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Tapping  Into the Booming Market for Domain Names, an Interview With Jeff Tinsley of  GreatDomains.com

 By  Shelley M. Liberto, Esq. (liberto@wwwiz.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 sale.

 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.

WWWiz: 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.

WWWiz: How do you measure the number of clicks for a  Web site that's not up yet?

Jeff: 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?

Jeff: 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?

Jeff: 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?

Jeff: 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?

Jeff: 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?

Jeff: 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?

Jeff: 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?

Jeff: 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?

Jeff: 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.

WWWiz: 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?

Jeff: 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?

Jeff: 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?

Jeff: 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.

WWWiz: Do you see anyone buying the top-level  domain names for investments only?

Jeff: 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.

Shelley M. Liberto is an attorney whose  practice focuses on software and Internet-related issues. His Web site is  located a http://www.libertolaw.com/.

 

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