This is my first domain-related post since October 2009 and no, I'm not going to regularly blog about domain names again in future. However, this particular issue is quite interesting in that it illustrates how domain investors are taking on a technological risk when buying domain names.
Last Sunday I commented on DENIC releasing one- and two-letter domains as well as pure number domains, which were previously impossible to register. This Sunday I will have to comment on the actual results of the allocation process.
As it stands now, 28% of all one- or two-letter domains that were claimed and registered during the initial registration phase were acquired by one company only, Tec-Media-Service. The company successfully registered 193 of the short domain names. Realtime.at came in second with 48 domains and Key-Systems secured 19 domains at least. Most other DENIC members, however, were not successful. Even United Domains, which belongs to United Internet AG, was only able to register three short domains, two of which I wouldn't denote as premium domains. The newly released pure number domains, most of which are longer than two letters, were more uniformly distributed.
Why is it that most of the valuable domains ended up in the hands of a few selected domain registrars only? One answer is that those companies have been experienced in dropped domain catching, a task that requires a similar infrastructure as the registration of domains during an initial registration phase. More importantly, however, the lucky registrars knew how to play the system. Especially Tec-Media-Service had a good strategy in place: It worked together with 1API GmbH, a domain registrar located in Germany. 1API GmbH is accredited for all major gTLDs as well as the 80 largest ccTLDs (country-code top-level domains) and offering its domain registration services to other companies through its entities HEXONET GmbH (Germany) and HEXONET Services Inc. (Canada). Tec-Media-Services and 1API then cooperated with an estimated 20 to 30 DENIC accredited registrars by acquiring and pooling their domain registration queries. In order to ensure a fair domain registration process, DENIC only allowed a maximum of four domain registration queries per minute per registrar. By pooling the resources of up to 30 different registrars Tec-Media-Service and 1API have been able to indirectly send as much as 120 queries per minute. It is not known how much Tec-Media-Service paid for the other registrars' domain registration rights, but I have already heard rumors of registration rights having changed hands at prices around €10,000. Apparently, many smaller DENIC accredited registrars thought that selling their queries would result in more cash than establishing an expensive infrastructure of their own. In retrospective, this reasoning might have been correct. The numbers make it clear that only companies with the most advanced technological and organizational solutions have had a realistic chance of successfully registering the extremely sought-after one- and two-letter .DE domain names.
Domain marketplace Sedo took a similar approach by pooling the registration queries of an unknown number of registrars. But of the 3000 domains Sedo put up for auction on its website, it could only secure between 300 and 600. Most of those have been number domains of lower quality. Domains Sedo auctioned off include TV.de (€279,499), PC.de (€158,700) and DE.de (€144,277). None of these was later registered by Sedo, though.
Looking at the results of the initial registration phase, one can understand why many domain investors believe the allocation process was unfair and that insider trading was taking place. But according to DENIC, the pooling of registration rights is not illegal. Personally, I have to agree. It was foreseeable that most companies or investors would not be able to actually get the domains they wanted. As is always the case with valuable commodities, the buyers with the largest amount of cash on hand prevailed.
DENIC, the registry of Germany's .DE top-level domain, has announced that it is going to make one- and two-letter .DE domains available for registration in a few days for the first time. In addition to these, it will then also be possible to register pure number domains such as 123.de, which, unlike under .com, could not have been registered so far. As per DENIC's rules, it was not allowed to register domains without any letters or domains shorter than three letters under the .DE TLD. Those rules are now about to be changed after a 2008 Frankfurt court ruling involving Volkswagen has finally been confirmed by Germany's Federal Court last week.
Volkswagen has long been fighting to be allowed to register the domain name VW.de, because the company is commonly known under the acronym VW in Germany.
Only three two-letter domains had been registered by German companies during the short time frame before DENIC disallowed the registration of short domains years ago. Those three domain names were IX.de, HQ.de and Deutsche Bahn's DB.de. Following the court ruling in June 2008, I already speculated about DENIC relaxing its rules at some point in the future. It was only a matter of time until companies would be able to register all other short .DE domains.
Now that Volkswagen won against DENIC, the registry decided to completely do away with its rule instead of only allowing the car manufacturer to claim its domain name. I think that was the right decision, although it is still not clear how the domains will be made available exactly. It is expected that there will be a rush for these highly valuable domains, but chances of actually getting one of them are very low. It is also expected that major corporations will try to take possession of their short domains through legal actions. About all two-letter combinations are trademarked, so lots of companies will undoubtedly go after their acronyms with the help of their legal departments. The case of Volkswagen has shown to what lengths large companies will go to protect their brands on the Internet.
What surprised me and domain industry insiders, is that DENIC is going to expand the German name space on October 23, 2009 already. That is only five days away from this post and it leaves registrars with very little time to prepare for the thousands of domain registration queries they will be receiving for these sought-after domain names. For this special occasion all DENIC-accredited registrars were given a limited number of queries they may send to DENIC per minute in order to ensure equal opportunities for everybody. But smart companies are trying to play the system already. Domain marketplace Sedo, for example, has partnered with selected registrars in an effort to pool those limited domain registration queries and increase chances of successfully registering a domain. Sedo started a special online auction for the most valuable .DE domains that will be made available. Interested parties can place bids on the domains they want. The highest bidder of a domain will then get it if Sedo and its partner registrars are successful in registering it on behalf of the bidder. Bids on most two-letter .DE domains are currently in the low to mid four-figure range, but there are still more than four days to go until the auction ends and the domains will drop on the open market.
It will be most interesting to see how all this will play out, considering the high amount of money ready to be spent on these rare domain names. As said, the exact process is still not entirely clear. I hope DENIC will explain things better in the coming days, so that all interested companies and private investors will know how to best go about applying for the domain they want.
Yahoo Search Marketing to change its payout algorithms and stop doing business with some of its direct partners. Overall, lower revenues for Yahoo's pay-per-click advertising partners are expected.
As has been reported by two blogs today, Domain Name Wire and Julia Mackenzie, Yahoo's search marketing division is going through some changes that are likely to affect the bottom line of the company's domain parking partners.
Yahoo (YHOO) already announced last month that it would change its payout algorithm, a change which will have a direct effect on the pay-per-click revenue that is generated through domain parking and that is paid out to Yahoo's PPC partners. Rumor has it that the new algorithm will evaluate all clicks even more strictly based on the quality of the traffic sent to Yahoo's advertisers. It might be that Yahoo is trying to increase the traffic quality of its search marketing network now that it will cooperate with Microsoft's Bing for the monetization of its search traffic. Whether Microsoft (MSFT) made it a requirement that the traffic quality may not be below a certain level is not known. Anyway, this change will definitely lower the cost per click for most domains and hence result in lower total revenues for domain name owners. Domain Name Wire has been told by industry insiders that domain parking revenue is expected to decrease by as much as 12% on the average.
In another related blog post today, Julia Mackenzie spreads the rumor that Yahoo is also going to stop working with some of its direct domain parking partners if their traffic score is below 7 out of 10. The traffic score is Yahoo's internal rating of traffic quality. This is a further step undertaken by Yahoo to improve the traffic quality of its network, and it will force some partners to go directly to Google (GOOG), if possible at all, or simply go to one of the many third-party domain parking providers like Sedo or Parked.com. Either way, they will probably suffer a severe loss in revenue.
Both Google and Yahoo have been working directly with holders of high-traffic domain portfolios to monetize their partners' traffic, which usually is a win-win relationship because the domain portfolio owners do not have to share their revenues with a middleman. But now, as it seems, Yahoo is going to decrease the number of its direct partners. Julia also writes, however, that the company's syndication partners (the big parking companies) will not be affected by this decision. That means that Yahoo and the syndication partners will be the winners here, while Yahoo's smaller partners or at least those with lower-quality traffic will lose out.
Domain parking revenues have been on a decline for a long time now and, honestly, I have lost faith in revenues ever going back up again. It is more likely that either Google and Yahoo or the third-party parking providers will try to get an even bigger slice of the pie in the future. What are the alternatives for domain name owners? Developing domains and then using AdSense for monetization is no real option, because AdSense is controlled by Google, too. I guess direct advertising deals is the answer, but that's material for another article.
Domain auction company SnapNames sells close to $47,000 worth of domains in its September online auction. MillionaireDating.com is the highest sale at $15,000.
As reported by Oversee.net's public relations department, the SnapNames September showcase auction concluded today with a total of $46,930 in domain sales. Out of the 90 domains 23 were sold, namely:
Especially MillionaireDating.com is a very good sale at a high price, in my opinion. Assuming no traffic, I would not have bid that high for it as-is, but apparently the buyer saw something in it that I don't see. I know a successful marriage broker from Switzerland who helps wealthy customers find the right partner. He is a multi-millionaire now, and every time he comes for a visit he either drives an old Bentley or a limited-edition Lamborghini Diablo. So lots of money can be earned when pairing millionaires off with each other, but it should still be difficult to make that much money on the Internet in this business, because there will always be something reclusive about upper-class dating that requires absolute confidentiality.