Daily Domainer

Toys ‘R’ Us is the lucky winner of Toys.com. The domain was bought by the toy store chain in a heated phone auction that took place earlier today at the final bid of $5.1 million. DirectNavigation blogged live from the auction here.

According to Domain Name Wire, the following bidders participated in the auction:

• 1-800-Diapers
• Toys ‘R’ Us via Eagle, LLC
• National A-1
• Schilling Aviation Corp (Frank Schilling)
• Socha APA David William Socha
• Faculty Lounge Partners

The following no-reserve domain auctions just ended on Sedo's most recent Greatdomains auction:

KXV.com – $3,000
KFQ.com – $3,000
KQH.com – $3,000
KBQ.com – $3,100
SJQ.com – $3,300
JXV.com – $3,600

SOL.com attracted 13 bids, the highest being 15,500 euros, but the reserve was not met. COP.com attracted 3 bids, the highest being $20,500, but the reserve was not met either.

According to 3character.com, the lowest observed LLL.com sale during January had been for $4,200.

In my opinion it's a big mistake to list valuable domains on Sedo without reserve. The LLL.com domains shown above would have probably sold for 20% to 30% more on domain forums, without having to pay any commission to Sedo.

Also, with Greatdomains auctions there are dozens of domain auctions ending at the very same minute, so it's difficult for those trying to strike a bargain to keep track of last-minute developments.

Sedo just sent out the following security alert:

We have been informed that due to a security problem at one of our competitors a list of their customer data including plaintext passwords is currently circulating on the web including relevant hacker forums.

Our Security and Compliance Team has found several of our own customers matching the publicly available list. Due to the seriousness of this matter combined with the possibility that you might be using the same login data/password at more than one parking company, we strongly suggest you to change your password at Sedo.

Sedo uses cryptographically unbreakable ciphertext for password checks and does not store your password in plaintext. This, and a variety of other security measures, ensures that your Sedo account is always safe from third parties.

We generally recommend to always use different login IDs for different sites and never hand out login IDs to any third party.

Should you have any further questions or needs, your dedicated account manager is looking forward to help.

Kind regards,

Your Sedo Security and Compliance Team

They are referring to NameDrive, which, as Domain Name Wire reported yesterday, had less than 1% of their client accounts hacked recently.

Many domainers use the same passwords at different sites, including registrars, parking companies, forums and email providers. If just one of these accounts gets hacked, all your other accounts are at risk if the password is the same! This is especially true if a site stores your passwords in plaintext. However, depending on the quality of a password, hackers might be able to recover it even if it is encrypted.

Sedo has had its share of security challenges in the past, so it is very nice to see that they are alerting their customers to this common risk.

DNJournal's latest Top 20 chart of domain sales prices is shown below.

Fly.com leads the list with an amazing $1,760,000 sale. The domain was brokered by Sedo and bought by TravelZoo, a publicly listed company. TravelZoo plans to use the domain to launch a travel search engine later this month.

Brian Clark, senior vice president and general manager at Travelzoo, said:

"We are delighted to acquire fly.com for our new offering. The name is a perfect match for Travelzoo's renowned approach: simple, fun, and world class. Where others see doom and gloom we see opportunities to serve travelers and advertisers with innovative approaches to finding the best values in travel."

This sale, in combination with YP.com selling for $3,850,000, as well as several other high ticket sales that remained unreported, will serve as a timely reminder to owners of premium domains not to sell their domains too low. (December's $300,000 sale of SC.com to Standard Chartered Bank comes to mind.)

Other noteworthy sales include:

• Roulette.it for $30,000 (the domain is still in escrow, but it was probably bought by a casino or casino affiliate)
• Fired.com for $20,600 (seems a bit much; it's a catchy term but what are they going to use it for?)
• Miami.us for $15,000 (looks like a steal, even for a .us domain)
• Ergo-Direct.com for $12,000 (this domain was bought by German company ERGO Versicherungsgruppe AG, which already owns and uses Ergo.com, but not ErgoDirect.com)
• WirelessHeadphones.com for $9,000 (the domain was sold to a domainer and the price seems just right)

Premium domain names continue to be an outstanding investment. This is nothing new to domain investors, and despite a recent slowdown in the reseller market, the actual numbers confirm that the end user market remains strong.

Looking at DNJournal's List of Top 100 Reported Sales of 2006, 2007 and 2008, the top 100 median sales price changed from $124,000 in 2006, to $197,500 in 2007, to $175,752.50 in 2008. After 2007's massive upsurge of 59.27%, 2008 brought with it a 11% drop. However, 2008's median price is still 41.74% higher than that of 2006.

A New Age of End User Sales

As we pointed out last year, with domain values shooting up so rapidly, very few domain owners were devoting any of their resources to actually developing their domains. There was simply no point in developing a domain you just bought if you could flip it a few months later at a significant profit. Broadly declining PPC (pay per click) revenues did not affect this situation at the time, but they have now contributed to the rapidly falling liquidity among domainers.

None of these developments appeared to have any effect on end user sales, which remained very strong in 2008. This is understandable as end users do not care about PPC revenues and the small isolated world of the domainer-to-domainer marketplace.

Let's look at the 2008 numbers and compare them with those of 2007:

At the end of 2007, of the 105 highest priced domains sold in 2007, only 33 domains (31.43%) had been developed or redirected to a developed site, 3 (2.86%) were affiliate sites, and 10 (9.52%) were either abandoned or appeared to be under development. 4 (3.81%) domains didn't resolve at all and a massive 55 domains (52.58%) displayed PPC ads.

At the end of 2008, of the 101 highest priced domains sold in 2008, 56 domains (55.45%) had been developed or redirected to a developed site, 2 (1.98%) were affiliate sites, and 15 (14.85%) were either abandoned or appeared to be under development. 2 domains (1.98%) didn't resolve at all and 26 domains (26.74%) displayed PPC ads.

The most notable change is that the percentage of developed domains increased from 31.43% in 2007 to 55.45% in 2008.

Accordingly, the percentage of domains displaying PPC ads decreased from 52.58% in 2007 to 26.74% in 2008.

Much of the increase of developed domains can be accounted for by existing businesses (end users) purchasing these domains and using them for their websites. This is a very good sign for owners of premium domain names.

At the same time, actual development on part of domainers has remained virtually non-existent. Combined with shrinking PPC revenues, the future seems bleak for domainers who do not own premium domains and are unwilling to adapt themselves from an environment conducive to PPC parking and domain flipping, to one where the wholesale market has dried up, development is king, and opportunities abound for the small number of domainers who are, by accident or design, still flush with cash.

(Now the only thing that's missing is for those geniuses who brought us the 2007 bubble to start talking down premium domains and tell us that the sky is falling so they can scoop up our assets for pennies on the dollar. Then the cycle will be complete and we'll be back in 2001, as predicted here.)

2008 was a very unique year in the domaining industry. The popularity of domaining continued to rise even as prices dropped. Increasing numbers of end users noticed the value of domains as well and there were quite a few astonishing sales reported throughout the year. At the same time, domain parking came to a virtual stand still and there were some rollercoaster-like price developments in the LLLL and LLL market segments. As the economic crisis picked up steam, end user sales have remained relatively strong, but an unprecedented domainer bubble, which was caused by easy credit and irrational exuberance, came to a slow but certain end.

Domain Registration Growth Continues

Despite all economic troubles, the number of registered domains kept growing during 2008. However, growth has slowed down quite a bit. Over the course of 2008, the growth rate of registered domains dropped from a 30% growth rate to a 15% growth rate. gTLD domains (like .com, .net, .org) went from over a 30% growth rate in 2006 to under a 10% growth rate in 2008. ccTLDs (country code domains) noticed a similar decline as their growth rate fell from 37% to a 26% growth rate. The majority of the newly registered ccTLDs can be attributed to specific TLDs like those for Russia and China.

Of course, it's important to emphasize that even a lower growth rate means that the number of registered domains is still on the rise! And much of the drop in gTLDs can probably be attributed to the introduction of new rules affecting the domain tasting industry.

The End of Domain Parking

Domain parking in the traditional sense is dying a slow but certain death. Earnings from parking revenue dropped significantly over the course of 2008; as both search engines and parking companies tried to maintain their profits during the economic downturn, domain owners found themselves at the short end of the stick. Alternative monetization solutions like mini-development or auto-development have sprung up for those who own dozens, hundreds or even thousands of domains and don't want to concern themselves with actual development.

The LLLL Craze Is Over

On November 2nd, 2007 the last available four letter dot com domain was registered. This was the start of what was going to be an unbelievable reseller bubble; many people argued whether this bubble would ever pop or not. In early 2008, some domainers started selling their lower quality LLLL .coms for $15 to $20 each. There were quite a few larger investors as well and they were hanging on to their domains in the hope of further price increases.

In the spring of 2008, things really picked up and at one point, the lowest quality LLLL .coms were fetching $35 to $45 per domain. Higher quality domains were regularly seeing end user sales.

Over the subsequent months, things slowed down. Lower quality LLLL .coms became very difficult to sell for more than $10 and we're almost back where we started. Still, it's only a question of time until things pick up again; it is possible that by 2010 or 2011 we'll see a second, more mature and sustainable price increase for LLLL domains.

LLL Domains Cool Down

At the start of 2008, low quality LLL .com domains regularly sold at $6,400 per domain. Within a few months, this minimum had increased to around $7,000 per domain. Then everything started to quiet down and the value of most LLL domains slowly decreased. At the end of 2008, low quality LLL .com domains were selling in the range of $4,500. That's still pretty good, but nothing like the predictions we heard from top domain experts in early 2008 that even the worst LLL domains would sell for more than $10,000 by the end of the year.

End User Sales Remain Strong

When the market was at its strongest in 2008, Fund.com sold for about ten million dollars in the most expensive reported domain sale of the year. DataRecovery.com also sold for a fair amount (over $1.6 million) in March, when the industry was at its peak. As if to demonstrate that the domain industry will tough out the hard economy, Kredit.de and Invest.com both sold for over a million dollars later on in the year when the economic crisis was already in full swing.

More recent transactions like FinancialAid.com selling for $480,000, SC.com for $300,000 and YP.com for a very nice $3,850,000 demonstrate that the domaining game will continue on even through harsh times.

2008 – A Year To Remember

It is likely that 2008 will go down in history as the year that the wholesale sector of the domaining industry hit an all time high and went on to drop very rapidly in the same year. At the same time, retail sales remained strong.

It is unknown what the future holds, but it seems that the worst is over and that the domainer-to-domainer market will slowly start to rebuild itself. The primary lesson for all domainers is that we should depend neither on other domainers, nor on parking companies for our monthly income.

The word is out: The domaining bubble has finally burst. Many domainers are short on cash and prices are falling across the board. What created the bubble, how did it end, and is there a way to profit from the slowing economy and financial crisis?

The Components of a Seductive Bubble

A significant percentage of the domaining bubble was funded by the monetary expansion that started immediately after the dot com crash in the early 2000s but did not gain full speed until 2005. There was lots of easy money out there seeking investments; some companies in the domain industry obtained huge lines of credit to enlarge their domain portfolio, while individual domainers mortgaged their homes so they could acquire yet another valuable domain. Other domaining companies were even funded by venture capitalists who at the time thought that domains would be the next big thing.

Another part of the domaining bubble was built upon rapidly increasing enthusiasm on the reseller market. Many domainers believed that prices would only go up and that if they bought a certain domain today they would just have to wait a month or two before they could sell it at a significant profit. For several years in a row that assumption was true, and as word spread it attracted new domainers and reinforced the bubble.

Accepting Reality Means Attracting Profits

It is increasingly obvious that reality has set in. The easy money that characterized the last decade is gone. The get rich quick domainers who entered the market in 2006 and 2007 have either gotten rich or given up. And most domain prices have come down to an entirely reasonable level where it's good to be a buyer again.

A Unique Window of Opportunity

The best years in history to get into domaining would have been 1994 and 1995. Domains were virtually unknown and a few visionaries who refused to sell out early eventually made a killing. Another major opportunity opened up in 2001 and 2002. "Dot com" had become a dirty word and most people wanted nothing to do with Internet-related investments.

2008 and 2009 will be another two of those years where everyone believes the sky is falling while the visionaries of today are constructing the empires of tomorrow. Take this chance because the next window of opportunity might not come around until 2015/2016.

How To Start With Nothing

It's not easy to start with nothing. If you're low on cash and your friendly bank won't loan you other people's money so you can speculate in domains, you will have to start small, learn everything you can, observe those who are successful, then work hard and bootstrap your way up.

Start with a couple of domains, sell them at a profit and immediately reinvest your profits. Domain development is another option, but do not get sidetracked with this unless you decide it will be an essential part of your business strategy.

The opportunities are out there. A few years from now you can be the next domaining mogul, or you might be one of those people who will say, "If only I had been around in 2008. Things were different back then".

Will you take action or have you already given up?