Roses and Domains

 

Where is domain investment ranked if the industrial class has no name?

Written by Danny Pryor for InvestingFunds.com on March 16, 2011

 

The domain industry seems to be the last industry to get any respect in the worlds of information technology and investment, if it is getting any at all. This is very unusual, indeed, because without a domain name, nobody would really be using the Internet. Can you imagine telling your friends to find you on 69.63.189.11? That is the current IP address for Facebook.com.

 

The United States is the place where the Internet started; it was called the "Advanced Research Projects Agency Network", or ARPANET, at the time. In the mid 1980's, the DNS and packet switching systems became married, and a new-fangled system was born. On March 15, 1985, the first -dot-com was registered: Symbolics.com. Today, the domain name is owned by Aron Meystedt, whose 69.63.189.11 profile picture is shown at left.

 

Since domain names have such an important role in the tech world, for industry, for the very success of the Internet, why does the domain industry, itself, not seem to garner the kind of respect you might find in, say, the stock market, where traders regularly bid up and down the price of GOOG, the stocky symbol of the behemoth search engine that helps us to find names, whether we search for a trademark or a generic equivalent?

 

A report from Dun & Bradstreet, commissioned in the very early morning hours of March 16, 2011, shows how the nation's largest business credit reporting bureau, noted for assigning businesses those DUNS numbers, has classified the revenue and marketability of the world of technology and the Internet. The D&B report we acquired shows computer systems, information technology, integration and the Internet lumped into a single industrial category, or Standard Industrial Classification.

 

At first glance, the report would seem to be following the same SIC system as used by the United States Census Bureau, which has to count people and industry. The problem is that the SIC system was replaced by the North American Industrial Classification System in 1997, about a year before ICANN was even formed. So the D&B system does have some catching up to do.

 

Nonetheless, the numbers are rather stimulating, to say the least. According to the D&B report, there is nearly $40-billion in revenues earned each year, in the United States, alone. That number gains new meaning when one considers the report does not include Internet Service Providers, such as Covad, Comcast or AT&T.

 

Even more interesting, more than three-fourths of the businesses that are in the "computer services, systems integration, information technology and Internet" are growing. About eight-percent are shrinking, and another 16% are stagnant. Clearly, there is money to be had in computers, software, Internet, etc.

 

 

What is even more interesting is the relative age of the companies on the D&B list. Of the nearly 9,500 companies profiled, about 25% of them are between 10 and 20 years old, which is significant. It is only in that time period that the Internet has truly evolved as an economic force, and only in the past ten years has it become recognized as the financial engine that drives volumes of traffic through the "virtual doors" of countless large retailers, service providers and smaller merchants.

 

The top players of the industry report, however, those making $1-billion in annual sales or higher, constitute only three companies of the entire pie of companies profiled above, although one, Micros Systems, Inc., is making so close to $1-billion annually, we decided to add it to the list of profiled companies. At least one on the list, Cubic, has been in business longer than the D&B report shows, having programmed government applications from at least the early 1970's, in San Diego and Las Vegas. The subsidiary company, however, was only formed in 1994.

 

 

Of those very largest of companies in the D&B report, only one is actually a significant player in the online world, and that is Netapp, which provides cloud-based data solutions for clients. But it is hardly in the domain space, as domain investors would know it.

 

Of particular importance to domain investors is how all this available money will come to serve or sever their fiduciary interests with the online world. It is no secret that many firms, with the kind of available "stupid money" as these, could easily wait for the right name to drop, then outbid the largest of domain investors on the aftermarket. With the resources at their disposal, they could easily hire a small town of attorneys to reverse hijack a name they wanted, and come with creative ways to get it. The more imporatant question is, "Why haven't they done it?"

 

Perhaps the best answer can be found in Rick Schwartz's diatribe at the 2006 T.R.A.F.F.I.C. East convention, in Hollywood, Florida, where he noted that "all the geniuses with all the masters degrees" dropped the ball when going for their companies' domain names. His specific example was hotels.com, which is owned by a Dallas company that does not own a single resort, hostel, accommodation or trailer park, for that matter. They do earn vast amounts of cash for charging all the hoteliers to list on their domain, though.

 

That mis-step by the resort industry underscores the very pitfall that comes with branding: Companies feel the brand is more valuable than the product the represented by the brand. Coca Cola does not own softdrink.com or soda.com or beverage.com. Neither does Pepsi. Each company generates over $1-billion in annual sales, but none is willing to shell out the money for a generic domain that would drive traffic like mad. Why? Is Coca Cola now larger than soda?

 

With that kind of generic apathy, it is hardly a wonder that D&B does not parse the computer and Internet industries in significant measure to help us get an "industry-outsider" perspective on domains. But inside the industry, as reported on DNJournal.com each week, on the weekly domain sales charts, there are hundreds of thousands of dollars changing hands, from company to company and continent-to-continent, as investors and traders pony up the cash for bigger and better opportunities online.

 

Indeed, a rose by any other name may smell just as sweet, but would a domain by just any name be as profitable?

 

 

Information sourced from the Dun & Bradstreet and other media sources.