«DomainSherpa.com: The Domain Name Authority Zappy's Proven Process to Extract Maximum Value from Domain Names - With Michael Zapolin Watch the ...»
Michael C: Yeah.
Michael Z: So, I said, "Let's start a new CO. You contribute the domain name, contribute the operating capital for the budget, and I will have my crew go out and develop this thing in the same methodology that I have done in the past with my partners." So, he said, "Sounds great." We set up InsuranceQuotes.com as a place to get insurance quotes. We put out press.
We did everything we normally do. And, as we were watching it, just like CreditCards.com, every month we were doing more and more commission revenues. And the amazing thing was that we were seeing that the metric that was blowing me was forty percent of the people who were coming to the homepage were filling out the application.
Michael C: Wow.
Michael Z: And I am like: "Oh my God, that is ten times probably what anybody else is getting." What it showed me was the domain was so credible, just like CreditCards.com. When somebody types in Credit Cards or Insurance Quotes, they get the search page; and, let's say it is insurance quotes, they get a page that has Geico, State Farm, AIG, and then, hopefully at the top of the organics is InsuranceQuotes.com. And they go: "Oh, InsuranceQuotes.com? I know what Geico wants."
Michael Zapolin (InternetRealEstate.com) Page 30 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority Michael C: That is exactly what I want. Yeah.
Michael Z: "Yeah, this is a cool place. Maybe I will do my due diligence."
They click on it and you have to have a page that represents what they think it should be when they get there. So you do not want some schlocky page.
But as long as that page looks strong, they are going to think to themselves:
"They have more to do with their time than just stealing my identity; maybe I am going to have various better quotes. So, okay, instead of backing out and going back to State Farm and Geico, or back to the Google search page, I trust this situation; I am going to fill out the application." And that is an incredibly important element of owning a domain name. I think it is more important now than ever because in the past it was all about having somebody find you in a search engine. Well, now, if they find you but they do not trust you, you spent all that money for nothing. So, in today's age, who does the consumer trust in the two seconds or one second when they are making that decision of what to click on? It is either very large brands who spend billions of dollars on branding, or it is going to be a generic domain for the category that they trust. And so, even people who typed in InsuranceQuotes.com. Those people would will out the application at like sixty-five percent. But people coming from organic search - forty percent consistently. It was amazing.
Michael C: Yeah.
Michael Z: So, again, we put out press, we talked to everybody in the industry, and, long story short, hoping we did not leave too much money on the table because they were not willing to let us retain a piece, we wound up selling it to Bankrate for an undisclosed amount, but an amazing sale.
Something that was multiples of what the domain was worth two years earlier that it would have sold for. So, we were able to separate ourselves. We were not selling a domain name. We were now selling a domain business with search integration and brand; and that is what you wind up getting - a super premium for somebody like Bankrate because, when you sell to Bankrate or somebody like that, believe me, they are going to go into your site and your log files. They are going to dig it out and, if there are any shenanigans with search engines - any fake traffic; any garbage -, they root that out in a second.
Michael Zapolin (InternetRealEstate.com) Page 31 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority So they had to be comfortable that we had attained all of this properly. And that is how you do a sale with them, but it was very similar to all the other sales. It happened really quickly once they got it.
Michael C: And did they price the purchase based on a multiple of your earnings?
Michael Z: Yeah, they priced it based on a multiple of our earnings, which was, again, I think the power of the generic domain. And I make this case all the time, but Rent.com was doing forty million dollars in revenue, Ebay bought them for 440 million - eleven times revenue. If they were RentalConnection.com, I think they would have sold for some multiple of earnings.
Michael C: Right.
Michael Z: Dealtime.com became Shopping.com and had one of the biggest IPOs; sold also to Ebay. When you are the generic domain, there is this good will value that they have to appreciate, and you wind up getting some extreme multiple. So, we got a multiple of more like our commission revenues as apposed to somebody else who would have gotten a much lower price because they did not have the good will and everything factor.
Michael C: Yeah, and what year did you close that sale?
Michael Z: 2008.
Michael C: 2008. So, four years ago. Does it still work today? I know it is only four years, but times are tough now. It is a tough market. The economy has just gone into the crapper. We are coming out of it hopefully. The markets are improving. Do you think that you would be able to do that deal today with Bankrate or not? Do you think you would be able to do that deal today and get a higher multiple based on some other factor of revenue or some sort of good will rather than just basing it on multiple of earnings, which is what people will pay for?
Michael Zapolin (InternetRealEstate.com) Page 32 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, definitely. It is one hundred percent doable today. There are a lot of people who are doing it. I am consulting to a few people that are literally doing it. I think it is actually easier right now; and I say easier because, even back when we were buying or doing the deal with InsuranceQuotes, we called State Farm, we called Geico, we called AIG when we were calling on Bankrate and everybody else, and they did not get it. Some of those big guys were like: "I will give you a half a million dollars.
That is what it is worth," you know? They did not get it. At the same time, in that window, I think ad agencies have started to get it in these last four years.
I think major consumer have started to get it. And I make the example. The reason it is better today is that, when you own a domain name like InsuranceQuotes.com, or Chocolate.com, or something like that, which is an Internet real estate brand that I am associated with, there is a trust factor that is very expensive to create. You have to spend a ton of money to get that credibility. So, nowadays, when the consumer is looking to trust somebody, there are a lot of people in business who have to or are trying to cover their ass. And I make the example. If you work in American Express and your boss says to you: "Hey, we are going to have one hundred of our biggest clients come. I want you to go get some chocolates made with the American Express logo on it. Have it ready for the big meeting in a month, or a week, or whenever it is." So, the person goes online and, at Chocolate.com, every day we get tons of inquires for corporate-type chocolate and stuff like that.
So, when that person goes on Chocolate.com and does it, my example is: if they have that event and the chocolate comes and it is all melted, and the boss is like: "Oh my God, it is all melted. You are making me look like an idiot.
What happened?" If you say to them: "Well, I don't know. I went to Chocolate.com and I bought it, and I guess they screwed up. I am going to get the money back." The guy goes: "All right. I get it." But if you said, "Oh, I went to GrannysChocolates.net and I got it, and I don't know," the guy is going to say: "What are you talking about? GrannysChocolate? Are you out of your mind? You are like fired." So, same example with the insurance quotes. I mean if my wife says: "Oh, we got to get insurance today. It's
lapsed." I say, "Okay." I do my thing. I come home that night and she is like:
"Okay, what did you do about the insurance?" Oh, I went on
InsuranceQuotes.com; they are getting me a bunch of quotes. She was like:
"Oh, okay." But if I was like: "Oh, I went to MichaelCygersInsurance and I am waiting for him to call me back," it is like that is not good enough.
Michael Zapolin (InternetRealEstate.com) Page 33 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority Michael C: Exactly. No, I came from Corporate America after a decade and the saying in the IT world, which I worked with a lot, was you never get fired for buying IBM computers. They may not be the best. They may not be the cheapest. They may not serve your company the best. But you will never get fired by buying big blue.
Michael Z: Yeah, exactly. I saw the Head of Search at Google talking at a Web 2.0 Summit, and she said they try to return the search results in like 0.5 seconds - half a second. And she said when they move that up to 0.7 seconds
- two-tenths of a second more -, forty percent of the people would not wait. It was too long, you know? And when you think about that and then you think about somebody coming to your search page, it is like you better really stand out. You better have real credibility. If you want somebody to come to your site and then fill out a form or give you a credit card, they better trust you more than ever. And right now there are so many bad choices for them to make that an obvious choice is Chocolate.com and InsuranceQuotes.com.
And if you make that easier for them, your conversion rates are going to be off the charts.
Michael C: Yeah. No, I get it. The Castello Brothers were on here. They talked about the credibility a PalmSprings.com gives them when they go and sell advertising, and being able to close that deal, and people pick up the phone when they call. Just like you said when you are calling Sandy Weill from Citi Group and others. So I understand the credibility. A lot of people have talked about just the sheer type-in traffic, and I think that Beer.com would get terrific type-in traffic, but when I think about a two-word domain name like InsuraceQuotes.com, I started to wonder. Well, how much of the fall off from having to type in two words and the whole thing is longer than ten characters. And I go back to my research that Wayne Nelson did when he spoke to you in preparation for this and, on Zappy.com, you have a great Business Week article, where you were the focus of it and you were quoted in it. And in that article I am not sure if you said or if they just quoted it. "About one in six Internet searchers never go to a search site, opting instead of direct navigation." What does your data show today? Has this number changed? Do more people use the browser as a search engine and look for the top search result instead of typing in the.COM?
Michael Zapolin (InternetRealEstate.com) Page 34 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority Michael Z: The numbers probably have not changed a whole bunch, but there are different reasons why it happened. Meaning I think people sometimes do not even mean to direct navigate. They just start typing in Google. I mean it is like the number of times that people put something into Google that they could have just put the word (Unclear 1:18.15.1) Google.
Michael C: Tack on a.COM, right.
Michael Z: You know what I mean?
Michael C: Right.
Michael Z: It is ridiculous. So, people are trying this stuff in. I notice, on iPads and iPhones, there is a little.COM button there. I mean how easy as you are typing InsuranceQuotes, and there is that little.COM. It is like click it. These are major strategic advantages to owning a good brand and, of course, a.COM brand. But I think the search engines too have their own credibility issues that they are trying to flush out in their algorithms. And they, quite frankly, trust InsuranceQuotes.com more than they trust InsuranceQuotes.il, or.US, or.BIZ because they know, in their algorithm, that if that person winds up doing something they should not be doing, they are just going to scrap the domain name and move to another one. Where InsuranceQuotes.com, you have to play really clean and they know that. And so, I think type-in traffic is still relevant. One of the sites I am involved with is Music.com. Site still gets over one million type-ins a month.
Michael C: Wow.
Michael Z: So, you think about that and it is amazing. But you think about all the reasons that people kind of default to whatever they find; when they find you, that is when you have to really be credible to get them to click on you, and then you got to be super credible for them to do business with. And I think all the proactive things that you can do to help yourself, why do you all the work and then have a bad domain name, and have the people go: "Well, I do not really know who they are, so let me click back to Google"?
Michael Zapolin (InternetRealEstate.com) Page 35 of 47 DomainSherpa.com: http://www.domainsherpa.com http://twitter.com/domainsherpa http://facebook.com/domainsherpa DomainSherpa.com: The Domain Name Authority Michael C: Sure.
Michael Z: You just did the same amount of work we did, but we closed forty percent and you closed one or two percent.
Michael C: Yeah. Music.com. I did type that in before our interview and I took a look at it. It looked like sort of a video-sharing site. A bunch of little thumbnails down the page. Is that a revenue producing website for you right now?
Michael Z: Yeah, it is definitely a money producer. It is definitely a cash flow positive type of situation. What it is not that I have always wanted it to be that I hope it becomes; and there is leadership there that is headed in that direction. It is open for sale if somebody wanted to buy it at the right price.