At the time of reading this it should be Saturday again!!

At the time of writing, it’s Tuesday night. I am quickly writing a post to be auto-published for this week’s domain musings as I have an all-week conference to attend that will also last all weekend.

So these are not necessarily musings, but rather a follow-up on last week’s post.

Domain Parking
Last week I presented a simple illustration as to how one could easily generate serious revenues via domain parking. Domain parking perhaps, is single-handedly responsible for the survival and growth of the domain industry.

Domain parking gave the domain aftermarket a lifeline, by providing the basis on which a lot of domains got traded between domainers. Very few domains are sold to end-users based on their branding potential. This means that the bulk of domains are sold based on their domain parking earnings potential.

In some cases, domains were been sold for as much as 6 times their annual domain parking revenue.

I am going to present 2 scenarios here. Firstly I will look into the reasons why selling domains based on domain parking revenues makes sense, and then the reason why it is just risky business.

Selling Domains Based on PPC Revenue
What makes the domain name extremely attractive is that for successful investors, it is normally a case of a very low initial outlay (start up capital) producing massive returns.

With domains, you earn money by parking them and/or selling them. Now if a domain name makes $0.20 (20 cents) a day, it would be an average of $6 per month, $72 per year in revenue.

If you were buying the domain name at 6 times yearly revenue, then the selling price would be $432.

Now paying for 6 years worth of revenue means that you would have to wait 6 years to recoup your investment. However, if you then sell the domain name after a year, you can recoup your original investment easily. How?

Well you would collect $72 in the first year in domain parking revenues. If you sell the domain name on the same terms of 6 years’ revenue for $432, then you your profit would be $72.

If you are good at selling domains, then you might even earn more by adding a value for the domain branding potential.

The Risks of The Domain Parking Model
However, when I came across this method of domaining, alarm bells went off immediately. IMMEDIATELY.

This is high-risk investment. Seriously. How do you guarantee that the traffic stats are genuine and that the domain will maintain that level of earnings? Traffic can be easily faked. Click fraud was predominant a few years ago (and still is).

So almost nothing was credible when it comes to domain stats.. A lot of people tried to overcome this by asking the seller to give them a chance to test the domain on their servers/domain parking accounts. As a seller, this is something that I would never do. Waste of time.

Now, if the traffic was genuine, how do I guarantee that the traffic will remain high? This is where the source of the traffic becomes extremely important.

If the traffic is generated from back-links, then the links could be removed by the website owners as soon as they realise that the previous website no longer exists.

If the traffic is from search engines that had indexed the pages of the previous website, then the search engines will drop the pages as soon as they realise that the domain name is now parked.

The only domain name that would stand the test of time are those that users type directly into the browser. Domainers refer to this process as direct navigation. Personally, I have never bought into this direct navigation theory. I think it was just a term and theory invented by domainers to add value to domains.

Yes, I do believe domains like shoes.com would get natural type-in traffic. But anyone selling a domain like shoes.com based on its type-in traffic would be leaving lots of money on the table. Such names should be sold based on their branding potential and the credibility that they could offer to the end-user.

There are quite a few other reasons why I don’t sell or buy domains based on the domain parking model. I like to have a degree of control over my businesses. I like flexibility and the ability to introduce creativity and originality. Domain parking notoriously lacks any degree of transparency.

No man can serve 2 masters. Either you choose the “lazy” life of domain parking by choosing to become obsessed with stats or you use your intelligence, or common sense rather,  to market domains based on their branding power.

Now that domain  parking revenues have taken a nose-dive, the whole domain industry is scrambling to find end-users. But guess what? Most of the domainers hold crappy domains. They weren’t focusing on quality, but quantity. Thanks to domain parking.

Arbitrage
This is getting a bit long, after just 5 minutes of typing. However, let me mention arbitrage quickly.

A lot of domain investors who invested in domains based on their domain parking revenues did not mind paying 6 years revenue, as they could pump unlimited revenues out of the domain name through what is called arbitrage.

Arbitrage, in a nutshell exists in every form of business. However in the domain space, this is where one would buys cheap traffic and resell it at a higher price.

So, for example, someone would open a PPC campaign with a smaller search engine, buy the traffic for let’s say $0.10 per click and sell it for anywhere between $0.50 and $3. They would send the PPC traffic to their domain parking page.

This is how a lot of domain investors managed to amass large domain portfolios in a very short period of time.

However arbitrage is now outlawed in domain parking. People still do it, but if caught their domain parking accounts would be terminated.

Arbitrage had to go. Arbitrage in the domain space posed a very, very severe threat to the existence of not only domain parking, but to search marketing as a whole! I will expand on the dangers of arbitrage next time.

Have a great weekend!!

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There seem to be two sets of minds operating in the domain industry: those who get the concept of branding, and those who flatly refused to be weaned from domain parking.

Those who get branding are normally the ones who understand the importance of quality domain names, and possess the wisdom of choosing quality over quantity when doing domain investments.

I have been preaching the gospels of quality domains and branding form day one. But lets look at the reason why some domainers will never get it, or flatly refuse to accept it.

Domain parking provided a lot o people with a bottomless revenue source in its heyday. Lets look at some numbers.

Let’s say you had a $10,000 credit card, or better yet, that amount of money at your disposal for domain investing.

At the average $10 cost per domain registration, you could pick up 1,000 domains. Lets say you did the research and employ the right tools and resources to acquire domains that do get a bit of traffic.

Let’s further assume that this traffic was sufficient enough to earn you $6 per month per domain name, an average of $0.20 per day, per domain.

With 1,000 domains, that would be $6,000 in revenue each month, or $72,000 annually. Are you excited yet? You should be.

Remember that you are only earning 20 cents from each domain name on a daily basis. Pay attention. With $6,000 in monthly revenue, you have almost earned all of the monies invested in the very first month. You can repay your credit card fully after just 2 months.

That would be 720% annual return ($72,000 on a $10,000 investment).

Stocks hardly do that, and the banks couldn’t match that. Even real estate would struggle to come close.

Now if you were smart, you would reinvest part or all of your earnings into more traffic domains.

This is going to get complex now.

Lets say you reinvested 50% of your earnings each month.

Month One – 1000 domains  =  $6000 revenue

Month Two – 1,000 + 300 domains x $6 = $7,800
(300 domains = $6,000 revenue x 50% = $3,000 divided by $10 registration  fee = 300 domains)

I won’t bore you, but if you do the maths, you should get something similar to what the following table illustrates:

Please be aware that these are just assumptions, and there is a degree of impracticality in that domain parking revenues are not paid out until the middle of the following month, and domain research does take time.

At the end of the first year, you would have accumulated 17,922 domain names costing $179,216 in domain registration fees.

You would have earned  $445,962 in domain parking revenues by the end of the year, which would result in a profit of $266,746, before any interest and taxes.

That is based on the following:
- An initial investment of $10,000
- An estimated $6 monthly domain parking revenue
- An assumption that 50% of each month’s revenue is reinvested immediately to acquire new domains at the basic $10 registration fee
- An assumption that each new domain name acquired earns the same average amount in domain parking revenues ($6 per month or 20 cents per day)

Either you are excited or you are confused. The reality is, it is possible. But in order to consistently earn an average of $6 each month in domain parking revenues, you have to acquire the “right” domains.

The “right” domains are those with the right keywords, search volumes and Cost Per Click (advertiser) or Revenue Per Click (domain owner).

To obtain the right domains, you need to fully understand statistics, know how to research keywords and be able to decipher search statistics and analytics.

You wouldn’t need to focus on domain quality and branding potential. You would only need to focus on domains with traffic (by analysing stats) and the more traffic domains you have, the more money you earn.

This, ladies and gentlemen, is the reason why so many domainers focus on quantity instead of quality and fail so miserably in grasping the concept of branding.

With the above illustrations, you could avoid the complicity by simply investing $100, 000 in new domain registrations. If each domain name earns an average of $6, then you will earn $60,000 per month.

That would be annual revenue of $720,000, and at $100,000 in annual expenditure (domain registration initially, and subsequent yearly renewals); your annual profit would be $620,000 in profits before any interest and taxes.

You would collect $620,000 yearly by living the lazy life. Hmmm. Not bad, is it? And to think that you wouldn’t even have to sell a single domain name!

That’s how the “legends” could famously declare that they don’t sell domains.

I could go even further and complicate things a bit more by adding arbitrage to the calculations and assumptions, but I will save that for another day.

Oh how things have changed, eh?

I may write a part 2 to this blog post. However, without an explanation, I would advise you not to base your domain investments on speculations of what your domain parking revenues will be.

Have a great weekend!!

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It’s Saturday, again!!

A Jet Is A Jet
Well the big saga this week was the sale of Jets.com. Last week we had Mint.com, but that wasn’t a domain sale.

This Jets.com sale however is indeed a domain sale. The domain Jets.com was sold for ONLY $375,000. ONLY. We often rate domains by how much they sell for, but not necessarily by how much of a bargain the buyer got. Well this Jets.com sale is the steal of the year!

First of all, for those people who think that AreaRugs.com (sold for $405,000 last week) was worth more than Jets.com, let me educate you. A jet is an aircraft using jet propulsion. Or better yet, have you ever looked up to see a shiny machine in the skies making a lot of noise? Chances are, you have seen a jet. No, not a space/alien ship or UFO. A jet. It is a man-made machine that flies through the skies, taking people from place to place, city to city, country to country. Have you got the picture now?

The bigger jets are normally called jumbo jets (Boeing 747, Airbus A340, A380 etc.) while, the smaller ones are normally called private/business jets (Learjet 45, Bombardier Challenger 300, Gulfstream etc.). The Airbus A380 is the world’s largest passenger jet.

I don’t know who the New York Jets are, and I don’t have time to research them. However, whether they are some cricket, table tennis, rugby or soccer sports team, they are not jets (no disrepect to their fans). They are a sports team. Big difference. So you can’t judge the value of Jets.com by looking at some sports team carrying the word “jets” at the end of their name. Absolute nonsense.

Maybe it’s my ignorance kicking in, but I thought that a rug was just a rug. What the hell is an area rug? Why would someone pay $405,000 for AreaRugs.com? I would flinch if I had to pay $5,000 for that. And yes, I am a domain seller.

Well if the rug business is that big and successful, I better start working my Asian connections for some dropshipping deals.

Maybe I’m biased as well. I am the guy that owns Aeroplanes.com. When this domain went to auction some years ago, I fiercely bid for it. It was like one of those domains that you just had to own. Although I won the auction, the reserve wasn’t met. Fortunately, the marketplace that conducted the auction offered to negotiate on my behalf to help me acquire the domain after the auction.

Surprisingly at the time, only a few other bidders were interested. Now I know why. Americans say “airplanes”. Well America guess what? You have got it wrong. It is really “aeroplanes”. The British and the rest of the world studying English say “aeroplanes”. You can check out Wikipedia to see the history of the word:

“In the United States, Canada and many other regions, the term “airplane” is applied to these aircraft. In Britain and many other regions, the term “aeroplane” is used. The word derives from the Greek αέρας (aéras-) (“air”) and -plane.[1] The form “aeroplane” is the older of the two, dating back to the mid-late 19th century.[2] The spelling “airplane” was first recorded in 1907″.

Now, I wouldn’t sell Aeroplanes.com for less that $5,000,000. Yes, laugh all you want. You can’t appreciate the true value of a domain name unless you understand its true branding potential. The word “aeroplane” is used daily in the news on TV, in print and online. Aeroplanes are seen in almost every movie and television show. There is no other object, word or thing that symbolises or represents “travel” better than an aeroplane.

Now, the domain name “Jets.com” is shorter and passes the domain radio test easily, but Aeroplanes.com is the better domain name. Period. Nonetheless, I was personally hoping for Jets.com to stay on the market a bit longer, and I wouldn’t have a problem paying a million dollars for it.

Anyway, I am not going to elaborate on this Jets.com sale, as Alan of NewFoundNames.com wrote a superb article on the Jets.com sale. I left a comment and subscribed to the comments thread. The debate got so hot I had to unsubscribe as my iPhone just kept beeping every few minutes with the “new comments” email notifications.

I like Alan’s blogging style as he says it like it is. Too many domain bloggers spend too much time trying to be politically correct, just because they don’t wasn’t to piss off advertisers. Well, it seems like only a few can really afford to call a spade a spade.

One final thing on this Jets.com sale… I want to give credit where it is rightfully due. I read somewhere where a popular domain industry figure gave credit to another blogger for “uncovering” the Jets.com deal.

No, It was Jamie Zoch of DotWeekly.com who first broke the news about the Jets.com sale. Jamie broke the news TWO days before the other guy did. I believe it is only right to give Jamie the credit.

Now I am not bringing anyone into any controversy. But this is something that happens all the time in the domain space. Someone breaks the news, and then another guy regurgitates it. Guess who gets the credit? The one who regurgitates it days later.

Now as a reader, you wouldn’t understand why I am mentioning all of this. But as a blogger, I know what it feels like when you are not given the credit or someone just barefacedly steals your story, content or topic.

Anyways… moving on.

Domain Auctions
We announced our daily domain auctions earlier this week. We won’t be meeting the October 1st deadline, as our promotional material is not yet ready. Also, we have another key upgrade to make. However, please continue to submit your domains, as they will have to be approved before they can be submitted to our auctions.

Have a great weekend!

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Greetings!

It’s Saturday again!!!

Mint.com sold for $170 Million
The big news this week is the sale of Mint.com for $170 million. No, it was NOT the sale of a domain name. Neither was it the sale of a website. It was the sale of a business. Well, in this case, an ebusiness, as it operated solely online (I think).

I was jut really disappointed, to say the least to see a lot of domainers, including prominent bloggers trying to have the domain industry claim this Mint.com sale. This was not a domain sale. It was the sale of an ebusiness.

I even saw people trying to compare the sale to a typical domain sale, by mentioning that the sales price represents 17x the annual revenues of Mint.com ($10 million annual revenue).

Domains are normally priced based on parking revenues where the value is set at a X times monthly/yearly parking revenues.

But quite frankly, that is not how you sell a real business. Far from it.

It was only last week that I blogged about branding. If you do not understand the concept of branding, then you need to look no further than this Mint.com sale. Read the article at TechCrunch.com that is written by Aaron Patzer, the CEO and founder of Mint.com to learn how Mint.com was created and subsequently sold for $170 million in just TWO YEARS.

In my opinion the domain name Mint.com had nothing to do with the $170 million price tag. When I think of “mint”, 2 things come to mind: the place were money is manufactured (literally) and a type of sweet/candy (for example Polo Mint, the mint with the hole in it).

Mint only has 4 letters and passes the domain commercial test with flying colours. However the owner of the domain name would have been extremely lucky if he could sell the domain name by itself for $300,000 in today’s domain aftermarket. Just my opinion.

So how did they manage to get the $170 million price tag? BRANDING.

I have been preaching this gospel for too long now and I now hope people can finally appreciate why I’m so obsessed with branding.

Read the article and take a look at the Mint.com website. It has first class design, great user-experience and great connections to social networking media.

The site also has a very large user-base. I am sure the 36,000+ Facebook fans, 19,000+ Twitter followers and 1.5 million users (as per its Facebook page) played a great deal in the valuation process.

The website is obviously powered by robust technologies. However, in accountancy, you can only value Research and Development at cost (how much you actually spent for wages, experts etc.) and this cost is depreciated over time.

So, when you add up all of the Mint.com assets (at cost less any depreciation, plus any amortisation) I would assume that it would barely surpass $50 million. It is private company so I am just assuming. Don’t quote me. However in my opinion, even that figure is quite generous for the value of Mint.com’s assets at book value.

So that would mean that Intuit, the buyer could have possible spent an extra $120 million more than the book value to acquire Mint.com.

In accountancy, that $120 million is referred to as goodwill. In marketing, it is known as the value of the BRAND.

Now do you really see the true potential of branding?

Branding in this case is all about the potential. I would assume that the $10 million revenue per year played a very minute role in the negotiations. Why? The company is just 2 years old. So the owners could have easily said that they were busy building the brand, user-base and technologies, and weren’t too focused on the revenue side of things. Hence, the bulk of the negotiations would be centered on the potential of the BRAND.

I would give a more in-depth analysis, but I will keep the rest close to my chest. One thing is for sure; this is a brand that I will be studying as a true benchmark of what domain branding can achieve.

So while most domainers are throwing tantrums over declining PPC revenues and Google closing Adsense accounts without warning, they are in reality failing to see the mountains because they are too focused on the foothills. Hey, I am entitled to my opinion.

Big Announcements
I am hoping to make some major announcements next week. So stay tuned. Our newsletter subscribers will be the first to know. You can subscribe here.

Have a great weekend!!

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It’s Saturday, again!!!

Where is the time going?

I have been saying that web development is hard work. But the truth is, web development is damn easy. There is an orgy of tools (even free ones) that you could use to build web pages and even multi-page websites without even writing the opening html tags.

You don’t have to be geeky to build and maintain websites these days. So why do I keep preaching that web development is hard then? I am programmed to think “ebusiness”. Why build a website if it is not going to make you money, or provide supporting services to a branded website?

Now turning a website into a profitable ebusiness is the hard bit. One of the simplest ways to do this is via branding. Nonetheless, I am going to stop preaching the branding message. I now realise that a lot of people don’t get branding. Given that I am now fully engaged in full-scale web development across many niches, it might be in my best interest to keep my branding philosophies close to my heart.

You can’t afford to let the competition learn how you think and/or what you are planning.

Frank Schilling said it perfectly: “I lose a tactical advantage by openly espousing my ideas and beliefs about business. If I tell everyone everything I’m up to, I lose a competitive edge.”

As a matter of fact, when I read that statement I immediately decided to go ahead with my plan to cut blogging to a bare minimum.

Late last year, I blogged about my intentions to launch an affiliate program here at eBusinessDomains.com. Months later, at least 2 big domain industry players launched their affiliate programs. I don’t have any proof that I inspired any of their moves, but I am certain that there businesses out there incorporating every possible ideas floating about in domainer land.

Anyway, back to branding.

Here is a story, I will try to make it short…

I remember, some years ago I was providing consultancy services in the Caribbean to a client that wanted to set up remittance services. The client, who at the time was an ex-banker, shared this story with me about how this very-well known multi-national bank a few years back had tried relentlessly to sell the local banks a software that would enable them to easily and readily provide remittance services.

A remittance is a transfer of money by a foreign worker to his home country. Of course you must have heard about Western Union and MoneyGram. When this US based multinational bank was offering the software the Internet and ebusiness (online) was just about getting popular. The technology would allow the person overseas to send the money, and within minutes, the recipient could collect it from one of many locations, locally.

The banks rejected the software. It was expensive. They didn’t need it. They wouldn’t be able to recoup their costs. They didn’t fully grasp the concept. Blah, blah, blah…

Just a few years later, a private sector company signed up with Western Union and started offering remittance services locally. Now, money sent home by migrants constitutes the second largest financial inflow (foreign currency) to many developing countries, exceeding international aid (the number one financial inflow is tourism).

The local banks suddenly realize that they had had a gold spoon shoved in their mouths but they spat it out. When they tried to get a piece of the action, put their tails between their legs and approached the US multi-national bank, they were simply shown the door.

They had to spend many times over the cost of the US bank’s software to acquire or develop their own technology. This was happening while the private sector (non-banking) company was reaping sweet success and inevitably becoming the market leader.

It’s a long story. But what I am trying to show domainers here is that branding is where the money is. I feel like the US bank relentlessly trying to sell what was obviously a golden spoon. The sooner you understand the concept of branding and learn how to fully analyze the scalability of brands; you will stop wasting money in your domain efforts.

Some domains and niches are fantastic! Great! They are category killers. But you just can’t brand them. Some will need the strongest of end-users to turn them into successful ebusinesses.

I read somewhere earlier this week where BottledWater.com which recently sold for $45,000 is now a blog. $45,000 to start a blog???! The domain name would be worth millions to a company like Evian, but to a normal person/investor, not much. That’s even when they have loads of cash to build any pimped out website.

Some domains are asset rich, but cash poor. They cost a lot to acquire and can be flipped easily. However, developing them successfully will be no easy task! Invest in domains and ebusinesses that can produce revenue.

Anyway, I need to get some sleep. I have a very long day tomorrow, (or later UK time).

Have a great weekend!!

PS. I will fix any spelling or grammatical errors tomorrow .

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