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New gTLDs and the Brand Bubble

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In the late 1990s and early 2000s, the world literally went crazy over websites with absolutely no revenue model.  Hundreds of millions of dollars were sunk into the “.com” bubble.  Now, those models have evolved into data mining, shopping and advertising and they are billion dollar industries.  This new regime is likely to be a brand bubble, with a few companies buying Internet brand real estate in general themes and generics and big brands putting their stake in the Internet ground to control their brand at a whole new level.  What is the brand bubble in the .anything paradigm shift?  And, what happens to all those companies who paid hundreds of thousands of dollars or even millions for their .com – what’s it worth now?  How does it change the brand game? 

After years of venture capitalists pouring billions into dot coms and often paying millions just to acquire the .com name, only to have the lion’s share of those companies completely flame out, is it any wonder that ICANN determined a high barrier of entry was required in the next generation of the Internet?  No one may be crying over the lost VC money, but the trickle down impact on the stock market has been felt by all.  For example, according to John Cassidy in dot con, the biggest venture capital deal of 1999 was $275 million for Webvan, an online grocery store.  Two months after starting, it filed for an IPO, which was a new record in the craze of .coms filing for IPOs.  It had lost $35 million on sales of just $395,000.  Following this IPO, others quickly followed:  egreetings.com, mothernature.com, smarterkids.com, ecollege.com, toys.com, pets.com and kozmo.com.  The commonality among all of these companies – they had no revenue – only venture capital backing.  The venture capitalists were actually creating wealth out of nothing by speculating and launching IPO campaigns.  Journalists soon began to realize that the jig may be up.  Pegasus Research International predicted in early 2000, that within twelve months at least fifty Internet companies would have no money left.  And on Friday, April 14, 2000, ironically 88 years to the day after the Titanic sank, CNBNC and CNNfn reported that prices were rising faster than any point in the last five years.  Waves of selling began to hit the technology driven NASDAQ.  Afternoon margin calls added pressure and at closing the Dow was down 617.78 points, its biggest ever points drop and the NASDAQ was down 355.49 points.  This was the biggest percentage fall since Black Monday, October 19, 1987.  This became known as Black Friday.  In just one week, nearly $2 trillion of stock market wealth had been eviscerated.  This became known as the Internet bubble bursting.  Jim Cramer said “The Gold Rush is over” and the days of entrepreneurs raising money on just an idea came to an end.  For companies that had created online divisions or tried to spin off Internet businesses, it was time to rethink everything.  The .com craze had a string of irrational investing that came to an end. 

A FEW OF THE MORE INTERESTING .COM FLAMEOUTS according to Philip Kaplan’s F’d Companies

  •   Kozmo.com, a delivery service of anything burned through $250 million before flaming out. 

  •  Furniture.com, after spending 2.5 million for the name and $75 million in venture capital, and a failed IPO, the company died. 

  •   Colo.com was created to build co-location or web hosting; $500 million in venture capital went in and by 2001, with $360 million in debt, they filed for bankruptcy. 

  •   Bizbuyer.com, investors paid $7.5 million for the domain name business.com and were out of business months later; $68 million dollars gone and 170 people out of work.

  •  Eletter.com, $23 million in investors and 100 employees later, they went out of business. 

  •   Buildnet.com, $142 million in funding and 1000 people ended up in bankruptcy. 

  •   Localbusiness.com, $16 million in funding, and 75 employees, it filed for chapter 11.

  •   Etown.com, $22 million invested by Best Buy as a free online consumer reports hoping it would drive traffic to their store – it didn’t. 

  • The list of .com startups with millions and millions of dollars and jobs lost goes on and on.  The moral of the story – just because you have a good domain name, doesn’t mean you’ll make money. 

 

What’s the Value of Your .com Now?

A final important question following the .com bubble – what’s your .com domain and brand worth now?  The real answer to this question will depend upon how well you execute your business strategy.  Your business strategy must evolve to thinking about how this next generation of the Internet will impact your consumers, users, customers, suppliers and stakeholders.  This is strategic planning 101.  A major shift is about to occur.  To think about it requires some heavy lifting and leadership to recognize the importance of it.  Your .com could be just as valuable if not more valuable if you plan correctly for it.  But if you stick your head in the sand and hope nothing will change – your .com won’t be worth much anymore. 

Figure 2.5 Top Domain Name Sale Prices

gTLD chart

 

 

The value of a domain was determined by 12 main variables:

 

1.       Length - How long is the name?

2.       Word Count - How many words?

3.       Clarity - How well does it describe its content? 

4.       Memorability - How easy is it to remember?

5.       Market Size - Large, medium or small market?

6.       Market Potential - Is the market lucrative?

7.       Market Applicability - Does the name apply to the whole market or small portion of it?

8.       Hyphens/Dashes or Numerals? e.g., MyDomain5.com or Music-CD.com (loses value)

9.       Any Substitute Names / Synonym Alternatives? e.g., University.com vs. College.com (loses value)

10.   Any Abbreviations? e.g., PPV.com vs. PayPerView.com (loses value)

11.   Any Variations - singular & plural nouns or verbs? e.g., loan.com (singular noun, verb), loans.com (plural)

12.   Domain Extension / TLD?  Is it a .com? (more value than others)

Of all the variables, the three most important factors in assessing domain value are the domain's TLD extension, its market size/potential and how well it describes its content.  But will that change now?

It’s All About Execution

.coms got the world excited about the possibility of changing technology.  It did change the way we worked and lived in profound ways that no one could have predicted. 

Because of the excitement and innovation occurring around .com concept companies, the stock market exploded into a bubble.  Yes, companies were overvalued and the market returned to evaluating companies based upon traditional Profit and Loss models.  But, the allure of innovation and the next big thing remains. 

Could .anything also do the same?  Could it spur innovative entrepreneurship?  Could it also create new possibilities, innovative thinking and a little irrational exuberance again?  As early adopters figure it out, those big companies that failed to get in the game will surely look to acquisition strategy to fill the gaps.  Anytime there is excitement, new ideas and money being pumped into something, the market tends to rise.

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