John Andrews is a Competitive Webmaster and Search Engine Optimization Consultant in Seattle, Washington. This is John Andrews blog on issues of interest to the SEO community and competitive webmasters. Want to know more?

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Domain Development & Liquidity: SEO will work for Equity

The domainer space is interesting and exciting for me because it is a rapidly changing market built on a disruptive concept, tightly linked to search marketing. It’s got style, including wild success stories and Big Courageous Egos, yet is actually quite simple in concept. In short, it’s beautiful. But like most things beautiful, it suffers from constant threats of destruction (that’s a video clip from Fight Club).

Recession Means Opportunity

A big recession is a gold mine for domainers. When money gets tight and people have to focus on their core jobs, they often decide to allow domains they are holding to drop, in order to save the reg fees. Of the millions of held domains out there, plenty would drop if the costs of maintaining them rose much higher than it is now. Inflation can cause that to happen, as can the tightening of budgets normally associated with a recession. So smart domainers have been building up cash reserves, getting ready to step in and buy whatever drops if the cash crunch gets serious enough.

Liquidity is a Problem

For many smaller domainers, though, liquidity was already an issue. I hear SEOs comment that “domainer’s are cheap” and “domainers are so used to paying $8 for something they won’t pay real money for consultants or contractors” but I know many domainers are already strapped for development cash, as domain parking pays very little and Google et al. actively “manages” the advertising profits shared with parked domains (very efficiently, I might add). How can a domain investor get some liquidity out of a domain portfolio, without selling domains into a downmarket, or even selling into an up market likely to go much higher?

Buying Shares in Domains

Enter domain stock markets like Fusu. Fusu hopes to provide domainers with cash for development, by creating opportunities for samll investments in domains much like the stockmarket enables large investments in industry via smaller, risk-managed investments in shares of the company. Via Fusu, you can buy shares in a domain (and the domain owner can sell shares of the domain for cash). It is a way to get some liquidity out of a domain asset, without losing control of the domain. I can’t say much good about the existing implementation of Fusu, but even that may demonstrate the sincere need for quality development resources in this domaining industry.

Partnering to Develop Domains

Another avenue to liquidity is partnering for development. There are VC-like development funds out there now, actively investing in domains by providing directed funds for team building, including web development, marketing and SEO. Some domainers have taken a direct route, offering partnerships for development in a Request For Proposal fashion. One press release I received recently for celebs.com reads:

The perfect partner for Celebs.com will likely have the resources to execute an entire business plan around developing this domain property. All aspects of the business will be the responsibility of the partner. Domains For Media plans to consider 4-5 partner proposals in the next 30 days and make a final decision by the end of February.

That’s right. All you need to bring to the table is everything but the domain name. Interesting approach, but it speaks to the purity of domaining.

Sweat Equity as Liquidity

Over the past 12 months I have spoken with a number of people active in this domain name liquidity event, but compared to SEO, this field moves very slowly. My experience with web development and search marketing tells me many of these players will lose their shirts to their vendors at least the first few times in the asset development game. I know more than a few CEOs of web development shops who are assuming control of web businesses right now because they build up controlling equity as contracted players on development projects over the past few years. Unless carefully managed, web development teams tend to do what they are contracted to do, and not what you really need done. The market is Darwinian in that respect, as I suppose all efficient markets are.

As an SEO consultant, I am interested in these opportunities. Given my experience, I am careful selecting projects, but my high standards are very practical and defensible, and not secret. I have no interest in being someone’s monkey, so yes, if there is real sweat to be invested there needs to be more to the business plan than one big exit event. If you have a real opportunity and need a high-integrity individual to help navigate to success, drop me a note.

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5 Responses to “Domain Development & Liquidity: SEO will work for Equity”

  1. aaron wall Says:

    Providing everything but the domain name is risky partnership strategy when I can buy good domains for $5,000 to $10,000 and then keep 100%.

    @Aaron: the celebs.com press release offers a value proposition for the domain name as an asset– “Celebs.com benefits from a large volume of natural daily traffic, and it is a highly brandable and easy to remember domain name” —  so I assume they have numbers to be considered when proposing a deal. The bigger question of how valuable is a generic domain name in the celebrity traffic market is a good one. Maybe it’s a quick start to monthly cash flow with celebs.com, and maybe that has an assignable value?

  2. aaron wall Says:

    In that vertical you could spend $100 a month on AdSense to build that 1,000 visitor traffic stream. Due to the trashy nature of celebrity gossip, I wouldn’t be against registering celebs.biz for $3,000 and keeping all the profits. And you don’t need a great domain in to succeed in that market…only a willingness to promote speculative gossipy trash. 1,000 uniques a month is nothing in a market where leading channels get 1,000 times that much traffic.

    http://www.alexa.com/data/details/traffic_details/celebs.com?site0=celebs.com&site1=perezhilton.com&site2=thesuperficial.com&y=r&z=3&h=300&w=610&range=6m&size=Medium

    http://siteanalytics.compete.com/celebs.com perezhilton.com thesuperficial.com/?metric=uv

    @Editor’s note: So Aaron has challenged if there is adequate value by showing compete/Alexa traffic data, which suggests celebs.com is holding very little value compared to others in that space. I’ve attached a chart here… celebs.com is down to 1-2k after declining for 6 months from ~5k, and doesn’t even appear on the chart once the traffic axis has been normalized for the big players (orange is perez, green is superficial, and blue is celebs.com running along the baseline). Also compete says celebs.com is off 70% for the year, which could reflect a cessation in PPC spend as much as anything else… again complicating any claim of type-in traffic. This example demonstrates the purity of domaining as understood by domainers. I have the domain name, so I am a partner without needing to do anything else.
    celebrity gossip seo

    But I have to point out that these toolbar traffic numbers are not absolute. Below is a chart showing this johnon.com blog and celebs.com together. Notice that I was running at  a fraction of celebs.com traffic until July 2007, at which time (according to compete) my blog “took off” to almost 8 times the celebs.com traffic. Why did my blog “take off”? It didn’t… compete started counted differently, having gotten itself included into new add-ons. Why didn’t celebs.com show a similar rise if it was simply an accounting change? Because it was an irregular change… no one knows which sites are impacted by the changes nor how much…. which makes site comparisons very, very sketchy in my book. According to compete, my blog is up 2500% for the year, compared to celebs.com’s being down 70%.

  3. john andrews Says:

    I was asked to point to the celebs.com press release and completely forgot.. it’s at http://www.reuters.com/article/pressRelease/idUS250410+22-Jan-2008+PRN20080122
    Adam at DomainNameNews tipped me off to a mention on DNJournal that Celebs.com was sold back in September of 2007 in a private sale for $110,000. It appears the buyer is the one now looking for a development partner. If Aaron is correct (above), the pressure is on.

  4. Joel McLaughlin SEO Consultant Says:

    Wow, interesting post. I didn’t even know there were domain stocks – silly me, I need to read more online. lol

  5. Sam Says:

    If domain stock markets take-off, and I mean REALLY take-off: I think we should all chip in for a piece of compete.com lol