Exclusive Q&A with Frank Schilling: IDN Success Stories to Come

Frank Schilling sat down with IDNBlog for the following interview. Frank owns one of the largest premium collections of domain names, and is one of the founding fathers of the industry. Frank’s blog can be found here:

Q: For the reader of this interview who is knowledgeable about domains, and who has an extra $1,000 in his/her pocket, where would you recommend that he/she should invest this amount?

A: I like numeric domains.. there are only 999 three number .com’s and 9999 four number .com’s Those are not fairly valued when you consider that numbers are the ultimate IDN. They are global and universal across all languages. Many of those numbers when read aloud in foreign languages sound like words. Chinese co’s are rushing to numerical names for that reason. And many good ones are not fairly valued. Get some translation software or a friend who speaks mandarin/Cantonese and start sifting through numbers. There’s lots of latent value there because many folks don’t know what they’re looking at or what they’re holding.

Q: What is the best shot that most domainers have at making substantial money in the industry?

A: Everyone’s definition of “substantial” is different, but sales and development provide greatest return all at once. A great PPC name may deliver $300 a month in revenue but that’s a slow payback compared with a cash-out of 30k on a sale, all at once.. it’s about the time value of money. The map showing the path to achieving financial success is going to be different for everyone, but I like the lead generation side of the business as well. In the name sales side, remember that all the money is made in the buy. You have to buy right.

Q: What overall advice do you have regarding (a) parking, (b) development and (c) resales?

A: Parking is a challenging business at the moment because the dominant marketplaces are opaque and dishonest, in a transparency sense. Good traffic is mixed with bad and sold at a discount. The marketplaces are different for domain traffic than they are for Yahoo and Google owned and operated properties, even though domain traffic often converts BETTER than that owned and operated traffic. As a result, pay rates have never been lower. Google and Yahoo’s earnings are solid so it’s not the industry, the traffic still has value, it’s just the ecosystem which sucks. That will take care of itself over time as publishers remove their traffic from PPC and focus on lead generation, development and re-sales, which are surprisingly robust given the weak economy. Development is still not practical for large scale portfolios so that leaves re-sales and lead generation which could ultimately fill some of the void left by PPC. The only wild-card on PPC is some of the change surrounding the yahoo-microsoft ad marketplace merger. If they get it right, pay rates to domain name owner/publishers should rise and google will raise theirs to remain competitive. PPC will likely see a resurgence. If they get it wrong then the exodus will hasten. We’ll know more come October/November.

Q: What do you say to those who question the sustainability of the domaining industry given: (1) the continued reduction in parking PPC payouts and (2) the fact that most sales seem to be to other domainers?

A: There are – what, 200 million names now? People have been questioning the viability of the domain name industry ever since there were 30 million. And we went through horrible economic changes in PPC in 2001 after the ad-bust, so we’ve been here before.. As long as there are domain names registered, there will be good ones and bad ones. As long as there are bad ones, there will be an industry to explain the difference and sell the owners of the bad ones, better ones. The slowdown in PPC is industry specific, not economy related. As I stated earlier, Google and Yahoo are selling record ads and amounts, but their marketplaces are effectively rigged from our perspective. That leaves pay rates lower than they could be. This dynamic will absolutely, lead to disruption as tranches of traffic bypass Google and Yahoo and sell directly to advertisers. Some advertisers will buy and pay for domain traffic. We know that to be true. On an unrelated (non-industry specific) note though, these are horrible economic times we live in. The economy is going to get worse, not better, we are in a massive single dip recession (not a double dip). It’s really more of a global depression in my view. All the printing of money and government stimulus has obfuscated economic reality, but has not helped the economy, and that debt will whipsaw back to hurt us in the long run. Governments have gotten huge and they are broke. In developed Countries, those Governments are scared that a broader collapse in the financial “system” will cause a re-write of how the people chose to be governed (remember what happened in Iceland?), so they will print money to make it seem like all is under control, and hope that things turn around. There are long term consequences to this money printing though. Look what happened to the price of gold in the last five years. We are past the point of no return because if interest rates revert to a historical norm of even 5%, then all taxes collected will go to paying interest on the soon to be 19 trillion dollar national debt. This will all end in a much bigger crash in the next ten years in my view. The domain name industry will change and right-size to this economic reality, however good names will stay renewed and get more valuable regardless of the economy. Domain names are like a radio for talking to people. Good names are easier to share, virally, with friends. A good name can change the destiny of your business and allow you to reach people all over the World.. That is a powerful tool and that dynamic and the participants who serve in this industry are not going to go away because of changes in PPC. Incidentally, very few of my sales are to domainers. I understand it can appear that way in unit volume, but in dollar volume, everyone sells more to non-domainers.

Q: Your company, NAmedia owns one of the top domain portfolios including many foreign names such as gatos.com (“cats” in Spanish) and anillos.com (“rings” in Spanish).

When and why did you decide to start buying non-English domain names?

A: It just sort of came about by accident. Back in the day not many people focused on Spanish terms so they were easier to acquire on the drops. Then back in 2005 I paid several million dollars to acquire a portfolio of stellar foreign names from a smaller legacy domainer (an original registrant from the early 90’s) It was a very good purchase in hindsight. The names you refer to came from that bulk purchase of several thousand names. Every name was a gem like that. As I said, it was an excellent purchase.

Q: Have you purchased any IDNs? If so, can you give us examples of IDNs that you owned or currently own?

A: I didn’t have the foresight or patience to focus on IDN’s but I think those who bought the right ones will profit on them at some point. That’s a very ambiguous statement because names are subjective, but there are certainly registrants who will profit. The achilles heel of IDN’s is that they are not global. I will not type Farsi, and a Russian will not type Chinese, etc.. but all will type English and Numbers.

Q: In November 2007, you wrote on your blog:
“IDN’s will certainly bring an epoch-like sh[i]ft in regional markets .. But there will be the splinterization effect as CCTLD’s in local languages compete with GTLDs in local languages which compete with IDN domains in possible ASCII character extensions (in both GTLD and CCTLD variants) .. it’s a mess.. A beautiful mess with a lot of opportunities for savvy domainers to make money.. but a mess I’m steering clear of for the time being.”

How would you describe the IDN market today, particularly in light of Verisign’s statement here?

A: I think Verisign will go Long new TLD’s in IDN . . . Let’s face it, they just divested the signing business, they are betting the company, all-in, on names and naming. There are so many corners of the domain name industry to profit in, it’s really a wonderful thing. I look forward to reading about the IDN success stories ‘to come’ on your blog and in DN Journal and others – I would like nothing more than to see newcomers and long time IDN stalwarts profit from their foresight. Let’s see what happens.

Q: What is your favorite quote of all time?

A: Those who would give up ESSENTIAL LIBERTY, to purchase a little, TEMPORARY SAFETY, deserve neither LIBERTY nor SAFETY. – Ben Franklin
Very fitting and prophetic in the context of all the bank bailouts and stimulus I touched on earlier. I’ve been a Ben Franklin fan for a longtime.

Q: What projects and opportunities can we expect to see you involved in next?

A: I think experimentation, and using my traffic more for my own purposes. I always joked that my business style was that of a one-trick pony – but it’s a very good trick. Well this old pony still has a few tricks in it . . .

Q: Thanks for your time.