Record-breaking domain sales, acquisitions, and growing industry credibility all highlight a critical year for the domain name industry.
The domain name industry had a heck of a year. It’s impossible to rank the top news stories of 2006, but I’m going to make an attempt. If you disagree, be sure to participate in the upcoming 2007 Domain Name Wire survey in which you’ll be able to vote on which news story was biggest.
9. Massive expansion of domain name parking companies – how many domain parking companies are there now? 20? 50? Who knows. But it seems like everyone is throwing their hat into the ring and offering domain parking services. This is good for the industry as it is forcing some of the original parking companies (such as Sedo) to innovate. In DNJournal’s review of May’s Las Vegas TRAFFIC conference, Ron Jackson captured the sentiment about domain parking growth using a joke from SmartName’s Lawrence Fischer:
One has to wonder how many more participants can crowd into [the domain parking space]. While speaking at lunch Thursday, SmartName.com’s Lawrence Fischer said that while playing blackjack in the casino he mentioned to the dealer that he had a domain parking business. Fischer said the dealer replied, “No kidding? I’m starting one too!â€ Everyone laughed because the best jokes always have a grain of truth in them. However, just as consolidation of domain ownership is accelerating, you have to expect that the same thing will eventually happen in the PPC category.
8. GoDaddy’s failed IPO – Bob Parsons may not call it a “failed IPO”, but I contend it was. First, GoDaddy filed to go public on the NASDAQ under the ticker DADY, ending months of speculation. It disclosed a lot about its business in its S-1. Businesses hate to disclose their numbers and inner workings, but it’s a necessary evil of going public. We learned that GoDaddy loses money and we learned about GoDaddy’s average order size, repeat business rates, growth, etc. Then the company suddenly pulled its IPO in August. I speculated about some of the reasons GoDaddy pulled its IPO, and GoDaddy chief Bob Parsons confirmed at least one of them: he can’t be shut up. Despite the failed IPO, 2006 was a good year for GoDaddy. It continued to add to its market-leading position and is helping the industry by lobbying for domainers on Capitol Hill.
6. Change in markets for gambling and adult domains – Thuuuud! Did you hear that? That’s the value of gambling and adult domain names. Some may disagree, but the value of these domains took a hit this year. A couple things happened. First, the U.S. cracked down on internet gambling. This sent shivers through the industry. Advertising providers such as Google (NASDAQ: GOOG) and Yahoo (YHOO) stopped advertising gambling sites many years ago after being pressured by the feds. With recent arrests of internet gambling heavyweights you can expect the value of online gambling domains to plummet. Keep in mind the U.S. is the biggest market for online gambling. As for adult domains, many of the big players in the industry want nothing to do with them. Investors in these companies don’t want to be associated with adult entertainment. Example: before being acquired by Name Media, Afternic cut all adult domains out of its listings.
5. Crackdown on typosquatting and trademark domains – typosquatting and registering trademark domains used to be a cash cow for a number of famous domainers. There’s still a lot of money to be made but it’s getting riskier to play this game. It used to be that the worst that could happen to a typosquatter is he lost his domain in a UDRP decision. The domain owner would make plenty of money between the time the complaint was filed and he lost the domain. But now companies are suing under the 1999 Anticybersquatting Consumer Protection act. Microsoft made a big media splash with its lawsuits this year. Neiman Marcus (NYSE: NMGA, NMGB) sued Dotster, an act which increased calls for a crackdown on so-called “domain tasting“. Much like adult and gambling domains, big time investors want nothing to do with these domains (save Marchex (NASDAQ: MCHX)). Even DNForum, long time safe haven for trademark squatters, banned posting trademark typos and trademark domains for sale this year.
4. .EU and .Mobi launches – which was bigger, .eu or .mobi? If you look at the number of domains registered you might say .eu. But I’d argue .mobi was much bigger given the aftermarket activity for the domain. Rick Schwartz, who heads the TRAFFIC conferences, made a big splash when he bought flowers.mobi for $200,000. The number of .mobi domains selling on the aftermarket is staggering. How many .eu domain sales have you seen? There have been some, and admittedly some big ones, but the launch of .eu was marred in controversy. So many .eu domains landed in the hands of speculators that the domain hasn’t caught on among consumers.
3. Service provider consolidation – Domain registrars and even a popular domain aftermarket were acquired in 2006. Moniker, currently the ninth largest registrar in terms of domains under management, was acquired by pay-per-click company Kanoodle, which is now part of a company called Seevast. Demand Media (see news story #2), acquired eNom. It then snapped up BulkRegister and integrated it into eNom, creating the second largest registrar in the world. On the domain aftermarket front, Name Media (which owns the Active Audience domain parking service and BuyDomains) bought Afternic. To call this activity “consolidation” is somewhat misleading since many of the acquired properties continue to operate as separate properties (e.g. eNom, Afternic, Moniker). But we can expect to see true consolidation in 2007.
2. Major investors enter domain name market – What happens when an industry led by individuals with small budgets suddenly sees an influx of companies with $100M budgets? Consolidation. Major portfolio transactions. iREIT took off in a big way this year, and Demand Media has raised $200M+. The founder of Demand Media, former MySpace exec Richard Rosenblatt, read the famous Business 2.0 article about domain names and launched his company. He hopes to take it public in 2007.
1. Domain values continue to increase – There’s not much to say about this other than “hooray!”. Moniker sold over $5M worth of domains at its most recent domain auction. Big companies are starting to realize the value of generic domains, as evidenced by the recent purchase of Vodka.com by a Russian company for $3M. Diamond.com sold for $7.5M. Sex.com sold for over $10M. 2006 was a good year to be a domain name owner.
So there you have it. My top 9 domain name news stories of 2006. Disagree? Let’s talk about it before the end of the year; then let’s look forward to a fantastic 2007.