NEW YORK – Inside a midtown hotel, Larry Fischer is on his cell phone with a financial backer, as his partner Ari Goldberger does quick research on a laptop computer.
They are bidding furiously at this auction of Internet domain names, with hopes of snagging megayachts.com. The duo won’t be deterred.
“$110,000, yes or no? Quick,” Fischer barks at Eli, the investor at the end of the phone.
Someone else makes a bid for $120,000. Fischer and Goldberger up the ante, and then again.
Going once, going twice … sold to Fischer and Goldberger for $150,000.
These are boom times in an estimated $2 billion industry that involves the buying and selling of domain names. When people type the generic names into their Web browser’s address field, sites that generate pay-per-click advertising revenue appear. Such “direct navigation” bypasses search engines.
“This industry is like the wild, wild West right now and people have no idea how fast it’s growing,” said Jerry Nolte, managing partner of Domainer’s Magazine.
Some believe the industry’s market value could reach $4 billion by 2010 as people continue to purchase approximately 90,000 names a day and the number of domain registrars swells.
At the end of first quarter 2007, at least 128 million domain names had been registered worldwide, a 31 percent increase over the previous year, according to VeriSign Inc.
“It’s not about words,” said Monte Cahn, founder and chief executive of Moniker.com, a company that specializes in domain asset management and held the Manhattan auction. “It’s like real estate. This industry is only about a decade old. People looked at domain names as a commodity. It’s a piece of real estate on the Web that can’t be replaced. It’s your stake in the ground, your stake in the Internet.”
At the Manhattan auction, Fischer and Goldberger snatched up four names for more than $1.2 million and a fifth for a client, representing only a handful of the names sold for a total of $12.4 million during both the live and silent auction.
The auctions were held during a domain conference in June that attracts some of the biggest players in this niche business.
One name – creditcheck.com – went for $3 million but paled in comparison to the sale of sex.com, which sold for $12 million last year, according to Cahn, who knew the site’s buyer and seller.
Most of the sites are lucrative for their advertising dollars. For example, megayachts.com isn’t an actual yachting site, but it contains numerous ads and links for real yacht companies, boats and cruises. The owners of the site get paid each time a viewer clicks on one of those links.
Bob Parsons, chief executive and founder of domain registration company GoDaddy.com, says this type of business is fairly straightforward.
“They make their money in two ways,” Parsons said. “One way is through the traffic they get and the other is the appreciation of the name.”
Over the years, Goldberger and Fischer have sharpened their formula for acquiring domain names and developing the sites using a fairly simple template, relying on research, savvy and plenty of instinct.
“You either know it or don’t by hearing the name,” Fischer says.
To help figure out a word’s potential value, they see how many hits it will produce using Google. They also troll lists of names with domain registrations set to expire, enabling them to get a jump on buying it.
They don’t bother with dot-nets or the others.
“Dot-com is king,” Goldberger said. “Dot-net is worthless.”
But there’s a big divide between thinking of a good name and getting it. There’s usually a chase, with Fischer trying to persuade owners to sell the names after he locates the owners unless it’s up for auction.
“He’s kind of like a rhinoceros,” Goldberger said about Fischer. “He chases them up a tree and waits them out.”
More than persistence is required.
Five years ago, the duo could get a good name for $10,000. Now the minimum is more like $100,000 – as the auction proved. The cheapest name they bought at the auction was blogging.com for $135,000.
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