Dot.com is still king, but should you invest in other domain names?

Today at TRAFFIC a panel of domain-industry experts came out decidedly in favor of investment in dot-coms, rather than other extensions, when asked where a new investor should put their money. They didn’t dismiss .net or .info or other extensions outright by any means. Following are several comments from the panelists, edited for clarity:

Brian Taff, vice president of corporate development, NameMedia Inc., a buyer and seller of domains: Dot-com “is the lead top-level domain and will always be the lead TLD. There may be some speculation opportunity in others, but the people who do buy the dot-whatever eventually do want the dot-com. Dot-com is really where it’s at. And it’s going to be where it’s at.”

Ron Jackson, editor, DNJournal.com: If you don’t have deep pockets, a key place to find value may be areas like .us.

Ari Goldberger, domain lawyer and investor, ESQwire.com and SmartName.com: “In a lot of cases, domains are tremendously undervalued,” but in large part, those are dot-coms.

Bob Martin, CEO, Internet REIT, online media company: A key thing in favor of a dot-com focus is that “one of the hardest things to change in the world is patterns of user behavior.”

-David Kesmodel

A panel at TRAFFIC discusses how valuable your domains are and the domain name aftermarket.

A big topic at the Traffic conference is how domain investors should place a value on their portfolio. And if you want to sell, what kind of buyer do you want? Not all buyers are alike. Some are investor groups, for instance, while others are small or midsize businesses seeking to acquire a domain to build their business. A small-business owner may be willing to pay a much higher multiple for a single domain than an investor aggregating a large portfolio of domains and focusing on paid-search advertising revenue. Today, a five-member panel including representatives of Sedo and Afternic, two major domain brokerages, tackled these issues. Here’s a snippet of some of their comments, edited for clarity:

Matt Bentley, CEO of Sedo.com: “How do you sell to end users? Sell on their timeframe, not yours. Don’t try to tell them how to run their business. Don’t hard-sell; get the word out, and let them come to you. Pitch on hard business value (real dollars), not soft factors. Work your connections.”

Roger Collins, CEO of Afternic.com: “There’s still a disconnect between buyers and sellers on the thinking about valuation,” and the aftermarket services still have a lot of work to do to promote to small businesses the opportunity to acquire names on those sites.

Robert Hoult, executive vice president, InterSearch Group, a search-marketing, domain portal and parking company: “We’re not doing as much buying of domains as we would like” because of market inefficiencies. And he offers some advice for domain sellers: “Use credible data to support your asset. Don’t tell buyers that Fish.com sold for $1 million to justify your asking price. Buyers want to hear why you think your asset is valuable. Fish.com is only relevant if you’re actually selling Fish.com.”

Jordan Rohan, Internet analyst, RBC Capital Markets: There are certain risks for domain owners, including Yahoo’s coming adoption of “smart pricing,” which could reduce yields for parked domains. “So developing your site at some level, even if it means cutting back on PPC ad revenue, to get increased visitation is important.”

Dan Warner, chief operating officer, Dark Blue Sea Ltd./Fabulous.com: The current aftermarket “is fundamentally broken. The sales are completely, utterly reactive sales. Customers are having to find their own way. It is not an open market. There are a lot of fundamental reasons – there’s not enough spent on marketing and commissions are too low. If we can all work together as a community to increase liquidity, you actually would double the value of your portfolio.”

-David Kesmodel

A session today at the TRAFFIC conference in Florida explores PPC and if domainers can count on this revenue source in the years to come.

Domain investors are heavily dependent on pay-per-click advertising revenue, so they often walk around with a feeling of insecurity. They wonder if that critical revenue stream might disappear – or decline — if advertisers
decided they didn’t want their paid-search ads, primarily placed through Web giants Google and Yahoo, to appear on so-called parked domains. Today, Eytan Elbaz, who runs the domain channel at Google, offered some insight into the public-relations problem the sector faces. “People perceive that the quality of your traffic is not as good as others,” he told domain investors, “when in fact it really is.”

That last part is encouraging to investors. But one of their clear challenges is to demonstrate to media buyers that they offer quality traffic. That’s an uphill climb.

The traffic-quality issue came up at a panel discussion on click fraud, during which Elbaz stressed that Google has a number of techniques to combat the problem and continues to bolster them. “Google takes click fraud very seriously,” he said, and actually blocks “the vast majority” of it using real-time filters before any advertiser gets billed.

According to a recent BusinessWeek cover story, academics and consultants estimate that 10% to 15% of clicks on paid-search ads are fraudulent. Elbaz declined to say what percentage of clicks on ads in the Google network are fake, saying, “The media loves to speculate on this stuff
because it is a pretty hot topic. The truth is I can’t tell you.”

Dan Warner, the chief operating officer of Dark Blue Sea Ltd./Fabulous.com, which owns a large portfolio of domains and helps domain owners earn pay-per-click ad revenue, said “very little click fraud actually exists nowadays” because of major technological strides by Google and Yahoo. Warner said he thinks less than 1% of clicks are phony.

John Berryhill, a lawyer who represents several big domain owners, said click fraud is a concern, but it is exaggerated by plaintiffs attorneys seeking a cut of the revenue enjoyed by the likes of Google. He also said “a little perspective is needed.” He held up a copy of today’s USA Today, criticized the quality of its journalism, and pointed out that many people in the room received a copy outside their hotel room door but either didn’t read it or barely looked at it. Advertisers, he said, waste a lot of money on print ads in that paper and other publications, and those ad rates are based on circulation numbers that don’t accurately reflect how much the publications are actually read. “The reason click fraud gets a lot of attention is because of the accuracy with which it can be measured,” Berryhill said. “Nobody runs around chasing newspaper guys . . . It’s almost a blessing and a curse at the same time that if you’re an online advertiser you can measure how much of your budget is wasted.”

-David Kesmodel

DNForum, the largest internet forum about domain names, has been hacked.

The hack job appears to be the work of the same group or individual that hacked SnapNames in January 2006. If you typed DNForum.com into your browser earlier this morning you saw a screen with an Iranian flag and a reference to DNJournal2005@yahoo.com (see screenshot below). The SnapNames hack incident had a similar screen including the same e-mail address.

Hack attempts are unfortunately nothing new in this industry. Last year a number of domain parking companies were subject to denial of service attacks, possibly launched by a competitor.

DNForum owner Adam Dicker is currently in Florida attending the TRAFFIC conference.

Internet Traffic Association discussed at Traffic conference.

Several major companies in the domain-name industry formally announced today the creation of the Internet Traffic Association, a non-profit trade group representing domain investors. Bob Martin of Internet REIT and Frank Schilling of Name Administration have spearheaded the formation of the organization, which seeks to give domain investors their first strong voice in Congress and at ICANN, the group that oversees the assignment of Web addresses. The move comes more than a decade after people first began investing in domains, and is an attempt to help change perceptions of the industry. Despite the entrance of publicly traded companies and influential venture-capital firms into the sector, the industry continues to be dogged by perceptions that it is largely composed of cybersquatters, people who try to profit by registering domains that infringe on the trademarks of corporations. The group is seeking a salaried executive director, and that person could live just about anywhere, Martin said. The group introduced its legislative counsel, Phil Corwin, a veteran lawyer and lobbyist in Washington, D.C. Corwin and the ICA already have been at work, but the group is in its infancy. Among the group’s goals, Corwin said, is to push ICANN “to create a true bottom-up consensus process” for addressing issues involving domain names.

-David Kesmodel