City Sites and a Traffic East preview
10/18/2006 - Monte Cahn
Monte previews the upcoming Traffic East Conference with the Web-father Rick Schwartz, and TRAFFIC’s Howard Neu. He also talks to David Costello. David J. Castello is the Chief Operating Officer for the Castello Cities Internet Network (CCIN) which includes some of the most successful city sites in the world including PalmSprings.com, Acapulco.com, Nashville.com, LagunaBeach.com and WestPalmBeach.com as well as prominent non-city sites such as Kennel.com, GolfClub.com, Cost.com and Whisky.com
[Commercials]
Monte: Hello, everyone. This is Monte Cahn. Welcome to another week of Domain Masters on WebmastersRadio.fm. We have an action packed show tonight. I have the TRAFFIC East special. We have both Rick Schwartz and Howard Neu, are going to be joining us in a little bit. Rick and Howard are the co-founders of the TRAFFIC Conference and we’re going to be talking a little bit about their history, what’s on store for next week at the live TRAFFIC Conference that’s slated for Hollywood, Florida on October the 24th through the 28th. And of course, we’re going to be hosting and conducting the largest live domain auction in history there. And there’s lots of great names coming in. As a matter of fact, the cut off was just about an hour ago and now we’re sorting through the list and narrowing down the list and probably have the most premier list of domain names for sale.
The second half of the show, we’re going to be speaking with David Costello. He’s the chief operating officer for Castello Cities Internet Network. Names like PalmSprings.com, Acapulco.com, Kennel.com, Whiskey.com, Cost.com – are all part of his portfolio. One of the most valuable portfolios on the Web.
So with that, we’re going to take a commercial break and be back on with Rick Schwartz and Howard Neu of TRAFFIC. Stay tuned.
[Commercials]
Monte: Hello folks; welcome back to Domain Masters. I ‘m Monte Cahn. As I mentioned in the show opener, I have two very special guests on tonight: Rick Schwartz, a.k.a. Domain King and Web-father. He is the CEO and co-founder of TRAFFIC, which is the conference that everyone is going to be heading towards Miami on next week in Hollywood, Florida. And Howard Neu, who’s also the co-founder and vice president and secretary and treasurer of TRAFFIC. Rick and Howard, welcome to Domain Masters.
Rick: Thanks, Monte.
Howard: Good to be here. Thank you.
Monte: Thanks for both of you having on. Now, this has been a pretty successful event so far and I’ve been privileged to be able to participate in basically all the conferences. Let’s go back a little bit to both of you and maybe give a little bit of background on how you got involved in domain names and the domain name industry. Rick, why don’t you go first.
Rick: Oh, [laughs]. I started the end of 1995 with my first domain name and I have vanity 800 numbers, which is kind of how I got onto the Internet. And, little by little I kind of found out that the secret of all this was the traffic behind the domain name and then the type of traffic to get behind the domain name. And, before you knew it, there was a domain industry. [laughs]
Monte: Yep. And then, you’ve acquired quite an extensive portfolio yourself. Names like Candy.com, Properties.com, Tradeshows.com, eRealEstate of course. And you were also . . . took part in one of the most successful domain sales, which was Men.com, for $1.3 million just two years ago.
Rick: Yeah, Monte; hopefully, someday there’ll be some more of those coming down the road.
Monte: Yeah. So, you’ve been a seller of some premium names and you’ve also been a buyer of some high profile domain names, too. You purchased Property.com for $750,000 and that went along with one of your key holdings, which was Properties.com. Correct?
Rick: Correct.
Monte: And at the last auction, you took down CD.com for like $250,000, so you still believe in the market and believe it has a lot of legs, I guess.
Rick: Overall. The market is just . . . we’re just starting to get the attention of people. We’re just starting to get the respect that domain names really deserved for a long time, so we’re definitely at the beginning, not at the end.
Monte: Yeah, definitely. Now, Howard, you’ve been practicing law since 1968 and prior to that you were a practicing certified public accountant and the forum municipal judge of North Miami Beach. Correct.
Howard: [inaudible] you know, you don’t have to tell them how old I am Monte. [laughs]
Monte: [laughs] Uhm, so give us a little background of how you got into the industry, because you’re one of the lead domain attorneys in our entire industry and maybe give us a little background about how you got involved in it.
Howard: Well, I got involved because I had a client who was involved in adult business and I was doing some legal work for him. And he put together a cruise of adult webmasters and asked me to speak on First Amendment situations and trademark and copyright infringement and I did and picked up 50 new clients and got involved in the Internet by doing that. Of course, one of those clients was Rick Schwartz. And Rick and I hit it off and we’ve been working together pretty much ever since.
Monte: Yeah, and so you’ve been on both sides of the legal venue for domainers. I guess you’re more of a domainer’s attorney, so you help defend the rights of people who own domain name when some of the large companies and organizations are trying to come in and use reverse cyber-squatting, some of the other techniques to try to get names back – is that correct?
Howard: Yeah, that’s pretty much what I and about a handful of my brethren do. But I got into the domain business because of TRAFFIC. I was representing domainers but I’d never had any domains of my own and we went to the . . . put together the first TRAFFIC conference two years ago and I said, what the heck am I doing? I should be collecting and investing in domains. So, uhm, gradually I picked up a few and I have just under 2,000 now.
Monte: And, I must say, you’re like one the best organizers of a conference and a great speaker and you’ve been able to help these conferences move along in terms of its venue and schedule and the introduction of all the speaking guests. And now this venue and this TRAFFIC conference has become a valuable resource for a lot of domain related industries and a lot of domain related people who come and are looking to get into the industry and those that are looking to learn. It’s an action-packed conference with lots of keynote speaker . . . headline speakers, heads of corporations - Yahoo!, Google and every thing. Bring us back a couple years, either one of you, and talk about how the conference originated, how it got off the ground and where its evolved to today.
Howard: Go ahead, Rick.
Rick: Well, [laughs] it, ah, it started as a little Boca-fest, maybe in my kitchen with 12 domainers and before you knew it, we had about 35 that wanted to come. And, Howard and I got together, and said, well, maybe we should do this at a hotel somewhere, ‘cause this has kind of outgrown what we expected. And then the next thing you knew, we had Fabulous and a domain sponsor and a couple other guys – Moniker – you wanting to sponsor the events. And then before you knew it, instead of 12 or 35, we had 135 people. And about this time two years ago, I can tell you, Howard and I were beside ourselves because we knew our reputations were on the line and neither of us had done a tradeshow before. [laughs]
Monte: Right, right. Well, you both did a great job. And then, of course, this has now evolved from 13-some-odd people to I guess the last conference – how many people showed up in Vegas in May?
Rick: We had 502 people in Vegas and we expect about the same here next week.
Monte: So, that’s fantastic. So, uhm, and a lot of new people are also applicants in our . . . are going to be attending the conference as well, I guess.
Rick: One of the things that we’re doing for the new people is we’re conducting for the first time an orientation at 3:45 on Tuesday, the first day of the conference, solely for what we call newbies, these people who have not been to TRAFFIC before to show them what we’ve done in the past, what we’re all about and how they can get as much as possible out being there for the next 3 ½ days.
Monte: Oh, that’s great. That’s great. Now, is there still time and still space to sign up for the conference, ah, currently.
Rick: I sent out a thing this morning; I think there were about 15 seats this morning or something like that. I think there’s about 5 seats left, so its just about a done deal.
Monte: So, if anybody’s listening and you want to be the last of the 5 remaining open seats available for the conference, go to TargetedTraffic.com and sign up online and I can swear up and down and guarantee it’ll be worth every penny that you spend by coming to Miami, or coming to Hollywood and being there – the networking, the auction itself is worth every dollar that you pay, that’s for sure.
Rick: Well, Monte, in addition to the auction, which of course is a big draw and its going to be extremely successful under your tutelage, uhm, we are going to have an exciting keynot speaker this year – a gentleman that everybody knows of, if not necessarily by name, certainly by reputation – and that’s Tom Gardner, The Motley Fool.
Monte: Yeah, definitely. So tell me a little bit about why he was interested in speaking and some of the subject matter he’s going to be talking about.
Rick: That’s a pretty interesting question, Monte. We . . . you know, we really wracked our heads around trying to figure out, you know, what kind of speakers to bring to TRAFFIC that really could understand what a domain is and what we do and why its valuable to the world. And so, you know, we had Ben Stein a couple of years ago and we really haven’t had a keynoter since then because we haven’t figured out . . . and then I stumbled on Tom Gardner, The Motley Fool. This is a guy that thinks out of the box and is on Wall Street and I think I can give him some homework that would make him become very interested in the domain industry and Howard and I had a conference call with him on Monday morning and Tom asked me, he says, Rick, what do you want me to speak about. And basically I told him, listen, I don’t want one of your canned speeches. What we want is we want you to do a little bit of research and find out what historical events or, uhm, commercial things in history were very lucrative but everyone missed. Like domain names. I mean, here are 6 billion people on the planet and there’s only a handful of people that figured out what a domain name represents and that’s why we all do this. So I said, find out, I said, you know, domains have gone up faster than gold, faster than real estate, faster than diamonds, faster than any other commodity in history. What other, whether it be oil or cars, I don’t know – what other things in history were great and everyone missed? And I think when he does that research and he sees what we do with domain names, he’s going to become very interested in what we do and he’s a very sharp fella, after speaking to him the other day.
Monte: Yeah, definitely.
Rick: The exciting thing about this is, you know, he has the ear of Wall Street. And if he, in fact, does something on The Motley Fool concerning this conference, which in fact equates domains with investments, [inaudible] high risk or otherwise, you get the ear of Wall Street, it changes all of the dynamics of what we’re doing.
Monte: Yeah, yeah, for sure. And one of the other new entries into this particular conference is we’re going to just be introducing a couple folks, a couple head folks from Madison Avenue on the advertisement side, on the advertising side, to bring them up to speed about what’s going on with domain names as well. Talk about a little bit about that.
Rick: Well, that’s going to be the precursor of the conference that we’re putting together right now for next June in New York, where we expect that Madison Avenue will be the feature attraction.
Monte: Yeah, so we’d be bringing the show right to New York and then Madison Avenue right there and then of course they’re the direct link to the advertisers and the online branding companies so that they can help them understand the value of why all these domainers own these key generic domain names that help drive traffic indirectly through their industry.
Rick: You know how I look at traffic? I kind of look at traffic as a big cruise ship and we have to go pick up all the elements of an industry and put them on board to show them what we do. The first people . . . when we started, you got to remember that sponsors and domainers didn’t really have much of a relationship; very few had a relationship. So the first element that we brought was bringing the sponsors into the folds. And then we went after venture capitalists and we brought them into the fold. Then we went after investment bankers and we brought them out into the fold. And, you know, we bring in Wall Street and we bring in Madison Avenue and eventually, the ship will go all the way down to Main Street.
Monte: Yeah, definitely. And there are a couple publicly-traded companies now that have made significant investments into the domain world; one of them being MarchX, who took down an inventory of about 80,000 domain names right here at Moniker for $164 million using public funds and it happens to be their most profitable line of business. So, this whole concept of an outside investment strategy investing into another type of vehicle that will help raise the value of a company and of domain names in general is working for a couple of the publicly-traded companies out there. And of course, some of the big banks last . . . venture capital companies such as Highland and Summit took out a company called BuyDomains and they’re slated to do some exciting things that might be in the public market as well.
Rick: Right; and one of the exciting things in that regard, Monte, that we’re going to be seeing the traffic is not only your live auction on Friday but your silent auction throughout the course of the conference and everybody who’s in attendance is going to be getting a code word to be able to access the silent auction so they’ll be able to bid on some really great domains that just don’t make the live auction.
Monte: Yeah, that’s true. Just a little bit about the auction process is we’re going to have both a silent and a live auction, but the silent auction will actually be an online auction (not a physical silent auction) and obviously with four hours to spend at the live auction, there’s only room for about 250 to 350 domain names of premier quality. There’s a lot of premier names that are going to be falling into the silent auction and there’ll be about 5,000 names in that venue, many of which won’t have reserve prices; many of which are priced right to sell. And its going to be very exciting. And if you’re going to be a TRAFFIC attendee you’ll have access to the silent auction from the 26th through the 28th, even after the live auction closes. And, you’ll be given a special password to access the silent auction and of course you’re going to be given a special password to access the premier domain list for the live auction as well. So let’s talk a little bit about the auction and how its evolved and what TRAFFIC is looking to accomplish and what we’re looking to accomplish at this particular event. Because this is going to be a record-setting domain sale venue and there’s a lot of reasons behind that. So talk a little bit about why you feel this is going to be record-setting.
Rick: Well, the first reason this is going to be record setting is, you know, the first auction was we all felt our way around it; the second auction, we said, my goodness, there are some serious names that were in here for some bargain prices; and the third auction people are coming with lots of money in their pockets. They’re coming with their checking accounts full and their coming to do business. And, you know, when you look at the quality of the attendees and who’s coming and the decision-makers from these companies – they’re not coming for their health. They’re coming to apply for some premium domain names.
Monte: Right. And obviously there’s a lot of folks holding off on buying names in the market because they’re getting excited about the domain names being offered in the auction that’s going to be occurring on the . . . both on the 27th and in the silent venue.
Rick: Well, I think this is really changing the face of how the aftermarket of domains is changing with the live auction. I mean, this is just an incredible opportunity for both buyer and seller to present what they have and to present this to the biggest domain buyers in the world all at one time, in one place, in one room and make a deal.
Monte: Yeah, definitely. Definitely. Well, there’s 40-some-odd-thousand names that have been submitted for consideration and its obviously a very difficult job to go through those lists and my whole staff and everybody here is participating in that and we’re going to be getting it down to a manageable level of between 5,000 and 7,000 domain names. And then of course the TRAFFIC attendees and the audience will be picking what names they’d like to see at the main event. And I can tell you that, with as much effort as we’ve been putting towards organizing the event, and also getting the names involved, we’ve also been talking to folks and making sure that they’re reserve prices are realistic. So there’s going to be a ton of transactions done at this conference, which is going to be great.
Rick: When the folks that are listening see the list of domains after the events and the prices that they sold for, no domainer in the industry is going to miss these events ever again, because that’s how incredible the line up is. I mean, in the last auction we had a few that, you know, would come up for auction and kind of everyone would laugh. There’s going to be no dead weight in this auction.
Monte: Yeah, well, actually, the last average domain sale at the last event was 58 names sold for an average price of $40,000. And that’s pretty significant. You know, those are considered pretty high priced domain names. And of course we had the largest dot-net sale in history, which was Sex.net, which sold for $450,000.
Rick: Yeah, let me tell you, that was one heck of a bargain.
Monte: Right. Now, in this event we have unique industry first time event happening and that is the new extension – dot-MOBI – has slated 10 premium domain names for this event because they believe in this venue and the fact that a market is created at an event like this at TRAFFIC. So hats off to both of you guys for being able to do that. But dot-MOBI has pulled 10 premium domain names that they have not released to any of the public yet and slated it for this event. So a couple of those names are Hot.MOBI, Fun.MOBI, Wow.MOBI, and a bunch of others – even StockQuotes.MOBI and others. And there’s also some other dot-mobi names that I just found out about that are going to be entered from some client that owns them – such as Gamble.MOBI and so on. Rick, you have some pretty good expectations or feelings about .MOBI, don’t you?
Rick: Well, I, uh . . . I think there’s an opportunity possibly there. It depends if all the speculators buy all the .MOBIs or not. And it depends how people with established websites embrace it or don’t embrace or they just offer a link on their .COM to be .MOBI compatible at some point. So I don’t know really how its going to play out yet. But, obviously, it . . . I look at it as a definite roll of the dice.
Monte: Yeah, definitely a role of the dice [inaudible]
Howard: [inaudible] we’re getting in on the ground floor here with .MOBI. It’s the first registry that has come to TRAFFIC and has provided some of their top domains for the auction. So I think that in of itself is very exciting.
Monte: Yeah, that’s right. To have them choose this conference as a venue to do a live domain auction for their not released domain names, what they consider some of their premium properties as a test to see how it goes is a pretty big thing and it’s a first time occurrence for a registry to do that.
Rick: When they see the results, then there’ll be a long parade of people coming after that.
Monte: Right, right. For sure. For sure. Uhm . . .
Howard: We’re also going to have something, Monte, something that was very successful in Las Vegas was our speed networking.
Monte: Yeah, that worked out really well last time. Tell us a little bit about that.
Howard: Well, [laughs] we lock the doors [laughs] and nobody can get in. But, everybody gets to meet everybody else on a very quality basis and we have our own little secret formula of doing it but its been very effective. And we’re going . . . because it was so successful in Las Vegas (even though some people unfortunately got shut out because they didn’t know we were going to lock the doors) we’re letting everybody know in advance that that’s going to happen this time and we expect that to be very effective networking.
Monte: Yeah, and then that’s of course why people are coming to this event – to network with fellow domainers. People that basically have been corresponding by chat or by email that they get to meet for the first time. In addition to some of the major corporations that help with providing all the foundation services in our industry. You know, not only will you meet folks from Moniker but as you mentioned before, people from NameMedia and DemandMedia and Fabulous and DomainSponsor, which is the lead sponsor for this event, and all these great companies that are helping form our industry in general are all going to be there so you can interact with them, meet face-to-face, look into their eyes and know that we’re all doing great business together in a cooperative manner to help expand our industry.
Rick: [inaudible]
Howard: Well, you hit the nail right on the head because we like to say that our tradeshow is unlike any other tradeshow because we’ve cut out all the noise and you get to meet these people one-on-one. We have more exhibitors than we’ve ever had before. But we’re never going to have the number of exhibitors like at AdTECH or something like that because we want to keep it personal and there’s a certain formula that Rick and I have come up with (mostly Rick) that works. And we intend to keep that formula for quite a while.
Monte: Great. So let’s talk a little bit about the future, because like last year, I guess three TRAFFIC shows are slated for 2007. Talk a little bit about the different venues, what the plan is for 2007 and why its important people should come.
Howard: [laughs]
Rick: [inaudible] obviously, we have a show next week and the show next week, the results of that will determine what the schedule will be for the show in Las Vegas in March and that’s at the Venetian. And, then we got to New York in June and back to the Hollywood, Florida in October again.
Howard: The key thing that Rick just mentioned is that we can’t tell you what’s going to happen at these other shows because we keep it fresh. And fresh depends upon what’s happening in the industry at the time. For instance, one of the things that we’re going to be discussing at this show is ICANN and what they’re doing with the registries, because that is what’s on everybody’s mind right. So, Rick has been terrific in keeping the seminars and the information that’s being provided to the attendees very fresh and very topical. So for us to tell you now what’s going to happen a year from now – impossible. It’s just not . . . we can’t do that.
Monte: Well, we’re also living in an ever-evolving industry where lots of things are changing on a regular basis. There’s new monetization opportunities, new companies coming in on the market. A lot of companies rolling up into other companies and offering new products and services. So, of course, its always changing and what’s hot today may or may not be hot tomorrow. But we’ve already seen from a year ago how the show has evolved and how our industry has evolved as well.
Rick: A lot of the focus has been on valuation because if you buy into this 6, 8 and 10X, well, that’s good for you but I don’t buy into that and so I . . . I think the industry needs a real good conversation of what a domain is worth [inaudible] . . .
Monte: Yeah, yeah. It’s all over the board. I mean, obviously, MarchX set a standard or they set a [inaudible] . . .
Rick: [inaudible]
Monte: Yeah, they set a floor for taking down a huge inventory of $164 million at 7 ½ to 8 ½ times, you know, annual revenue and people are using that as a guide, but as you say, it’s floating around, you know, under that and much over that, depending upon what type of inventory it is, how brandable name are, what the future is, future industries, all kinds of other stuff. But, you know, the good news is, is that there was a transaction at that level so it made everybody have a controversy about it and also, it’s a benchmark for us to work from to find out what the next valuation indicator is.
Rick: Right. Well, we have to define X and we have to explain why X is X. And, I think we’re going to have a really lively debate of those that think X is worth 10 years revenue and I mean, the average Wall Street stock, the company is 15 or 17 X and you got to remember they have employees and overhead and all of that and we just have, uh, oil wells. [laughs]
Monte: Yeah, definitely. Definitely. Hey, Howard, before I let you go, what are some of the new, like, legal items that domainers should be concerned about that might be covered at some of the conferences in the future? I know that in the past we have focused a lot of energy and time on helping the industry in general to prevent domain theft and then we got into what’s called “reverse hijacking” which is kind of like the big companies coming in and trying to take names away when they may not have a right to it. What are some of the new types of law, uh, legal cases that you’re seeing on the . . . in the horizon? Or what are you staring to see as a trend that people should be concerned about or be kind of aware of?
Howard: Well, the biggest . . . there’s two big trends. One is whether the courts have jurisdiction or not and the courts are finding more and more . . . forgetting about WIPO and NAF for the time being. But, you know, you go into Federal court in the United States and you find more and more that they’re finding jurisdiction. And they can serve by email and that type of thing, so that most of the courts are now finding that for some reason to accept the jurisdiction of the case. The other thing of course is the continuing debate as to whether domains are property or not property. Or contract rights. And the courts have been split on that. And, there’s . . . I’m not sure if there’s a case that’s been filed that is right on point that will be determined very shortly, but it has been a concern of many courts, with California being on one end and Virginia being on the other. So, those still have to be resolved.
Monte: Yeah, definitely. And, Howard, you’re going to be joining me at WebMasterWorld on a legal panel as well, along with a couple other attorneys and we’re going to talk about some of these issues regarding some of the new legal challenges with domain ownership and some of the opportunities with domain ownership. And so those of you who do attend frequently (which a lot of you do that are listening and on the chat board) go to the WebMasterWorld event and SES, we cover a lot of these items, as well as the monetization opportunities that are out there and always try to educate and keep everybody informed, so domain owners have their rights and understand why they have the right to own domain names when they do.
Okay, folks, uhm, I want to thank you both for your time. We look very forward to next week and a great conference, a great successful domain auction and a great venue for domain names and increasing the valuation of everybody’s portfolio. And again, hats off to both of you for creating a great venue for people to get together, interact, build relationships, meet their compadres and their partners and their companies that they do business with and their friends head on and meet each other and come up with new business opportunities together, because that’s where its all happening, is at that conference. A lot of deals were struck out of the last three conferences and it’s been great.
Rick: And hats off to you, Monte, for helping make the auction a success. And I know that with your guidance it’s going to get bigger and better as we go along.
Monte: Yeah, definitely. And just for all of you that are listening, the auction’s going to be broadcast live right here on this network. Last year when we did this, or in May we did this, and we actually had several hundred people (the estimate was 400 or 500 people listening live) and then people were going into the different domain forums and chats and getting up-to-date live events of what names were selling at what price and was really great. We’re going to be broadcasting that live on WebMasterRadio.fm on a special edition of Domain Masters; you’re going to hear some of the commercials at the commercial break about that particular event.
Rick: And we’re going to keep Ron Jackson real busy with those Top 100 slots.
Monte: Yeah, definitely. [laughs]
Rick: [laughs]
Howard: [laughs]
Monte: Well, thanks to both of you and we look forward to next week.
Rick: Thank you, Monte.
Howard: Thanks for having us on.
Monte: Okay; talk to you next week. Thank you. Alright, again, thank you to my special guests – Howard Neu and Rick Schwartz, the founders of TRAFFIC. If you want to attend the conference, there’s only 5 or 6 seats left. It’s at TargetedTraffic.com. There’s a lot of information about the schedule, the speakers, the venue. If you miss this event, because its almost sold out, there’s another one in March, another one in June and another in October of next year and I do strongly suggest that people go to this conference and meet everybody that’s in the domain industry. We’re going to take a short commercial break and be back on with David Castello. He’s the chief operating officer for Castello Cities Internet Network. This is some of the best domain names, city names, that you’ve ever heard of and we’re going to talk to David about his business and get some tips and tricks about how to be successful at the domain business. Stay tuned.
[Commercials]
Monte: Hello, Folks. Welcome back to Domain Masters. And thanks again to Howard Neu and Rick Schwartz. It’s going to be an exciting TRAFFIC conference. My next guest is just as exciting, David Castello. He’s the chief operating officer for Castello Cities Internet Network. This portfolio of names is some of the biggest, most valuable domain names in the entire industry. Names like PalmSprings.com, Acapulco.com, Nashville.com, LagunaBeach.com, GolfClub.com, Kennel.com, Cost.com (which is one of our headline names for the auction), Whiskey.com (another headline name for the auction). David and his brother, Michael, are also part of the board of directors for the Associated Cities Network. This is the group of domainers that own some of the top cities in the entire world. If everybody remembers last year, I had Dan Pulcrano on who owns LosAngeles, SanFranciso and Dallas and Memphis and a bunch of cities also. We have a lot of those folks as customers and they’re great domainers and have a lot of insight on how the domain industry works and how to be successful at their business. David, welcome to Domain Masters.
David: Thank you, Monte. Good to be here.
Monte: So give us a little bit of a background about how you got into this business; how you were able to accumulate such top, you know, valuable pieces of domain real estate on the Web. Give us a little background about how you got into it.
David: Well, basically, it all started with rock ‘n roll. My brother were in a band together for years and then we kind of branched out – he went into production and using the studio to use recording tape, in the early 90’s, he was using a system called a Spectral System, which is basically recording with computers. And from there he kind of segued into the Internet. And he started acquiring these names in 1995. He was telling me about them but I was promoting shows, I was promoting shows at the [inaudible] and The Whiskey on the Sunset Strip in Los Angeles, doing my own thing. And it sounded interesting but, ah, it didn’t really come together between us until 1997 when I left the music industry and basically went back to my hometown of Boynton Beach, Florida, just to relax and our mother said, you know, why don’t you talk to your brother, do something with your brother with this thing he’s doing on the Internet. And I sat down with him and we looked at some of the names and one was our hometown, BoyntonBeach, we had BoyntonBeach.com and you know, I’m also a writer, so I started writing history articles and writing about the city and I knew a lot of the mom and pop businesses. I put them on there. We started to see . . . I started to see things happening. So, that was really the start of it. He got the names in ’95; I came into the picture in ’97 and after about 4 months of building little BoyntonBeach.com, I said, uh, which of these city names are doing well. And he said, well, PalmSprings.com is doing a lot of traffic. So I hopped in the T-bird and I rocketed into Palm Springs in March of ’98 and things quickly, uh, snowballed from there. Very quickly.
Monte: Yeah, so, how many domain names do you guys have in your portfolio today?
David: We have, probably, almost a thousand names.
Monte: So, you have a thousand names and obviously they’re some of the best names in the entire industry. So, besides some of these city names, you also have some really killer single word domain names with a lot of meaning and I guess with a lot of traffic as well.
David: Exactly. And what had happened was I had fixated and concentrated on the city names, because I saw a way to monetize them but you’re right; there’s a whole ‘nother side to the portfolio that’s equally, if not more, impressive, that we had to [inaudible] some of them. DayChair.com is doing extremely. GolfClub.com has its own reservation center in Palm Divot, California. But a lot of the names we had parked. But they’re phenomenal names, like, Rate.com, Example.com, Cost.com (which will be at the auction). And we had started to really concentrate on those. Started looking at that side of our portfolio and you know, that’s why we started to come to TRAFFIC and meet a lot of people. It’s the first one we’re going to. We’ve heard a lot of good things. And its really the other side of the whole network that we’re really starting to concentrate on developing.
Monte: So are you guys . . . are you full time domainers now, earning your livings from the domains and the traffic and the revenue that you’re generating from the business?
David: Oh, yes. We’ve been full time since we incorporated in March of ’99. But we were full time before that. I mean, the city names alone do extremely, they do extremely well.
Monte: Right, right.
David: And we perfected that. Yeah, it’s actually a blast. I mean, its kind of ironic. I never thought I’d say this. We’re having more fun now than when we were playing in the band.
Monte: Yeah, well, that’s what a lot of domainers are saying. So, you’re going to get to meet a lot of those fun friends when you come to Miami. And you’re not going to believe how much fun they’re all having, because everybody’s making a lot of money monetizing their domain names. So let’s talk a little bit about how the domainers that are listening and the folks that are just about to get in the business how they can be successful at their business. Give us some of the insight tricks and secrets that have made your business successful and your Associated City Network type strategy that others can use in theirs. Tell us a little bit about what you learned, what you should do, what you shouldn’t do and how to be really successful at what domain names to go out and acquire and you know, being successful on the Web.
David: Well, my perspective started with the city name; now we’ve gone over to the non-city names and it’s really apples and oranges and its all shared along with the same principles. With the city names, when I came in I was fairly ignorant about the Internet. I knew marketing well. I mean, the business I was in, promoting concerts, is a very . . . it’s a tough business. You have to have really good street instincts – you can go belly up in a day.
Monte: Right.
David: And, so when I came in, I saw the traffic these names were doing. You know, a lot of them weren’t doing too much traffic but they were great names. And I acquainted that traffic with people coming in the gate; coming in the door where I’d have a concert. So I’m thinks, well, this is great. There’s already a pie-pot of people coming through. [inaudible] a way to monetize it. And then it went from there. You know, content of course is king. And if there’s such a fantastic synergistic effect when you have one of these names, with the intuitive type-in traffic. And then you compound it with content. And its like with the public, its so interesting. Nobody ever forgot PalmSprings.com. Nobody ever forgot (we say) DayCare.com or GolfClub.com. They would never say, ‘What was the name of that site?’ And that alone, because to me the public always dictates your success. And the way the public will remember and utilize what you have, that’s . . . you really have to go with their flow. You know, a lot of what I do now its not the way I would have done it for myself but I saw . . . I learned a long time ago in the music business, you follow the publics lead. And I saw the way they were gravitating towards these names. And so basically, just a pipeline of oil coming out of the ground and you happen to build a refinery. That’s basically what you do. And, with names like this, there’s many different ways to go about it. Some people use PCP, some people do leads. We do static advertising, which I got from the newspapers. I thought, newspapers are charging monthly and yearly rates and I decided [inaudible] the city sites. You know, we were told it couldn’t be done, which, for me and my brother, is like putting a red flag in front of a bull, because I got told it wouldn’t work. And it’s . . . you just go with the flow. And when you have a name that people gravitate towards, especially when you’re dealing with a lot of these names that . . . we have some names that [inaudible] that are going to be at the auction. Those names are branding and marketing monsters. And as long as you put something quality behind, they’ll beat a path to your door, because they’re already coming in the first place. I mean, there’s [inaudible] traffic . . . [inaudible] traffic means the name is already so much out there, the word is already out there, that they come to it. And then if you compound that with building a site and search engine optimization, you’ve got such a synergistic effect, its extremely easy to monetize. The difference I remember before that the big crash of early 2000, boy, you had intuitive names but you had people buying catchy names. And they’re not the same thing. They’re not the same thing. Its much more important to go for the intuitive theme or even an intuitive phrase, you know. It’s those type of names, like I said, you’ve already got a pipeline of traffic coming through and I watch these . . . I’d watch infomercials late at night and I actually had a friend that produced infomercials that did quite well and she told me, well, the toll free number does well but our domain name website doesn’t do well. And I remember watching one of the commercials and I couldn’t remember the name. It was some goofy long name and I’m thinking, they’re spending all this money on advertising and promoting a product. If they had a simple, intuitive name, they would compound they’re revenue and everything else that much more. [inaudible]
Monte: Yeah, so the name was left open to register, probably, and they never even covered themselves on the Web.
David: Exactly.
Monte: Right.
David: Exactly. And such a goofy long name . . .
Monte: So, you . . . I’m sorry, go ahead.
David: No, go ahead; sorry, Monte.
Monte: What I mean, you have the advantage because you got in early and you’ve been able to accumulate some of the most valuable properties. What would you suggest to the folks that weren’t in the situation that you were in, that got in early, missed the first initial rush but still is interested in the industry. Because there’s a lot of legs in the industry still. Do you recommend them holding out to try to buy a domain name in the aftermarket? Are there still good strategies and techniques in acquiring decent names with the extensions that are available today that may not be .COMs? Give us your feeling and your feedback on that.
David: Well, I’m very, very pro-.Com. What happened 8 years ago was essentially with the public Pop phenomena. They know it as .Com. That’s not to put down other TLDs or extensions, because some do quite well. My brother and I we only buy, develop .Coms. In fact, I had seen some great .Orgs and I have bought the .Com and we immediately get the spillover traffic because . . . I mean, remember when Cheney was on the debate and he kept saying FactCheck.com – well, it was FactCheck.org. But even he, you know, intuitively, just went to the .Com.
Monte: Right.
David: And, and, remember, we’re dealing . . . remember, the public has the final say here. And the way they go and what they remember and how they utilize it, its going to dictate a lot of your revenue. And I feel that . . . you know, I’ve spoken to some people that are developing these names that, you know, you’re never going to remember; you just hope that they’re going to be totally search engine dependent. There’s no intuitive traffic. And I said, you know, you should have taken all that money, because they’re spending a fortune on traditional media – radio and TV – and you should have bought a really good domain name. Because its an asset; it’s a great investment. It already has intuitive traffic. You have a pipeline always coming through. And you’re already building a momentum. The idea of starting from the ground up with some goofy long name or whatever is just . . . I would never do it. I’d rather invest in a name that has the intuitive traffic and then build from there with an idea and a way to market it and put a product or content behind it.
Monte: Right, right. Now, the other side of your business that you’ve been successful at, besides having the name, and that is you mentioned earlier, the content side. You’ve been able to turn a lot of the domain names into very sticky, content-rich sites that’s actually conducting business, generating traffic, even more traffic, and revenue. Talk about the tricks that you’ve been able to learn, some of the feedback and some of the inside that you’re able to give ot others about putting up the best types of pages with the right content so that it attracts business and people can be successful once they have a website up and running.
David: Well, the old saying, ‘Content is King,” is 100% true. So, we believe in that so much that when we sign a client – let’s say PalmSprings.com, which is, you know, that’s our flagship site – with PalmSprings.com, when we sign a client, whether it’s a hotel or a restaurant or any type of business or attraction (it doesn’t matter), we don’t link out to the site. We build them a flash page and you know what? We build them a flash page for free. And then we link off that page. So, as long as the flash page is free, they never argue. They pay us for the place in the advertising but we build the flash page . . .
Monte: And then you can put that up there as a linking strategy . . .
David: Exactly. And also its original content. And, uhm, all the reps, you know, they’re also writers – that’s the kind of sales people we look for, people with this kind of duality, where they can sell but they can also write – and they throw up this flash page. They interview the owner; the owner loves it. And its great, because it works two ways – one, works well for us, because we have the content; two, it works well for the consumer because time is your enemy on the Internet. Most people that are flying to a site are going to absorb 80% of what’s on the page in about 10 or 15 seconds. And if you’re really trying to get your client out there, its almost like a page in a magazine or if you’re driving on the freeway at 90 miles an hour. The time you have to look at a billboard is about as much time as you’ve got to push that client on a high traffic site. So when we’re linking out to a site, they do its called ‘ping-ponging.” They get hit with a front page, there’s a table of contents and chances are they’re going to hit the back button and ping-pong back to the main site, which would be one of our city sites. We learns with the flash pages that the revenue and the business just skyrocketed for the client. So it was a win-win for both the client and for us as a domain owner.
Monte: Yeah, that’s great. So, that’s a great linking strategy that maybe not a lot of people know about it is that it’s not that you bring them to your site but you build them splash page and then you link off of that site, so that helps with your link relevance and your link power rating in terms of the industry and its valuable content that’s dynamically changing. And then is your advertising business from those particular clients based off of a CPA model? Is it based off of a cost-per-click? Do you get a percentage of everybody that signs up and stays at their hotels, for instance? Or books reservations at a restaurant? Tell me how . . . what’s been most successful for you.
David: Oh, well, the first type I heard about CPC, I went running the other way. It didn’t make any sense to me, because I’ve been in sales. I’m thinking, my God, if somebody gets 5 real estate leads, they could sell a $600,000 house but how much is that in CPC? So, it didn’t appeal to me. And I basically took my write history and I’m kind of an amateur historian (I know the history of radio and television) and I was thinking of print media and I’m thinking, well, why don’t we just do static ads? And, of course, you raise your rate. You start real low; they get slammed. And we raise the rates. We do that with some people. With some people, for instance, GolfClub actually pays us a licensing fee. They licensed the golf section of PalmSprings.com. There’s different ways. But we don’t do CPC ever. We do static rates. We build it to the point where we’re looking at a way as if we were a newspaper or a magazine. And I think most people should look at their sites that way. I mean, could you imagine if the The New York Times was paid by running a full page on a Sunday but the The New York Times only got paid by how many people called the phone number on that page. They would never do it.
Monte: Right.
David: They’d put the page up and whatever your business is, that’s . . you get and they get they’re flat rate. Well, that was much more appealing to us. And we did it. And I’ve got to tell you – the revenue stats beared out. Just the front page alone, on PalmSprings.com, a year – I don’t even want to say what it makes. But its just . . . some people look at us cross-eyed but it does well and it has a 94% resigning rate. And the front page is currently sold out.
Monte: That’s great. That’s great.
David: [inaudible] something right.
Monte: So, now, off of your city sites and maybe on to something like Kennel.com and some of the non-city names: Cost and Whiskey and those types of things. Are you monetizing those for, you know, through just generating parking pages or are you doing stuff with those as well?
David: Well, as we develop [inaudible] DayCare.com – you have all the daycares pay for the listing according, you know, based on their region and city. Yeah, you get more into the flat rates. When you build a site, you have a name with intuitive traffic and then you compound it with the search engine traffic, you’ve got this unbeatable battleship. And once the client’s realize this, they start coming on. It’s . . . it just starts to snowball and we did it very well with Daycare. GolfClub is doing great. We’re going to start to do it with Kennel, which will be fun, ‘cause I’m a dog owner. And then as we get to the other sites, you know, these are big sites. These are big projects. And they’ve got to be handled that way.
Monte: Now, do you do any kind of . . . do you buy any kind of keywords? Do you do most of your business organically and generate your traffic through the mechanisms that you described? Or do you go out and buy keywords and drive additional traffic to your site? Or do you rely on the natural, direct navigation from just having kick-ass domain names?
David: You got it. You just said it perfectly. The direct, kick-ass navigation. I mean, what is the point of, ah, we spent a lot of money – our last major acquisition was National.com. And we spent a lot of money on the name and some people kind of looked at us. But let me tell you something – when ReMax came on, the site wasn’t even up yet and as soon as we put their lead sheet up for real estate, they got 5 leads the first day. And they called me right away and they were like, are you playing a joke on us? And I said, what do you mean? And they said, you can’t find this name – how did we just get 5 leads? I said, it’s called ‘intuitive traffic’ and you know, they got it. And its funny because once the client sees it, they realize there’s your site and then there’s everybody else. And that’s it. Yeah, you have the intuitive traffic. But then of course as you build content, you know, the engines pick you up but you compound it. You got to realize that PalmSprings.com, which I think for search on Google right now, it’s like #2; it does really well. 70% of the traffic to PalmSprings is not through a search engine.
Monte: It’s through direct navigation.
David: It’s intuitive; correct.
Monte: Right. So, it’s becoming . . . it’s becoming like an Amazon or an eBay, because people are just typing it in. There’s no reason to go anywhere else.
David: Right, right. Exactly. And the thing is, is that it even has [inaudible] advantage because people already knew what Palm Springs was. I mean, Amazon, I thought was 10 foot women out of Brazil until I realized what they were doing with the site. eBay, I didn’t know what that was so I went to the site. With a lot of these other names, you know, for instance, when you have a like Kennel.com, you know it’s about dogs. We own Bullion.com. When that’s developed, of course, it’ll be about precious metals.
Monte: Right. Right. Well, that’s great. That’s great. Any other tips or tricks that you could share with everybody that people wouldn’t even know about that maybe will help them be successful in their business?
David: It’s actually pretty simple. My favorite phrase is “Less is more.” I mean, remember, time is your enemy. The public . . . if you’re putting something in front of the publics face, give them a lot of information in as short a time as possible and in as many different areas and uhm, it’s worked. I can tell you my brother and I have done it many time. Even recently, not just back in the beginning when they were inexpensive – we ponied up a lot of money for these domains. And they are assets and correctly built, they are worth every penny times 100, whatever you’re going to pay for them.
Monte: And, just give us some insight. Being a domainer from the very early days – where do you see the industry going in the next one to five years. What do you think is going to change and what do you think is going to remain the same?
David: Well, its going to be . . . there’s no real shortcuts. I mean, its going to come down to content. It’s going to come down to developing these names. I mean, parking is nice but you know, when it gets to the point where you really have to develop these things; its snowballing out there and we do really well but we still . . . we haven’t stopped pushing. We’re still pushing like its 1997. And it’s important to do that. And, you know, that’s . . . think of yourself as building a newspaper when you build one of these sites. You start as just a little head up thing and try to build it up into a big newspaper – look at it that way. There’s a lot of be learned from traditional media: the way they had to promote, the way they had to get out in the public eye to be successful. A lot of those same rules still apply.
Monte: Right, right. And, have you . . . do you have any kind of reservations or concerns about all the click-fraud that’s going on and what Google and Yahoo! are doing to clean their networks up? Does that directly impact your business at all? Or do you think it helps it?
David: Well, we don’t deal with clicksters, so we don’t have the click-fraud problem. I mean, we, you know, it’s a different thing with us. I mean, some of our clients want traffic – some as far as the hotels frankly track the revenue coming in off their ads with us. Uhm, I mean, we’re in a different ballgame, the way we do it. We do it a much more . . . kind of a different way. I mean, I always thought click-through was done, because if you had a site and the client wanted to make sure the traffic that comes to that site was, you know, applied to them, you did the click-throughs so they knew the click-throughs was traffic that applied to their business. We don’t have that problem. We deal with a city name or one of these big intuitive names like Kennel; you know, people got to Kennel because they have a dog. People go to Nashville because its about the City of Nashville. So we don’t have that dilemma.
Monte: Right, right. Well, I was just talking about the industry as a whole, you know, about how its going to affect – actually, I think what’s going on with this whole click-fraud phenomena and ad traffic with Yahoo! and Google actually helps great domain name direct navigation sites, because people tend to type in those domain names and that’s been consistent. Like you said, 90-some-odd percent of your traffic comes in from direct type ins, not from search engines anyway; yet, you’re listed as #2 in the search engine for Palm Springs.
David: Right, right.
Monte: Organically.
David: Yes. And but it’s only all the engines for PalmSprings.com is only about 30% - 32% of the traffic.
Monte: Right.
David: Because when I found that out, it blew me away. I thought, before we really did the numbers, I thought maybe 10%, 15% and then when I saw that (and this is going back aways), I just leaned back in my chair and thought, of course. This is why this site is generating so much revenue. When I think of the word intuitive (and I agree with what you’re saying, now, about click-fraud and how it does really shine a nice light these names that have the intuitive traffic) – intuitive traffic is pure traffic.
Monte: Right.
David: It’s pure traffic and there’s no funny business about it. And the advertisers and the clients, you know, they realize that. Like I said, PalmSprings.com has a 94% resigning rate, which is ridiculous.
Monte: Yeah, that’s crazy. That’s crazy stuff.
David: I mean, the amount of money to be on that front page, you’ll see one of those little tiny tiles on PalmSprings.com, the average rate is $1,500 a month on a one-year contract.
Monte: Wow! [laughs] You’re doing great on that. That’s for sure.
David: [inaudible] being along there so.
Monte: Well, what you’re experiencing, even though you have a great direct navigation name is the latest study that came out from WebSideStory, which did the study in 2003 about 47% of all Internet users typed in directly to the URL line where they wanted to go. I don’t know if you remember that study from 2003?
David: Yes, I do.
Monte: And that was the beginning of what direct navigation was, that although there were search engines available, that 47% of all Internet users went to the URL line to type in their ultimate destination to get where they wanted to go . . .
David: Yeah.
Monte: And that study was just redone in the Spring and the stats were amazing to me. And that is even with the increase of Internet users, the resurgence and the increase of the usage of search engines, that now 67% type in directly to the URL line of where they want to go. So, its direct naviagation. It’s all about direct navigation. It’s about typing directly where you want to go to save steps and time. Although the search engines are, of course, huge and making tons of money on their paid advertising listings, and there’s more and more people doing research and looking at other things there, most Internet users type in where they want to go in the URL line to get there.
David: You know why I like that because the thing about the Internet that really appeals to people, individuality and thinking on their own – most people don’t want to be told what to do. And they like to just go with their instincts once they’re allowed to do so and that’s what that says to me. It says to me, you know, they’re going to go with what makes sense to them, and put it in. And that’s exciting to me because it shows the people as they’re getting used to the Internet and as they’re getting more comfortable with it. And its becoming a part of their lifestyle. They’re using this medium the way it makes sense to them. And I actually caught myself doing it, actually, a while back. I was going to Monterey for a weekend and I didn’t find what I was looking for; I just put in Monterey.com (which is a great site) and that’s how I found a hotel. And I said, look at this; I just did it myself [laughs] what are clients are doing.
Monte: Yeah, definitely. Well, David, its been a pleasure having you on and I look forward to meeting you for the first time at the TRAFFIC Conference. We’re also representing your domain names for sale. And just some high points or highlights about some of the names we’re selling in general. Of some of the top names, you’re names are some of our top names that will be up for auction and are getting some interest, and that’s Cost.com and Whiskey.com and Bourbon.com and so on and so forth. And you know, its exciting to see some of those headline domain names getting attention and also up for auction for what could be millions of dollars.
David: Yeah, we’re looking forward to it. My brother, Michael and I, this is the first one we’re going to. We’ve heard great things about TRAFFIC. Looking forward to meeting you and saying hello to everyone.
Monte: Well, great. And thank you for being on Domain Masters and the show will be archived and I’m sure a lot of things that you had to say will take heart with a lot of people that are listening and help them be better at their online business as a result.
David: That’s great. Thank you, Monte.
Monte: Alright, thank you, David; I’ll see you next week at TRAFFIC
David: I’ll see you at TRAFFIC. Take care.
Monte: Okay, bye-bye. Okay, folks, well, again, thanks to my guests, David Castello and you know, fortunate and definitely made a move on the Internet early, got some great properties, some great type in domain names; makes their full living with their direct navigation domain names in this business. And that’s another reason why TRAFFIC and it’s conference and the folks that attend that conference are of such a regarded . . . are regarded so highly, because they were able to go out and accumulate these domain names that are now driving, basically, 10% to 15% of all search revenue generated by Google and Yahoo! are the result of these direct navigation names. That’s a pretty big statistic, ‘cause that’s about a billion dollars now in 200 . . . you know, in this fiscal year, will be generated just from direct type in domain names. That’s incredible. So in any case, just a couple updates about the schedule next week. Next week we’ll be broadcasting live from the TRAFFIC East Conference in Hollywood, Florida. That will be Wednesday. We’ll of course have some live interviews on the floor. It’ll be 2 days before our live domain auction, which will also be broadcasted live on WebMasterRadio.fm, here on a special edition of Domain Masters. We will start the live auction on Friday at 1:30 EST and will run until 5 o’clock or 5:30 EST and there’s going to be some of the highest, most valuable domain names up for sale at this event: HMO.com, Auction.com, Whiskey.com, Cost.com; tons and tons of really, just killer domain names of the highest value and the highest regard in our industry will be up for sale at this event. And so we’re pretty excited about it. There’ll be a live auctioneer like we had at the first event and he’s quite an entertainer and we met with him today and he’s all fired up about the event as well. And, so you’re going to join us live at TRAFFIC on Wednesday for a live show for Domain Masters and then on Friday the live domain auction at 1:30. With that, I’ll let everybody go. If anybody’s interested in attending the conference, there’s only 5 seats left. Go to TargetedTraffic.com and there’ll be three conferences in 2007. Also, just a note is that we’re going to be putting on the world’s largest and first adult domain auction at the InterNext Conference on January 17th in Las Vegas, Nevada, as well. And so, this is . . . this live auction format is definitely hitting home with folks and the outside investment world and also within the industry itself, so we’re pretty excited about that. With that, I’ll let everybody go. Have a great week. Be the master of your domain. And I will see you at TRAFFIC, live, next week. Take care.
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