05|01|2011 08:54 am EDT
Marc Ostrofsky’s book “Get Rich Click!: The Ultimate Guide to Making Money on the Internet” (aff) is available as of tomorrow. DNN will be giving away five copies of the book on Monday. Courtesy of Ostrofsky, we also have the following excerpt from GET RICH CLICK! for you – almost the entire Chapter 8. Read it after the jump.
I created the slogan “Domain Names are Internet RealEstate™” back in 1995. I have amended it to read “DomainNames and Websites are Internet Real Estate™.” A good domain name creates mindshare™. You can own it, lease it or put up a virtual shopping center.
The Race Is On
It’s interesting to sit back and watch firms spend large sums annually on Internet advertising and buy Keywords to match their market needs – yet they fail to realize the business advantages of owning the domain name for the market they are targeting through advertising.
I happen to own a few good domain names such as Photographer.com, Consulting.com, Bachelor.com and MutualFunds.com. To this day, not one major firm has tried to buy MutualFunds.com. It baffles me daily. Hundreds of mutual fund firms market themselves on the Internet, buy “Keywords” from Google and Yahoo! and spend millions of dollars getting potential clients to come to their site. But none has tried to buy “MutualFunds.com” from me –yet. (In Europe, one smart public company did buy the domain FUND.com for 9,999,950.00.)
Many large firms use advertising agencies that, by definition, are not in the business of taking chances. These agencies are charged with being prudent when it comes to a client’s marketing and advertising dollars. But the right domain name is an asset on a firm’s balance sheet. Simply capturing those users who type the words “Mutual Funds” into their browser’s web address field could increase sales and save money in search engine advertising. Better yet, this direct navigation traffic – when a user bypasses a search engine by navigating directly to the site – is highly targeted. The domain owner captures prequalified leads often meant for competitors! (See Chapter 3 for more on direct navigation and search.)
Corporations are not always disclosing the prices they paid for the nameof their market. Johnson & Johnson purchased baby.com for an undisclosed amount. Sony purchased the name psp.com for seven digits. Lots of firms are buying names without fanfare or press releases. I own eTickets.com and offered it years ago to Continental Airlines in exchange for free tickets instead of money. The Vice President of Marketing at the time said to me, “Why would we want that? We already have a domain name.” He thought he had a grip on the situation and I clearly didn’t. He just didn’t understand the value of traffic. Today the name is worth 100 times my offer to Continental.
Today, domain names routinely sell for $1 million or more, and prices are going up daily! Domain name sales are for the name only: that is, the Universal Resource Locator or URL, which is the actual web address. While Sex.com sold for $13 million, Porn.com sold for $9 million and Diamond.com sold for $7.5 million, these firms had established websites, income, clients and advertisers. These were sales of businesses, not just domain names.
In the Internet real estate business, a domain name is the equivalent of land. It’s the location upon which a business is built and where business is conducted.
Real Estate Versus Internet Real Estate:The Power of Leverage
Physical real estate is a long-term, known investment. To purchase $100,000 of land, you might put up $20,000 and borrow the remaining $80,000. If the property doubles in value in a year, then it’s worth $200,000. Your $20,000 just made you approximate $100,000 not including the costs you would have had to pay on the interest for the $80,000. Not a bad return.
Internet real estate doesn’t work the same way . . . yet. Because this is a new, relatively untested, dynamic market, banks and other financial institutions generally don’t loan money against a domain name. Some, however, are starting to do just that – because of the substantial cash flow some Internet real estate properties command.
Andy Bernstein is the undisputed king of finding, owning, financing, managing and operating small, strip-mall shopping centers. His firm, Bernstein Investments (GreatShoppingCenters.com), understands the real estate business extremely well. To Andy, the real challenge isn’t finding investors but finding and creating good deals.
Andy and I enjoy a good debate comparing the commercial real estate business with the Internet-based real estate business. Let’s look at some of the differences:
Location Versus Mindshare
Andy Bernstein buys great locations he believes can appreciate significantly or generate substantial cash flow. Internet-based real estate offers an additional benefit: mindshare. A great domain name gets more traffic to the site associated with it than a hard-to-remember domain name with no relation to the target market. If you wanted cuff links, chances are you’d go to
CuffLinks.com. If you wanted Venetian blinds, you’d go to Blinds.com. If you wanted information on mutual funds, you might start researching at MutualFunds.com. An estimated 12–15 percent of those on the Internet type the term into the address field of their browser, hit return and arrive at the site with this URL. That’s called direct navigation, and the mindshare associated with the domain name alone generates customers.
Local Vs. National and International
Andy’s real estate serves a local community. But anyone who has an Internet connection anywhere in the world can access a website. If you have a laptop, PDA or cell phone with an Internet connection, you can access Internet real estate on the move.
One Versus Many
Each piece of physical real estate is unique. No two properties share the exact same qualities. But in Internet real estate, you and 500 others can have the same word in the domain name of your websites as long as each of you has a unique modification – for example, JustBlinds.com, UniqueBlinds.com, MiniBlinds.com and 3DayBlinds.com.
Cost of Entry
It’s expensive to build or buy a shopping center. You can buy a domain name for as little as $1.99 these days. With hosting, some programming skills or a “merchant solution,” and a way to process payments, your Internet real estate can be up and running, ready for business, in very little time for very little expense.
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Internet-based real estate has its equivalents and then some:
Location = Domain name.
Secure transactions and privacy = The customer feels secure supplying The Experience.
Andy notes the 10 things that make for a good experience at one of his shopping centers include: personal and financial information.
Traffic = Site traffic can fluctuate in minutes or days, often by a factor of 1,000 and more. Limitations depend on how effectively the business’s computers can handle the traffic volume.
Parking = Unnecessary on the Internet, although I do cover “parking of a domain name” later in this chapter.
Ingress and egress = Did the site download fast enough, or was it so slow that the client left and went to another property? Andy would lose a customer to a neighboring shopping center; you have to compete with every seller in your market who is connected to the Internet.
Lighting and landscaping = The look and feel of a Website is vital to the client’s experience.
Music/sounds = Shopping centers and malls often play music or incorporate fountains to create a soothing atmosphere. Websites can incorporate sound and video (though some users find music intrusive and animations distracting).
Signage = While Andy’s shopping centers spend money on advertising, promotions and public relations, the majority of the long-term traffic depends on the location and the tenant mix. On the Internet, marketing is king, even over and above a great domain name. Anyone can dramatically change the traffic with good publicity, marketing, Pay-Per-Click advertising, securing new affiliates to sell or resell products and search engine optimization.
Traffic Is Key
Andy and I can spend money to attract traffic to our sites, but on the Internet small changes lead to dramatic increases in traffic. Andy’s physical real estate stays put. He can paint it, change the construction a bit, add or delete parking. He can put in a Home Depot and triple the number of people that come to his shopping center. But there’s a limit to how much he can change the shopping center to attract more traffic. A good programmer and a great marketer can change the traffic to this site by a factor of 1,000 in a few days or even minutes.
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CORPORATE AMERICA . . . WAKE UP!
Ninety-nine percent of corporations have yet to figure out that they should own the one or two domain names that will give them the most free traffic: the generic name for each of their products or services. The name of their topic, their industry. They spent millions on marketing, advertising and PR but few have yet to realize the value of these assets. They spend hundreds of thousands of dollars per year on banner ads and Pay-Per-Click campaigns, yet the vast majority do not even consider buying the one asset that will yield the highest quality traffic. Why doesn’t:
Palm or Apple buy PDA.com
Sony or Panasonic buy TV.com
Dell or IBM buy Computer.com
Fidelity or Morningstar buy MutualFunds.com
Kodak or Fuji buy Photographer.com
Expedia or United Airlines buy eTickets.com
The American Heart Association buy HeartDisease.com
The Amazing World ofBuying and Selling Domain Names
Buying and selling used to be the only way to make money with domain names. Before 2003, speculation was the name of the game: people generally bought domain names they thought would be popular and would draw traffic. Then they’d wait until an investor wanted the name so badly he’d ask you to name your price. Today, paid search makes highly trafficked domain names worth the investment in the multibillion-dollar domain name business. This kind of traffic creates an income stream for the lucky domain name owners.
Once you have your Internet real estate, how can you use it to make money?
5 Ways to Profit from a Domain Name
1. Sell it. Sell the name for a profit.
2. Rent it. Rent the name, or just the traffic from the name, to a firm willing to
pay for that traffic.
3. Build on it. Put a website on the domain name.
4. Lease it out. Lease the name to a firm that wants the name and the associated traffic. For example, you could lease the name MutualFunds.com to Fidelity for three to five years. They would control what goes on the site.
5. Park it. When you own a domain name but don’t want to put up a website until the time is right, you can “park it” with a parking service. A parking service works with Google, Yahoo or one of several other players in the market to sell advertising or “clicks” that take a potential customer from your domain name to an advertiser’s website. The parking service puts up a “parking page” on your domain and then pays you every time someone comes to your site and clicks on a link. This is a good strategy, especially for sites with a lot of direct navigation traffic.
New Revenue from Domain Names:
If you want a simple strategy for making money with a domain name, here is one idea that 99.9 percent of domain name owners overlook. Some firms rent out the use of their domain name e-mail addresses. A firm called NetIdentity.com created a wonderful business model around this concept. Let’s say you own Doctor.com. You could charge a doctor $19.95 a year for “your firstname.lastname@example.org.” As a domain owner, it costs you nothing to do this and generates a great, long-term, recurring profit stream. Ninety-nine percent of the “domainer” community (firms that own thousands of domain names) do not do this yet. You might discuss this idea with firms that own great names to see if you can set up and manage this profit-making opportunity, splitting the revenue with the owner of the domain.
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The Investment: Short-Term Versus Long-Term Viability
Ten years ago, no one had heard of the term “swine flu.” Now, because interest in the topic drives large amounts of traffic to the website, swineflu.com is worth a lot more money simply based on the increased amount of Internet traffic it gets. If you wanted to purchase swineflu.com from its owner, you would need to consider:
- How much the seller wants versus how much income the site can generate
- Whether the name (or the topic) will be around for the next 2 or 20 years
- Is it a passing “fad”?
- The rate of return on the money spent to maintain the site
- Whether the underlying asset (the domain name and/or website) will be worth more or less in 2 years? 5 years? 10 years? 50 years?
- How high will the name rank in search engine listings – first or 20th or 200th?
- Will increasing traffic to this domain name or website be cost effective?
- How much direct navigation traffic does the name get?
Own both kinds of real estate. But if you don’t have the cash or credit to play in the physical real estate game, a few choice domain names may provide a good return on investment.
A piece of physical real estate may change a little, it may have different tenants, cash flow, look, feel and owners, but for the most part, it’s here to stay. In contrast, a domain name may be in vogue today and passé in 90 days. However, a more valuable piece of Internet real estate – or a domain name such as bachelor.com, photographer.com, consulting.com or mutualfunds.com, which is based on terms with staying power – is more like physical real estate due to its common use and mindshare, in everyday life.
This was an excerpt of Marc Ostrofsky’s book “Get Rich Click!: The Ultimate Guide to Making Money on the Internet“
(aff), available as of tomorrow. DNN will be giving away five copies of the book later on today.