Most domain investors would probably agree that the results of live domain auctions have been pretty weak recently. Aside from a few strong sales that have taken place, most auctions haven’t produced the results people hoped to see. I’d like to discuss problems I see in part one and give my advice to improve live auctions going forward.

In no particular order, here are some of the reasons I believe domain auctions haven’t been successful recently.

• Lower PPC payouts and poor economy affecting domain investors’ spending ability

For a few years, live domain auctions were dominated by some of the wealthiest domain investors. Many of these people and companies were spending money that they earned from PPC revenue. With payouts down across the board, there is less money to reinvest.

Likewise, with the economy in the tank, there is less financing available for domain buyers. People can’t refinance their homes or other property as easily, and ultimately it means less money to spend on domain names. In addition, people are more reluctant to spend money on domain investments, favoring a stronger liquid position to stay protected.

• The same domain names continue to be offered for sale.

There are a limited amount of top quality domain names that are openly available for sale. Many domain investors don’t wish to list their names for sale in a public venue and/or don’t want to set a price for their prized assets. Domain names are on the market longer, and consequently, even good domain names are allowed to be placed in different live auctions with the hopes that someone bids. Oftentimes, these domain names don’t have lower reserves, and they just sit on the shelf like day old milk. At one time their inclusion made a splash. Now it’s just embarrassing to see the same names at the same prices being auctioned in different venues.

• People have ridiculous sales expectations.

Let’s face it. Everyone thinks their names are hot shit. No matter how many times Monte or Rick will hammer their sellers asking for reserve price reductions, many people are reluctant to do so. Gone are the days when a bidding war will ensure a domain name sells for what it’s worth or more. People don’t want to lower their price to a point where one bid will lead to a very bad sale.

Domain owners have lost faith that buyers will show up, and they are unwilling to drop their reserve prices. Auction houses are either desperate to keep certain names in auction with the hopes of drawing some interest (while locking down exclusivity) or they are praying that the needy end user just happens to show up, with all senses lost after being hit in the head with a bag of money.

• Long exclusivity periods.

People like myself like to sell domain names quickly. I buy as low as possible and sell as high as possible, as quickly as possible. If I have a $20,000 domain name, I can’t/won’t take a chance and lock it up for 60 days because I need to move my inventory to generate much of my income. If the name doesn’t sell, I can sell it on my own, but I am obligated to pay a 10-20% commission. Some people may opt to not honor an agreement, but that’s certainly a reputation killer if not a legal problem. With lower sales rates, it’s not a guarantee that a domain name will sell at auction and it’s more difficult to justify a long period of exclusivity.

On the other side of the business, auction houses need to lock down these domain names. They can’t afford to spend time and effort selling a domain name if the name isn’t committed to them. I know for a fact that the auction houses work hard to sell domain names before and after auctions, so it’s not fair to not commit.

• Too many auctions and lists not revealed until just before the auction.
  

There are so many auctions these days that people wait until the last minute to decide where to submit their domain names. This causes domain auction houses to scramble at the last minute to find buyers. Domain buyers have very little time to review their lists. I know the first live auction happened when people simply put names up on a white board, but times have changed and more money goes into buying a domain name.

• End user buyers aren’t showing up.
  

Perhaps this is due to the above issue where lists aren’t finalized until the last minute, but it doesn’t appear that end users are showing up as much as they should (has always been an issue). I know that the domain auctioneers spend time contacting potential buyers, especially when it comes to high ticket names, but as any domain investor knows, it’s tough to get end users to buy. They have to want a specific domain name at the offered price at the time that it’s auctioned.

In addition, end users may not trust domain auctioneers as much as they would trust other auction companies who are more well-known. This industry is still young, and end users may not be  familiar or comfortable bidding at a domain auction held by a company whom they’ve never heard about. The registration process (and maybe previously a fee at Traffic I think) could also be a deterrent. Further, Snapnames still doesn’t allow remote bidding from a Mac (unless it has Windows).

• Cronyism and friendships can impact auctions
  

In the domain industry, there aren’t thousands of active investors. There might not even be several hundred – I really don’t know. Compared to other industries, this one is pretty small and there are a lot of people who are well acquainted with each other. Many auction participants are both buyers and sellers. Auction companies want to accommodate their best clients, and sometimes that means accepting domain names that shouldn’t be in auction – or should be priced lower.

• Too many domain names in auctions.
  

There are far too many domain names accepted in the live auction, and even more in the silent auction. I know a 4 hour auction isn’t unusual in the car world, but with sales down, it seems to drag on forever. Likewise, it’s difficult for buyers to wade through thousands of silent/extended auction domain names. People don’t want to put low reserves on domain names that might get a couple of looks and maybe one bid.

• Automatic entrance into silent/extended auction.
  

It seems that most domain names that are submitted to the live auction but don’t make it are relegated to the silent/extended auction. IMO, these auctions are stuffed with bad domain names, and it makes it difficult to find good ones at good prices. Truthfully, I barely even look at the extended/silent auctions, and I am sure others feel the same way. As a result, domain owners are reluctant to put low prices on domain names that might end up seen by just a few people.

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Ultimately, I think people really lack confidence in live domain auctions right now. As a result, there are lower quality domain names with higher than acceptable reserve prices. In an effort to stem the bleeding, more (lower quality) domain names are being auctioned in the hopes of a sale, and buyers and sellers are frustrated. I don’t think most of these issues are new, but they are exacerbated by other factors.

Tomorrow, I will post some of my suggestions for how to improve domain auctions, but I would like to hear what you think about the current problems with domain auctions.

Rick Silver was recently introduced by Rick Latona as the new panel moderator for upcoming Traffic shows. I had the opportunity to meet Rick (and his wife) at the Traffic Amsterdam conference, and I think Rick Latona made a great choice.

Rick Silver’s company, N49 Interactive, owns one of the best portfolios of generic .CA domain names, and almost all of them are developed, revenue producing websites. Some of his company’s sites include Dining.ca, Maids.ca, Resorts.ca, Schools.ca, Advertise.ca, Decorators.ca, and many, many more.

Right after the conclusion of the conference, I asked Rick if he’d be willing to do an interview on my blog since I hadn’t had the chance to interview someone whose done so much with so many fantastic generic domain names. He agreed, but due to both of our hectic schedules, we only just recently touched base about this.

It will be great to have Rick Silver at upcoming Traffic conferences – both because of his domain knowledge, but also because of his development expertise. Thanks to Rick for agreeing to the interview!

EJS: How do your generic domain names compare to the big brands in search engines, and how do .ca names compare to .com in search engines?

RS: Google and other search engines definitely give weight to the URL in determining rank. Just as generic domains have credibility with a human assessing a site, so too does Google give credit to generics. Take 2 plumbers; one with the URL JoeandSonsPlumbing.com and the other using PlumbersToronto.com. Assuming both sites have somewhat
equivalent content and link popularity, I would bet on PlumbersToronto.com to achieve the higher rank.

n49 network sites like AutoGlass.ca and Weightloss.ca often out rank big brands like YellowPages. Google is pretty good at returning actual plumber’s websites or niche sites in the particular vertical. Google doesn’t always want to put big brands like Yellow Pages or Home Depot at the top.

.ca’s domains and ccTLDs in general perform better when searching within the country. So .ca domain names tend to have an advantage on Google.ca vs. Google.com. It’s important to note that Google will redirect Google.com to Google.ca or Google.co.uk if it detects that one’s IP address is in that country.

EJS: Is there an opportunity for domain investors to utilize the platform you’ve built with their names?

RS: The n49 platform has been designed to allow partner domains provided they are generic .ca names that represent a category of products or services.  Typo domains or simple generic words don’t fit our model. Our ultimate goal is to provide targeted and meaningful content at generic .ca domains under a common umbrella that would promote direct navigation and provide a way to connect consumers with businesses.

In 2010, one of our goals is to replicate what we have done in Canada globally by providing a platform that allows for the rapid and mass development of generic domains on a global scale centred around connecting people with products and services.

EJS: What did you enjoy the most about TRAFFIC Amsterdam, and if you could add something to the show for the future, what would it be, especially now that you are the official moderator?

RS: Aside from the networking, the parties and meeting other domainers from around the world, the show was an eye opener for the vast opportunities in the global domain space with ccTLDs and also IDNs. Currently only a select few know the various ins and outs of acquiring country code domain names. This is the new frontier of domaining. Sure .com is king, but it’s no longer a .com world. It’s a ccTLD world. In addition we sold 2 domains at the auctions netting about $35k!

Going forward, I would like to see TRAFFIC provide greater depth in the seminars and on the panels. I come to these shows to learn something new and to discuss what strategies others are using that might work for me, and clearly improving monetization and development are key topics. And don’t talk developing unless you are prepared todiscuss SEO, CMS, UCG, building community etc. So there’s a lot to talk about.
EJS:  What do you think is currently the biggest threat to the domain investment business?

A (perceived) lack of integrity continues to dog this industry. When a guy like Arlington calls it a “Dirty Business” it doesn’t help promote investment in the industry. People would not buy stock if they didn’t trust the stock market. And while the sector, and certainly the value of domains have begun to command respect, it’s unfortunate that the actions of the few cast a shadow on the morality of the entire industry.
EJS: What do you think is the best opportunity in domaining right now and into 2010?

RS: Well first off I think that some form of development is the best way to increase the value and monetization of select domains, but as for the acquisition of domains here are my  TOP OPPORTUNITIES FOR THE AVERAGE AMERICAN DOMAINER:

a. Overabillionpeople.in – because India is experiencing massive growth and because they all speak English there and because only Jeff (and a few others) get it.

b. itsyourcctld.us – hello America! .us is your thing. One day you will get it. When I search on .com (from Canada) I figure I’m
searching the world, not the USA.

c. Justovertheboarder.ca – Sure Canadian presence requirements keep out the riffraff but really it’s so easy for the serious domainer to establish a presence. .ca is undervalued for sure. But of course I’m biased.

d. CategoryGeo.com – There isn’t much low hanging fruit in the .com world unless you have big bucks or are prepared to invest and develop. I do see a trend toward people using more hyper local keywords in searches and so domains like PlumbersArea.com, where area could be as small as a neighborhood. Plus even plumbers are wiseing up to the internet and are often buyers of such domains.