18th Feb 2015

CNN.com

Hot property — Web domain names

  • Story Highlights
  • Boom times in the buying and selling of domain names
  • Industry’s market value could reach $4 billion by 2010
  • Sex.com sold for $12 million last year
  • “Dot-com is king,” “Dot-net is worthless”

NEW YORK (AP) — Inside a midtown hotel, Larry
Fischer is on his cell phone with a financial backer as his partner Ari
Goldberger does quick research on a laptop computer.

They are
bidding furiously at this auction of Internet domain names, with hopes
of snagging megayachts.com. The duo won’t be deterred. They want this
name.

“$110,000, yes or no? Quick,” Fischer barks at Eli, the investor at the end of the phone.

Someone else makes a bid for $120,000. Fischer and Goldberger up the ante, and then again.

Going once, going twice … sold to Fischer and Goldberger for $150,000.

“You got it,” a smiling Fischer tells Eli. Mazel tovs are exchanged.

These
are boom times in an estimated $2 billion industry that involves the
buying and selling of domain names. When people type the generic names
into their Web browser’s address field, sites that generate
pay-per-click advertising revenue appear. Such “direct navigation”
bypasses search engines.

“This industry is like the wild, wild
West right now and people have no idea how fast it’s growing,” said
Jerry Nolte, managing partner of Domainer’s Magazine, a new trade
publication devoted to this little-known world.

Some believe the
industry’s market value could reach $4 billion by 2010 as people
continue to purchase approximately 90,000 names a day and the number of
domain registrars swells.

At the end of first quarter 2007, at
least 128 million domain names had been registered worldwide, a 31
percent increase over the previous year, according to VeriSign Inc.,
which runs some of the core domain name directories for the Internet.

“It’s
not about words,” said Monte Cahn, founder and CEO of Moniker.com, a
company that specializes in domain asset management and held the
Manhattan auction. “It’s like real estate. This industry is only about
a decade old. People looked at domain names as a commodity. It’s a
piece of real estate on the Web that can’t be replaced. It’s your stake
in the ground, your stake in the Internet.”

At the Manhattan
auction, Fischer and Goldberger snatched up four names for more than
$1.2 million and a fifth for a client, representing only a handful of
the names sold for a total of $12.4 million during both the live and
silent auction.

The auctions were held during a domain conference in June that attracts some of the biggest players in this niche business.

One
name — creditcheck.com — went for $3 million but paled in comparison
to the sale of sex.com, which sold for $12 million last year, according
to Cahn, who knew the site’s buyer and seller.

Fischer, 44, of Brooklyn, New York, and Goldberger, 46, of Cherry Hill, New Jersey, figured there was money to be made early.

Goldberger’s
entry into the business was unorthodox to say the least. In 1996, the
Hearst Corp. sued him, alleging trademark infringement after Goldberger
registered esqwire.com, which resembles one of the company’s magazines.

The
two sides eventually settled and Goldberger, a lawyer, was allowed to
keep the name. Word got out that Goldberger knew something about the
thorny legal issues involving Internet domain names and people began
approaching him for advice.

Goldberger’s fascination with the burgeoning industry was sealed.

“I
was an entrepreneur strapped into this suit-and-tie job,” Goldberger
said. “Kind of a square peg in a round whole and this lawsuit just kind
of changed everything for me.”

He eventually left the respected
Philadelphia law firm where he worked in 1997 and joined a small
startup in Manhattan called mail.com, which was buying up domain names.

Goldberger
began collaborating with Fischer in 2001, building their portfolio of
domain names. Together, they became a formidable yet quirky team
(imagine George Costanza and Jerry Seinfeld with the pioneering spirit
of Lewis and Clark).

Two years later, they created a company
called smartname.com, which they sold earlier this year. The company
took names and provided content and links for owners, getting a cut of
the advertising revenue. At one point, smartname.com represented 150
owners with about 150,000 domain names, generating 50 million unique
visitors a month.

Most the sites are lucrative for their
advertising dollars. For example, megayachts.com isn’t an actual
yachting site, but it contains numerous ads and links for real yacht
companies, boats and cruises. The owners of the site get paid each time
a viewer clicks on one of those links.

Goldberger and Fischer declined to say how much money they make from pay-per-click advertising.

Bob Parsons, CEO and founder of domain registration company GoDaddy.com, says this type of business is fairly straightforward.

“They
make their money in two ways,” Parsons said. “One way is through the
traffic they get and the other is the appreciation of the name.”

Parson
didn’t think there was anything wrong with the practice as long as
those involved weren’t using names trademarked by others.

“Domain
names are becoming 21st century real estate,” Parsons said. “Just
owning a domain name as an investment, I don’t see a problem with that.”

Anthony
Malutta, a lawyer who specializes in trademark law at a San Francisco
law firm, sees fewer trademark infringement cases thanks to improved
laws.

“Trademark law involving domain laws is much clearer and
much easier to understand,” he said. “It’s pretty clear that
registering a domain name that corresponds to somebody’s trademark is
actionable. As to generics, they’re just hoping to capture traffic.
You’re just counting on people typing in generic names instead of using
a search engine like Google.”

Malutta said domainers like
Goldberger and Fischer are not “gaming the system” which in his opinion
would mean registering domain names and then cybersquatting — driving
revenue off somebody else’s trademarked name like Coca-Cola.

Over
the years, Goldberger and Fischer have sharpened their formula for
acquiring domain names and developing the sites using a fairly simple
template, relying on research, savvy and plenty of instinct.

“You either know it or don’t by hearing the name,” Fischer says.

They
look for names that hit the “sweet spot” — short words that describe a
high-value product or services related to it. Words that allow them to
own a category such as bald.com and cardiology.com, two of the domain
names they bought at the auction.

To help figure out a word’s
potential value, they see how many hits it will produce using Google.
They also troll lists of names with domain registrations set to expire,
enabling them to get a jump on buying it.

They don’t bother with dot-nets or the others.

“Dot-com is king,” Goldberger said. “Dot-net is worthless.”

But
there’s a big divide between thinking of a good name and getting it.
There’s usually a chase, with Fischer trying to persuade owners to sell
the names after he locates the owners unless it’s up for auction.

“He’s
kind of like a rhinoceros,” Goldberger says about Fischer. “He chases
them up a tree and waits them out. He has patience and determination.
You got to be aggressive. It’s a tough game now. It’s like the gold
rush. The first guys did really well then it became more difficult.”

And
expensive. Five years ago, the duo could get a good name for $10,000.
Now the minimum is more like $100,000 — as the auction proved. The
cheapest name they bought at the auction was blogging.com for $135,000.
Other names sold for considerably less like irishwhiskey.com ($8,000)
and Jewishdeli.com ($9,000).

At the moment, Fischer, Goldberger
and Eli are sitting on their names. They’ve recently turned down
million-dollar offers for stocks.com and home.com.

But as white-hot as this business has been, it might not continue to mint millionaires.

“How
long will this model last?” Malutta asked. “It’s definitely a temporal
piece of real estate. As technology evolves, maybe direct navigation
will fall off the charts and there goes your property.”

Copyright 2007 The Associated Press. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed.


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