What’s in A Name?

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In 2007, Oversee.net staged a domain name auction that raked in $10 million, according to one industry blogger. But earlier this month, sales at two of the downtown L.A. company’s auctions didn’t even reach a half-million dollars.

Fortunately for Oversee, live auctions make up only a small portion of the company’s business. The company also does online auctions of domain names, which are still going strong, and offers direct sales. And the company brokers sales of domain names. While the action on live auctions is down, those other domain name sales are up.

Oversee’s main source of revenue is advertising on sites with domain names that it owns itself. The company is known for placing ads on websites without any other content on them. But it has recently developed some sites with content and services.

These days, Oversee uses live auctions less as a real selling tool and more for marketing: to publicize what’s for sale and establish prices. The people who buy at auctions are often looking for bargain prices on domains – where they sell advertising without developing any content.

“We see auctions as public marketing opportunities,” said Jeff Kupietzky, chief executive of Oversee. “It fits our strategy to expose our inventory to the right buyers to later facilitate transactions.”

The combined revenue for all of Oversee’s domain name-buying and -selling services increased by 50 percent last year, Kupietzky said.

Oversee, which has 192 employees, is private; he would not disclose revenues, but did say that the majority of the company’s money comes from the 1 million domain names that it owns and monetizes through advertising on “parked” websites that don’t offer content or services. Oversee also makes money off comparison travel site LowFares.com and comparison shopping site ShopWiki.com.

“Domain names have an inherent value like commercial real estate,” Kupietzky said. “The fact that they can be bought and sold is one part of their value. Ultimately, they will be developed or built out.”

Auction activity

During the first week of February, Oversee staged a three-day industry conference, DomainFest, in Santa Monica. The event, which drew more than 700 people, featured two live auctions for domain names.

(That’s the same conference that included a stop at the Playboy Mansion. Dozens of attendees fell ill afterward, sparking a good deal of news coverage.)

The company put up 160 names for sale and 51 names were sold. Although that number might seem low, Kupietzky said it’s common.

“Having the live auction is a public way to let potential buyers know about the availability of the name,” he said. “We establish the reserve price in the auction, but the buyer will get it in a private sale.”

The highest bid was for Won.com for $115,000. LoanQuotes.com drew the second highest bid at $75,000.

Andrew Alleman, editor of industry blog DomainNameWire.com, said it’s no surprise that Won.com got the highest bid. Generic names that are short, only one or two words, are usually the most sought after.

“A category-defining generic domain name is the one that will sell for a lot of money,” he said. “With a domain like that, you can get impact quickly, and instant recognition and confidence in a company.”

Other names at the auction were Kiss.me, which sold for $10,000, and Love.me, which sold for $32,000.

Although some buyers might use their newly purchased domain names for a website that features content and services, many of them won’t.

For example, Steve Kaziyev, chief executive of City Guide Media Inc. in Queens, N.Y., bought three domains during the auctions – OnlineInvestigations.com for $300, RetiringEarly.com for $900 and PoliceDepartment.net for $500. He said he’s going to “park” the sites, meaning he’ll register them but only put advertising on blank web pages without any content or services. By doing this, he can make money from people who accidentally stumble upon the websites while surfing the Internet. He’ll resell the sites if he can get a good price.

“Auctions are good to go to because usually you can find good prices,” he said. “We buy low and try to sell high.”

Alleman estimates that the domain name industry is worth $5 billion. Oversee’s largest competitors include Go Daddy in Scottsdale, Ariz.; Sedo in Cambridge, Mass.; and NameMedia in Waltham, Mass.

These companies could see a shakeup in the value of domain names in the next few years, Alleman said.

That’s because the group that oversees the industry, Internet Corporation for Assigned Names and Numbers, plans to open up new domain names for sale that would expand from the standard dot-com, dot-net and dot-org names.

Already, names with a .me or .co have become increasingly popular. Soon ICANN might introduce names with creative endings such as dot-drink or dot-la.

Kupietzky said he isn’t worried about the change because these new names will be confusing and hard to remember. As a result, he believes names with a dot-com will become more valuable.

“With these other extensions, people will forget or get confused,” he said. “It will reaffirm the dominance of dot-com as a global brand.”

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