RICK SCHWARTZ VS. MICHAEL BERKENS DOMAIN BREAKDOWN

May 4th, 2009 Posted in Aftermarket, Big Domain Doggies, Domain Appraisals, Domain Auctions, Domain Conferences, General Domain News, TRAFFIC Conferences

As a professional domain evaluator and appraiser, I thought I’d spend an hour or so reviewing some top domain purchases at TSV last week. I got my numbers/facts from Ricksblog.com. (thx Rick!).

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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9 Responses to “RICK SCHWARTZ VS. MICHAEL BERKENS DOMAIN BREAKDOWN”
By Yaron on May 4, 2009

I love:CampingEquipment.com
I think this is the best name in the group, and I think your development idea for it is very good.
It will be interesting to see what Michael Berkens is going to do with it.

XXXXXX Stephen Douglas Responds:

Thanks Yaron,

I definitely agree. It’s a huge market, and there are thousands of different prodservs that go with that market. If you looked at the domain name phrasing “Camping Equipment”, you could connect so many prodservs to it that finding companies willing to be featured in a directory specifically dedicated to camping equipment prodservs is a no-brainer. There are more than enough potential advertisers who would be willing to spend chump change to be listed in such a clearly “natural” longtail, CAMPINGEQUIPMENT.COM.

It truly is an amazing purchase for Mikey-B. I’m interested to see how he’ll roll with it.
By Gordon on May 4, 2009

Stephen,

Interesting post, I like the concept. A few questions….

How do you expect to turn the domain hotproducts.com into a major retailer and then flip it for a $4.5 million profit in 2 years? I’d guess that would mean in 2 years you’d need to have profits of well over a million – all in 2 years with an investment of $500k? Ask around the retail sector how likely that is to happen – not very. And that domain wouldn’t be a must have part of that formula.

As for campingequipment.com, I love that name – but there isn’t a chance you could get 1,000 people to pay $500 per year for a directory listing. The directory game is extremely difficult to convince people of the value, AND to actually provide value.

If it was that easy to buy a name and flip the business for $3.5 million (or even $500k), we’d have a lot more examples of it being done already….

XXXXXX Stephen Douglas Responds:

Hi Gordon,

Well my friend, thanks for writing and asking me a question that if I was going to provide the detailed answers to, it would cost a few points in the company and $10k a month consulting fees.

There are actually quite a few examples of domains that have been built out, either by domainers/endusers or endusers themselves. How much money do you think the domain “baby.com” brings to J&J each month? Books.com and Book.com brings to B&N? Toothpaste.com, razorblade.com, chocolates.com, business.com (the biggest of them all), and literally hundreds of other examples you’ve probably never heard of.

I have one domain I bought OOTB for $7.50 that I’m building into a directory where I tested the market and received an 80% positive response for my pricing on a directory listing annually. It’s not a high powered domain, and is more geo-related, but if my marketing research is somewhat accurate, I will see a $5,000 investment turn into $20,000+ a year, with minimal operating costs. If that occurs, I have four other similar geo domains that can potentially get the same results, and there is $100k yearly in profits after a year or two. My total investment on all the five domains would be around $20k.

Start small, test the waters. Jump out the box if the results bang.

I made the appraisals in my article for one reason — I know minimum domain values. I thought it was very interesting to see the published domain purchases between Ricky and Mikey, because the money they spent was like an expensive vacation for both of them, but they definitely increased the value of their portfolios. Having cash right now to invest in domains is like being a Viking warlord heading up a river to a small town to pay a friendly visit.

Thanks for writing!
By Johnny on May 4, 2009

What about Ad.com and BottledWater.com? What do you think about those two sales?

XXXXXX Stephen Douglas Responds:

Hi Johnny,

Ad.com was a winning purchase. I know a lot about Directi and Div, and he pulled off a great buy. It probably was hard to stop bidding up with RS sitting next to him waving around a champagne bottle. But the buy was a good one, and the domain is probably worth three times what Div paid. Wait a year or two, and I guarantee you’ll see Skenzo/Directi using this domain to some great purpose. This won’t be the last you hear of ad.com.

For BottledWater.com, I’m having a hard time integrating the suffix “ed” into a $45,000 domain purchase. However, studying bottledwater.com for about 2 minutes, you can see that the domain fits a huge demographic and terminology. This domain also was bought at about half its value. Depending on the buyer’s intent on how to monetize it, this domain has great potential on the several paths it can take. It will be interesting to follow which creek this “water” domain flows down.

Thanks for writing!
By INForum on May 4, 2009

Someone ate a large dose of hype for breakfast!

These may well all be good domain purchases (and indeed I think they are), but you can’t get a better indication of market value than the results of a well publicized auction.

To appraise a domain that just sold at a well publicized auction for 10x or more of its selling price is nothing but hype.

XXXXXX Stephen Douglas Responds:

Hi Jeff! Thanks for your opinion here. I don’t know what “hype” I’m delivering that will help ME, so the hype factor doesn’t make sense in your comment. But, just to defend my article, let me ask you this:

Ever heard of a domain being bought at an auction for cheap and resold later for five-to-ten-to-a hundred times the purchase price? Do some research and then get back to me. If you can’t find at least fifty examples, you need to practice your research abilities.
By Bruce on May 5, 2009

I don’t get it, I have names that are far more definitive than those in this article and can’t get one bid. Whats the secret to get to the big guys so they can see my list?

XXXXXX Stephen Douglas Responds:

Hire a domain consultant who has contacts from A-Z in the industry, and can evaluate/appraise to find out if you really have premium generic domains. Or just keep plugging away on the forums and blogs!

I notice you didn’t present a few examples of these domains. I provide an inexpensive way to at least get an idea of which of your domains are “best”, which is a process we call “evaluating”. This isn’t an appraisal, but an evaluation of the domain’s quality. Contact me for pricing: successclick -at- Gmail.com
By Kenny SB on May 5, 2009

Actually I think it depends on what the person does with the domain.

If he develops it, It can be the next facebook, yahoo and google.

He he just parks it, parking revenue goes down, then its a problem.

So in the end, it depends

XXXXXX Stephen Douglas Responds:

Yep, in the end, it’s either the “end user” who will develop a domain, or the domainer who develops it. Either way, development of a domain is the natural consequence of domain investing, which is something a lot of domainers kind of forgot about and focused mainly on PPC revs… now that is rapidly changing, with WhyPark.com leading the way.

Thanks for writing.
By Ohio Civil Engineer on May 6, 2009

If I were to pick my favorite domains from the bunch, I would have bought BreakfastBars, AsianFlu, BottledWater, and GlutenFreeRecipes

XXXXXX Stephen Douglas Responds:

And you’d be spot on! Lucky! Smart! and soon to be richer!
By Gordon on May 7, 2009

Stephen,

I wasn’t trying to downplay the value of generic domains – I love them, and own some nice ones myself.

I was simply pointing out that just because you own the best camping related domain name doesn’t mean you can get 1,000 people to pay you $500 each. And the difference between owning hotproducts.com and turning it into a website with $1 million per year in profits is infinite.

XXXXXX Stephen Douglas Responds:

Hi Gordon,
Thanks for the great point-counterpoint. You like HotProducts.com but not CampingSupplies.com for which domain could result in a standout website producing some serious jing.

I will respectfully argue against the fact that CampingSupplies.com could not be an incredibly successful website directory for camping, hunting, fishing, outdoor activities, hiking, biking, river rafting, beach accessories, car accessories, vacation spots, cabins, and so many outdoor prodservs it will make your head spin. With a $500k investment, you could easily build a directory nicely and advertise it to gain 1000 companies to advertise their prodservs on CampingSupplies.com for a measly $45 a month.

However, I agree that HotProducts.com can literally be a retail category killer if used correctly. Now, can we expect our opinionated friend, The Rick, do this? I believe so…

thanks for writing!