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The Internet Gold Rush 2.0
By Max | May 22, 2007
Back in 1999 and 2000, an internet startup couldn’t go wrong. Throwing up a website and advertising a little was like a license to print money. The money back then came in the form of stock market IPOs. A year later companies were doing everything they could to disassociate themselves from the internet.
The gold rush is happening again. Since Google launched its adsense program, the online advertising market has been reborn with a new vigor. There are a lot of people now making a lot of money. In some ways web businesses are models of perfection, not constrained by geography and often run with insanely low overhead compared to the offline world.
I read this article today over at CNNMoney.com. It is amazing what has been accomplished by some of these guys during the web real estate land grab. This article highlights Kevin Ham who runs about 300,000 domains. I thought the part about his control over all the Cameroon domains was pretty interesting. Cameroon domains end in “.cm” so there is a lot of misspelled type-in traffic that arrives at those domains. I wonder how many visitors Yahoo.cm gets each day?
Another domainer, Yun Ye, made headlines when he was bought out of 100,000 domains by Marchex in 2004. He made a sweet $160 million in that deal.
In the Kevin Ham article, I learned that he is paying quite a high multiple for some of the domains that he’s purchasing. I don’t really understand where he expects the additional value to come from. Type-in traffic is definitely a legitimate source of traffic and revenue, but why is he paying more than this type-in traffic is worth? The article explains that he has plans to build some domains into legitimate businesses. This doesn’t make sense to me, and I think it is a mistake. I could take any random domain that costs $8.95/yr. and build it into the same legitimate business. The business value will come from the resources put into it. There are a lot of big businesses on the internet with bad domains or nonsense domains. Yahoo.com and Google.com are big examples. I think you would have a tough time arguing that those domains contributed greatly to the success of either company other than the fact that they are short and easy to remember. The value isn’t in the name though, its in the business behind the name. I suspect that some of these domain names have been bid up to highly speculative sales prices, that one would have trouble capitalizing on. An example in the article is greeting.com, for which Kevin paid $350,000.
So if you are thinking about entering the domain game, be careful, because it appears some of those prices are in a bubble. I bet someone is going to lose quite a bit of money on them in the next few years.
Topics: News |
May 30th, 2007 at 1:07 am
[…] I have been reading a lot about domaining lately. I understand the basic idea. Register a www.xxxxx.com domain that someone might just type that in to their browser directly rather than searching. (type-in traffic) Then earn cash off the traffic when they click on one of the 50 advertisement PPC links. […]