I’m really excited about attending DomainFest in Macau. Once again Jothan Frakes and the team have put together an incredible event that is attracting many domain luminaries as well as individuals that are new to the industry.

For those that don’t know, Macau is an old Portuguese colony about an hours’ boat ride from Hong Kong. It’s known as the Vegas of south-east Asia and includes many of the familiar hotels from that famous city….such as, The Venetian and the Wynn.

It’s a short 9 hour flight for me to Hong Kong and when the event was announced I couldn’t resist attending. As well as this, I think that it was a stroke of genius to put a conference on only a couple of hours’ time zone change for me! How could I say no?

As soon as I signed-up Jothan tapped me on the shoulder for a few panels which I always enjoy. This industry has given so much to me, that like my blog, it’s one of the ways I like to give back. If you’re attending then be prepared for some sessions of in-depth analysis and insights into the domain industry.

So what do I like most about attending conferences like DomainFest? It’s the attendees that really make the event. The industry fosters an entrepreneurial spirit that can’t help but inspire you forward in your own ventures. I’m certain that the many different conversations will open doors to incredible opportunities.

What’s going to be fantastic is meeting domain investors from all over Asia. From my experience they have a unique and often very different outlook on what it means to be a domainer. Whether you’re from India, Korea, China, Hong Kong or any of the many different countries in the region I would love to speak with you to get your thoughts on where you think the industry is headed.

For those of you that are wondering how to get to Macau the DomainFest.Asia website has a great video created by Simon Cousins. He literally takes you on a tour of exactly what to do to get from Hong Kong airport to the conference….many thanks for putting this together Simon!

DomainFest runs from Sept 4-7^th and I believe that it will be an event that will become a regular fixture in the industry’s calendar. I look forward to seeing everyone there!

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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.

One of the easist mistakes many domain investors make is paying too much attention to their average daily revenue and not really understanding what it really means. The average daily revenue is made up from all of the individual earnings of each domain in a portfolio…..which makes sense but underneath that statement is a lot of hidden meaning.

A couple of years ago I met with the CEO of a large domain portfolio and they were amazed when I began to unpack the data that made up their average figures. So let’s look at a number of the misconceptions that many people hold to around their average numbers.
 

The Law of Averages

It's best to look at an example to illustrate what I'm talking about. Let's imagine that you have two domains in a portfolio, A.com and B.com. The average earnings per day for A.com is $1 and B.com is $0.10. Obviously, the average daily earnings for the portfolio is $1 + 0.10 = $1.10 per day.

If you are able to increase the earnings of B.com by 50% (which is a lot) then the earnings become $1.15 per day....which is barely a blip on the radar for most portfolio owners. Now here's the interesting part. Most people have 10 times more type B domains compared to type A domains. This means the average daily earnings is actually $1 + 10 x $0.10 = $2 per day.

If we increase the earnings of all type B domains by 50% then the results is $3 per day or 33% increase overall in earnings. This is a substantial uplift and is ACTUALLY ACHIEVABLE....all you need to do is really think about how your domains earn revenue. Here are three misconceptions that many domainers don't really think about.
 

Misconception One - Park All Of Your Domains At One Place

The problem with most domain owners is that they leave all of their domains with a single monetisation provider. This strategy can have a dramatic impact on your earnings.

After collecting data across the last 8 years at ParkLogic we've seen that no single parking/monetisation source wins more than 25% of the traffic at any point in time. This means taht you could be getting paid more for your traffic 75% of the time!

What's interesting is that this doesn't really depend that much upon your revenue shares etc. You could be getting paid 100% and the results are still much the same. The reason for this is that around 30% of the domains move every 3 months to a new higher paying solution. Finding out which 30% should move is part of our "secret sauce".

If you want to increase your revenue then do NOT place all of your traffic domains with a single source.
 

Misconception Two – Google Pays The Most

As much as parking companies endeavour to optimise traffic they largely have their hands tied behind their backs by Google. How is this? For a start, assuming that your domain is not blocked by Google (ie. it’s not a bad domain) then contractually the traffic for that domain MUST first be monetised by Google to the exclusion of all other monetisation solutions. This means that the domain traffic ONLY gets Google’s best price and this is not necessarily the top price that a domainer can receive for their traffic.

Never forget, that although Google is a key domainer partner they are obligated to first increase shareholder value and that improving your revenue comes in a distant second place. As can be seen from the below graph, for the past ten years Google has been driving down their Traffic Acquisition Cost (TAC). The domain traffic channel is a part of the TAC.

I recently conducted a test on a small domain portfolio that were being paid less than 1RPM by Google by routing the whole lot to tier 2 providers. The result was a 37% increase in revenue. This increase would never have been realised if I hadn’t conducted the test.

The next stage in the test is to continue to route the domains that were performing better on tier 2 and re-route the balance back to Google. Finally, the optimum answer is to then automate the process so that the traffic will always be paid the highest price by the entire market….and not just the Google market.

It’s clear that by continuously driving TAC down Google has now reached the point where tier 2 providers are clearly competitive. I don’t know any domainer that wouldn’t be happy with a 37% uplift in revenue! In a future article I want to really pull apart TAC and what it means for domainers.
 

Misconception Three - The Euro to $US Exchange Rate

What many domainers don’t take into account is that the Euros/$US exchange rate can play a very real part in the average performance of a portfolio.

For example, let’s imagine that we are comparing the performance of a portfolio 30^th June 2015 against the same time in the previous year. During this time the exchange rate has decline from 1.37 $US per Euro to 1.12 $US per Euro. That’s a decline of 22% that impacts negatively the numbers of any earnings for US domainers earned in Europe. Conversely, European domainers are loving the decline in their currency as the majority of online advertising flows from the US and they get paid via the US/Euro exchange rate!

Let’s make this a little simpler to understand. Let’s image that in June 2014 a European domainer parked with Domain Sponsor (US company) and they earned $1. They would have received $1 /1.37 or 0.73 euros. Ignoring all other effects that same domainer would now earn $1 / 1.12 or 0.89 euros. This is a big change in earnings that is largely brought about by the currency fluctuations.

The massive decline in the euro has meant that European domainers are enjoying a free increase in their parking earnings courtesy of absolutely no one. So many of the German domainers really need to go and thank their southern Greek friends.

So when a baseline is taken from a previous point in time....one of the things that you may have to consider in determining the success or failure of a test is the exchange rate. You also need to think about where your traffic routes through to and whether you can take advantage of the local advertisers and exchange rates.

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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.

In every industry there are people that we all can be tempted to aspire to be like. I’ve watched some domainers desperately believe that if they follow an industry celebrity then they will achieve the same level of success. Sadly, they get swayed by a personality and completely ignore the results.

When you’re at a conference it’s really easy to get caught up in all the hype and you can fool yourself into believing that everyone is much more successful than you. Let me say from the outset that the great majority of numbers that you hear can be divide by at least three. So don’t panic and just keep your eye on your own key business metrics.

When you get home from a conference and sit there alone wondering how you’re going to pay your domain renewals, the parties and personalities seem to become a distant memory. All that counts is the bottom line.

So don’t be swayed by the personalities…..dig into your own numbers. It takes a lot of work and skill to understand what is actually going on with a domain portfolio so that you can make sound business decisions rather than an emotional ones.

Don’t get me wrong, I love having a great time as much as the next person and it’s often the personalities in our industry that make it so exciting and vibrant. But business is all about making wise decisions rather than jumping from one miracle cure to another because someone said that the new solution was just so awesome!

Always ask yourself the question, "Who is ultimately who is looking after my valuable assets?" Are they measured individuals that will treat your family’s inheritance with the respect that it deserves or will they party like there’s no tomorrow on the value of your domains?

I don’t know about you but there are some personalities in this industry that I wouldn’t let within a hundred feet of my assets! The short-term excitement of being with these individuals may be exhilarating but remember when you leap off a cliff the fall doesn’t kill you….it’s the inevitability of the ground rushing towards you that does the damage.

Our whole industry is built on numbers. Numbers of people come to our domains, numbers of people click and numbers make up our revenue. Don’t lose sight of the fact that it’s the numbers and not the personalities that we should be watching.

There's a great saying that goes something like this, "Don't speak to the butcher if you want to invest in precious stones....speak to the jeweller." In other words, find the real experts in the industry and get to know them. They are often the ones that are quietly going about do their work.

And ultimately, get inspired by others but don’t aspire to be like them…..just be yourself.

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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.

I’ve been asked a number of times about who are the really good players in the domain industry. I thought that from time to time that I would highlight these individuals that quietly go about their business. They are people that are generous with their time, are absolutely trustworthy and great fun to be around…..in essence they are the heart and soul of what it means to be a domainer.

Jothan Frakes

I first met Jothan many years ago at a TRAFFIC conference and we talked into the small hours of the morning about the domain industry. During this time I gained an enormous amount of respect for him as one of the most knowledgeable people in the industry.

Our relationship really cemented at the TRAFFIC Downunder conference when he was part of a group of domainers that flew light aircraft back from the Gold Coast in Queensland to Melbourne. I was one of the pilots and it was a great time getting to know Jothan on both a professional and personal level.

Jothan has played many diverse roles in the domain industry but it is clear that he has a real gift for running exceptional conferences. From founding the successful Domain Roundtable conferences in 2006-7, to being intimately involved with DomainFest while it was with Domain Sponsor and now with the largest industry gathering, NamesCon. Jothan has developed a unique gift for conference formats, topics and promotions. Even now he is launching a series of regional conferences under the DomainFest banner – information on the next one can be viewed at doaminfest.asia.

The reason for these successes stems from the fact that Jothan consistently works incredibly hard at whatever he puts his hand to. When you speak with him you have his 100% attention and if he doesn’t have time then he’ll politely let you know.

Jothan has spent countless years attending ICANN conferences and helping raise the domain investor flag with registries, registrars and policy makers. Without his endless lobbying domainers may not have some of the protections over their assets that they enjoy today.

What many people may not be aware was that Jothan was intimately involved with the approval process for many of the new gTLDs. He conducted this extremely confidential work as a contractor for accounting firm KPMG and clock up endless numbers of air miles between the USA and India.

As you may have ascertained from his professional life, Jothan is one of the most connected people in the domain industry, knowing the domainer, parking, registrar, registry and ICANN sides of the business. If you ever need an introduction to almost anyone then Jothan is very likely able to make the connection.

When I first met him, Jothan’s one failing was his desire to help everyone and sadly I’ve seen people take advantage of his big heart. Thankfully, this exceptionally generous attitude has been tempered with wisdom as he’s continued to develop his professional career.

Personally, I count Jothan as a great friend with whom I have complete trust and confidence. More than all of these things, he is a down to earth fun person to be around that always has a great joke (seriously, he has some really good ones!) and a welcoming smile. I have had the privilege of meeting his wife and the three of us have had way too much fun together!

These are only a few of the reasons why Jothan is in my “Good Player” list. No matter how busy we both get we always make it a point of catching up at conferences to swap stories and learn from each other. He is the quintessential “Good Player” of the domain industry.

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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.

Check out the previous articles in this series on the domain name industry.

We now need to leap forward in time to 2014 when the first new gTLDs were launched. What does this mean for domain investors that has adopted a sales model? How will the price of .com domains be impacted by the new gTLDs?

I personally believe that the prices that .com domains receive for the stock-turn-model of selling domains will be maintained as the demand from the renewed interest in domains offsets the effects of a massive oversupply. As time goes by and the new gTLDs become more mainstream the prices of the .com domains and all other extensions will fall. If you’re a cash constrained small business why spend $1500 on a domain name when you can pick up something very similar for $10?

This would suggest that if you have adopted this business model for your .com domains then brace yourself for a decline in sales prices. I should say that this excludes the top-shelf single-word generics.

After the initial flurry of interest in the ngTLDs it will take around 7 years until we start to see them selling for prices at the current levels. What it does mean is that an investor buying today will need to factor in the renewals for 7 years before they can even start to see a return on their investment.

So if I’m buying a portfolio of ngTLDs for $10 each then I need to work my ROI around 7 years of re-registration fees before I can hope to sell them on a stock-turn business model of 1-2% per year. I would consider any sales prior to this time frame as an element of good luck. It should be noted that most of the domains will not have any traffic and this will contribute to the depress demand.

For many of the ngTLDs I’ve seen investors enter the market and snap up a lot of the quality domains. This surge in investor demand will have the impact of increasing the length of time for a ROI to beyond 7 years as the general public won’t see the gTLD being used by real businesses.

We saw an example of this behaviour when domain investors purchased the majority of the great generic .eu domains. It took years for .eu domains to be seen in traditional advertising. The length of time meant that many domain investors dropped their investments as the hoped for pot of gold didn't materialise quickly enough.

The renewed interested in the domain market has meant that many new investors have purchased large portfolios of domains and have not considered the sales time horizon. This is a big mistake. I would not be surprised if a lot of domains begin dropping in 3-4 years as investor cash reserves run dry. In fact, I’m banking on this happening and sitting on the side lines, cashed up and waiting for the opportunities to fall. The goal of every investor should be to hold an asset for the least amount of time as possible prior to selling that asset.

Let's explore what I'm mean from a very high level. Each year there are roughly 1,000 domains sold above $10,000 each. If we were to ignore the portfolio “quality” argument (ie. single word generics etc.) then the odds of selling a domain over $10,000 is roughly 0.0003%. Think of it as 1,000 divided by 300 million domains. The maths could be out a little but I don’t believe that it’s out by orders of magnitude.

If 0.0003% is the average figure then on a normalised distribution of quality then with great domains constantly getting offers domains at the entreme ends of the curve will rarely, if ever, receive meaningful offers. So if you do get an offer then my advice is to sell immediately.

What is amazing is that despite the decline in the PPC landscape it is still 2-3 times bigger than the total sum of domains sold each year. The difference between domain traffic and selling domains at the top end of the market is that domain traffic is monetisable now and it will ALWAYS be valuable for advertisers. An individual domain is only valuable to a small select group of businesses.

Let me return to the ngTLD market. Over the next few years there will be three successful business models adopted by the various registries. The first is those that have scaled vertically (eg. .club) and have poured all of their resources into making the single extension fly. The second is those that have scaled horizontally (eg. Donuts) and have several hundred ngTLDs under the one administrative structure. The third business model will be for specific market niches (eg. .cpa) which will adopt the extension as part of an overall global brand.

The balance of the extensions will either barely succeed or fail. Those in this camp that realise this first will be able to sell their businesses/contracts to one of the three successful models. The remainder will enter a frenzy of fire sales. The delay until this happens will really depend upon the length of time it takes for the cash to run dry for each of the registries.

From a domain investment perspective choosing the right ngTLD that will survive will be as important as choosing the right domain. It will be interesting to see what will happen to registries that no one wants to buy or can’t continue. Ifully admit that I’m unaware of the ICANN contractual details around this eventuality.

The bottom line is that ngTLD's are a very long-term investment and given this they have a LOT of risks associated with them for domain investors.....so if you end up buying up a portfolio then make sure that you choose wisely and have very deep pockets.

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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.