Domain Names

Today is an interesting and perhaps historic day in the domain industry. GoDaddy has acquired Afternic and SmartName from Name Media. Name Media is probably best known for the BuyDomains brand. They own one of the largest portfolios of domain names in the world at nearly 1 million domains.

GoDaddy is the largest player on the consumer side of the domain market by a wide margin. However, they aren't the biggest player and/or have serious competition in a lot of the secondary and domainer markets.

Domainer / Secondary Markets

Why Most Of These Markets Don't Matter Anymore

The expired domain names market is drying up as companies switch to pre-release agreements. With pre-release, the registrar where the domain is kept automatically sells off the domain and there is no competition. As GoDaddy grows bigger, they will capture more of the this market automatically in the long run.

Domain Parking and monetization has seen a pretty steady decline since about 2007-2008. Consolidation is happening, the market is shrinking. The vested interests are large portfolio holders, which GoDaddy doesn't have like all of the other conglomerates.

The Conglomerates with the exception of GoDaddy all have their own domain name portfolios. They are focused around monetizing their assets rather than customers. Almost all the conglomerates have failed to see major growth (Demand Media just turned its first profit in 2012).

What Does Matter?

With GoDaddy's acquisitions from Name Media today they have taken a serious foothold in the secondary market. Afternic is one of the largest markets and GoDaddy is probably on equal ground in terms of selling domain names from Premium Listings (pre-acquisition), although they don't publish any numbers that I could find. If we were to assume Sedo, Afternic and GoDaddy were similar in size, GoDaddy just became the dominant player by 2:1.

Why does it matter?

GoDaddy's strategy has long been economies of scale and cross-promotion/cross-selling products/services. They dominate the consumer side of the market and have the audience to sell products to. Now they own the market for secondary sales as well. They already charge a minimum 32% commission to sell a domain name with them. My intuition tells me they've struggled with getting the best inventory and streamlining the process to their liking. This isn't the first time we've seen them partner up to sell secondary market domain names, they tried it once before with Domain Distribution Network but there hasn't been much talk about the results. There was even a short termination between the companies over the deal. This deal expired on June 7, 2013 according to DNN. I could find no evidence of it being renewed.

Meanwhile, Afternic has solved this problem. AfternicDLS has a deals with many of the biggest registrars: Network Solutions, Register.com, Enom, Moniker, Name.com, and more. This solves the listing and selling problem. Their current Premium Listings only work for domain names at GoDaddy. A lot of domainers don't use GoDaddy and don't want to put their domain names there. Acquiring Afternic solves the technical and business problems that may have blocked GoDaddy in previous attempts to gain more of the secondary market.

What About SmartName?

I am not as sure about the SmartName play for GoDaddy. They could be trying to make a more serious run into the domain monetization space with a parking platform. They could be looking to upgrade their auction platform. Both of these could improve their bottom line, and it makes them more attractive as a larger one-stop shop for domain services.

Conclusion

GoDaddy is now the biggest player in the domain name sales channels both for new registrations and selling in the secondary market. With the upcoming release of new gTLDs, they couldn't be better positioned to sell more domain names and make more money. It doesn't hurt that they offer fairly comprehensive offerings for business owners such as web hosting, email, marketing and more. Economies of scale are real and GoDaddy is taking advantage of them more than anyone else in the business.

Consumers may actually be the big winner here. If this gets executed well, the customers who use GoDaddy will get access to a larger inventory of domain names listed on the secondary market and purchasing them may become as easy as registering a new domain name.

Update

(9/20/2013) I made a mistake with saying the auction platform was Smart Names, it's actually Afternic. Also, someone linked me Godaddy's auction stats. They don't give dollar values, only sales volume. So it's still apples to oranges to pears with Sedo/Afternic/GoDaddy.

I have also received a lot of criticism because of the company in question comes off in a positive light. My startup tracks GoDaddy's reviews and it's overwhelmingly negative. I understand a lot of people don't like them for a multitude of reasons. That being said, the point of this article was to acknowledge a very prudent business move by them. I went into this open minded and came out surprised. I think this is a win for consumers in the short to medium term because it's reducing the friction and pain involved with buying domains in the secondary market. It makes it far more accessible and easy than it ever was before with a brand consumers recognize. Consolidation of the secondary domain market also puts a downward pressure on domain prices if it stays integrated as an option versus buying new registrations. The consumer who is thinking about spending $10 is far less likely to spend $100,000 instead. But $100, $500, $1,000 may be more reasonable and likely to induce a sale on the secondary market.

I just published an article looking at the impact of the major outage that occurred yesterday (August 2, 2013) when EIG's Provo, UT datacenter failed. I also predict what to expect based on previous major outages.

There was definitely a major spike in data produced and I got down to analyzing it.

Full Story: http://reviewsignal.com/blog/2013/08/03/service-interrupted-a-look-at-th...

https://gacweb.icann.org/display/gacweb/GAC+Early+Warnings

Some interesting reading ahead for people interested in internet policy and domain names.

A couple fun stats:

Country with the Most Objections: Australia (90)

Most Objectionable gTLD: Africa (17 countries objected)

Guest Post I wrote for DomainNameNews

I was reading Mark Cuban's thoughts about Facebook trying to get him to pay to reach his fans. It's an interesting opinion and one I can empathize with. The crux of it is this picture:

Brands have spent millions of dollars getting people to 'Like' their brands. Now, Facebook is asking them to pay more to reach the audience they already paid to build. It feels fundamentally unfair because Facebook has changed the rules of the game half way through.

Of course, there is another perspective to consider: the users. They probably don't want every brand spamming them. There is some ambiguity to the word 'Like'. Some would argue it's not a laissez faire situation where brands are free to advertise to every user as much as they want. Facebook's EdgeRank is supposed to improve the user's experience by curating what users see in their feed (and it just so happens that more money greases the EdgeRank wheels).

That's a quick synopsis of the article. Let's get back on topic.

Why is this important to domainers?

Mark Cuban is advocating for brands to maintain more control over the way they communicate with their audience. He's promoting Twitter, Tumblr, Instagram and MySpace (no joke!). It's not mentioned in the article, but there is still only one place that the brand still maintains full control: their domain name(s).

I've argued in the past that domains are becoming less necessary as brands opt to use social networks for their primary web presence. Facebook has about one sixth of the world's population as users. It's easier to manage, easier to share content and easier to reach your audience (assuming you have money to spend).

This is a real kick back from brands. Maybe it's just one guy. Maybe not. But it should be a good reminder that when you buy into these social networks, you're potentially making a deal with the devil. They control the rules and you are beholden to them and the changes they decide to make in the future. Your relationship with your fans is moderated by someone else.

In the developer community we worry a lot about building our software on top of someone else's platform. We've seen Twitter take out competitors it didn't like and restricting their API to control what developers can do. Perhaps it's reckoning time for brands. Maybe they will experience the risk they've put themselves at by investing into social media on platforms they don't control and that don't have an established business model.

Let me be clear: I don't think this will stop brands from using social media. However, it may be the first of many tiny cuts in Facebook's business model which moderates how it will deal with brands. Some brands may decide to try to control their fans' experience more and invest in their own domains. At the margin, there may be some increased demand for domain names. Which is good news for domainers and the first good news I've seen in a while for the industry. I think the longer term outlook is still fairly grim for most of the industry, but end user demand is the only bright spot in my mind.

I took the top 1500 sites from Alexa.com and checked their registrar. Some companies have already said they were moving (Hi StackOverflow!). Huge thanks goes to Mike St John for his help in querying the registry.

Here are the 144 companies using Godaddy as a Registrar :

woothemes.com
proboards.com
stackoverflow.com
alot.com
wowhead.com
xkcd.com
seriesyonkis.com
exoclick.com
flipkart.com
goodreads.com
twitpic.com
babylon.com
bytes.com
opera.com
foursquare.com
r7.com
thechive.com
realclearpolitics.com
yousendit.com
dreamstime.com
justdial.com
ilivid.com
github.com
multiply.com
imesh.com
optmd.com
wimp.com
youm7.com
urbandictionary.com
amung.us
informer.com
pingomatic.com
networkedblogs.com
histats.com
chicagotribune.com
grooveshark.com
infusionsoft.com
buzzfeed.com
trulia.com
yoo7.com
hawaaworld.com
bearshare.com
slutload.com
piriform.com
incredimail.com
noticias24.com
ioffer.com
buysellads.com

I would advise anyone thinking of an .xxx domain to reconsider. Although you can register the rather pricey domain (~$95 a year) The ICM Registry are in full control of whether or not the domain resolves.
According to their website you need to register as part of their 'sponsored community'. 'Fair enough' you say, 'where do I sign up'? Well you can't. At least not until the ICM send you an email with a valid link to a sign-up form. What they don't tell you is when you will get that email, and no amount of emails to ICM will enlighten me either. For me it has been seven days so far. Meanwhile the domain is earning me nothing and the registered year ticks along.
When will I get the email? Two months, three, never? Who knows. All I know is this is a very shady practice and I would stay the hell away.

Source: http://www.reddit.com/r/web_design/comments/nattk/the_great_xxx_con/

It seems Godaddy has finally plugged a hole in its whois privacy system which allowed users to see the domain owner's email address domain (ie ****@kevinohashi.com) if they tried to retrieve passwords. Now it requires the user the enter that email address instead of verifying that the asterisked email address is in fact the proper domain associated with the account. I highlighted the fix in the image below. Privacy at Godaddy just got a little bit stronger.

Bad nerd humor is hilarious sometimes.

TechStars TV Episode 3 (around 15 minutes)

What happened: SocratED renames to Veri and gets the domain Veri.com

Transcript (might be a few mistakes, I went through 3-4 times to try and copy this word for word):

David Tisch: Socratic + Education = crap name

Founder: Seeing how no one was able to pronounced our old name, SocratEd, we thought it might be a good idea to move to a much shorter 4 letter domain that meant something, so we moved to veri.com

David Cohen: That's a good name, veri being truth.

Fred Wilson: four letter domains? impossible. you can't get a four letter domain.

David Tisch: where did they get the money for that is the first question I asked?

David Cohen: so here is the crazy thing, Lee has owned that domain for the past 6 years.

Fred Wilson: There you go. They are the team of that week for that alone, that's going from the out house to the penthouse.

I thought this was interesting for a couple reasons.

From a startup perspective, it's interesting to see how impressed investors can be from a domain name. A strong domain truly does send a signal.

From a domainer perspective, it's shocking to realize that it stuns these investors that a startup has such a good domain. They don't think they have the money and it's not sure if they believe a company should be spending that money so early either on a good domain.

I was recently introduced to Amartya Sen's Liberal Paradox and found it quite interesting. The Wikipedia page does an ok job explaining it, I liked this article more.

Sen’s liberal paradox is meant to demonstrate that when autonomous agents act with complete freedom, it is impossible for the agents to produce an outcome that is a net improvement to everyone. While this is not to argue for government intervention, it is to say that a pareto optimal improvement and libertarianism cannot coexist. In other words, the paradox shows us that the invisible hand of the marketplace is incapable of producing net improvements in welfare for a given society.

When you think about the domain industry in the context of the liberal paradox it makes sense why everyone is so unhappy.