I didn't want to lose you on this one! If you're at all
interested in Real Estate, Virtual or not, you've got to
read this article through to the end!
So, I posted the entire article here and I included the
link to the actual article.
After reading this article I found myself on a fascinating
journey that led me to places I didn't know existed on the
Internet!
I met (virtually, of course) people that are real players
in the field of ereal estate and virtual real estate.
"Domain King", the guy who sold Business.com for $7.5 million
is mentioned here.
So, drink this one up and try not to get your wheels spinning
on this one!
"Internet for Sale"At the height of the dot-com boom, cybersquatters hoped to
make quick bucks on Web domain names. Could it now be a
legitimate business?
WEB EXCLUSIVEBy Kathryn Williams
Newsweek
Updated: 1:38 p.m. ET May 11, 2005
May 11 - When a Florida man, in anticipation of the naming of
the new pope, registered the Web site BenedictXVI.com, the
Vatican was in luck. Rogers Cadenhead, who has since used the
site to publicize a nonprofit organization and plans to
transfer control to the Vatican, could have been an investor
looking to get in on a booming business: the domain market.
Indeed, owners of similar sites such as Benedict16.com and
PopeBenedict-16.org, are looking to sell to the highest bidder.
With the advent of the Internet, speculators went wild for
what they saw as prime virtual real estate. Paying $100
registration fees, they scooped up generic and popular
brand-name domains by the thousands, looking to sell them
off at 10 to a 100 or more times the price. With the 2000
dot-com crash, it seemed those investments were simply that,
wild speculation.
In some cases courts and arbitration boards ruled against
cybersquatters who registered domain names of famous brand
or celebrities. Just last week, actor Morgan Freeman was
awarded control of morganfreeman.com by the World Intellectual
Property Organization, a United Nations panel. But a
turnaround last year suggests that a legitimate domain
market may be booming again.
Sedo.com, a leading domain marketplace, estimates that the
number of secondary (already registered) domain transactions
nearly tripled between 2003 and 2004. While most sites there
sell for around $1,600, the British-based Dotcom Agency has
seen its average minimum offer more than double to around
$3,500 since the beginning of 2004.
Five- and six-figure sales are common, according to the
Domain Name Journal, which tracks the transactions. Last
year, CreditCards.com sold to Texas-based marketing firm
ClickSuccess for $2.75 million, one of the highest reported
selling prices since the bubble burst.
“This is a totally different market than in 1999,” says
Matt Bentley, Sedo.com CEO. “Today it’s really a much more
stable, mature market based upon existing revenue streams.
These domains are actually generating money.”
These days potential domain investors can quantify the value
of a site by its traffic and, while they’re waiting for a
buyer, register with a domain “parking service” that will
create the page and set up pay-per-click advertisements.
So if a Web surfer looking for a drum set types in
DrumSets.com, he or she is taken to a page of sponsored-link
ads. Each time a user clicks on a sponsor’s link, the domain
owner receives a fee. For domain owners, “it’s a win-win
situation,” says Bentley, who compares the parked domains
to making rent off real estate.
Rick Schwartz, the self-proclaimed “Domain King,” also argues
that Web domains are a good investment. He got in on the
domain marketplace pre-bubble. “I looked at domains from the
get-go as a commodity,” he says. “I was a believer that after
everything collapsed and burned, that domain names would be
the epicenter of the new Internet [boom].”
Schwartz says his portfolio of around 5,000 domain names has
earned him tens of millions of dollars. Ron Jackson,
publisher and editor of Domain Name Journal, credits
Schwartz’s 2004 sale of Men.com with jumpstarting the
“rebirth” of the domain market.
The sale, for $1.32 million, represented an 88-fold return
on Schwartz’s 1997 investment of $15,000. It’s an
opportunity he believes others have been foolish to miss out
on until now. “They’re 10 years late to the game,” says
Schwartz, “but at least they came.” And he believes there’s
still plenty of time to play. “We’re still on the
ground floor.”
Perhaps a bigger indicator that the domain market is on the
rebound is the recent interest shown by venture capital firms.
In November, online marketing services firm Marchex, announced
its purchase of a portfolio that expanded their holdings to
over 100,000 domains with 17 million users a month.
The price was $164.2 million, approximately eight times the
sites’ current annual revenue (a rate insiders say has set a
new bar for asking prices).
The company has since expanded its portfolio to more than
200,000 domains. “Traffic is a critical element in driving
product sales and advertising revenue,” says Marchex Chief
Strategy Officer Peter Christothoulou, who says he’s noticed
“heightened awareness and interest” in the market since the
publicly traded company’s announcement of the acquisition.
Jackson says to expect more deals like Marchex’s. “It seems
like every venture capital company in the world is nosing
around in this space right now,” he says.
Marc Ostrofsky, for one, is looking to cater to that interest.
The veteran domain speculator behind the record-breaking
$7.5 million sale of Business.com in 1999, is forming a
$250 million “Internet real estate investment trust.”
He and his partner, Houston investment banker Bob Martin,
have spoken with interested hedge fund managers and venture
capital firms in New York, Los Angeles and Silicon Valley.
“When the investment community heard what we’re playing with,
they liked it,” says Ostrofsky. “They liken it to a land rush.”
But Ostrofsky, who says he lost millions in the dot-com crash,
is confident there’s no bubble to burst this time around.
“I’m going to put 40 percent of my own net worth in this
market,” he says. “The bust was made up of companies that
were overvalued. We're buying in at the very early stages of
a growing industry, nowhere near the top."
Not everyone is so sure. Jody Westby, managing director at
PricewaterhouseCoopers says, “The more things change, the
more they stay the same. Perhaps there’s renewed interest,
[but] holding domain names and using them for hyperlink
advertising space, to me that’s nothing new.”
Regardless, trade publications like DNJournal.com and the
German site Domain-Spiegel.de, are filling the need for
industry analysis.
In October of last year, Schwartz helped organize the first
domain trade show in Delray Beach, Fla. A second will take
place this month in Las Vegas.
With new extensions, like the .biz and .info suffixes added
in 2001, and registration fees down to around $8, the
marketplace is expanding.
Earlier this month, domain data aggregator Whois Source
announced that the number of global top-level domains
(.com, .net, .org, .biz, .info and .us) had passed 50
million. Everyday tens of thousands of domain names
expire and become available again.
“Trees don’t grow to the sky,” says Jackson, but he’s not
alone in believing that there’s a lot more space for this
boom to grow.
© 2005 Newsweek, Inc.
