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The Value of a DOT US

December 14, 2011 Leave a comment

It is of common knowledge in the domain investment community that .us domain names are not the default choice for United States companies seeking to have an online presence. It is also of common knowledge, that as a result of american’s preference for .com as their national domain extension, .us domain names are assigned a value far below their ccTLD counterparts, such as Germany’s .de (Aktien.de $725,000), UK’s .co.uk (Beds.co.uk $130,000) or Australia’s .com.au (Deals.com.au $100,000).

This week, the DNJournal will most likely announce the purchase of a .us for mid four figures. The amount of the sale is almost insignificant, but I was the buyer, and in this post I will explain my reasons for believing that the .us is highly undervalued and carries a potential for companies seeking to develop an online presence with a prime generic name.

There are two main factors for which I think the .us ccTLD has lagged in value. First, as I said above, americans prefer .com – they associate it with their national extension. Even if a .com weren’t available, it is fair to assume that there will be a preference to choose another gTLD such as .net or .org, over the official ccTLD for the US, .us. This assumption can be easily corroborated by the number of sales and dollar amount per sale for gTLDs vis a vis .us.

The second factor is the restriction for .us ownership. Only American citizens or permanent residents are allowed to own a .us, and this is exactly the population that rejects .us domain names. If a european citizen saw value in a .us, there couldn’t be a way for that person to acquire such a domain name without much hassle and risk. Thus, the small population that can purchase the extension is its worst customer.

But then, why do I think a .us carries much more value than the market is currently assigning it?
The answer lies in the fact that there is a global perception on ccTLDs, which extends the relationship of any ccTLD to one not circumscribed to the specific ccTLD population, but rather as a geographic presence towards the global community. In other words, when a portal from Russia opens with their ccTLD .ru, like Mail.ru, they are not just communicating to the Russian community about their presence. Rather, Mail.ru becomes a portal for all global citizens searching for contact with Russia. All of the world -not just russians, will recognize and seek mail.ru when wanting to communicate with the russian community.

Outside of the US, it is evident from all the local media that ccTLDs are the default choice for companies to communicate with users. Thus, all internet users outside of the US have a psychological tendency, reinforced by local media, to see the web through ccTLDs. It is only americans who predominantly only experience the web through gTLDs, primarily .com. And so, therein lies the opportunity.

First, it can be speculated either way on the adoption of the American community on a .us. One can argue that american users will be confused and tempted to type in the keyword and then .com. Others can argue that branding will be harder and carry less prestige than the .com. I, on the other hand, have confidence in the ease of branding that carries a prime keyword .us. It further resonates on the prevalent patriotism that distinguishes americans.

However, there is another way of looking at the opportunity, and that is as a portal for the rest of the global community. It is much easier for a foreign citizen to understand and to recognize a portal using the .us extension as an american portal. Therefore, foreigners will want to participate in a .us portal with the understanding that they are participating in an american environment. The .us is easily perceived as American soil by the rest of the world. And that is where the value of a .us rises. If we consider the .us extension as a window to the US for the rest of the world, where our customers are not just Americans, but the global population seeking contact with Americans, we find that a .us can hold a huge market outside of its borders.

Where in the world is dot com?

I have just returned from a trip across several countries in Latin America and Europe and noticed a consistent trend – ccTLDs are dominating the visual space of major cities outside of the US. Yes, in the US dot com is king, but not for Argentina, Chile, Greece, nor Spain.

Argentina and Chile

In Argentina, .com.ar dominates almost completely in all forms of commercials and billboards that I saw. The local extension is very popular, even though it has had the limitation of not allowing second level registration (i.e. .ar).

The same popularity for the Chile domain extension can be seen throughout their capital, Santiago. Unlike Argentina, the most popular form of the domain is the direct second level domain. Dot com or any other domain extensions other than the .cl are almost non-existent.

Greece and Spain

At Greece I had the opportunity of visiting several places mainland, as well as several of their islands including all of the most popular ones. Again, the ccTLD .gr was by far the most dominant in all the places I visited. In Athens, I saw a few dot com addresses, but possibly no more than a 10%.

Finally, in Madrid and Barcelona I continued to see the same tendency as the other places. One significant difference was Barcelona – which might be indicative of what’s to come. The official extension in Barcelona was not the ccTLD .es. Rather, the gTLD of choice is .cat, which is short for Cataluña – the region Barcelona belongs to. Aside from the government using .cat as their official extension, and many businesses using .es, there was also a few .com and .info domain names used by businesses.

Conclusion

Important regions like Cataluña could push for having their own regional extensions (and they currently are), opening the opportunity to register domains under those new gTLDs. The new CEO of ICANN has expressed ICANN’s path towards the creation of new gTLDs.

“For example, the chief of the Zulu tribe, His Majesty King Goodwill Zwelithini kaBhekuzulu, recently sent a letter notifying us of his intent to register the dot-zulu domain name so that different but related businesses and other groups can be linked by their domain name to the entire Zulu community. According to His Majesty, “We believe that the .Zulu TLD, as conceived and proposed by the Dot Zulu Project Inc. represents the best interests of the Zulu community and will be able to provide a viable structure for us as an evolving community.” New York City and the city of Berlin have expressed a similar interest in their own domain names. It is impossible to imagine the possibilities that could occur when these and a multitude of other TLDs are opened.”

If we extrapolate from Barcelona, when trying to enter a local market outside of the US, descriptive or generic domain names including the region or country (Berlinicecreams.com) will most likely be less desirable or useful than the new forms of gTLDs covering those regions (icecreams.berlin). I can see a dot com as being more desirable if it is in the travel industry, where the visitors are not the locals, but rather a population of foreigners.

There are many countries out there that still have high value generics available for registration. There are also still relatively low prices for premium generics in the secondary market for some countries. However, one big impediment has been the management of these domains, scattered through multiple NICs all having their own particular ways of renewal. So, if you are willing to deal with that inconvenience, then ccTLDs and new regional gTLDs could be a good pocket of growth for Domain Investors.

Acquisition Opportunity for Yahoo or Google- Marchex

October 20, 2008 1 comment

Last time I analyzed CNET’s individual assets, the company was acquired 4 months later. Now, amidst the current economic nightmare, there is a fresh new opportunity to grab a gift – Marchex (MCHX). Yahoo, who’s recent conflicts have left many asking for Yang’s head and who’s stock has lost almost 50% since failed negotiations with Ballmer, has a small opportunity to vindicate themselves.

Of course, there’s also Google who needs to continue increasing their revenues in order to support their generous stock PE. Although I would insist that this is a more logical acquisition for Yahoo! to build themselves into a more attractive position for Yahoo! to be acquired, possibly still by Microsoft.

So, what does Marchex bring to the table?

High quality traffic and prime Internet Real Estate.

By its own, Marchex is priced slightly below their current value. However, when you take Google or Yahoo’s advertiser base and traffic sources and fuse it with Marchex’s high quality domain portfolio you get a multiplier effect.

Marchex has made two brilliant moves:

1. Spanish domain portfolio acquisition

This portfolio contains over 100 of the most attractive Spanish domain names and was calculated to generate more than one million unique visitors per month. Of course, these are mostly visitors coming straight to the sites, because of type-in traffic. Take a look at the jewels:

mujer.com (women.com)
fotos.com (photos.com)
deportes.com (sports.com)
salud.com (health.com)
peliculas.com (movies.com)
mascotas.com (pets.com)
futbol.com (soccer.com)
cocina.com (kitchen or cook.com)
tarjetas.com (cards.com)
dietas.com (diets.com)
computadoras.com (computers.com)

The whole list is found here http://www.emediawire.com/releases/2007/5/emw527846.htm

The value of these domain names are like a slow curve that quickly accelerates exponentially as the Spanish market (Spain, Mexico, Caribbean and South America) online advertising solidifies. One must understand that this market has been extremely slow to develop, mostly because of the number of computers available in each household and lack of understanding from old school marketing executives. However, the panorama is changing quickly and will fuel advertiser dollars to the ‘net.

The Spanish domain portfolio could be easily worth $500 million to $2 billion in a 5 year window, depending on the development of all these domain names into fully usable content and social portals.

The second source of value in Marchex is their 2004 acquisition of UltSearch’s domain portfolio.

In this portfolio, there are over 100,000 domain names of high search traffic value. There are also a few generic jewels in the mix like beijing.com, debts.com, and remodeling.com.

It’s hard to value the whole portfolio and I suspect that most of the names would probably not be of any significant worth. However, assuming even 1% of the names are of the quality of debts.com and beijing.com would make the portfolio highly attractive.

I wouldn’t doubt that this portfolio had at least $100 million in value (Marchex paid over $150 million a few years ago for the portfolio).

Finally, someone over at Marchex decided to accumulate zip code domain name. Wrap them up, put a bow on top of them and sell it for a few million to some telephone company still figuring out their online strategy. I’d also garage sale the auto content generation technology.

Marchex is currently priced at $300 million. Year-to-date they are down almost 30%. This is exactly how much it is worth.. a 30 to 50% premium on its current price.

Poor Performance by SnapNames Viajes.com

April 17, 2008 Leave a comment

Last night I read of the auction for “viajes.com” (travel.com). I immediately placed a bid and began the process to determine the maximum amount I could afford for such a jewel of a name. My head spinning with plans…

This afternoon, I receive an email from SnapNames:

viajes.com auction

Notice the “To” field. Yes, it contains the emails of EVERYONE who participated in the auction. My personal email, without consent, accessible to everyone who participated in the auction.

RE: DNZoom

Sahar Sarid is one of the most active voices in the Domain industry and a leading domain investor. Recently, he launched a contest to determine the best features needed for domainers, to be incorporated in the recently launched DNZoom service. As a domain investor, I’d like to jump in with a few suggestions of what I believe is needed to improve the domain investment market:

These suggestions are in no particular order:

1. Have active offers with expiration dates or without expiring. I have seen way too often in the domain forums how sellers of the domain claim that they once received a “$x,xxx” offer for the domain once. Well, make this process transparent. I want to buy xyz.com, I give them a $xx,xxx offer that will expire in 2 months. I give them a $xx,xxx minus $x,xxx offer that will never expire. This offer is visible – it is active. Other buyers can see the active offers on the domain. The seller can choose to execute the sale based on these active offers any time they want.

This adds value to the market by establishing floors on demand for domains. This further increases the amount of data available for calculating the value of comparable domains. Active offers by reputable buyers could even serve as collateral for the owner of the domain to take out a loan.

2. Expiration dates for domains should be active. By this, I mean that there should be buttons for me to click on and have it add the date to my calendar. Palm, Google, Outlook. This way, as I search for domain names, I can click on this active link and instantly integrate it into my calendar system which will remind me when that domain is going to expire.

Furthermore, you could have a paid service of receiving an SMS alert when a domain is close to or has expired.

3. Group data on an industry and provide a perspective to domainers on how well they are performing on their monetization. (OK this is a bit hard to do) But imagine if I was in the  “travel” industry. How are my travel domains performing relative to the entire pool of travel related domain names? Which parking service is performing best for that industry. Perhaps lead generation by xyz parking company is proving to be more lucrative in this industry. Perhaps it is Cost Per Click by abc company.

4. On that same note, let domain holders know when specific industry domains are being sold. If I have a strong portfolio on “car” domains, it is more likely that I will pay a premium for a domain related to “cars”, because among other reasons, I have a multiplier effect in income when I hold many domains from one industry. So, identify or ask domain holders which industries they are interested in, and notify them when a domain has been put on sale or expiring auction.

5. Transparency on traffic and revenues! Offer the option to share certified income reports and/or traffic with prospective buyers, or simply to share it in a public space. If publicly shared, then integrate it into the whole search experience. This way, people can search the whois and see the field for traffic and revenue of that domain. Or search by traffic and/or revenue. Buyers can then make their offers in the style of Suggestion #1.

6. Open is the new black! Once you have gathered enough data, put it out to the world in the form of APIs. This will make the industry stronger, unleashing valuable data for bright minds that want to build applications we haven’t even imagined.

I hope many of you choose to participate in this contest and make this industry better.

Quick Q&A: Could the value of a premium generic domain name depreciate?

January 25, 2008 2 comments

This is a debatable subject. The specific question I want to consider is: When a company accomplishes a dominant leadership position in an industry, how will the generic domain most descriptive of that industry be affected in its value?

Here are three examples to consider:

Books.com – This is a powerful generic domain. Yet, it would be interesting to learn how many actual type-in visitors it generates for Barnes and Nobles. The reason – Amazon.com. Amazon has become synonymous to books for most Americans. So, when people buy books, how much type-in traffic has Amazon taken from Books.com due to a powerful brand?

Auctions.com – You probably said it in your mind before actually reading it – eBay.com. Perhaps their success was greatly influenced by fate/luck, when they tried to register echobay.com as their website’s domain name and it had already been registered. This is why they had to shrink it into the catchy four letter word. Again, when you want to buy or sell in auction format, how likely would it be for you to type-in Auctions.com, rather than eBay.com.

Search.com – Some lawyers are even trying to stop reporters from using the term “googling”, as search giant Google overshadows even the phrase “to search” with the increasingly popular phrase “to google”. How would you think this change has had an impact on the value of Search.com?

If in these three cases you agree that the word actually lost value, rather than appreciated in value as a company grew into a leadership position of the industry, and you own a premium generic name for an industry in which a new company is growing to become a leader of that industry; then you should try to sell the domain name before the company establishes itself as the leader. Or at least for accounting/tax purposes, you should be able to begin a trend of depreciation from your asset as the company’s leadership position solidifies.

Italia.it Closes

January 23, 2008 Leave a comment

What a beautiful domain name. Apparently, the estimated budget of $45 million euros for development of this portal by the Italian government was insufficient. Italia.it was launched last February under heavy criticism for its high cost and complicated structure. The ephemeral website was finally closed by the Minister of Culture and Tourism, Francesco Rutelli.

Complete story here (in Spanish): Italia cierra su página Italia.it 

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