Tapping Into the Booming Market for Domain Names, an Interview With Jeff Tinsley of GreatDomains.com
By Shelley M. Liberto, Esq. (email@example.com)
The registration and sale of domain names has become a legitimate and booming sector in the advertising industry. GreatDomains.com, founded in 1996, is by far the largest auction marketplace for secondary market domain names. The site currently offers more than 750,000 domain names for
GreatDomains.com also offers high integrity appraisals, escrow services and a ``free-parking" space to test out the inherent
popularity of commercial domain names not yet in use. With the most popular dot-com names rapidly becoming unavailable, the secondary auction market for domain names promises to be a booming business for years
to come and GreatDomains.com is sure to be in the forefront. WWWiz contributing writer and Internet attorney Shelley Liberto interviewed GreatDomains.com CEO Jeff Tinsley.
Let's talk about the history of GreatDomains.com. Who came up with this idea? Is this your project?
Jeff: GreatDomains.com has a very interesting background. The company was founded in 1996 by Steve Neumann and Irene Ng.
Steve is our current president and Irene is our vice president in charge of brokerage operations (they both happen to have their real estate licenses). Together they ran one of the first companies that made
real estate listing information available publicly over the Internet. One day, Steve realized that these names would be traded like any other real property and decided to set up a site. I joined them in 1997 and the
company has really taken off, especially during the last year. Steve had the vision that one day these names would be very valuable and there needed to be a marketplace to buy and sell these names.
GreatDomains has established the principles and procedures by which these domain names are bought and sold. So our contract and escrow process has really become the standard. We're also the only ones that can
legitimately give you a true appraisal. We have a proprietary evaluation model that has become the industry standard as well.
WWWiz: How does one appraise the value of a domain name?
Jeff: Our proprietary 4-C model is similar to that used in diamond appraisal. You've heard of the 4-C model for valuing a
diamond, right? Color, clarity, cut and carat. Our first ``C" is character. The fewer characters the better, of course. The second ``C" is commerce. We actually have about five subcategories under commerce.
How large is the industry that the name applies to? The third ``C" is whether or not the name is a ``.com" or not. Because obviously everybody wants a ``.com" and those are the most valuable. Finally, the last
``C" stands for clicks. Many of these names are actually getting visitors to the site even though there is no site on the other end. Loans.com, for example, had about three-to-four thousand visitors a day
without any marketing, which is pretty amazing. Those three or four thousand people were expecting to find a company on the other end that could facilitate financing for them.
How do you measure the number of clicks for a Web site that's not up yet?
It can be tracked. We provide our users with a free parking page. That's what we call it if they don't have a site on the other side. We track the statistics to see how many visitors they're receiving on a monthly basis. We point their DNS (domain name server) at their registrar over to our DNS so they automatically have a free parking page. Users that visit the parking page can make an offer on the name from that page.
WWWiz: How does your system work? Is it based on a commission system?
Yes it is. If a buyer is found through our site, a deal is negotiated through our site, and we handle this transaction through the contract and escrow process. We typically take 10% plus a $250 escrow fee. If a buyer is found independent of our service, individuals can still use our contract and escrow services. With this service, we ensure the buyers will get their name as well as protection and the sellers will get their money. That service costs 1% of the transaction or a minimum of $500.
WWWiz: Is this simply to assure the security of the transaction?
Jeff: Yes. For their protection, of course. We also handle all the messy paperwork so they don't have to.
WWWiz: Have you come across cyber-squatting issues in connection with your business?
GreatDomains.com is very careful not to step on the toes of any third party that has rights to a name. When a user is interested in listing a name for sale, they have to acknowledge that the name they are listing does not infringe upon the rights of a third party. There is no reason for us to handle names that infringe upon a trademark. There are enough good generic names out there for people to buy and sell. So we just handle the typically generic names where there is no issue. Let me give you an example, we have been contacted by several companies including Lycos, AOL and others that have found certain names listed within our site to which they object. As soon as we're notified that there is a problem, we immediately delete those names. We also have a filter that is set up on our site to keep those names from being re-listed. We've contacted the top 5,000 companies in the country to let them know we will filter names that they do not want listed on our site. So we've really taken a proactive approach.
WWWiz: Does the same filter work with users' inquiries?
Yes. We have the filter set up to block the ability of users to add a particular name or make an offer on a related name. For instance, Netscape asked that we not allow any words to be listed that include the word ``netscape" or any domain names that include the word ``netscape," so we have a wild-card filter that will not allow anything to be listed with the word.
WWWiz: Do you feel that the value of the ``.com" top-level domain name will diminish as others arise?
No, absolutely not. All of the major companies that brand their companies with the ``.com" are fixed to it. Some companies have even changed their company names to add the ``.com." When you are forming a newer commerce company, people refer to your company as a dot-com company. It has become a standard term in the English language. If you are a real business on the Internet, you want the ``.com" version of your name. It would be a shame for you to only buy the ``.net" version. As an example, if you were to go out and buy a radio spot for the name ``Loans.net," I wouldn't be surprised if you were going to lose traffic to your dot-com competitor at Loans.com. People are just automatically used to typing in ``.com" at the end of any name.
WWWiz: Would you recommend that someone who registered a ``.com" name to also pick up the ``.net" name to avoid any conflict?
For $35 a year, it can't hurt. It's worth locking up the other extension.
WWWiz: What about some of these new top-level domain names that are being proposed? Where did ``.TV" come from?
As I understand it, the island of Tuvalu has rights to the ``.TV" extension. Idealab of Pasadena, one of the better-known incubators, purchased rights to it. Bill Gross, their chairman, is known for investing in these very high profile companies including eToys and Homepage.com.
WWWiz: Are there a host of other top-level domain names that are being suggested?
There are. We expect people to buy those as well, but once again, businesses that are putting real money behind their companies that want to establish themselves on the Internet are buying the ``.com" name. Even if you bought a ``.store" or ``.firm" or one of the others, I wouldn't be surprised if you lost traffic to the ``.com" version of your name.
WWWiz: Are there any competitors now to GreatDomains.com?
We don't have any real competitors. We're the only company that has a comprehensive set of services for this entire secondary market. We're the only one that has established a contract and escrow. We're the only one that has 800,000-plus listings within our site. We're the only one that can give a real appraisal-base, not only on the 4-C valuation model, but on the real transactional data because we have sold more names than anybody else. Our site gets over 15 million pages a month and we're one of the top 1,000 sites that people get online. None of our competitors are even in the top 10,000. So there really isn't anybody else in this market that is a competitor. We sold most of the high-end names, and we sell more names on a daily basis than anyone else. As a matter of fact, we sold more names in April than we sold in all of the other months combined. It's virtually impossible to find a name that's going to work for you from one of the primary registrars like Network Solutions or Registrar.com. People are willing to spend a little bit of money to get the best possible name for their business.
Maybe it also means that e-commerce continues to boom. As you suggest, they're just moving from the registrars to the resale market. Do you foresee the value of ``.com" top-level domain names going up?
They will continue to go up. They are in extremely high demand. There are so many new businesses that are starting every year that need a ``.com" name, yet they can't find it from the primary registrar. The demand is not going to stop any time soon. The analysts are predicting the number of top-level domain names to be sold to be 140 million by 2003, and then that market is going to slow down. Our market is only going to increase because when all the names are taken, they'll be resold.
WWWiz: Share the Loans.com success story. Who bought that one? Who registered it first?
The gentleman's name is Marcello Tiero and he is in the Silicon Valley area. He bought the name back in 1994. As a matter of fact, he got the name for free. That was back when you could still get a name for free.
WWWiz: And he registered it on Internic, is that right?
That's right. He wanted to create a site where he could originate loans and realized it was more of an undertaking for him than he thought. So he realized that the property was very valuable as he received offers over the years. We first contacted him about a year ago and at that time he was considering taking an offer for right around $100,000. We told him the property was much more valuable and we would love to represent him in the sale of that property, and we did. He eventually sold it for $3 million. He was very happy that he decided to work with us.
WWWiz: Where do you see this business five years from now? Do you predict any future trends?
Jeff: Eventually some of the companies that are being built from their ``.com" name are
going to be resold. We already have several developed Web sites listed for sale, so we foresee the sale of Internet-based businesses. Hopefully we'll handle those transactions as well.
Do you see anyone buying the top-level domain names for investments only?
Absolutely. We have come across many a savvy investor who has made very wise investments in domain names and ended up selling them for considerably more than they paid. Marcus Strofsky, the gentleman who
sold Business.com for $7.5 million, bought that name for $150,000. At the time, his friends thought he was totally out of his mind.
WWWiz: When did he do that?
Jeff: I think it was two
years ago. At the time, that was one of the highest prices paid for a domain name. I've come across many individuals that have made a considerable return on their investment in a domain name.
M. Liberto is an attorney whose practice focuses on software and Internet-related issues. His Web site is located a http://www.libertolaw.com/.