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«DomainSherpa.com: The Domain Name Authority Zappy's Proven Process to Extract Maximum Value from Domain Names - With Michael Zapolin Watch the ...»

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So, I really liked the domain. I thought to myself: "Computers. Everybody is using the Internet on a computer. I have got this 1-800-COMPUTER phone number with it. This is really a big play." And I got together with a guy named Mike Ford on this one; was my partner on this. And he came from the computer background and he is a sales guy. He sold to some of the big computer companies in the past. And told him what I wanted to do; he loved it. We came up with a price. It was five hundred thousand dollars and the owner was keeping something like twenty percent. A little bit less. And that Michael Zapolin (InternetRealEstate.com) Page 18 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority was the deal. We went out and talked to our friends and family, and folks like that, and we wound up talking to Jeff Taylor. Mike Ford did at a Boston College Entrepreneurial Event. Jeff Taylor from Monster.com was speaking there. And so, after the event, he went up to him and said, "Hey Jeff, we bought this 1-800-COMPUTER and Computer.com," and Jeff was like: "I love it." He said, "This sounds amazing." He said, "We are thinking about doing a Super Bowl ad, like you did last year," and Jeff said, "I think that would be a great thing." He was carrying like a multi-billion dollar market cap after doing that. So, long story short, Jeff agreed to come on as an advisor, to come on as an investor, and chaperone us to do a Super Bowl commercial Michael C: So, let me pause the story right there for a second, Zappy. If anybody is watching this show and they have not seen the Super Bowl commercial from January 30, 2000, they need to pause the video right now.

They need to start a new tab in their browser, go to Zappy.com, and I believe it is in the upper right hand corner is the commercial. It is hilarious, so go ahead and pause the show, watch it, and then come back.

Michael Z: Yes. Welcome back. Yeah, it was a blast to do that. And it was an insane time, so we very quickly raised the money to do a Super Bowl commercial, which, at the time, that year was 2.7 million dollars.

Michael C: Wow.

Michael Z: You got a one 30-second commercial in the game and you got two commercials in the pre-game. So, we were the very last advertisers to buy a spot in the game. They were really already taken, but somebody like Pepsi or Budweiser had three or four spots, and so they sold one them to us.

The network did. And the network said to us, "Super Bowls have been lopsided events in the last few years, so a lot of people may tune out of the show, but you guys are getting the last commercial break in the game, which traditionally is not great, but there may be still a critical mass of people watching at that point. So, do you want to take a shot?" And we said, "Absolutely. Sounds like, between that audience and the press that we can potentially get leading up to it, it is worth the risk." So, we bought the commercial with Jeff chaperoning us, we worked with an ad agency out in Michael Zapolin (InternetRealEstate.com) Page 19 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority New York, and we created this Super Bowl commercial; and Mike Ford and myself being total egomaniacs, we were like: "But where is the spot that we are in? Like you have got Dave Thomas from Wendy’s. He is in his. And Michael Bell is in his spot. Like where is our spot?" So they were like: "Oh yeah, yeah, we got that spot." So, we did a spot that is kind of like a spoof on Woody Allen. It is an old Woody Allen movie, where they are talking to relatives of his and about himself and stuff. So these people were actors and actresses. They were not really our relatives.

Michael C: It was not really your family.

Michael Z: No. The idea was to do something. Our concept for Computer.com was computer stuff for the novice. So we felt like if we could give that novice message and the site had all kinds of information and stuff for novices, the phone number was backed by a computer reseller. And so, the plan was launch the Super Bowl, launch the site the same day as Super Bowl, which was obviously a technical thing that we needed to get right, and then launch the Super Bowl commercial. And so, it was total (Unclear 43:13.6) and faith, but as it turned out, we were the last spot in the game and it turned it out. It was the Rams v. Titans game, which, if you remember, came down to the very last play in the game, where the guy kind of reached out to kind of score the touchdown on the last play. So our commercial went off and it was prior to that play, but everybody hanging on the edge of their seat. I will never forget. It was one of the most surreal moments of my life. I was in the ABC Disney Box at the Super Bowl in Atlanta, and in the booth was Michael Eisner, and Joe Nameth, and John Travolta, and all these people. And the advertisers were there, so each time an ad would go off, everybody would like hug the advertiser or something, or go: "Yeah, good commercial." So, leading up to it, everybody kind of knew we were the last spot, was rooting for it to happen, and so they had to make a first down on a fourth down play, and they had a get out of bounds. All this crazy stuff had to happen for us to still be relevant.

Michael C: Right.

Michael Zapolin (InternetRealEstate.com) Page 20 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority Michael Z: So, when the spot went off, the Head of Disney - Iger, who is the Head today - said to me: "I don't know if you have a horseshoe up your ass, but that was the highest rated commercial all (Unclear 44:36.8).

Michael C: And it went on to be declared by Adweek, which is one of the largest advertising publishing companies in the industry of advertising and marketing, to be one of the best Super Bowl commercials of all time.

Michael Z: Yeah, they loved it. I mean it was a lot of fun. The funny thing was, when you see the commercial, you see, at the end, my buddy, Mike Ford, who is my partner laughs. He lets out this like grunt.

Michael C: He lets out a snort.

Michael Z: Yeah, and it is so ridiculous. Like we were totally mocking the whole thing. I think they appreciated that. But what happened when the commercial went off was pretty incredible. We could see back at the servers and Jeff Taylor had made sure that we were not going to crash that, and we had all kinds of amazing technology in place, but we could see that within the first twenty-four hours - while the Super Bowl commercial was happening we were starting to get flooded, and then after it flooded after the game - we had one million people came to Computer.com within that period.

Michael C: Wow.

Michael Z: And so, after that experience, we went on to raise more money at a much higher valuation - exactly what we had hoped would happen. And a couple months after that, if you recall, that is when the Internet completely melted down. And the Super Bowl commercial that we did really, I think, saved us because, by doing that commercial and being proactive, when everything melted down, we were showing people what we were doing and what our stats were. And our partner in the eCommerce store that was answering all the calls and taking all the orders online was a company called Siberian Outpost at the time. And when we showed everybody, you could see that when people came to Computer.com, because of the credibility of being Computer.com and then the education and information we were giving people, when they went into our store, they were buying ten percent of the Michael Zapolin (InternetRealEstate.com) Page 21 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority time, which was five or ten times what Siberian Outpost was getting when they got traffic from CNET or AOL.

Michael C: Right.

Michael Z: So, we showed this to all the retailers and we had a deal set up that was millions of dollars in cash and equity in a publicly traded company worth one hundred million dollars plus. Just a great deal, but their stock was ticking down every day from like fourteen dollars to twelve to ten to eight to four. It was just melting. So, as that was happening, we shifted and started talking to some of the business-to-business companies that were in that space.

And then they started. (Unclear 47:25.1) fell from like three hundred dollars a share to eight dollars a share in one day, and that whole segment disappeared.

But one of the guys we were talking to said, "Office Depot. Their online division. They are actually growing it. And I think you guys should talk to them." So, long story short, we wound up doing a deal with Office Depot their online division. Sold them the domain, sold them the phone number, sold them the business, all the data that we had, and wound up being able to pay off our investor notes and get a small token amount of Office Depot stock. And quite frankly, if we had not done that Super Bowl ad and we would not have those metrics, it probably would have been next to worthless.

And I think, again, I am trying to evangelize development for anybody who has got a good domain or category that they are passionate about, and I just think you have to be proactive because there are so many great things that come out of that development that you maybe cannot see in that moment, but that come back to help you.

Michael C: Definitely. So, did you walk away from the sale of Computer.com with break even; basically, taking the cash that you got and putting it towards the investment, and then walking away with stock that then became valuable?

Michael Z: No, it was a loss, but it was a partial loss as apposed to a complete loss, which, at that moment, was like a victory to people who were the note holders. People like Jeff Taylor and people who had given us investor notes. I mean they were happy to get their investment back that was not happening for them for most of the places they were invested.

Michael Zapolin (InternetRealEstate.com) Page 22 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority Michael C: Definitely. So, the lesson from this. The very beginning of the show we talked about how we are going to learn the wins and the losses, or what you learned and what you unfortunately learned negatively during the experience; and I love that you brought up this story and I love that you are open with the fact that it was a loss because you had two, what sounds like, really easy wins with Beer.com and Diamond.com, but you show that the same game plan that you executed against those was used in this case and, if you would not have done that, yes, you would have ended up just like every other.COM startup in 2000 that started up in '98 or '99, and you would have walked away with nothing except for a domain name.

Michael Z: Yeah, absolutely. It is a learning curve. So, just to transition to the next domain that I wound up doing, which was CreditCards.com, a lot that I learned during that Computer.com experience affected my critical thinking.

So, I thought to myself: "What I did not like about the Computer.com experience - the limitation there was, was a physical product." And they always come out with a new computer, so the old stuff is no good, and there are all kinds of (Unclear 50.21.3). You have to be always on the cutting edge.

So, I thought to myself after the Internet bubble burst. I thought: "I want to go back to my Super bowl list of what categories I would buy, but I want the non-physical product ones. Those are the ones that I am going to go for now."

So, if you think about it, credit cars are non-physical. Mortgages. Insurance."

Those are like non-physical products that were on the list. So, I thought about credit cards and I thought: "Wow, what a great category. I am using my credit cards like crazy. I would love to be on the other end of that food chain." And I thought: "There is no product. It is just a promise between you and a credit card company to pay. That is amazing." So, I approached the owners of CreditCards.com and, like a lot of people, they were, post-Internet bubble, throwing the baby out with the bathwater. They said, "Oh, we have this great business doing backend credit card processing," which they did. And they said, "CreditCards.com. It is a little too.COMy. Like we do not need it. Take it," and I was like: "Okay."

Michael C: Wow.

Michael Zapolin (InternetRealEstate.com) Page 23 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority Michael Z: So, bought it for one hundred thousand dollars, which I had budgeted way more than that to buy it. But again, they just wanted to distance themselves.

Michael C: Let me pause the story there, Zappy. One hundred thousand dollars back in 2003?

Michael Z: 2001.

Michael C: 2001. Okay. 2001. So it was right after the.COM bust. They did not want it, but clearly it still had value. A six-figure domain name. Tell me about the negotiation process. Do you remember that because all of these are great domains, but I think a lot of domain investors that are watching this right now would say: "CreditCards.com? That is like the holy grail for making money online"?

Michael Z: Yes.

Michael C: What was the negotiation process? Did you make an offer to them? Did they say: "Well, I think it should be about two hundred"?

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