Guest: Howard Hoffman
[Commercials]
Monte: Hello everyone. Welcome to Domain Masters. I'm Monte Cahn, your host. It's been a whirlwind last couple weeks. We've been at two major conferences and out of town. Last week, if you'll remember or maybe you didn't make the show, because we rescheduled the date. We had our Domain Master show broadcast live from the convention floor at WebmasterWorld in New Orleans on Thursday, and had some great guests on, including Stephanie Leffler from MonsterCommerce, Byron White from LifeTips, I had S. E. Guru on to talk about his panel discussions, I had Chris Rumonde, who is also an SEO and domain owner, and we talked about the show and how much WebmasterWorld has grown through the years. It was like the 7th or 8th conference; we've attended 3 of them and it has basically doubled in size. I believe their next conference is in Las Vegas in November, so we'll be on board for that as well. Today I have a great guest. He happens to be one of our customers, but also is a very successful domainer. My guest this evening is Howard Hoffman. He's a former MIT and Stanford graduate, a civil engineer, and basically kind of invented his own oxygenated water company, called Hi-O-Silver, and we're going to be speaking to him today about his success on the internet, what his brick and mortar experience in the real world had what reflected experience it had on his success in the domain world. He also runs a domain site called PPCIncome.com, which compares major pay-per-click services for domain owners, so you can see where to have your domain names parked for the best returns. We'll be on with him in a minute, and I also did a big Q&A with Jason Hendelus from the ICR, the .xxx Registry; and I have some questions and answers that we can go through after that as well. So, we'll cover some good topics today. So stay tuned for a couple commercials, we'll pay some bills, and be back on with Howard Hoffman. Stay tuned.
[Commercials]
Monte: Hello everyone. Welcome back to the show. I'm Monte Cahn, your host. As I mentioned my first guest, Howard Hoffman, has been in the domain name business for quite some time and also the water business. He's been frustrated with the ever-changing search engine optimization game, so Howard was one of the earliest pay-per-click advertisers to go to be included in Go2.com, which later became Overture; and he's now, I guess, evaluating a bunch of PPC programs, including Domain Spa and Domain Hop and Domain Sponsor, and has a really good sense of the PPC market. We're going to talk to him about his business, how he got in the domain name business, and a little bit about his success story. Hello. Howard?
Howard: Yes.
Monte: Hey. So, welcome to Domain Masters. I explained before you're not only a Moniker customer, you're also in the water business; and wanted to get a complete history from you. How you got started in the domain name business, what brought you to this industry, and let's talk a little bit about your business in general.
Howard: Okay. Well, thanks. It's a pleasure to be here, Monte. First of all, it was about seven years ago I started bottling Hi-O-Silver oxygenated spring water; and when things were starting to really take off with the internet and I had this crazy idea that I could launch this product with this new medium, the internet. So I created a web site and my bottled water ready to sell, and then I waited for the orders to come in.
Monte: So, before we go on, tell us a little bit about the water; because I was introduced to it last year at the T.R.A.F.F.I.C. East show in October; and we all were drinking it. You brought a lot of bottles in and stuff. Tell us a little bit about the water itself and what makes it special.
Howard: Okay. Well Hi-O-Silver oxygen water; I had the idea actually for producing this because I was working with a doctor, a dentist, who was treating people who had bad breath; and it occurred to me based on my water engineering experience that oxygenated water would probably take care of that problem, and it does. But it also occurred to me it might have other benefits, such as for sports performance and I did some research and then obtained a U.S. patent for oxygenated water. And actually I thought that I would just sell this idea to a big water company, but I found out halfway through the patent process that another patent had been issued before mine, which was to some Hungarian researchers who were working with Olympic-class athletes in the Soviet Union and Hungary, and they demonstrated improved sports performance with oxygenated water and got this patent ahead of mine. So I could no longer sell the whole ball of wax to a big company. I figured the only way to make anything with this patent of mine was to develop my own water and sell it myself.
Monte: Wow.
Howard: So, it's kind of funny how one thing leads to another.
Monte: Yeah. And so you thought about the internet and how powerful that is or how it could be the medium for your water company.
Howard: Right. I had already met some people who were very successful launching products, but one thing is to keep oxygen in the bottle. I bottle it in glass; and if you look around you, you see everybody drinking water from plastic bottles these days.
Monte: Right.
Howard: And the oxygen doesn't stay in there. So, water in a plastic bottle is expensive enough and difficult enough to ship as it is; but trying to sell water in glass bottles was really crazy to try to be shipping everything by UPS.
Monte: Right, because there's breakage, you risk your bottles getting broken, and of course weight, it's heavier, it's a lot more expensive, I guess.
Howard: Right. Here you start out and you think, what would be a great product to sell on the internet, make it something that doesn't have any shipping cost; but I went the opposite way. I guess it could have been worse; I could have been selling anvils. [Monte laughing] But, actually anvils might have been easier, because they don't break so easily. The thing was I had created my web site; and you know, I was looking for customers. And so the first thing I did was figured out why I'm not getting anybody to my web site. Of course, you have to start learning how to play search engine games and search engine optimization. And I started learning as much as I could about that; but for a new business, it's very tough to get listed very high in Yahoo, and Google, and those companies, unless you really know what you're doing or you have an established product. So I tried all kinds of different things to get publicity, to get the company going, and finally I discovered something which initially didn't sound very good to me, and that was Go2.com.
Monte: Right. And what year was that? Was it back in 2000?
Howard: Well, I was one of their earliest advertisers; so I guess it must have been around then. It was either 1999 or 2000.
Monte: Yeah. Yeah.
Howard: And so, Go2.com became Overture, they changed their name; and they're now Yahoo Search. And so the great thing about this for me was that I could get listed pretty high on their pages, I had to pay so much per click; and back then they started out, it was only $.01 per click minimum. So, if you picked the right search terms, I could get a lot of traffic for $.01 per visitor.
Monte: Right.
Howard: And that was far more efficient than anything else I had ever tried. I mean, I had tried paying for banner ads, and I had paid for ads on newsletters, and all kinds of different things. And I'd put out $50 and get 2 visitors back; and it's pretty hard to make any money selling anything when you get very little response rate.
Monte: Right. Now do you know the lifetime value of a customer in your business?
Howard: Well, it really depends on if it's someone that picks up a bottle occasionally; or, we have a lot of customers that, once they become really a customer of ours, they drink a couple bottles a day.
Monte: So you have an automatic shipping schedule, just similar to like when the Zephyrhills' truck pulls up twice a month or whatever and refills your big bottles?
Howard: Well, actually, I only sell to my distributors; and the distributors sell to the customers. We sell to retailers in fact. And so, for example, in Houston we have a distributor that does a lot of home and office delivery; and his customers will order 3, 4, 5, 10 cases of water at a time, and that's a lot better than somebody going to the grocery store and picking up a couple bottles or a 6-pack. And so the value of those customers, I don't know, it'd be hard to say; but, if they continue to drink the water, you'd have to put it more in dollars per year than lifetime value. But, you know, it's worth hundreds of dollars certainly.
Monte: Right. Well the reason why I'm asking you is because, when you do your analysis on how much money you're going to be spending out per click, and obviously you've done a lot of this analysis, which is some of the things that I'm real interested in asking you about. You're not only measuring a one-time purchase; but, like we do at Moniker, we measure the lifetime value of a customer. We're hoping that through the little money that we do domain name registrations for that we also are able to monetize that customer by helping them with their domain name sales, having them use our escrow service, our hosting and email services, and trying to supply as many products and services as we possibly can to make up the margin in other ways so that they become a lifetime customers; and therefore, their lifetime value becomes higher, because it's a renewal business.
Howard: Right. Well that's a great strategy; but in our case, we really only have one product and I really don't want to get any more products. I found it challenging enough filling one bottled water. And, we also have it in cans, and we may have it in different sizes.
Monte: So you don't want to move onto the flavors then, I guess, like everybody else is doing?
Howard: Actually, we tried that early on; and it was a disaster for us. We just didn't have the right equipment and it was a real problem without going into too much detail. But, what I was going to say is that, see if I was just relying on selling this over the internet and going by UPS, the customers just can't really afford it and they just won't buy much of it that way. So, that's why I need to have this partnership with the distributors. But what's been fantastic about the web site, Hi-O-Silver.com, has been that that's how I found the distributors. They found me because of the web site; and in fact, even better, and I don't want to drop a name here, but I've got-
Monte: You can drop names. It's okay.
Howard: I've got a guy, his name is Andrew Kline, and he has a business called Athlete's Agency International; and he represents professional athletes and represents products to them for endorsement deals. So right now, we're just getting ready to ship some samples to a famous, retired quarterback; and I don't know if that'll go anywhere or not. We'll see if he likes the product.
Monte: Can you mention the name of the quarterback?
Howard: Well, let's see, his last name sounds like a state.
Monte: Montana.
Howard: There you go. I don't know. It'd be great if Joe would try our water and like it, and want to become our spokesman. But, I don't know. We'll have to see if that can happen.
Monte: I'm sure he will for the right dollar amount. [Laughing]
Howard: Right. Right.
Monte: I just posted your Hi-O-Silver site, by the way, on the chat room so that people know where to go to learn more about your water product.
Howard: Well, great. I appreciate that. But, the idea here would be that the web site gives you public exposure; and therefore, that's how this customer of mine, Andrew Kline, called me. I mean, he contacted me; and he knows Joe Montana personally, and a lot of other professional athletes. In fact, the way he got into the business was he played for the St. Louis Rams for 3 years. So, he's a former athlete and understands the business.
Monte: Is he a customers of yours? Does he drink your water?
Howard: And he's a Hi-O-Silver customer.
Monte: Okay. Great. So he can speak from experience and stand behind the product that he's offering to other people, in athletics at least.
Howard: Absolutely. So, anyway, getting back though to the domain business, it was my early experience advertising with Go2; and one other thing I figured out early on was that, getting additional domain names, allowed me to create additional web sites to funnel traffic to Hi-O-Silver.com. So, I've bought up a lot of names like SportsWater.com, HealthWater.com, a lot of CitynameWater.com; and I found that, of course, I could sell names. And I've done a fair amount of that, and bought names that had nothing to do with water. But this idea of being able to get names and generate traffic was something that really fascinated me initially.
Monte: Right.
Howard: And I knew there had to be some way of converting that into income; but I didn't have a clue, I didn't have an idea of how to do that. I tried a few things. I tried putting some banner ads up, and I tried joining some affiliate programs, and I made a little bit of money with those things, but not much. And what really changed my life was a phone call from Australia from a guy named Dan Warner of Fabulous.com; and I was kind of struggling because, in addition to having this water business and spending a lot of time with domains, I have a family, and a California-size mortgage, and I had to have a full-time job to support everybody while I was putting all of this money into my bottled water business.
Monte: Right. Right.
Howard: If it wasn't. When you start a new business that you can't expect to life off.
Monte: Right.
Howard: So, anyway, I kept struggling and thinking I should give up the domain business, because I wasn't really making much money off of it, considering how much effort. I was building up a portfolio of domains, but-
Monte: How many domain names did you have at that time, when you first heard from Dan?
Howard: About 900.
Monte: About 900. Okay. And you're at 9,000 today?
Howard: Yeah.
Monte: So, it's going to be interesting how the story progresses.
Howard: Yes it is. So, Dan called me and told me that he had this company, Fabulous.com, and he could generate some income. He was talking about I could generate $5 per thousand unique visitors, which sounded awfully good to me at that time, and that they had a lot of tools that they had developed for themselves that they were now making available to select domain owners. So, I signed up and I put most of my names onto Fabulous.com. Initially, I just tried some; but it was very exciting to see this traffic that I'd been getting all of a sudden converting into some income.
Monte: So just give us an idea back then of what you were earning when you first did this. I mean, do you remember some of the figures you were earning each week, month?
Howard: Absolutely. I know in April two years ago, so this is April 2003, I was earning $5 a day; and I thought that was great. I knew if I could earn $5, I could earn $10; and if I could earn $10, I could earn $20. I didn't know how far it could go, but I knew that I could earn a lot more.
Monte: With increasing your portfolio and increasing the value of the domain names that were within the portfolio and driving traffic to them.
Howard: Plus I also saw that there might be services that would do even better than Fabulous.com and I started trying to research that. So, I found out that, yes, there were a couple of competitors that were also doing pay-per-click for domain owners; that is, taking the traffic and sending it to advertisers, which, of course, that's what I had been starting out as an advertiser in pay-per-click.
Monte: Right. So you're now taking advantage of the advertisers that would be on your traffic.
Howard: Right.
Monte: Versus paying for traffic to come to you?
Howard: Right. So, I had switched roles. Instead of buying traffic to come to my web site, I was selling traffic to go to other people's web site. And actually, at the same time, I was still buying some. I still had my Go2 account and I still was buying some advertising. And I discovered a couple more services. I discovered DomainSponsor and TrafficZ and ZEDO, and I started using them. It occurred to me, I saw that some names seemed to do better at one place, and some names seemed to do better at a different service.
Monte: Exactly.
Howard: And I've got this strong engineering, math-kind of background. So I created a spreadsheet and started trying to figure out how to optimize my income over the different services to see where my names did the best. And what I found was that, if I split them at that time, about 50:50 between DomainSponsor and Fabulous, I could do pretty well. And so maybe I got it from $5 a day up to $10 a day. And it was lot of fun and I was pretty secretive though about most of what I was doing, because I felt like this increased the value of my domain portfolio.
Monte: Right.
Howard: So, initially I was very reluctant to share any of this information. I was pretty active on domain name forum and, you know, I would post some things; but I wouldn't post very much because I didn't want to give away my trade secrets.
Monte: You felt there was some Intellectual Property there that you discovered and you weren't sure whether others had discovered it; and you wanted to protect your revenue and your income, in case somebody was going to tap onto you.
Howard: Well, sure. I mean it basically occurred to me that, hey if I can earn more income on my traffic than other people, then I can afford to pay more for domain. I can then justify, you know, I'll earn more which I can reinvest in my portfolio; and that's what I did with most of the early income, was I just kept reinvesting in more domains. And actually, initially, it was just enough to like maybe cover my renewals; but I got this idea of putting together a web site to tell other domain owners about the different pay-per-click services. And I did this in large part because I could get referral income.
Monte: Right. And I'm on the site now, which is called TPCIncome.com, and I see that you have kind of like a review of several PPC programs, GoldKey, ZEDO, TrafficZ, NetVisibility, DomainHop, DomainSponsor, Fabulous, and DomainSpa.
Howard: Right.
Monte: And I guess soon you'll have our system up there, which is called TrafficClub, which I know you've heard about, which kind of uses your same concept of discovering that domain names perform differently on different PPC programs.
Howard: Right.
Monte: All in one program, instead of having to split your names up amongst multiple programs, it's in one program that actually has all those feeds coming into one program; and it automatically optimizes your domain names for you and tells you what names do better, so you don't have to test them yourself. It continuously tests in that way. So you're dead on to not only evaluating that, and discovering that, but it's great that you're able to write a review and show other people what experiences you've had on each one of these different services. So, tell us a little bit about these other services that you've tried and what you've found to be a successful approach, going back from being secretive in what you're doing and now telling everybody about it, which we've all discovered. It's a good thing now to share with our fellow domainers because we all are growing and advancing a business and an industry which is getting healthier and more and more lucrative, that we all need to all be working together. So, it's obviously what you've found out that you should be doing as well.
Howard: Correct. That's exactly the case. So, what I've done is I've tried to take my names, and everybody's portfolio is different, but I took a representative sample of my domain and I would try them at different services, and I would see how much they earned and try to see which names do better at which place, and try to make it simple though for the domain owner. There's a lot of stuff that goes into a pay-per-click service, most of which I don't even know about. There's a lot of stuff that goes on under the surface; but what I focus on is the bottom line and I tell people don't get too involved in what revenue share am I getting, and what is the click through ratio, and all those things are important and they all end up affecting your bottom line; but I tell people look at the bottom line.
Monte: Yeah. How much money are you making.
Howard: How much money am I earning off this domain per day.
Monte: Right. Right.
Howard: And I always knew that, as good as DomainSponsor and Fabulous were, I always knew that things could improve; and I still believe that the pay-per-click pages that we're seeing today are going to be much more effective at connecting web surfers to advertisers, which is the real function that they provide.
Monte: Right.
Howard: It's interesting when you go, like, domain conferences and for example, I was at the Round Table in Seattle, and a lot of people there really kind of have a negative attitude towards pay-per-click pages. They don't think they're particularly valuable. Well, of course, for those of us that own domain names, we see the value coming in in the check from the pay-per-click service every month. So, we know they're valuable to us, but the question then is, are they valuable to the web surfer.
Monte: Well, actually, what we're finding out from my experience and from the experience of attending some of the same conferences, obviously, the T.R.A.F.F.I.C. West, T.R.A.F.F.I.C. East, and we had folks at the Domain Round Table as well, is that the advertisers think that the domain traffic is the best traffic of all.
Howard: Right. But it's interesting that the advertisers are seeing that; but a lot of people, you know, there were people at Round Table that were like Registrars and attorneys, and people that are involved in the domain business, but not looking at it either as an advertiser or a domain owner. And they see those pages; and they don't think they're very interesting, because they are not content rich.
Monte: Right. Right. And there are also a lot of, most of the other Registrars in our community look at domain names not as assets, but as commodities.
Howard: Right.
Monte: Something that you have to renew every year. We look at domain names much, much different and always have; because we used to be on the side of owning and selling domain names; and then discovered how valuable they really are. And now we treat them that way as a Registrar; so that's why we try to monetize them for everyone.
Howard: Right.
Monte: And that's the big difference when you work with somebody that treats them differently. So, a company like Fabulous, a company like Moniker, treats their domain names and their customers a lot different than NetworkSolutions or Register.com does.
Howard: Absolutely. I couldn't agree with you more. And you know, one thing, when people say that the pay-per-click pages are not particularly valuable, I mean, you could say the same thing about a Google search page, or a Yahoo search page. There's not a lot of content really there. It's just information to get you to where you really want to go; and basically, the pay-per-click pages serve the same purpose. And I think that the pages that we're seeing today are much better than the ones that were created a year or two ago. The key, though, is really to get the most relevant information to get the most targeted information to the web surfer, because then they're going to click through.
Monte: Exactly. You don't want to throw up things that are unrelated, because that's when they'll click off.
Howard: Absolutely.
Monte: You know something that's interesting that came up is, um, and it came up a little bit at the T.R.A.F.F.I.C. West conference in Las Vegas, and I don't know if it was brought up at the Domain Round Table or not, but I just attended the WebmasterWorld conference and there's a very interesting phenomenon going on within Google and Yahoo right now, and that is that they're discovering they're both actually opening up the limits in terms of the number of characters that can be searched in a search browser, because people are starting to type in now longer phrases and terms into the search box to tell them exactly where they want to go. So, instead of typing in, in the old days, if you typed in the word “autos,” it was one of the most valuable clicks you can get if you're an auto seller, you know, an auto dealer. Our company sold autos.com for $2.2 million; so we know that it was a valuable domain name, and CarsDirect bought it and now they're using it as a competitive site to compare themselves against their CarsDirect site for marketing and management reasons. But, what's interesting is that the keynote address, John Battelle, who started Wired Magazine, talked about this phenomena how the natural type-in user is now typing in multiple words and phrases to get to where they want to go. And it's rolling over into the domain name world now; and people are typing into the URL line “New Jersey Auto Sales” instead of Autos.com –
Howard: Right.
Monte: So that they get to geo-targeted results by typing in where they want to go instead of where they think they're going to select from on a list of 20 or 30 selections on a page.
Howard: That's really interesting; because when you talk to a lot of people, they'll say, “Oh I never use the browser to search for things. I never type in a domain name of what I'm looking for. I always use a search engine.” And I'll bet that's false. I'll bet that most people think they don't, but a lot of people will type it in by mistake. They'll type into the search bar on the browser by mistake.
Monte: Exactly.
Howard: And, secondly, people will do typos all the time. They'll think they're going to Autos.com, but they'll go to Auttos.com, with two t's, they'll double up on the “t” or something.
Monte: Right. Right.
Howard: And so, you know a lot of people figured a long time ago that typos of good names can actually be good names. And if you look at the domain sales in DN Journal, every once in a while you'll see one of these really big sales that comes up, you know, $20,000; $30,000. There was one for over $100,000 this year of a typo.
Monte: Right.
Howard: And some of them generate very good income.
Monte: Yeah. Actually, the stat is, just in case anybody doesn't know, that 67% of web sites are found through what's called direct navigation, that is, a direct type in into the URL line. It doesn't mean that more people don't do searches in the search box.
Howard: Right.
Monte: What it means is that they actually end up at a web site from direct navigation more than they do from going to a search engine. Sixty-seven percent. That's from WebSideStory, which is a research organization that keeps track on clicking and direct navigation results. If you think about it, that's pretty mind boggling that only 43% of the people that type, go to a search engine actually end up at a web site of where they want to go.
Howard: I wonder how Favorites fits into that equation then.
Monte: I'm not sure. Maybe I'll go get the study and post it up, you know, on the next broadcast or I'll post it up in the forums or something, but it definitely validates the fact that owning a good domain name that is descriptive in nature or generic gets people to where they want to go on the web.
Howard: Right. Well, it kind of reminds me. I remember hearing about domain names before I got involved in them at all. Before I owned Hi-O-Silver.com, which was my first domain name. It sounded, you know, like hey all those people are out there trying to buy up the domain names of big companies. That's what I read about, that's what the media picked up. That there was this kind of land-grab going on where people were registering Heintz.com or Ford.com, you know, in the hopes of making money off those companies. But the smart people back there were the ones who were registering generic terms. They were registering names like autos.com and chairs.com and hats.com, and whatever.
Monte: Exactly.
Howard: Those turned out to be the really valuable properties. You could never get a trademark on because they're too generic to be trademarked. And it's interesting because now, in a way, domain names can be more valuable than a trademark.
Monte: Oh, yeah, yeah. Definitely. I mean, they've proven to be in many cases.
Howard: My company, Hi-O-Silver.com, is a going concern and everything, but I would trade it for, you know, the domain name water.com. I wish I owned that one.
Monte: Yeah. [Laughing]
Howard: You know.
Monte: Can you share any of the success that you have now versus what you had back then, I mean, terms of revenue, your earning per month now compared to what you were on a daily basis, or monthly basis, or give us some degrees of how much more successful you are now today than you were back when you first were starting out on Go2.com?
Howard: Well, I don't want to be too specific, but I can tell you that it's now my full-time income. My job. I was able to quit my day job last September; and it's kind of funny, cause I still have two jobs. I carry two business cards. One for Hi-O-Silver and one for PPCIncome.com; but between the domains and Hi‑O‑Silver, I'm a very busy guy. The Hi‑O‑Silver, anything I earn there I just have to put back into marketing; whereas the domain business is supporting my family. So, that should give you a pretty good idea.
Monte: And you're under the mind set, also, to liquidate some domain names when good offers come in, which is a good philosophy. It's something that we saw over and over being repeated at several of the domain shows. There are some of the domainers that are just holding onto their inventory, just don't want to sell it, just don't want to sell it. But you've learned how to monetize your domain names, not only from earning traffic, but you sell your domain names from time to time too.
Howard: Well, I'll tell you, I had to to earn enough income for a long time; but I'm taking the for sale signs down more and more for my domains because, as I find better ways to monetize traffic and these pay-per-click services keep improving, it's becoming less and less important to me to sell the names.
Monte: Right, or you'll still consider selling, but it's at much higher pricing.
Howard: Absolutely.
Monte: Right. So you would still take offers and take domain names and sell them, but you're completely right, because that's what's happening. The domain values are going up and the portfolio values are going up, especially after the Marchex sale and purchase of the Ultimate Search inventory for $164 million. That validated the fact that a portfolio of good domain names is worth money.
Howard: Right.
Monte: And they've been able to do pretty damned good on that purchase thus far. They took an 8-10 year return and shortened that return on investment down to 5 years; and through their renegotiation of contracts and better navigation and better monetization and stuff through their domain names. So it was a pretty good purchase for them and a good win for the seller, because they have some stock in the going concern as well. It's going to be a pretty business going forward.
Howard: Right. Well that was one of the premiere portfolios and I can remember competing in the name-dropping game, the name drops with Ultimate Search and ByDomains. You know, I was always amazed at the great names that they were able to acquire.
Monte: Yeah. They've acquired a lot of names doing that, and that portfolio is sitting here at Moniker; and so, it's kept nice and safe. I've watched it grow from, oh, I think when we took it over, it was about 20,000 domain names, and it's not 97,000 or something. It's a pretty incredible portfolio, and of really good words, you know, really good names. And I must say there's a lot of similar portfolios like that here, and they're all being looked at, and there's negotiations going on, and other kinds of sales. We just did a couple big sales over the last week of some really premium domain names or some smaller portfolios of related domain names, I should say, by some of the domain investors that have come on the market.
Howard: Yes, well actually, that was one think I kind of, my eyes were opened at T.R.A.F.F.I.C. 2004, was people you know investing money outside funds. So actually I've been doing that for some of my friends; and starting to invest money on domains for friends of mine who maybe I was getting a 1- or 2-year payback on my investments, but I could find other names that would be too expensive for me cause they might have those 4- or 5-year paybacks. But, for most people, you know, that are looking at investments today and they see the risks in the stock market and they see returns on more reliable types of investments, like Certificates of Deposit, and Money Market Funds, things like this returning 3% and 4%, until you tell them, hey I've got a good chance you could make 20% or 30% with a lot of upside potential and capital gains potential and very little risk if we choose the right names. So, I've been doing that for friends of mine.
Monte: Where do you see the market going, given what you've experienced since 2000 and 1999, where do you see it going now that you've had your hands, your pulse on the game and you've seen multiple PPC solutions? Give me your outlook.
Howard: Well, I tell you, when I started with Fabulous.com and I was very happy to get an rpm of $5, and DomainSponsor got me up to the $40 range, and now I'm like around $90. So, you know, I don't know how far it can go. I mean, it's amazing. I never thought it would go that high. But, of course, it depends on your domain names too. Because I have some domain names that will routinely earn an rpm of $500 or even $1,000 or more. It just depends on the domain name and where you have it. So, I hate to predict kind of wild numbers; but I knew that where we were a year ago when it was at $50, at least I was earning $40 to $50, I knew it could double yet. So now that I've found a service that will get me up to $90, I don't really know if it could double again. It seems hard to believe that that could be, but maybe it can double again.
Monte: Right.
Howard: But I don't think this will go up forever, and I went to a very good presentation at AdTech. Fabulous, the guys from Australia, were out here; and they put on a one-day seminar for a pretty large group of influential domain owners. People like Mark Ostrovsky and Rick Schwartz were there. So, I thought Dan did a great job just really analyzing the whole where are things going, and I would have to really defer to him. But he still saw that there might be a couple more years of pretty large increases in the total revenue coming into domain traffic, and then after that it's going to have to level out. It just can't keep going up at these rates.
Monte: You never know. I foresee and we're starting to see is a lot of direct advertising, taking domain names and going past or bypassing the PPC solution provider and going directly to the advertiser.
Howard: Well, if you have the right names, you can do that. I mean, I got into this relatively late, so I don't own the real marquee domains that make that obvious. But you think about this, as brilliant as the people at Amazon are and the great web site they put together, and it took them a while to be profitable, but they didn't get books.com, they let Barnes & Nobel get that name. That had to be a major, brilliant marketing move by the people at Barnes & Nobel. And I don't know who gave them the advice to buy that name, or what they paid for it; but that was absolutely brilliant. I'll bet you anything that, if you asked the people at Barnes & Nobel how much they would want for that name, they would simply say not for sale at any price.
Monte: Yeah. For any price.
Howard: Because it's the cornerstone of their online business.
Monte: Exactly. And actually kept, the rumor is that it kept them alive while Amazon was just wiping them, and it's a pretty formidable competitor to Amazon. I mean Amazon, you know, like you said, are the gurus in web site navigation and successful conversion and personalized membership; and they really know how to retain, acquire and retain a customer, there's no doubt.
Howard: And look at how many places on the internet are selling their product for them; how many affiliates they have. There are affiliate ads all over the internet. People have web sites just devoted to selling for Amazon. So, I mean, they've developed so many techniques and so much infrastructure that it is an amazing success story; and yet they made that mistake. Well, let's put it in the positive. Barnes & Nobel made that great move to buy books.com.
Monte: Yeah, yeah. That's more like it. Yeah, definitely. So tell me about, um, are you going to be attending T.R.A.F.F.I.C. 2005 on the East Coast over here?
Howard: Absolutely, I wouldn't miss that. 2004 was great, but I'm sure that T.R.A.F.F.I.C. 2005 is going to be greater still. And for me it's just the opportunity to network and see what other people are doing. You can't put a value on that. So, I've already registered; and a lot of the people that I talk to every day or email everyday are all going. So I'm looking forward to seeing them; and I guess I'll see you there, too.
Monte: Yup. You certainly will. We have a booth, we're one of the sponsors of the event, and we're also sponsoring the domain auction that's going on at the event. So we're going to sell some domain names there with a live auctioneer.
Howard: Well, that sounds like fun.
Monte: Yeah. Yeah. So, we're going to, actually I was going to start working on it myself, probably in the next 3 or 4 weeks or so. Get it all ready. So there's definitely going to be some good sales and a real, live auction, and you know, some cocktails, and should be a lot of fun. Well, Howard, I really appreciate your time and being my guest tonight. And it sounds like that you've really worked yourself into a very successful business. The fact that you were able to quit your day job and move into domain names full time and develop the company and the experience and the life that you have. There's hats off to you.
Howard: Thanks. And I appreciate being on your show, Monte.
Monte: And I do believe that a lot of what you said here today can be picked up by others and people can really get a lot out of it. So, one area that people can go to is the PPCIncome site, and that's PPCIncome.com, posted up on the forum here a couple minutes ago and I'll post it up again. And it's a great place for people to go and compare PPC programs, learn about what their techniques are, and what's working well and what's not, and how they rate terms of customer service, TrafficClub will be up there soon, as well, I'm sure when Howard gives it a try. And we're open for the public to try it out. And also, check out Howard's water site, which is Hi-O-Silver.com. I also posted that up, and you can get some oxygenated water. I've had it myself, and I was able to stay at my booth for 24 hours straight. [Laughing]
Howard: We'll make sure you have plenty of it in Florida in October.
Monte: Oh, yeah, yeah. Gotta bring a lot more of that, cause my guys loved it.
Howard: Alright.
Monte: Definitely. Well, thank you for your time. Everyone stay tuned, stay on. We're going to break for a commercial and I'll be right back and wrap up the show and answer some questions about the .xxx approval that came out several weeks ago. Stay tuned.
[Commercials]
Monte: Okay guys, welcome back to the show and welcome back to Domain Masters. Again, I want to thank my guest, Howard Hoffman, for being my guest. That was a great interview, and we learned a lot about how a civil engineer with an MIT degree got started in domain business and became successful with his own business just from trying out the online advertising market and finding out what worked and now has completely moved a portfolio of 9,000 domain names and making himself a nice living. So, it's really nice to hear. I know everybody has been wanting to know more information about the .xxx extension; so I spent a considerable amount of time on the phone with Jason Hendeles over the last couple weeks getting some questions answered. Jason is one of the founders of the ICM Registry who submitted the .xxx application back in 2000, and it was just approved. So we have some answers to some of the questions that's probably on the top of everybody's mind. So, some of the key questions that I asked him that might be interesting to people is that what is accomplished by the .xxx extension that cannot be accomplished by a voluntary rating system; and what this is in regards to is that adult web sites and content have to be rated in order to allow certain folks to come in and, of course, under-age people not to. And so the .xxx extension actually has technology just by simply being able to block an extension from a domain name route and not allowing children to access certain web sites that have this extension. So, there is a positive part of this extension that is focused on screening children and other people that are not supposed to be on adult sites out, and that's one thing the .xxx extension does. So, you know, rating systems will continue to exist and hopefully be significantly improved upon, with the creation of .xxx registry. Unfortunately, voluntary rating systems have generally not been widely adopted by the majority of smaller adult web masters. Labeling each web page of an adult site with an appropriate label is both expensive and requires a degree of technical competency. In addition, as content is consistently changing, it is often time consuming to ensure that the labels are accurate and operational to the standards set by the PICs. So, this .xxx extension helps accomplish that. Next question obviously is what does this extension, what's it going to cost folks. So, and I see that being asked on the board. .xxx will range between $75 and $100, depending on who the Registrar is. We will be one of the lead Registrars registering this domain name on behalf of our customers. We serve both the adult and mainstream community, so we'll be doing that. And the reason why this is so expensive, and people might say why is it so expensive, but it's not a TLD but an STLD, which means it's a sponsored TLD, similar to .travel and .jobs, which are sponsored TLDs. That means that they will be going through extensive research to verify that you are in fact in the industry and that you have legitimate rights to your domain name based off of your .com name and your mark and your trademarks, and so on. So, that does take a little bit more expensive, because they have to put questionnaires in place and other types of interfaces to validate that you are, in fact, in the adult community and that you'll be operating an adult web site or operating adult content on a .xxx platform. In addition, $10 of each domain name is going to go to the IFOR Organization to support it's charter. IFOR is the International Foundation for Online Responsibility. It's a place where freedom of speech folks, the child advocacy organizations, and the adult community have come together and agreed that there has to be some responsibility around adult content and the adult folks don't want children going on the web sites, as much as the children folks don't want children going on web sites that have adult content. So, they've come together and agreed on a platform in which that's going to be managed and maintained. So, again, $75 to $100 per year will be the registration cost for each domain name. What is the process for trademarking and branding names that are .com names to .xxx. Additional TLDs provide the opportunity for more than one party to legitimately use a name. It is a simple fact that not every domain name in the .com is owned by the same party in the .net, .org, etc. However, we certainly want to avoid abuse of registrations and cybersquatting on the established brand names. We intend to implement a trademark protection policy at startup and on an ongoing basis which incorporates lessons learned from prior TLD launches. One of the most successful TLD launches that protected trademark rights was the .biz startup, and their claimed process was a pretty successful process in which it gave legitimate business owners and trademark owners the rights to register .biz names and they'll be using a similar process to do that. How do you respond to the concerns that government might try to step up and control the space? And Jason's answer, over the past five years several U.S. legislators have tried, without success, to create a mandated .xxx or similar platform. One of the results of these initiatives was a voluntary .kids.us extension. I'm sure a lot of you remember that extension. It was not successful, which has been unsuccessful with only a dozen or so active sites. In truth, if the U.S. Government felt that such a move would not run afoul at First Amendment guarantees, there would have been little stopping them from creating a .xxx.us extension or similar in attempting to mandate. Whether you are a .xxx, a .org., or a .com, or even a .ca, and if you are acting illegally, you risk being prosecuted whether you're any of those extensions. So, to net this answer out, the U.S. Government cannot mandate who is supposed to be on .xxx sites and who's not, and the reason for that is that it is a top level domain extension, an STLD, and it's not a U.S.-based mandated extension, it's a worldwide extension. So, the U.S. Government can't mandate who has to be on it and who is not. So, there is not going to be a U.S. mandate, there is not going to be people forced to be on it. There has to be a, I guess a, consensus in the community whether they should be on the .xxx platform or not. When do they anticipate being able to register .xxx extensions. They anticipate in the 4th quarter of 2005. And another reason for the high charge, or the higher fee, in the .xxx extension is that, because there is not going to be millions of domain names registered, as there are in .com, .net, and .org spaces, there's going to be a lower amount of domain names registered and they want to maintain that they're going to have a viable registry and registration platform going forward. So, again, $50 or $60 some odd dollars of their process, of their fees, are going to go towards operations. And it's also set up as a non-profit offering that's going to be operated through the .info registry or affiliates, by the way, so it will have a similar EPP platform as .info does. It's going to be operated and maintained by that same registry, so it will have a similar process. And if you remember, we had the .jobs folks on and the .travel folks on several weeks ago, and each one of those extensions are close to the $100 mark for similar reasons, that there's only going to be a couple hundred thousand of these domain names or so registered, maybe at the most 200,000 or 300,000, because there are just not that many domain names that have viability in the adult world that don't have those names. And finally, everyone probably is aware that new.net has been selling a .xxx extension for quite some time. It is not a true A route extension, it is an Applet application that you download on a computer; and because IdealLab, which was the parent company of new.net, IdealLab used to touch about 50% of all internet users at some point, and that was about 2 to 3 years ago when there was about 179 million computers using their connections through MindSpring, and NetZero, and Jewelry.com, and Etoys, and some of those sites that they used to own, and ComissionJunction, Overture, all started out at IdealLabs, so in case you guys didn't know that. Some computers have the ability to view a .xxx extension through this Applet. When .xxx, the real true TLD, comes out, there will not be this Applet, or this Applet will be secondary to the A-route extension and the real extension of the .xxx extension will preside over any other extension that is out there. So, those, anybody who spent money on these extensions, and they also .travel, anybody that spent money on .travel or .xxx using the new.net platform, their extensions are not basically going to work anymore. So, you guys should be aware of that. In any case, I'll have some more information over the next coming weeks about the .xxx platform and I will be participating on a couple panels coming up on some of the seminars, domain-related seminars and speaking to that subject. Because we're going to be pretty well informed about it soon. And with that said, I'm about 9 minutes over our show time, so I wanted to wish everybody a good evening, and a great week, and thank you for tuning in. Again, my apologies for the screw up in the schedules over the last couple weeks. We've been bouncing from a couple trade shows, and it's been hard to coordinate the show around our meeting schedules; and so, I'm glad we were able to do a live broadcast last year, or last week from the WebmasterWorld show. We have I think all of the archives up on Moniker.com up until the last show. I don't think we have the WebmasterWorld show up yet, but we will very soon. And we'll have this show up there as well. So, with that said, be the master of your domain name and your domain on Domain Masters. I will see you next Wednesday, same time, same place.
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