There’s been a lot of discussion and near-obsession lately about alleged “shill bidding” by a certain domain auction company executive, but most domainers didn’t know there was a larger and more relevant news report about live auctions by the company that bought the domain, Auction.com. On its face, it seems this story eclipses the “Halverez” scandal by a long shot.

“Inside Edition“, a TV news show, investigated home foreclosure auctions held by the Real Estate Disposition Corporation (REDC), the buyer of the currently 4th-ranked highest-priced domain name sold this year, AUCTION.COM. This nationally reported story aired on November 25, 2009 on  “America’s NewsMagazine”, as Inside Edition calls itself.  The televised story was also transcribed in its entirety on Inside Editions’s website.  Although the show seems nebulous, it has been a CBS-syndicated program for 22 years. It covers stories on consumer reports, hidden camera investigations, and celebrity gossip.

Here’s are portions of the transcripts on the broadcast story from INSIDE EDITION‘s website:

“Airdate: 11/25/2009

It’s fast-paced, loud, a total frenzy, and when the gavel slams down, you could be a homeowner.

And business is booming. Every weekend in ballrooms across America, hundreds of people flock to foreclosure auctions, hoping to get a piece of the American dream at a fraction of the price.

INSIDE EDITION went to auctions in New York City and Dallas, and right away, we noticed something curious.

As soon as the bidding started, men in tuxedoes began pointing and yelling into the crowd as if they saw someone bidding. Maybe they were seeing something we didn’t.

“…It was as if they were screaming and yelling and pointing and shouting, but you couldn’t see anyone else they were talking to,” says real estate expert Jim Randel, who attended an auction with INSIDE EDITION. He says he believes auctioneers create this hysteria to get people to bid.

There’s another thing we found curious. The brochures showed hard-to-believe starting bids, $500, $1,000 for nice homes. But when those homes came up for auction the auctioneer started at $1,000, but immediately jumped to $10,000, then $20,000. INSIDE EDITION saw that time and time again.

The auctions are run by REDC, Real Estate Disposition Corporation. The chairman, Rob Friedman, says there’s nothing wrong with generating interest in the homes with low starting bids, and they are legally allowed to bid up the price themselves. “People are getting great values at these auctions. We have sold houses for $500 in several auctions,” he says.

…(responding) “Here it is on your brochure and you need a magnifying glass to read it,” says INSIDE EDITION’s Chief Investigative Correspondent Matt Meagher.

“It’s announced at the auction, it’s on our website, it’s literally in seven different places.  We really do want all buyers to be informed,” Friedman says.

But Jim Randel warns consumers if you’re thinking of attending an auction, it’s buyer beware: “You might be able to pick up a good deal here but at least know what the rules of the game are,” he says.

As for those guys in tuxedos who appear to be pointing to no one, the company (REDC – AUCTION.COM) says they (the “ring men) are not always responding to someone in the audience, but they are legally allowed to do that.”

Auction.com was reportedly purchased by REDC (located in Irvine, California) on March 24, 2009, for $1.7 million.  Auction.com now points to REDC’s company website at REDCGROUP.COM, where they indicate they have the required licenses and regulatory affirmations to hold live auctions:

“Real Estate Disposition Corporation (REDC) is a fully licensed and bonded real estate auctioneer and sanctioned real estate broker. With our recent partnership with Stone Point Capital, LLC, whose experience and relationships will assist REDC’s goal to grow our business worldwide, we look forward to an opportunity to serve your needs and invite you to join the list of financial institutions who have experienced outstanding retail reserve auction events with REDC.”

As listed on their website, REDC (Auction.com) claims to have created “innovative” auction programs:

“Using the auction-marketing process we pioneered and have since perfected, REDC has sold more than $5 billion of real estate assets, including a staggering $3.4 billion in 2008 alone. REDC conducted a record 300 auctions in 2008 and auctioned 32,800 homes, another industry record.”

Their website boasts they “pioneered” and “perfected” the auction-marketing process. REDC works with banks trying to recover funds from the tens of thousands of foreclosed homes in the country. They do this by promoting and producing their “innovative” high-powered auctions to consumers and investors, where they claim you can buy a home for as little as $500.

Some of REDC ownership subsidiary companies also own FOOTBALL.COM and LANDAUCTIONS.COM. Those entities as listed on whois are REDC, LLC; NRP, INC.; and NETAD,LLC.).

I wrote to REDC over two weeks ago asking for confirmation and clarity on this “legality” they claimed about self-bidding, but as yet I have received no reply.

The story has been reported and commented on in many other websites, including San Diego’s real estate blog. REDC also has an international reach, and at least one negative response to their auction procedures. REDC upset some people in the UK earlier this year according to this report in the Guardian dated Feb 28, 2009 on their auction tactics.

The purchase of Auction.com by REDC back in March of 2009 was reported in most domain blogs and news sites. Most featured a statement from Friedman saying REDC was “really wanting this domain”.

Another story by DSNews.com reports:

“In less than four hours this past weekend, Real Estate Disposition Corporation’s (REDC) online foreclosure auction generated $14.9 million in foreclosure real estate sales in Dallas, Houston, and Seattle. The sales activity produced by Auction.com boosted the company’s total sales to more than $2 billion in 2009, REDC said.”

SUMMARY: In this remarkable investigative report by Inside Edition, you can watch Auction.com’s selling techniques through hidden cameras videotaping some of their events. In what was alleged by Inside Edition to be a common occurrence,  the Auction.com “ring men” (guys dressed in tuxedos “pointing” out the bidders) were yelling and pointing into the crowd as if there was a new bid on a foreclosed home, when there seemed to be no person actually raising their paddle. Inside Edition’s story has REDC disclosing that it’s legal for them to do this. This sounds to me to be saying that the formal-attired “ring men” can indicate that someone has “made a positive bid” on a foreclosed home price during the auction, even though there is no auction attendee actually bidding.

However, the biggest surprise reported by Inside Edition was the comment by Chairman of REDC (Auction.com) Rob Friedman stating they were legally allowed to “bid up the prices themselves” on the properties they were auctioning.

AUCTION.COM WHOIS INFORMATION:

Registrant:

REDC, LLC RED, LLC

1 Mauchly

Irvine, California 92618

United States

Registered through: GoDaddy.com, Inc. (http://www.godaddy.com)

Domain Name: AUCTION.COM

Created on: 17-May-94

Expires on: 18-May-17

Last Updated on: 03-Jun-09

Administrative Contact:

RED, LLC, RED, LLC  jm@x5t.com

1 Mauchly

Irvine, California 92618

United States

+1.9496994246

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Comments from the company, AUCTION.COM (REDC) to explain their position are welcome. Links to any disclaimers located on their sites, or PDF’s of auction brochures are welcome.

If anyone found further questionable or favorable information regarding REDC (Real Estate Disposition Corporation), please comment here.

I left out about 2000 words of other details and information extending this story, which I may followup on if there is interest.

Let’s start with Owen Frager of the Fragerfactor.com. He picked up on a side comment I made on Michael Berkens blog about Madison Avenue. It’s the same thing I’ve been saying for three years, but I appreciate Owen’s recognition and credit given to me about my “observation”.

I think in the archives of my blog here, I’ve commented several times about Madison Avenue agencies fearing domains. I know I made about 20 posts on domain forums about this. I worked as a consultant for one of the largest MAA’s, Foote Cone & Belding, so I know the intricacies of their “profit model”. One thing MAA’s don’t want is having a client purchase a domain name for 1/10 their ad agency budget and then seeing that domain perform better, and forever, bringing in eyeballs. This is a clearcut “crystal ball” of advertising investment success for any company.  Spend $1 million on a domain name that brings in eyeballs 24/7/365, or pay an ad agency $10 million for a campaign that lasts, well… maybe 60-90 days.  And, throw in the kiss by the pretty girl when you score the touchdown – the investment in the domain appreciates, so as I’ve said, a domain is an “appreciable marketing asset.” It is a fact that many domain companies that failed during the Great Internet Bubble Massacre in 2000 had domains worth more than the company’s other assets.

The MAA’s don’t like this idea, and really are terrified of it. I actually found a “Brandweek.com” article alluding to this back in 2005. “New Media” advertising was threatening the “old guard”. It was regarding the Johnson & Johnson “baby.com” domain purchase and branding. Contact me if you want to read it.

Then Rick Schwartz writes about “incestuous” domaining, which is great to see his change of heart, because for years, he’s promoted his TRAFFIC conferences as being only for the “best of the best” attending. There is a reason the term “bluebloods” came about. It referred to royalty back in medieval times, where the court advisors believed royal bloodlines should only marry each other, which kind of weakened the DNA of the spawn, hence “bluebloods”.

I coined the term “incestuous domaining” years ago, because I knew that selling domains back and forth to the same group of people, especially at domain conferences, would eventually diminish the value of the domain unless the buyer/domainer developed it.

So I’m honored by Owen’s recognition of my observation (really a fact) that I’ve been pushing for years, and I’m really honored that Rick The King would be influenced (or will this be denied?) by my longtime and recent comments about “incestuous” domaining.  Go to TRAFFIC and see the changes for the better in domain conferences!

Either way, it only matters that this industry focuses on the right markets, brings in the right demographics, reaches out to the right people, works to present themselves legitimately and transparently, and ultimately… for all of us… those people at the end of our invitations will be excited and interested end users.

Cheers!

So, out of respect, I’ll start with Rick’s domain purchases first… although I’m leaving out a few picks he made that are questionable to me… of course, I can be mistaken, and it wouldn’t be the first time.

Here’s Rick Schwartz’s Top Picks:

HotProducts.com – $9k  Incredible buildout retail site… major branding! This one domain alone owns all  other buys at the auction for the price. Invest $500k in this domain, you have a killer brand website touting the best deals on the internet, and a pickup acquisition at about $5mill or more in 2 years. This is the one domain I really wanted to bid on. Congrats on this one, Rick. My appraisal value at minimum – $80k
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NetMarketers.com $1,250
This is a nice domain for the price. Now if Rick can get the ignorant old school marketers to respond to the reality that a great domain name is the beginning of any company’s prodservs… My appraisal value at minimum – $25k
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AsianFlu.com $3,000
Hopefully this flu won’t appear, but if it does, Rick will make a lot of money off people getting sick, scared and dying… which is not something weird or bad, we have pharmaceuticals doing that daily. It’s just business, and I have some domains that have this unfortunate “quality”.
Appraisal value at minimum – $25k
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AffiliateAdvertising.com $5000
This domain is a category killer. Unbelievable that Rick bought it at this price. This domain can own CJ and other affiliate “sources”, so they better think about making some offers to Rick to pick this baby up.  Appraisal at minimum value – $75,000

The rest of the domains Rick bought, with the exception of “breakfastbars.com” for $1300, have no meaning to me or I can’t see where the value will come from. I won’t appraise them. Let them expire or sell them quick on Snapnames to try to recoup your money. Exhibiting.com?  $5k? Exhibiting what? What do you see this domain pointing to as a website? A museum? Heck, Rick could have picked up Supplications.com (Prayers) for one fifth the price and had a simple website or flip for 5x ROI.
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Now for the total damages for Rick:

Rick spends $42,550 for domains minimally appraised by me here as follows (I left the purchase price as my minimum appraisal on domains I wouldn’t have purchased, except for one where I lowered the value off the domain purchase price), and Rick gets domain portf value MINIMUM of:  $265,300.

So Rick scores nicely by instantly increasing his domain purchases at the auction about 5.3 times his investment, at the MINIMUM expectation of value for each domain. In other words, his purchases added about $220,000 of increased cash value to his portf. Free cash down the line. Pretty damn good…

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Now for Mikey-B’s picks:

CampingEquipment.com (Correction) hey, this domain was mentioned on other sites, but the real domain is “CampingSupplies.com” which Mikey B bought. No problem, maybe even better because it’s not a longtail -$16k Sweet buy and just $20k more to build a power directory on this domain to list every single camping prodservs retailer/manufacturer at $500 a year… hmmmm I’d say about 1000 potential directory advertisers paying chump change to be listed… half a mill a year. This was a killer buy.  This domain, built correctly, could be a pickup acquisition at $3.5 mill or more in 2 years.
Appraisal value at minimum – $100k
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ImageConsultants.com for $9,500
Like Mikey said, huge business. A simple directory again can bring in EASILY a half mill a year within 2 years of development. Appraisal value at minimum – $150k

PhotoDeveloping.com -$3k for a service people will always use, even with digital cameras. Over 50% of digital camera users don’t know how to process their photos, and every photo outlet/drugstore has digital processing services. Very good buy. I was considering this one. Appraisal value at minimum – $50k

Redistribution.com - $3k for wholesaling and product placement, and other product flow management. Appraisal value at minimum – $10k

GlutenFreeRecipes.com for $6K – HUGE NEW MARKET IN FOOD RECIPES, EASY TO BUILD, EASY MARKET TO IDENTIFY.  Category killer for millions of people who are gluten intolerant. Appraisal value at minimum (even as a longtail) – $50k
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Now for the total damages for Mikey-B:

Mikey spends $37,500 for his five domains. No waste, picked cleanly, all domain purchases have excellent ROI potential.

By my minimum appraisals, I put Mikey-B’s ROI on his domain purchases at $360,000. This puts Mikey’s ratio on ROI at a whopping 9.6 times his investment, raising about $323,000 of free cash value into his domain portf.
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Bottom line from the Viking:

Both Rick and Mikey-B spent very little and gained a hell of a lot of potential ROI with their domain buys.

Kudos to both. I think more domainers should have let their b*lls hang low (including myself, shamefully I admit) like these guys and jumped in to bid (of course, having millions of dollars in cash reserves helps a lot, and these buys were woefully wimpy purchases amounts for both these power domainers). I would have bid on at least three of these domains, except excuse, wife “sell what you have”, excuse, wife “almost 4000 domains already”, excuses …”that money can go to building the deck walkway from our sunroom to the pond then over to build the cedar bridge across the creek and gazebo (about 60 yards)” aarrggg

Best story I try to tell my wife is how Frankie took his family finances to the edge of disaster to now control a portf worth hundreds of millions.  Every domainer should BELIEVE in the domain they’re going to buy, have a purpose for it, understand the market behind it, and then step up like a man and control the business online with a category killing domain.

I would hate to have to sell my domains at the bargain basement prices that Rick and Mikey swept up. However, even at those low prices, I bet the sellers made more money on those domains than if they had… gulp… invested in stocks or mutual funds!  Thank GOD for domain names!

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If you are confused about the value breakdown/categorization of your domain portfolio, the most valuable but inexpensive service you can use to help define where you should spend your domain dollar is in having your portfolio evaluated.

EMAIL ME FOR DOMAIN PORTFOLIO EVALUATIONS AT ONLY $.50 PER DOMAIN ON 300 OR MORE DOMAINS (for portf under 300, it’s $1.00 per domain). Find out what domains you own are premiums, which need to be built out, appraised and sold, or dumped. I also do TM cleaning for bulk domain lists within this pricing. Identify your potentially dangerous domains that could cost you big!

successclick [at] gmaildotcom