Frager Factor

Wednesday, October 06, 2010

Mike Berkens Nets $230,000 on 2nd Best Domains In Three Months In This Horrible Economy

Photo: Judy, Bandit and Mike Berkens via DnJournal.com

'We're still selling names, mostly to end users. We don't really sell anything for under, realistically, 5 grand. Very, very rarely do we sell something under that. We've sold, including two pending sales that I have at Escrow, I was just looking back over, about $230,000 in domains this year in this horrible economy ~~ Mike Berkens March 2009


Take a trip back and time and learn from a doer and thinker who is transforming the web. It's Mike Berkens and part two of his conversation with Jeff Zbar on Domain Success. In it he does something that he rarely does. He discusses specifics about his domain name sales.

Mike: Domainers could be broken up into groups and the different groups are far different, have different needs and requirements and have different abilities to acquire domains. Some domainers need to sell a domain to make their rent payment or their mortgage payment. Other domainers, it doesn't change their life if they sell a domain for a million dollars or not. You got another guy who may need $5,000 next month to pay his mortgage or 1,000 bucks to pay his rent. He needs to sell. It's hard to generalize about all domainers because they're just so varied in needs and assets.

From my perspective, we've always looked long term. I've never done any, what you would call, domain flipping, which is acquire a domain with an eye to flip it off to somebody else and make a small profit within the next 30, 60 days. Never done it, so I really can't opine about that situation. I know a lot of people do it and they're successful doing it. I think it's going to be harder with this economy to do that. So if that's something somebody's used to doing, I think they're going to have a harder time of it.

Jeff: Right.

Mike: I can tell you that from what we're seeing, we're still selling names, mostly to end users. We don't really sell anything for under, realistically, 5 grand. Very, very rarely do we sell something under that. We've sold, including two pending sales that I have at Escrow, I was just looking back over, about $230,000 in domains this year in this horrible economy. There are buyers out there. The Internet's still growing. The case can be made as people are losing their jobs to the tune of half a million a week or so, these people are not finding employment and a lot of them are going to be turning to the Internet to build out some sort of business. Something so that they can earn some money for themselves.

Jeff: Right.

Mike: They're going to need a domain. I wrote a blog about this, I think, a few weeks ago. These people don't have $150,000 or a million dollars to go buy a domain, but they have $5,000 or $10,000 and they see the value in it and they'll spend it. There's a lot of money that flows through the system.

Jeff: Right. In 2007, Dan Warner of Fabulous had identified your MostWantedDomains as having one of the top five privately owned domain portfolios. It's hard to say this, but the current market aside, how do you go about amassing such a portfolio and protecting it for the long term? You've touched on some of that as far as being smart, looking at second-tier or the second-stage name, if it's not Toys, maybe it's ToyStore. How would somebody maybe look at it with today's market in mind to amass a portfolio like that and to protect it for the long term? I imagine it means maybe being a little bit leaner in the names you choose as opposed to thinking, "I'm going to grab hundreds or thousands." Maybe get a few really good ones as opposed to a bunch of fluff.

Mike: Right. It's a good question. I think the honest answer is probably, as we sit, there's very little chance of anybody acquiring a portfolio of this nature and of this size the way things are right now or duplicating what Frank was able to do. I know a lot of people look at Frank and look what he did back in 2001, 2002. The last time the Internet bubble burst, so to speak, where he was able to acquire hundreds of thousands of premium domain names and build the world's best domain portfolio. Can you duplicate that? I don't think you can.

There are some reasons why you can't. One of the reasons is that a lot of the domains that we all picked up back in the day were picked up outside of these drop auctions. Before the drop auctions, there were just drops. It was first come, first served. There was scripts and other ways of getting these domains at greatly reduced prices. We weren't paying thousands and tens of thousands of dollars per name for these great domains that we got. That's right now where the market's at. Still looking at NameJet, even in this bad economy, a good name is still selling for $10,000-plus on NameJet.

Jeff: Right.

Mike: Can you get 75,000 or 50,000 really good domains? Probably not. It's not realistic. If that's not available, then you need to take another approach at it. You don't need to have 50,000 great domains. You can have 1,000 really good domains and you'd be doing fine.

Jeff: There's a newspaper ad that used to run on, a TV commercial for a newspaper. They used to say when you're ready to buy a stock, you're ready to buy it from someone who's equally ready to sell it. You've commented how every day we have to decide whether to sell or to hold. Talk, if you would, about the need to think clearly and firmly, not to second guess yourself. You make that decision, it comes back to that gut check. "Is it something I really want to do?" Some of these names, it sounds like you've got it down to the science of, not the passion, but the science of knowing the right number, knowing what you're willing to part with something for. How do you set that metric up? Talk, if you would, about the decision to buy, sell, hold on any given product, especially sell and hold.

Mike: Sure. I need to say before I answer the question, I need to point out the fact that, if I look back over the years, I would see thousands of domains that I bought that I probably shouldn't have bought or overpaid for and tens of thousands that I passed on that I should have bought. When you're doing domaining full-time, you're probably looking at thousands if not tens of thousands of domains every day. As we all know, it's a seven-day-a-week, 365-day-a-year deal.

If you're looking at 10,000 names every single day and you're making a decision on each of the 10,000 names, even though you're not realizing you're making it, but you really are. You're saying, "Yes, I'm going to try to get the name. Yes, I'm willing to pay $70 and backorder it. Or no I'm not." If you are willing to pay $70 and it goes into an auction, then you have to put a price on how high you're willing to go. In that process, you're going to, inevitably, make a lot of miscalculations, and you're going to do exactly what I've done hundreds if not thousands of times. To survive, like a stock trader, you can't really go back and look at each domain and what you could've done, should've done, or would've done had you had a chance again because I don't think it's healthy.

Jeff: Right.

Mike: You'll wind up causing yourself some mental paralysis, actually. Scared to do anything

Jeff: Right.

Mike: Which would be the worst situation to be in, scared or panicked. Very bad.

Jeff: I think that's true in many parts of life, in many things we decide to do. It's down to that gut check and decide and move on.

Mike: Right. If it's a long-term thing, in any business, if it's a real business, you need to look at it on a long-term basis. You can't look at it as, "How did I do last month? Is it successful or not successful?" It's more of a long-term deal. When you look back over whatever period of time you've been doing it, if it's been for a year or five years or 10 years or whatever that period is, overall, how have you done? Are you successful? Is your portfolio better than it was last year? Are you making money? How's your return on your investment? You need to look at it as an overall accomplishment or failure rather than looking at each singular domain acquisition or sale.

Jeff: Right.

Mike: You certainly will wind up selling a domain way under what you should've sold it for. You will buy and spend way more on a domain than you should have. It's just part of the business. You're going to pass on a tremendous amount of names that you'll see somebody else get and sell and make a lot of money on it that you could've made. That's the way it is.

Jeff: Right.

Mike: You can't focus on that. You just have to focus on your overall business plan, how close are you getting to it, and is the business getting better for you or getting worse. If you're not accomplishing anything, if you can't look at your portfolio every year and say it's better than it was the year before or my revenue's better than it was the year before, then you may need to change the plan.

Jeff: Right. There's that business plan and there's the fluidity of the business plan, as well. Keeping it something that's not hard and fast. It's a living, organic document that needs to change and grow and alter.

Mike: I actually wrote a post today about a guy who had sales strategies. He wrote a post about general sales strategies for general businesses, not for domaining, but I switched it around and put it into a domaining sense. The point that he had, and I think it's a really good point, is that you still have to identify your assets, in this case your domains, and you have to decide what are your platinum domains, if you will, what are your gold domains, what are your silver, and what are your bronze domains.

The gold and the platinum names you really need to hang on to, unless you get an offer that you think is a good offer for you, not necessarily in regards to this particular economy, but whether it's a good offer regardless of the economy. Your bronzey kinds of names and your silver kinds of names, those are the ones that you might want to be flexible with. Those are the ones that you might want to, especially if you need to, generate some revenue and take in some money to pay your bills. Those are the ones that you should concentrate on selling. It would be better to take, I guess, a haircut of 60% or 70% on a bronze name than taking a haircut of 25% maybe on your gold or platinum name.

Jeff: Right.

Mike: If you need the cash.

Jeff: Right. If you need the cash. Exactly. Your portfolio has a variety of names and styles and you were speaking to that earlier. You have a mix of generic search domains, but also a call to action taglines, show names. Tell us about some of the end-user sales you've made and how these names were ultimately used. You spoke of a sale before we got started earlier in the cheese category but which has not, I guess it's too soon to know how it's going to be used, but how are some of these used out there? It might even show how you saw in your mind how these might have prominence or importance to a potential buyer down the road when you originally registered them.

Mike: Right. The name we were talking about before we went on the air was GreatCheese.com, which is a name we sold in January of this year for $25,000 and change. It belongs to a cheese company and they're using it for their product. It's a true end user. I went back and looked and it's a name that we paid, actually we just hand-registered that name. GreatCheese.com.

Jeff: How long ago?

Mike: We didn't pay anything for it.

Jeff: Do you remember how long you've had it?

Mike: Probably four years.

Jeff: Four years.

Mike: Yeah. That's why I think this is long term. The names I pulled out, which we recently sold, all names that we basically acquired back in '05 and have recently sold. One of them is TestofFaith.com, which we sold for $5,000, which is one of these names that has a meaning certainly, but didn't have any PPC revenue or traffic. It was bought by a religious network that's using it now for media.

There's a name I think we acquired for 64 bucks back in '05. KeyToMyHeart is a name that we sold for five grand. Same sort of deal, same holding period. FalseEyelashes, that's a name that we just recently sold that was a name of a low acquisition cost into the mid five figures. TheLobby.com is a name that we sold also into the five figures that we paid 140 bucks for. Again, these are names that a lot of people wouldn't pick because they didn't have traffic, didn't have revenue, and they weren't stars of the show kind of names.

Jeff: Right.

Mike: But they have a value and they mean something. Are you going to be able to buy a name like that over at Go Daddy tomorrow and then have a buyer come to you next month or five months from now and buy it? Probably not. This is a long-term business.

Jeff: In looking at the other side of what you do, in developing names and products, you have a bedding domain business, one where you never touch product. Even your partner doesn't touch the product, yet you increased revenues 400% by just parking the page. It seems contrary in many ways to current wisdom. Give us a little bit more insight about this and tell us how did you know this is something that might work?

Mike: You don't know it's going to work, but you have to try things in life and see if they'll work. If it makes logical sense that it should work, then you have to try it and give it time for it to succeed. We had a name, LuxuryBedding.com, which was parked, and we were approached by a guy who does web development in the bedding arena. He actually does Bedding.com and a lot of other high-profile bedding sites. He's put up a page for us, custom designed it and made it into an e-commerce page. The name is doing significantly better than it did as a parking page.

Again, this is not an overnight situation. This is a situation that takes a little time to develop, so you have to be somewhat patient, because when you get it off of parking, you have the opportunity to get it ranked by the search engines. Again this takes time, especially once it was a parking page. A year later, now that it is ranked by the search engines, I think it has a Google page rank of four the last time I looked. Last week when I looked also, it was on the first page of Google under luxury bedding was LuxuryBedding.com. For a while it was the first one. I'm not sure where it is right now. It switches around a little bit.

The name's doing substantially better than it did as a park page. Of course, I would argue that it's a much more valuable name than it was as a park page because it now has a Google page rank. It now has a lot of repeat traffic and visitors. It's an e-commerce site. We also did this with the domain name HomeFashions.com, and I just bought DiscountBedding.com off of a NameJet auction a few weeks ago for the specific reason to accompany the LuxuryBedding name and to develop that into an e-commerce site as well.

Jeff: Interesting.

Mike: I think all of us who have been doing domaining would agree. In real estate, they have the term that's used, the highest and best use. I think we all know that parking is the lowest and worst-use, but it's easy and it's scalable to thousands of domains or tens of thousands or hundreds of thousands of domains. There's no other solution out there yet that's scalable to thousands or ten thousands, etc., of domains.


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