«DomainSherpa.com: The Domain Name Authority Zappy's Proven Process to Extract Maximum Value from Domain Names - With Michael Zapolin Watch the ...»
Michael Z: Yeah, it was not beer for life, but it was like enough that they felt like they had tricked us at the end, which is always, I think, how you want that negotiation to end.
Michael C: Sure.
Michael Z: So, it was really a great experience. And then, when I called the kid, one of the great phone calls of my whole life was when I called this kid who sold me Beer.com and I was like: "I just sold Beer.com!" I go: "I am sending you 1.4 million" because he had twenty percent. He's like: "What?
You sold it for 1.4 million? Oh my God!" And I was like: "No, no, no. I sold it for seven million; you are getting 1.4 million." So, it was like a lot.
Michael C: Unbelievable. Have you stayed in touch with the kid that originally sold you Beer.com?
Michael Z: Yeah, I mean I track him along the way, and he has done some really cool stuff since then. He was already into like Internet hosting and all kinds of cool stuff. So, he is really done. He is a smart guy. I do not want to discredit him. He is not just some drunk college kid. And just to show you what the environment was like, you had to be pretty creative back then. He originally, when he called up and wanted to get Beer.com, we had to actually physically call up to get these things, and he said, "I want to reserve Beer.com," and they said, "Well, you cannot because you have to have a business use for a domain." So, he went out and he set up a company; and his first name is Bill, so he set up Bill's Energy Exchange Reserve (BEER). And Michael Zapolin (InternetRealEstate.com) Page 7 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority he called them back and said, "All right. I need the name," and they gave it to him.
Michael C: Wow, smart guy.
Michael Z: Yeah.
Michael C: All right. So, let me unpack this because it's a phenomenal story.
Of course, the late '90s leading up to 2000 was a boom time in the economy.
The.COMs were taking off. Everybody was investing in Internet startups at the time, so it was perfect timing for you to buy Beer.com in '98, get it for a great deal, throw some vision onto what it could be, and convince other people to do that. Would you say that timing was one of your best allies in this deal?
Michael Z: I actually think it is sort of always the same timing because you are always trying to come up with what the pricing is and what the eventuation of the situation is going to be. So, when I bought that back in 1998 and I told people I was going to pay one hundred thousand dollars, they were like: "Are you out of your mind? That is the stupidest thing I have ever heard," you know? And I was not getting a lot of feedback like: "Great price," you know? I was getting quite the opposite because it was a little bit
early. And leading into the next domain name that I wound up buying was -after that experience I went right back to my Super Bowl list and I was like:
"Oh my God, what is the next category?" So I am looking at the list and I am thinking: "What industry is going to be effected by the Internet over time?" And I saw the name Diamond.com on there, and I was like: "It is pretty cool because a diamond, they just De Beers it or somebody mines it out of the ground. And then they cut it, and they finish it, and they cut it again. And then they sell it to a wholesaler, and they sell it to retailers, and there is all this process and all these markups; and if the Internet could compress that, then it would be a better system for people to be buying diamonds." So, at the time, I reached out and it was a software company in Texas. A business-tobusiness software company called SI Diamond Technologies; and they had taken Diamond.com. I showed them what I did with Beer.com and I said, "I want to take this thing and do what I did." So, they said, "Okay." So we agreed on a price, which was three hundred thousand dollars and them Michael Zapolin (InternetRealEstate.com) Page 8 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority keeping about twenty percent of the LLC so that they had upside too. And, again, at the time, to make the point of what people were saying, I said, "I am going to buy Diamond.com for three hundred thousand dollars," and they were like: "That is ridiculous. Nobody is going to buy a diamond on the Internet. You know what I mean? Yeah, maybe a fifty-dollar little trinket or whatever, but nobody is buying a diamond on the Internet." So, for a domainer, you have to be willing to go against all the nay-sayers who are saying bad idea; here are all the reasons this is not going to work. You have to put your blinders on because, again, even today, it is such a future category and future vision that you have to ignore all those people. So I ignored them and we bought it. We, again, put up a very thin site. It was like How to Buy a Diamond, Diamond Auction Sites, and Diamond Retail Sites. We were not even selling anything. I put up press about what I am doing on Diamond.com
- what it is going to be. Of course I get calls from all the diamond companies.
This is now 1999, so there was starting to be a frenzy. And I spoke to De Beers and a bunch of other pretty good-sized companies. Some just totally did not get it. And De Beers said, "Look." I wanted crazy money and they said, "Well, we do not think we can disrupt our diamond channel that we have right now. We have plans to go direct in the future, but it is quite a ways off. You should be talking to one of our major site holders - one of the people that we sell to - because they are going to get in and they are already thinking retail." So, they matched me up with a guy named Beny Steinmetz out of Israel, who is one of the big diamond buyers out of Israel. And I contacted him. He immediately got it. He had started a company in the online diamond space. He had got one hundred million dollars from SoftBank and he was rolling along. So he had a management team. I did a deal months after buying that Diamond.com for seven figures of cash, plus equity in this company that was being managed that had a whole budget and Beny Steinmetz behind it, and just kind of put that deal in place and moved back to the list.
Michael C: Wow. So, it sounds like you have got two deals now. The deals were done, the sites were built, and then you sold them off. And they almost seemed identical, Zappy. They seem like you had a category killer domain name - something that has wide mass appeal. I love what you call the Super Bowl test. I have never heard of that before. So, using anything that might advertise to the masses on Super Bowl, so it has got to be an enormous industry - something that a majority of people in the United States are going Michael Zapolin (InternetRealEstate.com) Page 9 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority to purchase potentially by watching the Super Bowl commercial. And then, you put a website. You have a vision of what it could become someday. You put out press regarding that vision. You get as many interested parties thinking about the deal; then you negotiate and you close it.
Michael Z: Yeah.
Michael C: So it seems relatively easy. Can something like that be done today do you think?
Michael Z: Yeah, I mean it is happening all the time. I think the mistake that people make is they are not willing to do some of that really simple stuff.
They will get a good domain name or a great domain name and they will just try to market the domain. And it is like such a waste because, if I had not put up that placeholder for Interbrew to see what it maybe could become or Beny Steinmetz to see what Diamond.com maybe had the possibility, I would have had to rely on their vision to happen. And I do not want that.
Michael C: So, instead of hoping that somebody else is going to have the vision of what it can be and then realize the value of that, you are saying here is what it can be; now put your value on that.
Michael Z: Yeah, and I would add to that, that it shows proactivity so that, when the guys at the big beer company said to me: "Sell it to us," and I look back at them and go: "Well, I am having fun and I am doing all this stuff," it was like legitimate.
Michael C: Right.
Michael Z: It was not just I got a domain name and hey, I might do something. So they had to like factor that in, and I think any time I am buying a domain name or selling I always look at how the person is using it; and as soon as I see how they are using it, it gives me a much better indication of where their pricing is probably going to be because to walk away from the opportunity is something that you are able to factor into your price. And most people do not do it; and that is like kind of the tragedy of domains because it is somewhat easy. And when I describe, let's say, my next couple deals, I Michael Zapolin (InternetRealEstate.com) Page 10 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority went much deeper on the development because of the time and place, or the opportunity that I saw and what the methodology is seems to be the same.
And I think I am doing it today and I have done this in the past few years and had some of the same types of successes doing that along the way. So, it is not a 1998, 1999, and 2000.
Michael C: Yeah, it is not a pre-2000 model that only works there. Okay. Let me ask you a couple more questions about both of these two deals, and then I want to talk about some of your newer deals, Zappy. The step in the process where, after you have developed sort of Version One of the website and before you sell it - that step right there is market the hell out of it. How do you take your vision for what the site can become and get that out into the public in front of the people that may be potential acquisition targets?
Michael Z: So, that is a good question. Again, my thinking is that you have to be able to give them something visually to show what is possible, or where you are going. That does not always mean that they want to go that direction, but it gives a sense of forward momentum. And so, when I do that, what I try to do is to leverage the press because that is great. Every industry has industry press, and those people you know are reading the industry press. So, when they see that in the industry press, it has another level of credibility because they start thinking: "Oh my God, if I am seeing this, my competitors are seeing this too."
Michael C: Right.
Michael Z: And then, third, I will make a point of contacting all the major players in the industry. Contact them. CEOs; Heads of Marketing. Send them an email. Send them a screenshot of the site. Send them a link. Send them an article that recently ran in the industry press. And just create that anticipation and some of that desire in them, where some of these people resurface a year or two/three years later and you have laid this foundation along the way. And I will never forget. The next deal that I wound up doing was Computer.com.
And we bought Computer.com and the phone number 1-800-COMPUTER.
And the idea was, in 1999, when we bought it was to launch with a Super Bowl ad.
Michael Zapolin (InternetRealEstate.com) Page 11 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority Michael C: Yeah, I want to talk about that. That is a great story, Zappy.
Okay, but hold on. I want to back up for a second because I am going to come to Computer.com because I have watched that Super Bowl ad. So, in that process step where you are marketing it, you want to go out to the industry trade magazines. So, if you are running Beer.com, you go to Beverage World, for example, which is one of the largest trade magazines - it has been around for one hundred years - and you want to try and make sure that they write some sort of Editorial about Beer.com launching; how it is going to be an industry focal point for consumers to come together and what your vision is for the future.
Michael Z: Exactly.
Michael C: So, they go do that. Not Beverage World per se, but one or more of the industry trade magazines goes and does that. And then you are going to take that link to the website, or you are going to take that PDF of the print magazine article, and then you are going to find the contact address for major CEOs in the industry and you are going to email or write to them.
Michael Z: Yeah, and nowadays it is so easy. You have LinkedIn; these places where you can literally figure out who is who at the corporation, send them a message, email them, call the company, and say, "Hey, I am sending John Smith an email." It is so simple now.
Michael C: It is a lot easier now. You can go onto Elance. You can hire somebody for fifty bucks to find the CEO contact email address or guess the email address, and you print off some letters, you FedEx it to the address, you call the secretary, and you say: "Hey, I am sending something very important.
Can you make sure it gets on the desk? It is arriving tomorrow," and you are done.
Michael Z: That is it.
Michael C: Like for five hundred bucks you have got the attention of every single major CEO in the industry.
Michael Zapolin (InternetRealEstate.com) Page 12 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority Michael Z: Yeah, absolutely. And getting to where I was going with the Computer.com thing is if you can get an industry expert involved in what you are doing, that is going to be an incredible thing. So, Jeff Taylor, who is the Founder of Monster.com, who had done Super Bowl successfully the year before. We reached out to him immediately when we bought Computer.com.
And when he heard computer and said, "You did Super Bowl successfully.