Monte talks with Adam Strong & Mitch Farber

[Commercials]

Monte: Hello everyone. Welcome to another great week and great show of Domain Masters. I'm Monte Cahn, your host. We have a couple really kick-ass guests tonight. Adam Strong has been a longtime customer of ours and a domainer since 2000, 2001. Always like having people like me on the show who started investing in domain names some time ago and have learned the tricks of the trade and have been successful monetizing, and also Adam has a lot of experience on the internet and definitely has some opinions about what's going on, on some of the ICANN side of things as well and it'd be nice to get his opinion on everything.

My second guest tonight is the president of NetBilling.com. NetBilling.com is one of the largest merchant processors on the Internet. They take care of both the adult and the mainstream world and we're going to be talking to Mitch from NetBilling at about 7:30 or so.

Had a great week in domain sales which we'll talk about in a little bit. On DNJournal you'll see a pretty active week for Moniker and our escrow service and our domain sales and brokering service led off with a $700,000 domain sale, so it was pretty cool. And we have a pretty exciting week going on as well, so the market's definitely heating up. Stay tuned. We're going to break away for a couple commercials and be back on with Adam Strong.

[Commercials]

Monte: Hello. Welcome back to the show. It's Monte Cahn. My first guest is Adam Strong. Adam's been a domainer since 2000, 2001 and I also just realized we have something else in common I just discovered after reading some of his little bio here. Adam, you online?

Adam: Yeah, I'm here.

Monte: Hey, I didn't know you were in the medical business a little bit here.

Adam: Medical business? Oh, yeah. A little bit.

Monte: Yeah? You sold some medical equipment?

Adam: Yeah; I don't know much about it, but yeah, I have sold some medical equipment before.

Monte; Yeah, I was in healthcare for 15 years and sold major medical systems to hospitals and physician offices and all kinds of stuff for many years until I got into this silly domain game.

Adam: Yeah; see, I was the guy who came in after you and bought all the stuff from the hospitals and state agencies and then turned around and flipped it to somebody else.

Monte: Oh. Cool beans, cool beans. So thanks for being on the show tonight and I know of course you and I have talked lots of times. You've been a long time Moniker customer but why don't you give us a little bit of a background of how you got involved . . . well, give us a little background on yourself and how you got involved in domain names.

Adam: Okay. Well, web development is really where I came into contact with web names, I guess. My background is design, graphic design and about . . . I graduated in '94 from college and started working for a small ad agency and doing print design and web design. But I guess it was about '97 when I first kind of got myself an introduction to domain names. I started working for a guy who owns BritishVirginIslands.com . . .

Monte: Oh, who is that?

Adam: It's a small advertising company in The British Virgin Islands, actually. You would think that the island itself would have had the .com but I think they had some crazy, you know, BVI-government, you know, .co.uk or something like that but the BritishVirginIslands.com domain, the company that I worked for was really, their primary purpose was actually helping some of the smaller hotels, the tour operators, the charter boat companies that worked out of there. We would build their websites; we would design their brochures but we used BritishVirginIslands.com as the gateway to pick up those customers and then in turn we would actually advertise those customers, you know, build a directory of all the hotels, all the charter groups and you know, use that domain name as the central hub for the island. I mean, what other name could they possibly use, really? I guess that was my first kind of taste of domain names. When I worked there, we would get calls all the time. I think, I can't remember the guy's name, I think it's Christopher Black, but he owned almost every other Caribbean island domain name .com and he would call us all the time, you know, trying to hustle my boss out of, you know, out of the domain to sell it, you know. Five figure offers were always on the plate and you know, my boss, he just never buckled and just decided it was well worth it for him to keep it and I think right now he kind of considers it his retirement fund. But that was my first taste of domains, I guess, but I came back here and, back to Springfield (I live in Springfield, Illinois) . . .

Monte: Oh, great.

Adam: . . . and started doing design on my own. I quite my job down in the Virgin Islands; seems like kind of a stupid thing to do but I was more comfortable living back in Springfield where I'm from, so I just moved back here and started doing graphic design again, mostly web design, and you know, a couple friends of mine worked for different companies and had caught on to the domain name game and bought and sold domains, you know, when people were . . . when there was a craze, I guess, about 2000, 2001 and so, I had bought some and sold some and kind of used my creativity at the time, I thought it was my creativity, to come up with what I thought were great ideas and great names and my whole intention was, of course, if I didn't sell the domains was to build these into websites, but of course that never really happened either, so . . . but . . .

Monte: Well, how's the graphic design and web design business been for you just recently?

Adam: You know, I, I'm out of that, actually. I would say around that time period is when you started to see the bubble bust, I guess. Actually, no, it was after the domain, after the hype of the domain name season. You know it's really hard. I've been talking to a lot of people since you invited me on this and I'm trying to put dates together and I mean, the last four years has just been a huge blur . . .

Monte: Right.

Adam: . . . you know, from the time that I moved back from the Virgin Islands 'til now; I moved back in '97, '98. It's just a huge blur for me. A lot of things have happened in my life, but the main thing is that I make a primary living from domain names now rather than web design. So, the web design business, you know, I still kind of dabble a little bit in web design on my own and you know, I'd like to think that I still have some skills in that, but you know, it's definitely not my primary money maker right now. You know, I do work on occasion for clients that I worked with, you know, since that time in '98 but really, it kind of fizzled.

Monte: Right.

Adam: A lot of that has to do with outsourcing; you know, who isn't a web designer right now? So . . .

Monte: Well, I'm not. [laughs]

Adam: Yeah, well, I mean . . .

Monte: No, no. I know what you mean.

Adam: . . . [inaudible] in about 5 minutes time. And you know the competition is just too . . . . there's too much competition in the field. There's lower margins. You know, I got in, you know, early on, and made some good money doing it and worked for some companies that made good money doing it but you know, I started weaning myself away from it and (not on purpose) I saw the domain channel as a more profitable one and invested a lot of time in it.

Monte: Okay. So let's go into the domain channel a little bit.

Adam: Sure.

Monte: 'Cause that is where you're making your living and you know, talk to us about, you know, what you got started doing back in the early days and what you're focusing in on now and what your general experiences, you know, the general experience that you're seeing.

Adam: Well, in the early days, you know, I concentrated, you know, on stupid things. You know, I bought . . . one of the domains I bought was OnSkis.com and I developed, like, a portal there; and I did a little bit of development here and there, because there was really no way to monetize domains. Um, I bought names . . .

Monte: You did work with GoTo back in the early . . .

Adam: Well, early, early on, you know, you had GoTo.com, boxes, search boxes that you could put on your site. But, you know, pennies. You know actually the site sent the search but somebody had to actually initiate the search and, you know, if all you had was a big yellow box on one page, you know; it's not really enticing. But, so, we had a lot of targeted traffic going to the page that had just a search box, you know. If somebody's looking for a specific product and there's just a search box there and not maybe links or descriptions or whatever, you know, there's less of a conversion rate. At least, that's what I saw. So I would develop a little bit but I think it was around 2001 when I started hanging around AfterNick and GreatDomains and in the chat rooms and meeting people and learning about drops, that I started thinking, you know, maybe I could get some better names, you know, instead of registering new names I could pick up some of the names that had been, you know, discarded; either names that were former sites or names that I thought, you know, sounded pretty good. Again, I was still in that “sounds pretty good” mode of thinking. But I think at the time some of my “sounds pretty good” were pretty decent buys 'cause I still have some of those, so. But I hung out on those boards and learned from some of the people that were there that were willing to share information and team up and work, you know, toward a goal of buying more domains. At the time I think I was just looking at, you know, well I'm just going to resell all these, you know. Every name I have I'm just going to put it on AfterNick; somebody's going to buy it. But the reality is there's an endless supply and not as much of a demand.

Monte: Right, right.

Adam: And then the, as I think, it was the end of 2001, maybe 2002 monetization angles became more prevalent. You know, instead of GoTo.com, people, you know, you started to see the rise of the ultimate searches pages coming out with full search engines, basically and that's kind of, I think, when a lot of people started looking at, you know, yields(?) [inaudible] search engine, so. And that's when I started looking at traffic. And I think part of that, part of the reason looking into traffic was being a part of Rick's board meeting, meeting people at AfterNick who were part of Rick's board who then invited me over to Rick's board and then from there it just kind of spiraled, I guess, out of control in terms of how much money I spend on domains now. You know, I started picking up more and more names and drops and working hard on the drop angle of things.

Monte: Yeah.

Adam: That was 2002 and I'm still doing the drops everyday.

Monte: Who do you primarily work with on the drops; which companies?

Adam: Ah, you know, that's a question that I've heard from a lot of people but the answer to that question is you really can't not work with somebody. I mean, you pretty much have to work with all the companies. But primarily, I love working with Snap. I mean, Nelson Brady is a godsend over at Snap and I hope they're listening over there at SnapNames and give Nelson a big pat on the back for his job. But I really appreciate SnapNames and I think their system is the best system out there but I work with Enom, Pool, you know, all the people that chase drops.

Monte: Right, right.

Adam: Guys have caught drops through various companies and I end up with names through you guys so. But I think if you're going to go for a name, if you really want it bad enough, you gotta . . . you can't just put all your eggs in one basket and hope that Enom gets it or GoDaddy or whoever, you know, you have to work all the angles, so. And I think most people at this stage know that. They can't just pick one, pick SnapNames and hope that they get it.

Monte: Yeah. So, so what would you say your most valuable domain name is and, if you could, share with us what its doing and you know, how money is it earning you? And why?

Adam: I have a lot of domains that I have, I guess, concepts behind; I guess in terms of my next phase I guess is taking the domains and developing them into properties. Some of my names are perfect for that and that's why I bought the names and some aren't. So value, I guess, is different for me than for most people. I think SpamBlocker.com is probably one of my most valuable names that I own . . .

Monte: Yeah, I agree with that.

Adam: I know that you've seen it. It's probably on your page, I think. You brokered it for me.

Monte: Yep.

Adam: It's probably one of the names that, if I got a great offer, I would sell it, for sure. But I think in the short term I'm looking into developing it and putting a product on that site but again, I think there's . . . I'm baby-stepping into that like I do with most of the things I try to get into. But . . .

Monte: As a web designer, though, so you own a lot of domain names. Now are you're making your money from primarily PPC pages currently?

Adam: Yeah. I would say about 80%, 90%. I do have some other deals worked out with some of my names that I get CPA(?) or paper deals and/or rev share. One of them is GetOutOfDebt.com. I've partnered up with a company that does debt consolidations and their payment program's based on a pay-per-lead and then there's also a residual rev share built into that as well. And most domains, from my experience, if you can find a good partner to work with and a trusted partner company that can fulfill leads and things like that. Most domains make considerably more money on a pay-per-lead type of basis than they would on a pay-per-click. But again, it just depends on the traffic and the type of name you have. But I'd love to get more names like that. GetOutOfDebt is, you know, I look at it and I'm like, man, that's a four-word name, you know, and most people think, you know, oh, the one-word names are the great names but that domain does great for me in terms of revenue compared to some of my other names that I would think that, you know, they're one-worders but who cares if they don't convert into anything?

Monte: Right. Now, I mean, most people would think from your web design background that you definitely want to have a two-pronged approach and like we heard so many times at the T.R.A.F.F.I.C. conference, that, you know, building some websites out, making some money from that, you know, making your concepts and dreams into actions, you know, on one side and then monetizing the names that you haven't got to yet through PPC or using some kind of combination of that. So I assume that's in your plan.

Adam: Right. Yeah, that's kind of like been in the back of my mind. Like, I'll buy a name or I won't buy a name necessarily on the drops, you know, with a plan in mind. I look at it as a business decision; you know, this kind of name can make excellent dollars on PPC and I'll pay more if I think I can develop it. If I just think it's a name that will do well on PPC but I don't have a chance at developing it, I'll probably just bid with that PPC in mind. So now, I'm giving everybody my bidding technique, but there's names that I bought on the aftermarket, if you will, where I've got a specific agenda in mind. I know the name will make money on PPC but, yeah, I probably have more than my fair share of names, looking at my portfolio, that I kind of need to get up off my butt and start developing.

Monte: Yep, yeah.

Adam: And actually, for anybody who's listening, you can send your resumes to me . . .

Monte: [laughs]

Adam: I'm looking for some good programmers, so if you're interested in doing some development work, send your resumes.

Monte: What, what do you want the programmers . . . what background do you want?

Adam: I'm just looking for someone that's creative and has an open mind, that can take ideas and execute. I'm not really . . . I don't see myself as much of an executer in terms of ideas as much as I am capable of coming up with ideas and concepts. I can do great at the design end of things but that's it, so I can put a shell on but I need somebody that has the experience that can take ideas and run with them. And compare what's being done in the market right now and make it better, so, kind of vague but, you know, I guess I'll find the person when I know who they are once I talk to him.

Monte: Right, right. And, so, what are some of things, you know, from your experience now, so you have experience, it sounds like going back to 1997 with domain names, really, but starting to own names yourself, what are some of the best experiences that you can share with fellow domainers that are listening and on the chat about, you know, number one, acquiring good names for the right price and some of the things to look for; and two, then monetizing them so they fulfill the dream of returning a positive return on investment to your bottom line?

Adam: Well, I think everybody's case is going to be a little different but I guess I'll give you one example. I picked up a domain on eBay, it was TravelTalk.com . .

Monte: That's a good name.

Adam: Yeah.

Monte: What did you pay for that name?

Adam: Ah, 1,500 bucks. [laughs]

Monte: Okay.

Adam: A steal, I think. But, ah . . .

Monte: I think so.

Adam: I'm pretty sure it was 1,500 bucks; don't quote me on that but the domain was actually owned by somebody that was our competitor when I worked at BritishVirginIslands.com; it kind of comes full circle. And so I basically bought out the competitor, you know, like 6 years later and you know, the guy . . . there's traffic built into the name, its got a good ring to it and I think it could be redeveloped and made ten times better than the site he had up there. So, it makes great money on PPC; its probably one of my, I don't know, top 15 names, I guess, but you know, I think the money . . . I think at this point in time, if you're getting into the game, if you're just getting into the game, there's a lot more competition so, you know, if you're coming to the domain angle with just the idea that you're going to make money on PPC, you're going to have a long, long time to make that money back. But if you've got the idea that you could buy it, make a little money now and have time to develop that domain name, you know, that's a pretty good plan, in my opinion. So if you buy . . . if you spend $60,000 on a name, it's not going to obviously make that money back right away on PPC; I'm kind of like . . I like to use Brian Knowles as an example, you know. The guy buys a great domain name and he's developing a business model around it. So I think the domain game, if you will, the main business channel, whatever its called, you got to put a little bit more thought into it now than just what I was doing, you know, three, four years ago. You know, buying domains just to buy them and put them on a PPC page is probably the short term solution. You need to think, plan a little bit of what you're strategy is, you know, are you going to build a company around a specific niche or a specific product or service. I think that's the best way to go about it now. I don't think there's room for somebody to come into the game without really deep pockets.

Monte: Right, right. So, you mentioned you're picking up drop names everyday.

Adam: Yeah, but it's kind of like . . . I'm picking up drop names everyday and there's more risk in that and I'm capable of absorbing some of the risk that somebody, you know . . . if it was back where we started, if the prices and competition was a tough as it is now, you know, I probably wouldn't have stuck with this. I think now if you come in and you buy a drop, I mean, names yesterday, or today actually, a domain went for, you know, $25,000 or $30,000 that's basically a typo; I mean, they had it at Overture.com scored like $3,000, I'm not sure who the buyer was but it went from 25 to 30 grand. I mean, I could take 25 or 30 grand and buy a heck of a lot better name with more . . . I mean, that's, I know that name is going to make money because it was a credit card related typo but, you know, there's better things to spend your money on but it just goes to show you the market . . . you know, average names on SnapNames are going for . . . you know, the names that I'm putting in are going for, you know, $1,500, probably the average price for a domain. You know, people burn through money pretty quick just entering the game and trying to get in on that on the ground floor. You know if you've got a couple hundred thousand dollars you burn through it pretty quick at $1,500 a name but I think you could buy one or two of those $25,000-type names, with $100,000, if you've got a good model to back it up, to develop something on those sites and not just park it at PPC, that's all.

Monte: Right, right. And how many domain names do you have in your portfolio right now?

Adam: Ah, it grows everyday. I think I'm around 3 or 4 thousand, I say, right now.

Monte: Right. And, you selling . . . you sold some also. I mean, you sell some names for the right price but you're generally holding onto names for the right price, is that correct?

Adam: Yeah, generally speaking . . . you know, I hate to give you all my strategies, but . . .

Monte: Well, but one purpose of this show is to, you know, without giving away total, you know, ingredient secrets but we want obviously people learn, just like they do on Ricks Forum and other forums. We want people to get a good idea so that they learn to be successful and what it does is it really benefits all of us in the industry. It's not more of a competitive play but more of things that you can bring the light to other domainers, actually help us all because it strengthens the industry, you know?

Adam: Yeah. I agree with you. There's a . . . the fact of matter is I think that the competition is so tough that anything that I give away isn't really a secret anymore and anything that a newbie can take away from it might not really even help them but maybe it will. But my strategy with buying domains has always been buy a domain that I have an idea behind and if I'm not buying it for that reason, it should make the money on PPC. You know, whatever I pay, it should make the money on PPC based on, you know, my metrics or my portfolio that I know this name's going to make this much money; or the other strategy that I've bought names for, cheap names, I buy this name because I think somebody might want to buy this domain. It sounds like a domain that business would use. You know, I won't . . .

Monte: So you buy a lot more of an intuition buy.

Adam: Yeah, an intuition buy. And it goes back to the early days when I bought names with that, hey-this-name-sounds-cool-type of mentality; some of those names actually panned out so I'm not afraid to risk 1,600 bucks on something that this name might pan out to be a $2,000 sale later on. And those are primarily the most of my sales that I make are like small figures like that, $2,000, $5,000 sales. It's not peanuts, when it all adds up at the end of the year, like . . .

Monte: Well, if you look at it as a normal investment, which people should. You know, people don't look at domain names, unfortunately . . . well, I guess it's fortunate and unfortunate. I mean, if you made a 20% return on any investment in a year, you'd be jumping down ecstatic, you know?

Adam: Right, exactly.

Monte: So that means if you bought a domain name for $10 and turned around and sold it for $12, that's your 20%. No one would ever . . . no one does that. But if you did that, you know, tons of names now, but you know, in a sense, lots of people are doing that. Some of the large, you know, domain aggregators are doing that. They're buying domain names, you know, at between $7 and $10 and they're monetizing them and you know, as long as they get, you know, between $10 and $20 back, that's a successful investment and they have a reason to renew those domain names. So, you know, large companies with large portfolios that are picking up domain names that are available in the open market in general registrations are doing quite well doing that. I mean, Napster's a company that's doing that successfully, and Vendare, you know, there's New.net has 300,000 names as well, they're doing it successfully, I guess, and then there's those that have premier portfolios that are, you know, looking at thousands of dollars of return on investment per domain name per year.

Adam: Right, right. You know, like a company like Vendare is doing it based on, you know, they're getting their information in other ways and they're able to buy names that they know exactly, relatively speaking, how much traffic the name's going to get before it lists; there's hardly any risk to what they do, in my opinion.

Monte: Yeah.

Adam: And companies like BuyDomains put a lot more risk into what they buy, you know. They're buying inventory to sell. You know, they monetize some of the domains, but I'm actually talking about names . . .

Monte: They actually monetize all the names and then what they do is they sell based off of the monetization calculation, just like whatever times revenue that's . . . they know to peel names out based on that X-times revenue and hold on at a certain price and never go below it because they're always making that money back.

Adam: Right. Well, some of those names . . . there's names that I've inquired about that have zero traffic, so they're not making money on some of the names; I mean, prices are still $1,500, $2,000. You know, I talked to a couple of guys there and I would venture to guess that their average price for a domain is somewhere in the thousand range, maybe less, but you know, those are the types of deals that I'm talking about. I'm not talking about SpamBlocker.com domains that have that have traffic built in, that are making money on PPC. I'm less likely to sell a domain like that; extremely less likely to sell a domain like that, as opposed to . . . I can't even think of one; actually, I sold one just the other day – ForceGear.com. Actually, I sold it back to the people that dropped it because, you know, I felt kind of bad for them. But you know I didn't sell it back to them for an exorbitant amount of money because after talking to the guy I kind of felt bad for him, but ForceGear isn't going to make me any kind of money on PPC but it just kind of sounded good. It had some information that I dug up on it in Google and things like that. But those are names that . . . BuyDomains has a great, huge inventory of names like that that aren't going to make them a ton of money, but they're like lottery tickets, one of Rick Schwartz's examples, you know; one day, that name somebody may want it and I'm willing to take that risk so . . . a lot of people don't even bother with that angle, I guess.

Monte: Now, before we end up the show, what's the exit strategy for you? You know, when do you bail out or at what point do you bail out or what point do you jump on the bandwagon and go do something else or is it something you're going to stay in and dabble in for quite awhile?

Adam: I'm probably going to keep . . . I'm moving more towards the development end again. Exit strategy, you know, heck, I don't know. I don't have any exit strategy yet. But I'm more than willing to listen to anybody that's going to help me find that exit but I just think development is my next step and I've got some pretty decent names that'll allow me to move into that realm. I think I have the experience to do that type of thing as well.

Monte: Good.

Adam: I think that's my exit. But I'm still going to always be a domainer . . .

Monte: Good, good . . .

Adam: . . . even though a domainer [inaudible] . . .

Monte: . . . I'm a domainer at heart as well and I know most of the people that are listening and are on the chat, either just got in it, but like we've been hearing over and over when I had Andrew Miller and those guys on the show, and especially going to T.R.A.F.F.I.C., we're in the very first beginning stages of the first inning of a very long baseball game, I think, and you know what we see today, 10 years from now is going to be worth a lot more money, even if we think its inflated today.

Adam: Sure. I don't have any plans to get out and I think there's no real reason for me to get out at this point, you know, I'm a young guy and I'm making money now and I don't see that, I don't see the decline coming any time soon, so I'm not jumping ship yet.

Monte: Right, good. Well, anything you'd like to just add or let everyone that's listening or anybody that's on in the chat room know about how to be successful or any other points?

Adam: I really don't think so. I just think, you know, I don't know, Monte.

Monte: [laughs] Well, I think you do know. You're doing great job, you're definitely . . . you're making money and you've got some strategies in place; it sounds like they're paying off for you and everybody has a little bit different approach, and you're using some of your previous experiences as a web designer to come up with some neat ideas and I think you're going to play some of these things out and they're going to be very successful for you.

Adam: Oh, I hope so.

Monte: Yeah, definitely. Well, it was a pleasure having you on and I want to thank you for not only being my customer but also sharing a lot of your experiences with the people listening and the folks on the board, and I'd love to have you back on again someday.

Adam: Thanks, Monte. I appreciate it.

Monte: Okay. Well, thanks, Adam, I appreciate it.

Alright, folks, stay tuned. My next guest, Mitch Farber, who is the president of Netbilling will be on in a couple minutes. We're just going to do a quick commercial break.

[Commercials]

Monte: Hello, everyone. Welcome back to DomainMasters. I want to thank again Adam Strong for being my first guest tonight and hopefully, he was a valuable guest for everyone that's listening and everyone on the board. All the domainers that have their own personal experiences are good people to have on so that everybody learns from them.

My next guest has also been requested, basically it's because of the merchant processing business in general. There's lots of questions always from domainers and website developers about merchant processing and the differences between payment processing and all the different companies out there but Mitch Farber is the president of Netbilling, which was founded in 1998 and Netbilling is used worldwide by thousands of online merchants and they have a complete gateway processing system and call center. They do payment processing for both the mainstream and adult industry and we're going to learn a little about that segment of the business and find out what payment processing and merchant business is all about. Mitch, are you online?

Mitch: I'm here. Hi, Monte.

Monte: Hey, how're you doing?

Mitch: Great. How are you?

Monte: Good. Where are we calling you from?

Mitch: I'm in Valencia, California, just north of Los Angeles.

Monte: Oh, okay. Great. Well, thanks for being my guest tonight. One of the questions that always comes up, you know, once people get websites and they want to do business on the web, you know, there's all these components that people have to jump through, you know, all these hoops, one of which of course is getting the website, getting it developed, getting a designer, then putting in a shopping cart system, but it really ends with the merchant processing and the payment processing part.

Mitch: Sure.

Monte: [inaudible] . . .

Mitch: . . . [inaudible] components and we started doing this in 1998 and realized there were some gaps to be filled, so what we wanted to do was come about this from an angle, from a mainstream angle, and help people establish merchant accounts and be able to facilitate their credit card needs as well as accepting online checks. So, we started doing that and then realized that as these merchants grew, they didn't want to handle their own customer service aspects, whether it be customer service or order taking or order verifications, things like that, for mainly for physical products, but sometimes for membership sites as well and so we opened up a call center which we have in our facility and started doing that, handling all that for the merchants.

Monte: Oh, that's nice. So, you're one of the few merchant companies with a customer service and call center facility.

Mitch: Yeah, there's only a couple of them that I know of besides us that do it and we've been doing it for several years now and have really been able to have reps that really know what it takes to process payments and facilitate the merchants in a call center environment to be able to keep members in the website and to make sure to help people with the products that they're shipping and if they're receiving the products properly and how to use some of the products that they receive and things like that.

Monte: Right. So, how did you start Netbilling, or how was the company started? How did you get into the Internet and into the business to begin with?

Mitch: Well, we owned our own websites and it took a lot of time and effort to get a shopping cart up and we had membership areas as well and to establish a merchant account and things like that and we just realized that there was no one company out there that we could find at that time in 1998 that would really help us do everything in one place and we had to make so many different calls and establish relationships with different places and you know, find a shopping cart that would work with the gateway system that we wanted to use and things like that, so we just started developing our own thing from scratch from using some outside developers as well to help us build a really strong payment gateway and shopping cart system and internal mail system for our call center and things like that and that's how . . . we developed it for our own stuff, found out that its working great for everyone, started working on fraud tools to help reduce chargebacks and help keep fraud away and that's how we got into it and started signing on merchants to help them do the same thing.

Monte: Now, now, a lot of people use companies like, you know, Verisign for payment processing, their PayProFlow product and there's Authorize.net, you know, for their payment systems; explain where Netbilling fits into the mix of all these different gateways and all the payment processors and the differences between the people that actually process the payment and the actual people that collect the money and pay out and all that stuff.

Mitch: Sure. Well, Verisign and Authoize.net are both huge companies. They been around . . . Authoize.net has been around for years. They basically do . . . you know, they're a payment gateway. They help merchants . . . I don't know if they do merchant accounts at all, which we do do. But they help merchants set up the payment processing and they integrate with the shopping cart and it's really on a very basic level. And I'm not, you know, that's great for some merchants but there's a lot of merchants nowadays that need a lot more. They want advanced reporting and advanced fraud scrubbing and they want a company that's going to provide 24-7 customer service and things like that; so we're . . . Netbilling has kind of come into this realm as, we're not just going to provide the basic services (which is great for some people) but we have all these advanced tools that we've provided for people. And it's the same thing with Verisign and PayProFlow. And they're both great products, they're both very simply products as far as reporting and things like that. They just don't seem to facilitate successful merchants in ways that a lot of these guys need to be helped these days.

Monte: Right. And so going on, one of your key advantages, I understand, is the fraud and the chargeback prevention.

Mitch: Yeah. What we've found . . . we have a lot of tools on the back end looking at credit card bins and things like that and comparing credit card numbers and velocity controls where we check, you know, how many times people are trying from the same card and how many times they're declined and where their IP address is as compared to their credit card number that they're typing in or looking at their physical address as well as their credit card number versus their IP address. And so what we did, we not only had those tools on the back end but we've given those tools to the merchants on the front end, through the Netbilling administration area to allow them to vary some of those tools to fit their websites better, because some guys, depending on what they're selling, for instance, a jewelry company who's selling a very high-end ticket item, they typically need stronger fraud scrubbing and stronger comparisons to what's going on and where they're shipping throughout the world as opposed to somebody who's selling coffee cups. A guy who's selling $20,000 or $100,000 diamond rings probably isn't going to ship a product to Indonesia.

Monte: Right, right. So, so, you know, one of the things I do know is like some of the companies that we just spoke about, Authorize.net and Verisign and some of the others, they have not way to . . . like, you can't go online and report through your interface the bad credit card, or if you're getting a fraud system and they're not also sharing credit card and fraud transaction and activity with you back, so it sounds like that's something that you guys do there to help your network out.

Mitch: Yeah, absolutely. Because of the wide variety of merchants that we process for, we've contained millions of bad credit card numbers over the years. Not just credit card numbers that have been reported to us or given to us or leased from outside companies but within our own system, within our own merchants, we log every transaction and all the events that take place with that take place with that transaction, and when a transaction is marked as fraud, we mark the card number, the IP address, the physical address and all the components that go along with that actual transaction and add that to what we call our Global Negative Database that is shared between all of our merchants. And again, a merchant has a choice . . . I don't know any merchants not using it but a merchant can turn that on and off. And not only that, but they have, a merchant also has their own Negative Database within our system which they subscribe to, so anything that they've added will also be used within that global area as well for other merchants to share. So, you know, since 1998, since we've been doing this for so long and have such wide variety of, you know, fraudulent orders trying, you know, coming in and chargebacks and things like that, we're able to continuously log those and our merchants benefit from being able to share that information.

Monte: Right. So, that must be one of your key advantages, 'cause, you know, there's a lot of merchant processors and payment processors out there. I guess you guys have been around for a long time. What do you think is your key, you know, top two, three reasons why you're different from those who have come and gone in the industry?

Mitch: Well, I think giving the merchants the flexibility to, you know, to go into this advanced reporting and to utilize the fraud tools that we have and giving them a lot more control on the front end for the Netbilling administration interface, as well as how they submit transactions, that's whether they're using our payment forms that we provide on our secure servers or using tailored payment forms that they've integrated directly into their websites or shopping carts, give them the flexibility to really control their business and how, you know, how they really process those transactions and control the data afterward also into affiliate programs and things like that.

Monte: Right, right. Boy, that's definitely a good reason. And the types of companies you provide services for on the Internet – how wide a range is there?

Mitch: Oh, God, there's an airline company that we provide services for; there's a lot of photography sites; a lot of investment sites; a lot of adult-type sites; a lot of different types of product sales and subscriptions and its just . . . its all over the place. I see people signing up and I'm like, wow, like ski lifts – we process for a company that does . . . it's a seasonal thing . . .

Monte: Right.

Mitch: . . . their lift tickets, things like that. Its all over the place and its . . . and some of the things that I see coming in I'm like, wow, man, I didn't even think of that as a business. Crazy.

Monte: Right. And so, when somebody wants to get started and wants to consider Netbilling, what does one need to consider? I mean there's obviously . . . maybe you can go over some of the cost structure that concerns people as well. You know, people are concerned about the initial cost of set up and then there's this transaction fee and then there's the percentage on the sale . . .

Mitch: Right.

Monte: . . . and all that stuff, so lots of people get afraid, you know, if they're being taken advantage of and everybody offers the lowest rates and there's differences in credit card rates like Amex versus Visa versus other payment forms – walk us through the basics and then maybe some of the dynamics of how this business works and then what you guys offer that makes you competitive.

Mitch: Okay, sure. There's a couple of ways to look at it. There is what they call Third Party Processing and that's a company like [inaudible]bell, Paycom, do check out that provide all the . . . a lot of the services that we provide and what happens is you're using their merchant account, which is fine for people who are just starting out, they don't have money to get a merchant account or don't want to invest in setting up an LLC or a corporation or a dba. Very low cost to set up . . . you know, there's Paypal, of course . . .

Monte: Yeah, right, right. You know, a very basic Paypal account.

Mitch: Exactly, exactly. Same type of account . . .

Monte: But even them, you know, they charge 4% - its expensive. Its expensive when you're receiving money.

Mitch: Yeah, exactly. They charge 4%; Paypal's one of the lower cost ones. If you look at some of the other ones out there, they'll charge you 15%. There's also . . . it seems like for shopping cart products, the few companies out there that are doing third party stuff, charge between 5% and 12%, is what I'm seeing. And that works; its quick set up. Now, the way that we do it is we'll take a merchant who wants to set up and we'll work with 6 or 7 different banks domestically and several offshore and we'll facilitate the merchant in setting up the actual merchant account. So, lets just use as an example, if you're going to sell pens, custom pens on the Internet. To set up a merchant account for product sales is typically $45 (that's the Bank At fee); if its adult products, its $99, and that's all the money you need to put up to establish the actual merchant account.

Monte: So that's not so bad.

Mitch: We do the paperwork, we submit it to the bank that's going to give you the best rate from the ones that we work with and what happens is, after the merchant account, there's a couple of pages of paperwork and typically for product sales, we'll get an approval within one or two business days. Once we receive the approval from the bank, what they provide us with is a Merchant ID and a Terminal ID and we take that Merchant ID and Terminal ID and plug that into our system; once its live in our system and tested, then the merchant can integrate with our system however they want. Now, we're using this example of selling pens; they're going to set up a shopping cart. So once you have your website up, you can get your merchant account 'cause you need to show the bank your website. Once you have your merchant account, you can set up your shopping cart and whether you use our shopping cart (we have a free shopping cart that we've developed and we do the hosting for; its very easy to add products to. You can have up to 10,000 products on there with images and descriptions and different shipping methods and that's free as part of our services as well ) . . .

Monte: Oh, that's really cool; that's a really unique offer.

Mitch: Yeah, and its really simple to use. We designed it to be a very simple cart that somebody with no HTML experience can set up and we've kept it simple where it doesn't do inventory management and affiliate management and all that kind of stuff, because we wanted to keep it simple and we know that there's great third-party carts out there such as Ofcommerce and you know, there's all kinds –

Monte: MonsterCommerce is a great cart as well.

Mitch: MonsterCommerce; there's Sebo; several of those which work with NetBilling as well – a lot of them have Netbilling plugins that are free. So people who want a more advance cart can use one of those. OFCommerce is an open-source cart that's free as well and all you do is tie that into your Netbilling account and process payments for your products. So once you have that all up and running, you're ready to go. And when you have your own merchant account, there's several advantages to that. You have, besides having full control over the fraud tools and the administration area and the look and feel of your website and things like that, one of the financial benefits is that with a domestic merchant account, you're paid every day. So since our system automatically settles these transactions for you once a day, 24 – 72 hours after today's transactions are settled, you start getting that money in your bank. And since we process, since we settle batches – that's what their called, batches of transactions – since we settle batches everyday, after that 24 – 72 hour period, you're getting paid everyday. If you're using a third party company, typically you're getting paid once a week, once every two weeks or once a month.

Monte: Oh, I didn't even know that.

Mitch: Yeah. So, that's some of the advantages there. But the main advantage, the main advantage that people use Netbilling as opposed to a third party company is because of the controls, the lower fees and the flexibility. And flexibility kind of ties in with the control thing, but it is separate as well.

Monte: Right. So, explain to everybody what the transaction fees are and how that's broken out. Like why is it (I mean, we know because we do processing), but from a merchant system, why is American Express more expensive than Visa? What makes rates go up and down within an account and how they fluctuate throughout the year; you know, do you guys take a piece of the transaction or is it just a one time charge or is it both, you know, how does it all work? And why?

Mitch: Okay. For a merchant account, the bank charges those fees. And typically, it depends on the product that you're selling, the monthly volume that you have, what you're average ticket is and your credit history; when they set up your merchant account, they'll give you what's called a discount rate. And that discount rate, again, using, you know, pen sales, for example – say you're doing $10,000 a month in pen sales, and your average ticket's about $25 and you have good credit. We can usually set up that account for about 2 ¼ % and 25 or 30 cents a transaction. That's what the bank is going to make off of your money. And when I say the bank, that includes Visa and MasterCard and American Express and those guys. Typically, American Express and Discover, because they're not what we call bank cards, you apply for those separately, which we also set up; there's usually no application fees for that and they do charge for American Express and Discover, they do charge a little bit more those. But its all facilitated through the same merchant account.

Monte: Right.

Mitch: So you will pay a little more for those transactions but keep in mind that 90% of your transactions that you do on credit cards is going to be Visa and MasterCard – they're the king.

Monte: Right.

Mitch: And those you pay a little bit lower rates. Because of American Express and Discover and Diners Club and things like that, because they're not as big they wind up having to charge a little more.

Monte: Right, right. Well, and also American Express typically doesn't make their money on financing, so they don't get their extra money through interest fees and other things that people are paying for so they're people who pay their cards up front.

Mitch: That's why the merchants pay a little more. Because they don't make as much money off the cardholders, they make more money off the merchants.

Monte: Right, right.

Mitch: Which is okay. It's not that much more but you're talking about high ticket items, you know, like if we're talking about $100,000 rings, I'd certainly rather see somebody use their MasterCard for that than using an American Express Card because 1% of a thousand bucks, you know, that stuff adds up.

Monte: Right, right.

Mitch: Or a thousand bucks or whatever it is. But, you know, offering more payment methods is to the merchants benefit. And again, since most of its Visa/MasterCard anyway, that's where the majority of the transactions are going to come through. Another thing that we do is process online checks for people. And that's another great way to process also. If you're talking about product sales, I wouldn't ship any product until the check actually clears. Even thought the system is completely automated through Netbilling, we have no way to check to see if the funds are actually in the account. What we can do is we compare it to our Negative Databases and we do some other types of checking to make sure that the guy hasn't written bad checks through our system before, that the account exists – but there's no way to verify funds and to hold those funds in someone's checking account until the check actually clears. And typically, since it's all electronic now, those bad checks come back to us (its called ACH) but those come back to us typically in two days. So you have your system, you have your system query our system to see, if somebody pays by check, to see if the check has cleared, you can go ahead and ship the product. If it's a membership type site, where you're just giving away some bandwidth, you know, its not such a big deal. People want instant access to membership-type sites, and if a check comes back bad, our system automatically disables their password, adds that checking information to our Negative Database and stops the recurring billing. So, that's all automated. But, again, for product sales its important not to ship products until the check actually clears.

Monte: Right, right. So those are the bank fees. Does Netbilling make money from those transactions, obviously that's how or is there an additional billing fee for Netbilling on every transaction?

Mitch: What we do is, we have a $25 a month gateway fee that we charge every merchant and on top of that, depending on your average ticket, we offer a couple different pricing plans and what we typically do is (and it's the merchant's choice, of course), for people who's average ticket is under $20, we offer them 1.5% and 15 cent transaction, or, if it's over $20, we charge 45 cents flat rate.

Monte: Oh, I see.

Mitch: Yeah, and because 1.5% and 15 cents of $20 is 45 cents, so . . .

Monte: Well, what do you do if they buy – like in the case of domain names, if one name is $18.95 but 100 domain names is $180, it automatically flips over to the transaction?

Mitch: Well, when we set up, we ask the merchant, based on their average ticket, how they want us to set up the account as far as the price point goes. And we do do volume discounts and loyalty discounts and things like that.

Monte: Right. And so, those are fees that are on top of the bank processing fees, obviously.

Mitch: Yeah, yeah.

Monte: Okay. Alright, I understand. Now, just give us a quick, uh, so steps on getting this all set up. What does one have to do to get this all set up on their own website so, walk us through the steps, say I just registered a domain name, I just got my web hosting package, what do I need to do from your site?

Mitch: Okay, if you're going to sell product, what you need to do is, to get your merchant account, you got to have your website up and running, you got to have a terms and conditions page up, letting people know you're going to sell product, what you'll do to refund people, how you're going to charge people, things like that . . .

Monte: Do you help with that, with templates and stuff?

Mitch: Yeah, we give examples for that, no problem.

Monte: Okay, good.

Mitch: So once you have that up and you're able to show the bank that you have an actual functioning website, that you have a business registered, whether its through, just a dba they call it (doing business as), or an LLC or a corp. and your credits okay, all you do is you come to us, we'll do a walk through our system to show you everything; once you're sold on that, then we'll send you, depending on what you're selling, an application package through email of whatever bank we're going to send you through. You'll fill that out, you'll send it back to us, and then we submit it to the bank. While its being submitted to the bank, then you can go ahead and we'll set up your Netbilling account for you, if you want; the shopping cart up for you, which really takes about 10 minutes to implement that and then you start adding your products and descriptions to it as well as choosing your shipping methods, however you're going to do it there, and then we have in our system test card numbers so even if you don't have your live merchant account yet, you can still test everything out and make sure that its up and working and that its accepting payments and then you're ready to go.

Monte: Oh, cool. So, it's a pretty quick and painless process, it sounds like, and you have 24 hour customer support, so you're supporting people all over the various places of the country and also, I guess, around the world.

Mitch: Absolutely. And as far as call center services go, especially around the Holidays, even guys with smaller websites don't want to handle their own customer service. And again this brings us back to people disputing charges and wanting good customer service. From a customer standpoint, when they get their credit card bill, what they want to do is they want to look at their credit card statement, call the phone number if they're not sure what that charge is and get immediate response. If you're not able to provide good customer service, usually 24-hour customer service, then you can have Netbilling do your customer service for you. And whether its, just from a simple standpoint, if we're just going to handle your customer inquiries for you, if you're not even doing phone orders and things like that (which we'll handle as well), lets say that you want somebody . . . you want our reps to handle your calls 24-7 for you to answer basic questions about the website and answer questions for you about charges on their credit card bill, what happens is when you get your merchant account it'll have your company name and at Netbilling we will issue you your own toll-free and non-toll free number that is exclusive to your company and when, on their credit card bill it will show our phone number.

Monte: Oh, that's, that's cool. So, I mean, what do you charge for that? Is that a . . .

Mitch: Yeah. What we charge is . . . we do it on an increased transaction basis but we've been turning more to a permanent thing and its usually about (depending on the volume) about 85 cents a minute. And we also do it on a flat call per call basis.

Monte: So there's a lot of different options there, so . . .

Mitch: We have a lot of options depending on what you're needs are. 'Cause some guys just want us to do . . . handle basic customer service and order inquires for them. Sometimes we up sell products to people who are canceling a recurring product or if it's a membership we do cancellation up sells or, you know, we . . . we do everything. I mean, we really do everything at our call center. Our call center's amazing. And just so you know, its not an outsourced call center in India. Everything's done right here and we have great supervisors and great management in the call center as well.

Monte: Right, right. How many people do you have working at Netbilling?

Mitch: We have about 50 employees total.

Monte: Okay. Good, good. And one last question before we wind up the show. But there's this philosophy among companies about having multiple payment processors and merchant accounts going on at the same time. It sounds like you kind of do that all within Netbilling, having different banks and different options going . . .

Mitch: Yeah.

Monte: . . . Explain the strategy; I mean, obviously, its in case one merchant goes down, then you have a back up, but . . .

Mitch: Absolutely. Occasionally, you know, obviously, it's the Internet, so connection problems do occur once in awhile, and a lot of people will have a secondary gateway or a secondary merchant account in place (even if its through our gateway because we can stack multiple merchant accounts to be able to contact the bank network and get approvals). Now looking at it from a different perspective (and this is typically with more high-risk accounts like adult accounts) what they do is they'll send transactions through one processor and then if its declined there, they'll cascade it to another processor and try to get it approved there. And that works sometimes; it doesn't work other times. But from a redundancy standpoint, for most merchants I do, I would love to believe that we can be up 100% of the time, and we are up 99% of the time, but sometimes there will be a communication problem between us and the merchant, or the merchant and us, where its something that completely between both of us and for some reason they just can't reach us.

Monte: Right.

Mitch: And if that's the case, its good to have another . . . its good to have a way to cascade to another processor for that reason right there.

Monte: And do you recommend a partner processor that you cascade to when you're setting up a client on your network when they ask that question?

Mitch: No, not really, because I don't think anyone's as good as us.

Monte: [laughs] Okay.

Mitch: I mean, there's some great ones out there and we're happy to recommend depending on what people need.

Monte: Well, I'm just wondering because if people are coming to you as their main payment processor and you're mapping out a strategy, it sounds like you just suggested that's a good strategy to have in case the 1% of the time which is, you know, 4 days a year or something that that (well, adds up to 4 days a year if you really think it out at 365 days, a 365 day year; you know, 4 days or 4 times a year you're going to have that problem).

Mitch: Yeah. Yeah. And, you know, that's likely; that's likely to happen. Last year it was less and I think this year its been a little bit less as well but around the holidays when traffic starts going up you never know what can happen.

Monte: Right, right, right.

Mitch: I mean, since people are setting us up as the primary and its very, very rare that they'll bounce anything to a secondary, they can really use any payment gateway that'll accept their business and that will accept the merchant type that they are.

Monte: Right, right.

Mitch: Yeah.

Monte: Okay, well great.

Mitch: Yeah.

Monte: Okay, well, it was a real pleasure having you on the show and I know Matthew (“Chipmunk”) is going to be seeing you out in L.A. at the WebMaster Access Gathering.

Mitch: I'm looking forward to it and we're doing a big poker tournament out there, too.

Monte: Yeah.

Mitch: It'll be a lot of fun. And . . .

Monte: Texas Hold 'em, baby.

Mitch: Yeah, if . . . I know, its crazy. If . . . I really appreciate you having me and if anyone's interested about our services or doing a demo of our services or any questions at all, you can email HYPERLINK "mailto:sales@netbilling.com" sales@netbilling.com; that goes to our sales department. My email's HYPERLINK "mailto:mitch@netbilling.com" mitch@netbilling.com and we're always very happy to help and answer all kinds of questions.

Monte: Yeah. I'm going to post you up on the board and let everybody know how to get a hold of you because it sounds like a great solution; you sound like one of the easiest companies to work with and you're somebody that we would recommend as well.

Mitch: Oh, thank you very much. And have a great day.

Monte: Okay, Mitch, I really appreciate your time.

Mitch: Okay, thanks.

Monte: Okay, take care.

Alright, folks. That was great for Mitch Farber to be online and tell us about the whole payment processing process. It sounds like Netbilling has their act together and that's made them very successful. The fact that they have online customer support 24 hours a day and reasonable fees and have been through the dot com boom and bust and succeeded in those environments and been able to survive and have a strong client base, 'cause every good reason for anybody looking for a payment . . . merchant processing system that's easy to implement should be considering Netbilling, for sure.

So with that said, just a quick brief update on some of the domain sales because if you go to DNJournal.com you'll see a pretty active week, not only from us but from some of the other companies – AfterNick and Sedo and SnapNames that were mentioned on the show tonight. But we ended up winding up the auction from T.R.A.F.F.I.C. and completed the sales of consulting.com for 180 grand and we also sold medicine.org, which is one of the highest .org sales that we've been able to do, ever. I think its actually the highest domain sale that we've done in .org. And its one of the highest in the entire industry, which was for $85,000. And that was a really good sale. And processed a couple of really big portfolio sales for well into the six figures as well, so again, from the domain name sales standpoint, in front, things are very active, picking up quite a bit. There's a lot of people looking for portfolios and domain names and a lot of sales going on. Our escrow service is really getting a lot busier over the last couple of weeks; a lot more transactions coming through for buyers and sellers wanting to look for a safe escrow solution for their domain names, so definitely, come to Moniker.com to do those domain transactions because we're the only solution that actually puts the domain name into escrow as well as the funds, unlike Escrow.com which only processes the funds part but relies on everyone else to change the ownership of the domain name, which is just the owners and the buyers and the sellers.

And next week we'll be live again; we'll be at Web Master World next week. We're on a domain panel, or I am, on the first day. I'm stuck with four very reputable attorneys but I 'm on a panel with the legal domain crew on the first day of Web Master World, next Tuesday and it should be a great show. If anybody's heading out to Las Vegas, make sure you come by the Moniker booth. We're giving away domain names, a Texas Hold 'em table and doing some other things while we're there as well. And we'll have some live broadcasts along with my great friends at WebMasterRadio.fm; Brandy and Daren were just out at AdTech this week and I'm sure if anybody hasn't tuned in to some of the AdTech wrap-ups, AdTech was a very, very good event; we were unable to attend, unfortunately, because of the hurricane aftermath here. I personally just got power back on Sunday. But Brandy and Daren have been keeping me updated on the process at AdTech and says its just a killer out there so we're going to be getting some updates on just what's been going on at AdTech and of course, Web Master World next week.

With that said, have a great week. I'll see you next week, same time, only from Las Vegas. Vegas, baby. Be the master of your domain. I'll see you next week on DomainMasters.

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