that as an industry we are going backwards….which should be a little bit of a concern.

The first thing I wanted to do was try and dimension the size of the domain sales market. I decided to start with the estimated size of the Sedo marketplace as they quite regularly published their numbers. I was more interested in the number of domains sold and also proportions of the size of each sale.

After some mathematical magic, I came to an estimated sales volume of just shy of $37m for 2016…..I think this is a little low as some of the larger outliers will push the number up to around $50m. If there’s anyone from Sedo that can confirm or deny this number that would be awesome!

The next question I asked was what proportion of the total market does Sedo have? Sedo actually sold around 99 of the top 304 domain sales for 2016….which suggests about 32% of the domain market. This seems a little on the high side to me.

In this article, I’m going to let you into a little secret. You may not have heard of anyone else approaching domains the way I’m about to outline but in my opinion, it’s the future. These ideas are what keep me so entranced by domains.

If you are wanting to extract the maximum amount of value from your domain names then the answer is in the data. It really doesn’t make a difference whether you are a buyer, seller, developer or traffic monetizer, the key to generating additional revenue always comes back to the numbers.

As I’ve spoken at conferences or written different blogs I’ve been accused of many things but there has been one consistent accusation that I’m actually quite proud. “You’re always banging on about the numbers!” I love my numbers and more than that, I love trying to interpret what they are telling me.

Over the past 10 years, my ParkLogic business partner and I have continued to be fascinated by domain names because the data tells so many different stories. We’ve taken this to the extreme level by tracking around 250 different metrics for every domain on our platform each day. This leads to hundreds of millions of data points that can be algorithmically analyzed and trend curves plotted over time to see where the next seam of gold will come from.