December 11th, 2007
I’ll be quite honest with you – this post took some courage to write. It’s a topic that is hotly contested as of recent. Peruse a domain forum where somebody mentions the acronym ‘IDN’ and you are sure to find people choosing sides. Some of the discussions get ugly quick. I am not sure why, though. I do know that for all of the opposition to IDNs nobody has yet to convince me why I shouldn’t have purchased more than 3,000 of these darn domain names.
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Posted in IDNs | 12 Comments »
December 8th, 2007
It’s been 8 years now since I registered my first domain name. And since that time no other topic of conversation has stirred more emotions than “domain valuation.” Attend a domain industry conference and you are surely to meet up with a circle of business owners talking about “x” this, or “x” that, well maybe not – more likely they are talking about the food at the previous night’s sponsor party. That aside, I want to bring this topic back into the spotlight and talk about the value of a domain name. I also want to discuss where the liquidity in the domain market exists. This may even answer that all important question that people are always asking: why can’t I sell my domain names?
My equation in the title of this post sums up how I view the value of a domain. A domain name has value equal to the value of its traffic value, brand value, utility value, and discretionary value. How nice – I am sure this clears it up for everyone? Not. What I am trying to get at is a domain name can have zero traffic value but still have brand value. A domain name can have zero brand value but have traffic value. And, a domain name can have neither brand nor traffic value but retain some discretionary or utility value (a person’s name such as BobSmith.com, for example, has value to ‘Bob Smith’). I guess that also leaves the chance that a domain can have no value, or a value comprised of two or more of the variables.
I believe the difficulty with quantifying, or appraising, the value of a domain name is that all four of the variables in this equation can be subjective – especially brand value and most certainly discretionary or utility value. That leaves us with traffic value as being the lone quantifiable variable, and even this discussion doesn’t get settled very easily. However, I believe that traffic value has been the stimulus for much of the liquidity we have seen in the domain name market. This is not to say that domain names have not been purchased on the basis of the value from any or all four components but I would argue that traffic value has been a clear “market maker.” Read the rest of this entry »
Posted in Domain Names | 5 Comments »
December 6th, 2007
This is the first post on our blog so I thought I would start off with something that is both timely and controversial: DEBT. Timely because of last week’s announcement that NameMedia had completed a deal to establish a $125 million credit facility; and controversial because of the topsy-turvy ride we have taken in the global equity markets this past month mostly attributed to the spillover from credit concerns in the US. Therefore, I believe that speaking to the topic of debt is a great starting point.
Before I go into some financial analysis let me first state that, admittedly, debt is an uncomfortable topic for me. I am not fond of debt, personally. As a business manager, however, debt can and often is the best friend to a growing company. It is cheap – let’s come to this a little later, and it is often easy to acquire. Quite simply, debt shouldn’t be a dirty word. And using debt to finance acquisitions or new capital projects should not be frowned upon.
Debt is cheap. What do I mean by this? Well, I should be more specific and say that debt is almost always relatively cheaper than other financing sources. It is cheaper than other financing sources because the interest payment on debt is also a tax deductible expense. The impact of this on the cost of debt can be significant. In financial terms, the amount of “benefit” you receive from being able to deduct your interest payments on your income statements is equal to your marginal tax rate multiplied by your borrowing rate. Wow, that was a lot to say. So, instead of trying to explain this let me illustrate this for you. Read the rest of this entry »
Posted in Domain Names | 4 Comments »
