Expired Domains

Expired Domains now being categorized as a legitimate business.

Marc Ostrofsky and Bob Martin say: "We’re buying in at the very early stages of a growing industry, nowhere near the top."

I have talked about Venture Capital companies entering the expired domains market (Why Buy Expired Domains) and now newsweek runs an article mentioning this. Many years ago internet speculators were seen as cybersquatters because they saw the future and acted upon securing prime domains that would one day be virtual gold mines. The difference between a cybersquatter and a visionary, is that cybersquatting is registering a typo or TM domain to piggyback off of another companies advertising or popularity, and a visionary is someone that registers domains based on generic terms, new emerging non tm products, and fads.

“Domain King” Rick Schwartz was also mentioned in this newsweek article. Rick has been one of the main visionaries in the domain industry, always remaining optimistic and convinced that the future of the internet relied on targetted traffic. And as he says “The best is yet to come”.

These venture capital companies and new comers to the domain game according to schwartz, “They’re 10 years late to the game, but at least they came.â€?

In November, online marketing services firm Marchex, announced its purchase of a portfolio that expanded their holdings to over 100,000 domains with 17 million users a month. The price was $164.2 million, approximately eight times the sites’ current annual revenue (a rate that has set a new bar for asking prices). This deal along with many soon to come deals, is driven by the growth of Internet keyword advertising (PPC), which has enhanced the value of domains that can attract traffic without any original content, from pure type in traffic and previous development, allowing speculators to turn typos and search-optimized advertising sites into dollars.

Marc Ostrofsky is not new to domains. Marc was the owner of Business.com that sold for $7.5 million in 1999.
Marc and Bob are forming a $250 million “Internet real estate investment trust.â€? He and his partner, have spoken with interested hedge fund managers and venture capital firms in New York, Los Angeles and Silicon Valley. “When the investment community heard what we’re playing with, they liked it,â€? says Ostrofsky. “They liken it to a land rush.â€? But Ostrofsky, who says he lost millions in the dot-com crash, is confident there’s no bubble to burst this time around. “I’m going to put 40 percent of my own net worth in this market,â€? he says. “The bust was made up of companies that were overvalued. We’re buying in at the very early stages of a growing industry, nowhere near the top.”

Ron Jackson and DNJournal.com were also mentioned in this article. Jackson, another visionary, has been documenting sales in the industry since December of 2003.
Jackson says to expect more deals like Marchex’s. “It seems like every venture capital company in the world is nosing around in this space right now,� he says.

So the big question is why these Venture Capital companies are so interested in the industry, and why are they willing to pay up to 8 years revenue?

These VC’s are visionaries as well, up until now the PPC model has worked with middlemen involved in the equation. A company interested in recieving targetted visitors for their products signs up with google adwords. A PPC search engine recieves the traffic from a domain owner and sells it to google, who is taking their cut from the advertiser. Advertiser pays 100%, google takes their %, the ppc search engine takes their %, and then splits the remainder with the domain owner. Although none of these venture capital companies have admitted this, I believe that their future plans involve direct sales of the highly targetted traffic domains to the advertisers. This in effect would save the ppc advertisers money, and still earn the domain owner a better return on their investment.

This newsweek article sheds a little more interest into the domain industry and within the next few months many more venture capital companies will be seen more on the sales charts. Now if there were only a way for us to reach the ppc advertisers and make them understand that they could save money, we could make more money then everyone would be happy (except the middle man).

View the entire newsweek article here:
Internet For Sale

Sidney Parfait
DropWatch.com

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This entry was posted on Saturday, May 14th, 2005 at 1:38 pm and is filed under Now is the time. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.