Frank Schilling the World Famous Domain Investor

http://www.seobook.com/archives/002242.shtml
Interview of Frank Schilling, the World Famous Domain Investor
[[17th May 2007]]

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Having coined the term domain investor,
Frank Schilling is a recognized leader in the domaining field.
He talks about domaining on his blog at
frankschilling.typepad.com
I recently asked Frank Schilling if he would be up for an interview and he said sure.

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[[ seobook : ::::: ]]
What is the best domain you regret not purchasing?

[[ Frank Schilling : ::::: ]]
Cameras.com sold for 1.5 million.. That was a really tasty one.. I chickened out over a million. Wish I could get in the Delorean and go back in time on that one.
Also
Food.com sold to the food network in a San Francisco bankruptcy court in 2003. it went for $300,000 ish .. I should have bid 500k back then.

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[[ seobook : ::::: ]]
Is it too late to get into domaining?
If you were starting today which model would you go after?
Would you try to buy a few strong domains
or try to own a much larger portfolio of weaker ones?

[[ Frank Schilling : ::::: ]]
I think
there are so many untapped opportunities here..
Within a few years, hundreds of thousands globally are going to be directly employed in this industry.
It is early not late.
This is like California in the 1960’s. -- yes, it’s not the 1920’s anymore,
but there are still mountains of untapped opportunity.
I would probably focus on buying and selling, flipping up and bootstrapping profits back into the business if I had to start today.
Also SEO and PPC keyword arbitrage.

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[[ seobook : ::::: ]]
What are your favorite cities to visit?
How does real estate there compare with domain name prices?

[[ Frank Schilling : ::::: ]]
I like Los Angles and Las Vegas a lot.
It’s funny because those cities real estate histories have parallels to the domain industry.
In Southern California you have Irvine
where one man basically acquired millions of acres through the early 1900’s and then sold to a large corporation in the later 1900’s.
Today the seller looks like a fool because he sold so cheap
when viewed against the development
which has occurred in the surrounding area.
Yet had he not sold, none of the roads, utilities, infrastructure would be there,
so the area would not really be as valuable.
So if there is a comparison between domains and real estate, I think
“development naturally follows acquiring the land” and
“prices increase as the people come in”
are the two over-riding factors.

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[[ seobook : ::::: ]]
How many ways do you categorize domains?
What types of domains are the best from an investment perspective?

[[ Frank Schilling : ::::: ]]
We have 60 main categories such as “cars”
and then 1600 subcategories including “car accessories”, “towing”, “insurance” etc.
The best domain-names are generic defensible keyword-style
(one two and three word)
phrases which get some trickle of organic generic-intent type-in traffic;
for nothing more than the keyword-weight, gravity and resonance of the generic words
that make up the domain name.

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[[ seobook : ::::: ]]
Many domains tend to sell for a multiple of PPC earnings. In 10 years time do you think the baseline will move to some other metric?

[[ Frank Schilling : ::::: ]]
It already has.. No good domain portfolio has changed hands since BuyDomains and that business would have sold for considerably more than the rumored amount had the company’s former owner been engaged in selling advertising alone, vs selling his names. Prior to that there was ‘Name Development’s’ sale to Marchex (Yun Ye transaction). No large, high-quality portfolios have changed hands since. Other sales have been smaller or split-portfolios consisting of good names interspersed with trademark issues.
Individual names often sell for 100 years PPC.
No high quality domainer would dream of selling a portfolio worth potential billions to a third party for 10-12X PPC revenues.
PPC is a flawed multiple because it works off a rev-share.
If you buy a portfolio for 10X
and it is on a 50/50 rev share
(after “cost of services” through Google Adsense)
that means
you sold your portfolio for 5X what Google could make with it.
Maybe
3X if you exclude the amount Google shaves for smart pricing.
[[[[[[[[[ 'the edittor notes : :::::
------------------
even may b[be] only 1.5x e.t.c.
in case of that
u cant park your property directly with Google
due2[due-to]
b[be] un-able 2meet[to-meet]
those requirements of minimum monthly traffics e.t.c.
n
[and] there4
u'r forced2park w/ the domainspa this kind o'[of]
domain parking middlemen
who can meet those minimum requirements
n
[and]
the typiccal domain parking middleman takes away
an other 50% or even more
off of anything left by Google e.t.c.,
i.e. ,
u can take only 25% or even less o'[of ]
what your property can earn w/ Google e.t.c.,
------------------
'the 3x above-mentionned by My Dear Sir Frank Schilling
's only for the case of that
u could directly park your property w/ Google e.t.c.
]]]]]]]]]]]]]]]]]]]]]]]]
That is so insanely cheap.
Only a fool would give names away like that.
If I were selling I would pick a walk away number
(the youtube style multiple)
or I would sell names individually.
The breakup value of large portfolios will be in the billions if they aren’t already.

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[[ seobook : ::::: ]]
You have mentioned that
you thought search was promoting too many anchor stores vs smaller boutique websites.
Do you think this creates an opportunity for other search players or adds value to topical community resources?
Do you see it becoming more or less profitable to make niche websites and domain names?

[[ Frank Schilling : ::::: ]]
I think of every domain name as an alternative search engine under the keyword embodied within the name.

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comments

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I think here in Germany around 80% of type-in traffic are .DE domains.
Wouldn't be surprised if it was similar in France with their .fr-tld.

Patrick on May 17, 2007 06:22 PM

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Hi Aaron,Great interview. Thanks.
It kind of re-inforces one of the larger acquistions I have recently made.
I wanted to start a community forum for Expats.
I had the choice of registering some mediocre domains or going for what I think is the real cream
- www.ExpatForum.com.
I ended up paying in the low $xx,xxx region for the name. Most people think I'm mad.
I believe that
when the site is successful
then the name will have amazing brand value power behind it.
I think ShoeMoney puts it so well when he says to always "Plan for success"...

Bob Sheth on May 18, 2007 06:19 AM

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Great Interview.
All other things being equal between 2 sites.
The advantage of using a Keyword domain is 3 fold.
1) Gets Type-in traffic
2) Better Search engine listing for the keyword, both specific and long tail
3) Better CTR
& Lower pricing for the keyword in the relevency based PPC's
like Google Adwords and Yahoo-Panama.

Ravi Venkatraman on May 19, 2007 12:33 PM

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Very rewarding interview.
I seldom read through anything like this becuase it is so often fluff ...
this one has some real meat an dis very informative.

My own cut regarding the ccTLD's ...
their type-in use and value will vary significantly from country to country. I know that
.de, as already mentioned, is very widely used within Germany.
But I have a Canadian business associate who has his comapny's "brochure" type site on
www.hiscompany.com and
www.hiscompany.ca
His "brick and mortar" market is about 70/30 US/CA, but
his traffic on the web site is more than 90/10 .COM/.CA

Dave Starr --- ROI Guy on May 20, 2007 08:18 PM

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2BR Apartment In SoHo[[that-real-place-in-NYC]] for $100k? What a Ripoff! @TropicalSEO

http://tropicalseo.com/2007/2br-apartment-in-soho-for-100k-what-a-ripoff/#comments

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2BR Apartment In SoHo for $100k? What a Ripoff!
June 21st, 2007 Domaining

I find these sorts of posts to be mind-boggling. I think we’re in an odd time where premium domain names have shot up in value so much in such a short period of time, that even some domainers are saying “Can they possibly go any higher?”

Scotland.com $1,000,000 - Nope, Wow, nice name. But I have a gut feeling, crickets will chirp. I think it is worth it but this is the wrong place to auction it off.
Seniors.com $1,000,000 - Nope, Do old people use computers? I think this one is too high.
ComicBooks.com $500,000 - Nope, Where is Marvel? Someone should broker this sale.

Premium, 1st-tier vertical domains are like Manhattan real estate.
They aren’t going to lose value year-over-year.
God ain’t making Manhattan any bigger and He sure ain’t making a second Scotland.com.
In 2009 these prices will seem laughably cheap, just like NYC real estate prices in the ’80s now seem.
Considering domainers as of yet haven’t grokked the synergy between SEO and keyword.com, it’s not surprising that much of the perceived value remains hidden.
Now who wants to give me 12M in funding to start a hedge fund?

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6 comments ↓

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#2 admin on 06.21.07 at 8:51 pm
> Is the SEO benefit that great, compared to buying a brandable and doing $999,994 on SEO/promotion?
If you have a $3M total budget
— hells yes, I would rather have Scotland.com + 2M to spend
— then[[than]] ScotlandWebGuide.com + 3M to spend.
It’s not just the typein.
It’s not just the “direct” keyword synergy.
Also
the links you get for seeming more legitimate,
the branding benefits,
the increased likelihood of offline citations.
If you have little startup capital, the costs of domains seem ridiculous.
If you’re well-financed and going for a major play,
they seem pretty cheap.

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[[[[[[[[[ 'the edittor notes : :::::
My Dear Sir TropicalSeo does always b[be] prepared2say the sweet things 4[for] domainers ,
e.g. ,
http://tropicalseo.com/2007/top-4-lies-domainers-tell-themselves/
http://tropicalseo.com/2007/why-demand-media-and-web-20-domain-parking-will-fail/
http://tropicalseo.com/category/domaining/
]]]]]]]]]

the later the dearer , the 4years price trend stats @Conceptualist

[[[[[[[[[ the edittor notes : :::::
the later the dearer[more-expensiver] , u'r the chooser ,
but ,
please
b[be] prepared 2b[to-be] held 2b[to-be] responsible for your own choice
]]]]]]]]]

http://www.conceptualist.com/?p=228

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TH·E CON·CEP’TU·AL·IST
One who maintains the theory of conceptualism

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Double Your Pleasure With Double Valuation
Published June 23, 2007 in Domain Names.

Moniker’s auction at Targeted Traffic NYC was a huge success. Allot of people, allot of activity. While 10.9M is a small number in Wall Street what’s important to note is the growth numbers.

Here are some numbers from selected TRAFFIC auctions in the last few years.
Traffic East Delray Beach 2004 - total est. 50k-60k
Traffic East Delray Beach 2005 - total est. 400k-450k
Traffic west Las Vegas 2006 - 2.1m
Traffic East Florida 2006 - 5.3m
Traffic NYC 07 - 10.9m

The numbers on some of the domains that were sold were simply mind boggling. While I believe the domains are worth it, these prices are what we are used to see from end user numbers, now selling to speculators. It makes me feel good as it gives added liquidity to the domain market, and as many have told me after the auction, it makes them feel as their portfolio valuation is now at least double as before the auction.

For a long time Rick Schwartz has said if someone wants to buy for X, ask WHY? In the past when selling a domain or a portfolio, industry buyers were buying primary based on X (rev). Today it is totally immature to sell based on X and not consider the resale value of these domains, as resale prices are quickly becoming many times over the traditional 6x-10x buyers enjoyed in last few years.

This of course isn’t the end, but the beginning. While today you have that extra power in your hands of resale value data, we are still missing many other aspects domains have, such as SEO benefits, development benefits, brand recall benefits, and other characteristics similar to real properties that apply to our domain names.

To those who have waited patiently, to those who believed, Kudos!

Cheers
Sahar


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