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Depression-era domaining is different

By October 17, 2009 February 27th, 2017 8 Comments

The news of JustDropped.com joining forces with Epik has prompted a number of reactions in the domainer community.  It also raised some questions about Epik’s motivation to integrate drop-catching capability as a service offering and in particular whether we will continue to make domains available cheaply. The addition of JustDropped, preceded by the addition of the DNKO auction platform, also raised questions about Epik’s strategy.  This post — the first of many — will begin to answer these questions.

One question that has come up a number of times relates to the topic of drop-catching and specifically can anyone beat the “big boys”, e.g. Snapnames, BuyDomains, Pool.  I think this is the wrong question.  The real question is what is the future of “abandoned domains”? To answer that question requires a discussion not only about strategy but also the macroeconomic factors that informed it. Briefly stated, I believe that a lot more domains will be abandoned, starting with the marginal TLDs, and expanding to the premium TLDs.

Macroeconomic outlook — Kondratiev Winter
As context, I believe the current economic downturn is far from over.  Many economists believe that we are in what is referred to as a Kondratiev Winter.  This is an economic super-cycle whereby the period of prosperity we just witnessed from 1982-2007 is likely followed by a period of recession (current) and then a depression (pending). This “shakeout” period is highly disruptive — what Joseph Schumpeter referred to as “Creative Destruction“. Business models get tested. Those who execute well, and adapt to the new climate, are able to persist.

Never-ending deficits ultimately manifest themselves in the form of a weakening national currency

Never-ending deficits ultimately manifest themselves in the form of a weakening national currency. Thankfully domains can be priced in any currency.

Consider for a moment that China’s foreign reserves have rocketed to an unfathomable $2 trillion while the US has racked up an equally unfathomable one year deficit of $1.4 trillion. This is seismic stuff. There will be aftershocks.  For anyone building a business, the success models and instincts that worked in 1982-2000 and 2002-2007 are not likely to be the same ones that will work in 2009-2020 and beyond. As entrepreneurs, we have to consider the scenario of a protracted downturn, potentially lasting a decade or longer.

We are just getting started -- some call it "FDR Redux"

We are just getting started — some call it “FDR Redux”

For Q2 2009, US GDP shrank by 1%.  The only reason why Q3 and Q4 will likely not be negative is because of massive government spending.  Remember your college economics class: C+I+G+(X-M).  Well, C (the consumer) is in the tank. It is the “G” that is carrying the water at the moment.  Fed Beige Book notwithstanding, the recession did not really end.  It was mathematically avoided through government stimulus.  Businesses know this which is why they are not hiring. The ticking time bomb is that national economies of the US, EU and Japan, can’t continually fund government spending without inviting a worst case scenario.

Downturns lead to efficiency and that’s a good thing
So what does a Kondtratiev Winter have to do with dropping domains? Turns out a whole lot — many domains will change hands during this cycle. Back in 2001-2002, you could buy a domain on the drop, wait for the recovery in 2003, and profit as the ad market boomed. This created wildly profitable domain parking businesses and entrepreneurial icons like Frank Schilling. However, I believe this time will be different. The winning  model will likely not be the same one that worked during the last great buying opportunity, largely because the ad market will stay soft for some time.

As it is, many domain owners are not covering their registration fees. Monetization from parking continues to fall as domainers bounce from one parking company to another. Some have experimented with minisites — usually not recouping their investment. To make matters worse, the likely next move for domain renewals fees is UP, not down.  As a result, I believe that cash flow forecasts that are predicated on a return to 2007 CPM levels with no change in annual registration costs are too optimistic.  Sure, selling domains in the interim can provide some offset against falling parking revenues. However, this is not a sustainable strategy.

Epik’s strategy: capital-efficient domain development
So, how does Epik intend to weather the storm?  Simply put: capital efficient domain development using a platform-based approach.   Here are the main development themes:

  • Directory portals:  Sites like Tanning.com, Karate.com and Haircare.com all use the same back-end platform. Traffic is growing 300+% per month through entirely organic methods.  We are adding new category directories at the rate of 2-4 per month.  Clothing.com, Bookstore.com and Dive.com went live last week. Dining.com and Court.com should be live within 2 weeks. Each site gets fresh content added several times a week.
  • Product portals:  The launch of HardDrives.com 2 weeks ago is part of a larger strategy. The platform behind it will improve steadily. We will release 10-50 new product portals per WEEK through an exclusive partnership with Wishpot, a company I backed in 2007.  Wishpot will go way beyond using Shopping.com and Amazon.com feeds.  It will enable suppliers to directly list their SKUs through what is called a social storefront.
  • Reference portals:  In June we announced an exclusive deal with Evri.com.  The deal is delivering.  The network of reference portals has grown to 630,000 topics in more than 600 categories.  By year-end, we expect this to be at 1.7 million sites. Wherever possible we want these portals to be run on the stand-alone domains that most logically map to the topic.  Otherwise, we’ll use an epik.com subdomain as a placeholder.

Gloom and doom aside, I believe it is a great time to be a domainer. The web remains the most efficient platform for processing transactions — buying products, disseminating information, answering questions, making new friends, etc.  However, undeveloped domains — like raw land — are not all that economically useful. To extract value from the raw land, it has to be developed into something that is genuinely useful to some target audience whether it is something ridiculously simple like PostOfficeHolidays.com or OilPrices.com, or something way more complicated like Patents.com.

The other major advantage of a platform approach to development is the ability to do intuitive cross-linking between related topics built around a unified semantic ontology.  We have spent the last 4 months (June-September) building platforms, while adding production capacity in site hosting, content development, graphic design and project management. The factory is open for business!  We are also adding more features to the platforms and providing increased flexibility to power users — the upcoming launch of Epik Pro (powered by DevHub) will make this more clear.

To build out the Epik network, Epik needs more domains.  It matters less to Epik who owns these domains. What matters more is that the domains are able to benefit from the massive network effect made possible by semantic cross-linking. Epik’s primary function is to provide the unified architecture, regardless of who owns the underlying domains.  However for the Epik network to be a win-win with domain owners, we know that Epik also has to bring liquidity to the domain economy, through a combination of short-term monetization and long-term value appreciation.

It is my personal goal for Epik to earn the reputation of being “The Domainer’s best friend”.  Epik intends to provide domainers with many of the tools and services needed to thrive through the downturn with a primary emphasis on cost-effective domain acquisition, capital efficient domain development, and timely sale of developed websites through either private sale or public auction. The pieces of this enabling ecosystem are rapidly being assembled.   However, Epik can’t do it alone.  If you have not submitted your names, do it today by visiting us here.  It’s free and there is no minimum commitment.

Join the discussion 8 Comments

  • @Rob

    Very informative post, thank you for sharing.

    I am curious to see how you do with “the massive network effect made possible by semantic cross-linking” on a large scale, in competitive niches.

    Historically, this has been tried by many and eventually the links are devalued and/or the sites are delisted.

    – Richard

    • Rob Monster says:

      @Richard,

      Wikipedia has 53 million pages indexed by Google. It is also built around semantic cross-linking. The crowd did a good job keeping the content authoritative, and making the cross-links relevant. Epik envisions a similar approach but with the major difference being that content is federated across nodes of content that combine content and community, and which can be navigated to using a domain name. There are of course multiple ways to achieve this objective. Done well, I think domains can be a valuable ingredient for making it easier to find the content you are seeking with as few clicks as possible. As the web transitions to mobile devices with smaller screens, direct navigation becomes even more important.

      So, I believe the bottom line is that a sustainable effort will require that the cross-linking be done well. And for this we have the benefit of a large head-start from existing efforts to build ontologies of content. Evri.com is one example but there are many in more and more areas of vertical knowledge.

      Rob

  • @Rob

    I agree that a great internal linking structure is very useful to the visitors – and the SE’s.

    But once you start interlinking domains of the same theme it becomes tricky, especially if the content on the sites is thin (ie. parked, mini sites etc.) and you’re using the same “backend” to build all of the sites.

    We’ve been building out a few hundred sites in the geo domain space using our own platform using a very strong internal linking strategy on a per domain basis. We’ve had great results, but we’re not interlinking like content between domains at this point. 😉

    “Epik envisions a similar approach but with the major difference being that content is federated across nodes of content that combine content and community, and which can be navigated to using a domain name.”

    Like I said, I look forward to seeing you do this on a large scale with competitive niches.

    – Richard

  • Rob Monster says:

    @Richard – I believe the key is to develop useful content with valid links. This is tedious but the alternative is damaging to the brand. The unified platform does not mean duplicate content — to the contrary. There is a big difference between being “machine generated” and being “platform based”. Epik is the latter. We use technology to help manage content, community and workflow. A small army of content writers is under construction in our offshore center in Sri Lanka. Moreover, we are working to build out a network of professional writers for major categories in the content directory.

    Important to note, with a unified platform it is possible to maintain consistency which would be nearly impossible with a network of mini-sites. As many in the industry know, we use DevHub for some of our back-end. The release of Epik Pro later this month further integrates DevHub. This is one of 3 active platforms, the other 2 being the directory platform (e.g. Tanning.com) and the product platform (e.g. HardDrives.com). We are working on platforms for local geo sites (of which we already have thousands) and for fan sites (e.g. MitchelMusso.com).

    The product area is one area in particular where cross-linking offers up some interesting possibilities. For example, consumer the new site Clothing.com which just went live. If someone searches for say “Roaring 20’s styles” we should cross-link related sites, e.g. Flapper-Dress.com which is an Epik product portal. Easier said than done but this is the essence of semantic cross-linking in a way that is “user-centric” and contextually aware.

  • @Rob

    Great info, thanks for sharing.

    Look to forward to following your development efforts and seeing the results!

    – Richard

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