Enough to pay $12,000 for it?

I just got the results for the Domainfest first-day auction, described as “very strong” by Oversee’s main on the ground, Mason. Certainly looks better than last year, which was a bit of a wash-out. Is this another sign the economy is finally picking up?

Anyway, of 73 domains, 49 were sold totaling $150,950.00. It’s good but it still seems under-par. Oversee’s CEO Jeff Kupietzky alluded to this in his opening speech. Jeff believes that this is early days, that the world of domains will explode some time soon, like a real estate boom.

Maybe he’s right; maybe he needs to persuade himself he’s right, with a portfolio of one million domains that will cost over $5 million a year in holding fees. I’ll ask him tomorrow morning.

Here’s a random selection of domains, prices and mindless comments from me from the list:

familycounselor.com – $12,000 – really?
pucks.com – $12,000 – because it’s sort-of like “fucks”?
snack.net – $7,500 – I think this is a cracker
borrow.net – $5,500 – pretty good. Can’t decide whether more or less useful in a bad economy
gallows.com – $1,600 – Gallows humour if you think the domain is worth this much
taxicabs.net – $1,000 – you’d think that was worth more – maybe *too* generic
handheldvideogames.com – $900 – waste of money
cooks.info – $500 – I’d say that was worth it, people love searching for recipes online

And the lowest sold: manhattanapartmentbuilding.com for $100.

Just an update on my previous post – Adam Epstein from AdMarketplace won the first round of the PITCHfest.

The winning idea – pubMarketplace can be found at, well, pubMarketplace.com. There is a flyer in the Domainfest bag about the service.

It advertises itself as “Bringing the Power of Search to Content Publishers” and offers the ad tag cloud that he showed off during his presentation.

Whenever you hear editors decrying the death of newsprint – and the Guardian’s Alan Rusbridger did exactly that this week – there is always someone who points out that online advertising has jumped x percent in the past year and is now worth xx billion.

And the response is always: but that remains only a tiny percentage of overall advertising. The online world is here, it’s coming, but it’s not enough to sustain the system in place.

Well, online advertising may not be fully matured but it not for a lack of energy or innovation.

I’m sat in the chandelier-filled Starlight Ballroom in the Fairmont Miramar Hotel, Santa Monica, attending Domainfest 2010, and on stage are five sages of the online advertising world dissecting a business model idea put to them by an eager young domainer.

As conferences go, Domainfest is a pretty exciting one. It probably has something to do with the average age of the attendee (24?) and that the industry it seeks to cover is a fast-moving, ideas-filled world.

The “PITCHfest” that I’m watching invites five finalists to outline their idea for a new way to do online advertising – and make money from it. One at a time they come up to the podium, make their pitch and then deal with questions and comments from the sages on stage. (For full details on the pitches, see Domain Name Wire’s story.)

It’s a novel structure for a conference – somewhat like Dragon’s Den on TV – and it works, to the extent that you almost forget that every industry, when put closely under a microscope is incredibly dull.

Every industry has its jargon, but the Internet world insists on putting all its jargon into three-letter acronyms (TLAs). “The problem with CPC is the CTR. So what about PPC?” – these terms flow off the tongue so fast that you can miss them and hear new ones – did he say RPC? Did I hear CPR?

The presentations are good though – people who have clearly put a lot of thought and work into complex, advanced and automated systems – all to grab a few cents here and a few cents there. Add it all up and you might start making money.

Who’s clicking?

Here’s a question that I have though: who the hell are these people that are clicking on online ads?

I don’t. I don’t believe I ever have either. Not even the ads on my own site. Admittedly I’m a very bad example. I hate ads. I skip them without seeing them in publications; I wander off in TV ad breaks and use my digital recorder wherever possible to avoid them; I don’t recall huge billboards – even in Los Angeles where they are bigger than buildings.

It seems I’m not alone – one presenter boasts that his new system will get a CTR of 1.5 percent “which is absolutely unheard of”. What that means in plainer English is a click-through-rate of 1.5 percent, or 15 people in every 1,000 people that see an ad click on it.

Maybe the tough part of online ads is that it is possible to get these stats. When it is an ad in a magazine or newspaper, there’s no surefire way to know what impact, if any, they had. It’s not a pretty picture: advertising execs forced to recognise that most people are actually completely uninterested in work. You can even put a figure on it – 1.5 percent. And that’s high.

Of course what people are outlining isn’t rocket science – one guy’s pitch is basically that he makes text ads that look much nicer – but it is a sign that this is an expanding market. The atmosphere is lively, the décor is bright, the people are young and friendly, perhaps a little too geeky.

It is far from the mature market conference where middle-aged men in suits sit on a stage raised six feet above the audience and propound at great boring length to the assembled masses. The irony of course is that it won’t be until that happens that the world of online advertising is strong enough to support the monster publishing houses.

I’m off to Domainfest 2010 in Santa Monica this morning, hampered slightly by a dreadful cold.

Should be interesting – this morning they are experimenting with almost a TV format and having people pitch new product and service ideas for increasing website traffic and revenue to a panel of experts who will tell them what they think.

And this afternoon a discussion about the big beast – new Internet extensions of generic top-level domains – and what they might mean. It’s titled: “New gTLDs: Bonanza or Bust?”

Then there’s a domain auction that I can’t decide whether to go to or not. May need to come back home and get some rest.

Here’s what happened at last year’s Domainfest in Hollywood.

Dangerous degree of arrogance backfires

You know it’s bad when you start to feel sorry for the person on stage. Hal Bailey must have wondered what the hell happened. Coming to DOMAINfest Hollywood as the man in charge of AdSense for Domains, Hal was here to tell the assembled masses that Google was going to allow them to make money while sitting on their arses.

This incredible gift was going to come with some rules though: domainers would have to clean up their game. They would have to post original – i.e. not stolen – content on all the domains they owned, and they would have to provide a valuable informational service to their fellow Netizens. If they did that, they would find Google warm in their embrace; if they did not then Google would not help them and they would be out in the cold.

You can imagine Hal planning out this gentle lecture in his head before taking the stage with fellow Google employee Matt Parry: tough love but they would thank him for it later. It didn’t quite pan out like that.

Instead, the one-hour “Google Perspective: Winning over the Advertiser and Optimizing Site Performance through Analytics” was a lesson that Google executives would do well to learn from. Customers are customers and not just grateful users of services – no matter how much market share you have.

The whole thing started badly when Matt Parry used his presentation on Google’s Analytics tool as no more than an advertisement for the service, running through a series of slides that showed its features and telling everyone why they should use it. The problem was everyone in the room was already using Analytics, alongside one of the many other tools out there that help you find out who is visiting your websites and what they do there (Mint, Performancing, Quantcast, SlimStat, and so on).

Mistook Domainer conference for sales pitch

He did slightly better while promoting another service – Google’s Website Optimizer – by at least giving some real-world indications for why this might be useful. But he had horribly misjudged the audience. The people in the room make a living from following, gathering and analyzing traffic and design on their multitude of websites. If they weren’t good at it they would never have paid the $995 conference fee. So why was Google taking up their valuable time telling them that if a webpage looks nice and the links are friendly that more people will click on them – and that will make them more money. Was this guy serious? Is that the best Google can offer?

Parry sat down and Hal Bailey – the man who leads the partner management team for Google AdSense for Domains – proceeded to leap straight into a snake pit. In the US, the expression used most often for describing people that have been brainwashed by their own corporate hype is “drinking the Kool-Aid” (Wikipedia will tell you more).

Well as Hal got on stage and told his audience that to his mind cloud computing is the way forward (“If I was a student, I would be thinking to myself ‘why spend $600 on software when you can have free office tools online?’”) you could practically see the Kool-Aid dripping out his ears.

AdSense, he told us like only a true believer could, is a “very powerful revolution for the world”. It has brought users and advertisers and domain property owners together. Online advertising has changed people’s lives – and Google was to thank for it. “People can make a living doing what they love,” Hal revealed. “Five years ago that would have been impossible.”

Welcome to Google World™

Of course in many respects, Hal is right, Google’s AdSense program was a leap ahead of the previous ad-serving services and so it still retains a first-mover advantage. But in Google World™, AdSense didn’t build on years of innovation from a range of companies and industries (the porn industry of course was the true innovator). No, instead online advertising is something that Google created. Sort of like how God created Man.

With this awesome power comes responsibility, so Hal embarked on his lecture: “Google’s role in domain world is trying to educate people about quality – to provide a positive user experience to users.” What Google was looking for was “stability and integrity”. Not only that but Google has a vision. It is “providing the world’s information”. And in case you were wondering how grand this vision was, Hal explains: “And when we say the world, we truly mean the world – not just the United States.”

Hal then informed the room how to create websites that please the Google God. “If there’s something you’re excited about and want to teach everyone about it, we encourage everyone to do that. But if you are planning on scrapping content – with no end value to end users – that is probably waste a lot of time and effort for not a lot of return.”

We were also let in on the Google secret for how it values websites: “If have a growing number of people visiting your site, you’re probably providing value.”

Let me tell you why I'm not going to answer that question...

And then it was back to how great Google was and how it was helping domainers to help themselves. “We have helped improve the domain space as a whole. Years ago domains were seen as a bad place to be. So we provide value to the Internet as a whole and we expect to continue to go down that path.” And Hal leaned back to enable the lucky benefactors of Google’s patronage to ask questions of its wisdom.

Clearly these words and this Google God vision is a very popular concept in Mountain View. The problem is that it is also nonsense. And arrogant, self-serving nonsense at that. Google provides a service and it provides that service for a fee. And, as Hal was just about to find out, that means that people aren’t quite ready to accept the world as painted by the Big G.

Any questions?

“I wonder if you could tell us what the revenue cut is that Google takes from Adsense?” was the first question posed from the floor. “I’m afraid that revenue share is not disclosed,” was Hal’s response to a few snorts in the room.

“What are Google’s plan for the domain channel?” asked the next speaker. Hal couldn’t speak from AFS (AdSense for search presumably) because that was a different department but in terms of AdSense for Domains, well that was proprietary information.

Will Google add all the books it is scanning to the Google main search and “flood the Google database”? (From the domainers’ perspective this would like the sudden arrival of millions of high-level websites competing with their own). Hal’s not going to take that one either. “Book search is a separate product at the moment so I don’t know about that.”

With Hal giving a series of non-answers, the questions started getting a little more aggressive. “You say that you want transparency for the advertisers, but when you are asked for any information, you say it is proprietary. Shouldn’t people know what you are making?”

So how much of my money do you intend to keep?

Hal had nowhere to go. “Well, that’s a different product and a different group. But all of them have a non-disclosed web share. But I am pretty sure that that share has not been changing.”

“People should know!” exclaimed the speaker to applause in the room.

The next question: is Google aware of how much money different domains make? Another risky pass. “There are confidentiality agreements with respect to that so I can’t go into details about what information we do and do not share with partners.”

The questioner asks again: can Google tell how much a domain making? “We don’t talk about that,” Hal insisted.

Let’s recap

So, to recap, Google has so far told the people that it makes very large sums of revenue from that:

a) They have to change their behaviour if Google is going to allow them to give it money
b) They don’t have a right to know how much Google is making from their work
c) They aren’t allowed to know any aspect of the information that Google has built up from code running on their websites

This prompted the next question: “Would it motivate Google to be a little more open if all the domainers boycotted them?”

It was at this point that Hal’s realized that something had gone very badly wrong. To his credit, he tried to joke his way out of it. “Er, yes, we did a calculation and it would take 16 days.” He got some laughter and leapt in fast. “We’re here to support the domain industry. A year ago, advertisers were calling us saying ‘get us off the domains’ – so we put a lot of effort into working with community.”

Hal then also remembered a piece of Google messaging designed to persuade Congress that it doesn’t need to investigate the company for abuse of market power: “You are more than welcome to try out other programs.”

The next questioner then tried to throw Hal a lifeline: “It is quite clear that you don’t want to say anything about transparency – but do you think the market will be more transparent in future?”

Hal was too flustered to see the route out though. “For our large partners that we have contracts with, they know what cut they receive. But for online, for different compartments, I don’t think they will change that.” The questioner tried again: Google for Domains for example is a step forward for more transparency. “I don’t know what plans are there,” Hal responded desperate to get off the stage.

Is that more Kool-Aid, Hal?

And there it ended, much to Hal’s relief and to Matt Parry’s, who had sat there praying that no one asked him any questions. The session was billed as “Google executives share their knowledge of the evolving analytical tools available.” A more accurate description would have been “Google executives get roasted by the domainer community for their dangerous arrogance.”

That won’t be the end though: we can expect many more of these confrontations until Google lifts the lid of secrecy of its main revenue source. When it does reveal its percentage cut on online advertising, it already knows that every single AdSense competitor will advertise madly that they charge less, and as a result a huge slice of Google’s market share will vanish overnight.

Until then, Google will just have to calculate how much the domainer community’s anger is worth to them.

We first learned that the domain name market was far from stable around eight years ago when the dotcom crash turned a booming market into dust in just a few months.

Over the years, that market has grown in strength: its stability saw people invest in advanced systems for buying and selling domains, and the never-ending demand for Internet sites, coupled with the fact the the number of top-level domains stayed the same and so the domain space became smaller, meant that prices increased steadily to the point where tens of thousands of domains became worth tens of thousands of dollars.

Well, the DOMAINfest domain auction has just demonstrated that the domain name space may be more stable but it ranks alongside art, rather than houses, when it comes to property.

In short, the auction was a bit of a wash-out, with none of the 200+ domains available exceeding expectations; most hitting the bottom-end of their estimated value; and a very large number meeting no bidders and being pulled off the floor.

The big names were especially badly hit: zimbabwe.com was slated for $100,000+, no one would touch it and it went unsold. Monalisa.com – possibly frivolous but clearly memorable – also went unsold. Rather worryingly for the blogging community, weblog.com – a snip at $500,000 – has very solid traffic – 700,000 visitors every month. It went down to $200,000 and still failed to sell*.

Strikingly, sleep.com – a domain I wouldn’t mind having – went unsold, failing miserably its $1 million to $5 million price tag. Screensavers.com – which purportedly has made more than $13 million in revenue and boasts 5,000 downloads per day – did slightly better and was sold for $800,000.

Publishing.com was also in the $1 million to $5 million bracket. It opened at $500,000 and no one went for it. Unsold. And spotlights.com suffered the same fate. Jet.com started at $200,000 and saw no bids.

So the big spending is out on domain names. But how about the smaller fish – the day-to-day businesses?

Well, they fared better, but no one was leaving with a windfall today. The exceedingly well-priced fly.travel went for a measly $2,500 – with the auctioneer practically pleading with the sole bidder. I nearly bought it myself. Inventions.info – which strikes me as a good long-term bet – went for just $1,250, but at least that was within its expected range.

The “.me” domains – which are currently being extensively marketed following the registry’s purchase last year – did better than expected, but I still think that $10,000 for contact.me is going to be widely seen as an incredible bargain in just a few years’ time.

The domain name market certainly seems to follow the vagaries of the wider economy. Digitalnotebooks.com – a dotcom! – went from $5,000 to $4,000 to $3,000 to $2,000 to $1,000 to $500 and still there were no buyers. Seems no one wants to buy laptops and no one wants their respective domains either.

All that said, there was still a lot of money flying around for what remain largely intangible names on an invisible network. No one believes the Internet is going anywhere soon – and .me’s comparative success shows that marketing breeds confidence – but now is not the time for flashy auctions it seems.

The big event at domaining conferences is the auction – almost like an online cattle show – where proud owners get to show off their biggest beasts and wait in silent anticipation for the huge pay-off.

I’m at DOMAINfest in Hollywood and it being Hollywood, there is some glitz and glamour to proceedings. The auctions people are dressed in tuxedos, swirling lights, a booming PA piping music and MCs, bars in the corners and excited chatter.

For an economy in the doldrums, the online auction market looks healthy (we shall see in a minute I suppose). There are 203 domains up for auction. No less than 18 of them are going for between $100,000 and $250,000; 4 for between $250,000 and $750,000; and no less than four domains with an “opening bid range” of over $1 million.

So what are those domains?

Well, the four big ones are screensavers.com, sleep.com, copiers.com and publishing.com. I’m not sure the screensavers domain is worth anywhere near that but I quite fancy sleep.com – but for one million?!

What is also striking is the fact that dotcom remains king. Of the 26 valued at more than $100,000, all but one are dotcoms – and that one exception is no less than four .net domains bundled into one (forclosures, forclosure, foreclosures and foreclosure.net).

The “premium” .me domains are mostly valued at between $5,000 and $10,000 – even good ones like contact.me. And, the President of Oversee.net Jeff Kupietzky has just told us it is the first time that .travel domains are up for auction (“now that the restrictions have been lifted”). But .travel has to work on its value – we have free.travel – surely a great name – for just $1 to $5,000. Maybe it’s just untested waters – we shall see in a minute.

Update:

The auction experience is a little intense – a bloke with a microphone the usual super-fast-paced auction rattle, but with three attendants pacing up and down at the front, pointing at bidders with a variety of signals, shouting out comments, prices and yelping indecipherable exclamations when they get a response.

One screen on the left lists the lots and expected range, a screen on the right gives a real-time bid list – where it is, what’s being asked for, where the bid is coming from – the ROOM or ONLINE etc. It’s an intense experience and it’s hard to concentrate sufficiently to write this post.

I’ve recorded one of the exchanges on my mobile phone so you can get a sense…

Listen to the DOMAINfest auction noises

Second update:
Well, the economy is clearly having an impact – almost all the domains are at the bottom of their ranges; some below; some are pulled out after no interest. Spotlights.com was listed as $100,000 to $250,000 but no one took it when reduced to $50,000.

Likewise the four foreclosure domains (.nets) referenced above. The auctioneer even broke off his patter and started talking about the value of foreclosures – billions of dollars in 2008, he explained (at breakneck speed – maybe people couldn’t catch the words as they zoomed past their ears). It made no difference – it was pulled off the table after no one bid on $100,000.

And just now one of the big boys – jet.com – set up for $500,000+. It was opened at $200,000 and no one bit. Which is a shame because I have no doubt it will be worth double that in just two years. All you need is the $200,000 to start with :-).

I’ll be taking pictures at DOMAINfest today and sticking them on Flickr – and possibly here – with a CreativeCommons license (free non-commercial use; attribution required). The stream is below:

Today I’m at DOMAINfest in Hollywood. It’s the last day of a two-day conference all about the domaining side of the domain name industry – the sale and resale of domain names and associated websites.

Doug Brent, ICANN COO, is here to talk about policy issues and the work ICANN is doing this year – some of which is likely to impinge quite heavily on this fresh industry. But I wanted to come and learn about this aspect of the DNS and hopefully encourage people to get involved in ICANN.

So, if you are here and you see me, come over and chat. I’ll be here and writing blog posts throughout the day.