The Domain Brokerage Business - Andrew Rosener - CEO of MediaOptions.com - e14

Hey, Michael here. You will now hear some episodes of the Michael Girdley Show that we had branded differently, called Unusual Profits or some such like that. Same show, same person, just me interviewing people and producing content that could be helpful on your journey and mine as well. So with no further ado, here's the episode. Hey, Michael here. Sponsor for today's show is actually a product that I'm a part of called DM Bridge. And what DMBridge is, uh, is a service that we built, uh, to solve the problem that Twitter's direct messaging functionality is a total mess. So we built DMBridge to help you fix that. Um, a lot of the other solutions, uh, do things like requiring you to install a whole nother inbox. We didn't want another inbox, so we created DMBridge. And what it does is it takes all of your Twitter DMs and has them appear inside of your email inbox. So you can reply to them just like it's a regular email. You see them just like it's a regular email. You can search them later like it's one of your regular emails, all just by using DMBridge. So, uh, we're currently live with the product. Uh, would love for you to sign up and become a customer, uh, and check it out. So you can find that at dmbridge.app, uh, and go on there, put in your name, uh, and be either part of the beta or join us as part of the live use of the product. And again, check it out, dmbridge.app. All right. Welcome to the Unusual Profits Podcast. I am your host, Michael Girdley. This is a podcast where I spend some time each week with a person operating and very knowledgeable in an unusual market or an interesting industry. So Today I am joined by Drew Rosner, who is a domain broker and has been in the domain brokerage business, I guess, for a dozen years now. Drew?

Yeah, the actual brokerage business, 13 years. 2008, we started the brokerage side of the business, but I've been sort of in the domain game 23, 24 years now.

Holy cow. And you're dialing in live from Lisbon, Portugal, which wins the award so far for the furthest away from me guest. So hopefully there won't be too much of a lag from Texas to Portugal, which is beautiful.

Pretty good pipes.

The internet, it's magical. It's the pipes that come together.

Yep.

Well, I think we'd love to get started with how, you know, how did your journey reach up to being and doing what you are today? So you said you've been doing this for a long time. How did you get into the domain name brokerage business?

So, you know, in college I had studied database information systems. And database design, basically. This was at the emergence of the consumer internet, mid-'90s, late '90s. Obviously, we were learning about the internet in conjunction. I'm hyperactive and very curious, and so every time I had an idea, I thought, "Oh, I'm going to get a domain for that." It wasn't on speculation, it was just that I just had ideas and I thought, "I'm going to register a domain for that." I just started accumulating them because, as one does, you only execute on maybe 1 out of every 10,000 ideas that you have. Thankfully, but that was pretty much how I started. Then it was actually after the dot-com bust that I realized these things started to have value. At that point, I was third wave into this game. It wasn't that you just go register these things for the most part, you had to buy them in the secondary market. As I started exploring that secondary market, which I hadn't previously even known existed, I realized that it was a cash-intensive business. If you want to build a portfolio of valuable domain names, you need cash, or you need cash flow in order to sustain that acquisition strategy. And so, I launched the domain brokerage business because I had been in sales my whole life. I've always been very comfortable with sales. What I found was that there was nobody really doing outbound sales of these from this small pool of domain investors to the world at large of end users who could actually put these things to use. As we say, the highest and best use case for any given domain name. I took on the role of playing matchmaker between the domain investors who had all this inventory of phenomenal domain names, and the end users who, whether they knew it or not, would benefit from owning these domain names. And so luckily, I was extremely stupid and naive, and I just said, "Hey, why not?" And I launched this business, which is today mediaoptions.com, and it's gone through multiple iterations, but it's maintained that brand, which I don't even actually like my brand, but it is what it is these days. But here we are later, and it's been an incredibly effective strategy. And to this day, We basically employ the same strategy, which is use the cash flow generated from brokering other people's domains or helping companies, primarily startups, but also large companies launching new products and services, to acquire their best domain name. So we help both the buy side or the sell side, never both. And we use that cash flow in order to acquire more domain names from the open market for our owned and operated portfolio.

Yeah. That's great. So today you're almost a broker-dealer to use the investment banking parlance, like where Goldman Sachs brokers investment banking products here. They're also running their own book of investments as well. So you're doing both, which sounds smart.

I think so. I've caught a lot of flack over the years for it, but from my standpoint, I wouldn't change a thing. I think it gives us absolutely unequivocally the best insight into the market. I think we've got a stronger pulse on the market than anybody else. None of our competitors are putting their money where their mouth is. The bubble that they're in, in terms of market data, is going to be driven purely by their customers. And so, that's always going to be limited and it's always going to be biased. I was one of the largest, probably the largest owner of two-letter.coms in the world. I'm one of the largest owners of three-letter.coms in the world. We've got one of the most valuable domain portfolios in the world. So when I'm speaking to somebody who has a very valuable domain, we really only work at the top of the market, top, I like to say the top 2%. And so when I'm speaking to somebody who has a very valuable domain name, they have an easier time, I think, to relate to me, and I have an easier time to relate to them and their concerns and their wants and their needs, their expectations, because I'm holding many of those domains myself. I put my money into the market at risk in the same way. Yeah, I think it gives us a really unique perspective on the market and certainly better, and I think at this point, that's proven itself out.

Well, and then I'm thinking back on my history. I'm 46, and my history with domain names, it seems like there was the first phase of when domain names became a thing back in the early commercialization of the internet, '70s and '80s, where Here and there were dot-coms, but it wasn't much of a thing. And then the second phase felt like— I remember when the first internet boom happened in the early '90s, you would pay $300 to— well, I guess there was only one registrar back early on at that time. Yeah, it was Network Solutions. Network Solutions. And I got girdley.com then. I've had it for 25 years. And evergreen.com was available back then for $300.

I remember being like, "Oh, who wants to own Evergreen?" And now that's owned by my friend Adam Strong, who's I was also a domain broker.

Oh, no way. Okay.

Yeah. Yeah.

I remember that's one specific, I was like, "Well, do I want to register girdley.com or evergreen.com?" I chose girdley.com. This is stupid.

You definitely should have gotten evergreen.com. I can tell you.

I would be super— Yeah. I also should have bought Bitcoin and should have done a lot of other stuff differently. So that was kind of phase 2 where there was a monopoly on buying domains. And then kind of what happened around 2000, things started to change again because that's when I remember my friends day trading basically day trading domains and stuff. I'd love your perspective on the—

Yeah. Day trading domains was tricky at that time. The market was highly illiquid. There's very few people in the world that actually knew what these things were worth. I would argue that today, there's still less than one hand of people who I would tell you really understand how to value a domain name, but it was starting to emerge in that time, in the early 2000s. But the day trading, or let's say trading domains at that time, mostly consisted of domains which were expiring and then coming to market, and then you had these different tiers of players. So you had these guys like my friend Harold Whiting, who was a drop catcher. So he was creating this software to ping the registries relentlessly so that the moment one of these domains expired, it got automatically registered. Then he would then sell it. He had tiers. I don't know what they were exactly, but it was something like 3 tiers of quality. Tier 1, you paid $500 flat fee regardless of what the domain was. Tier 2 was $1,000. Tier 3 was $5,000. It was like, but for $5,000, you were getting domains like home.com, killer names. Then you had the guys that knew how that system worked, who would then arbitrage it. Then you had the guys that just had a lot of money, understood these things were worth money, but they didn't want to spend their day trying to arbitrage this system. They were ultimately, let's say, the third rung where some guy took his flat fee, next guy played the margin, and it ended up with the guy that was willing to just hold it for the next 10, 20 years. And there wasn't a lot of interplay among collectors because there was some, but not a lot. Then some of these marketplaces started to come about, and forums, and then with the forums, then you started Rick Schwartz, the self-proclaimed domain king, big respect to Rick. He's an amazing foresight and amazing negotiator. But has played the game very differently than most others, but with a phenomenal outcome. He's certainly generated over $100 million in proceeds from domain sales and passive income from parking. He started a conference called Traffic. I think that was the first time that people started coming together and talking to one another and saying, "Hey, how does this work?" Then suddenly you had monetization. You could start monetizing through Yahoo and through Google. Suddenly, these passive assets that you were holding that were in some way a liability because it costs money to keep them and they weren't generating any cash flow, it was more like a lottery ticket, suddenly it became serious assets because you can now monetize the traffic. It was naturally going to the really good domains and people click on these ads and you earn money. You could earn a lot of money. I have friends that were earning Tens of thousands of dollars every day, 100% passively. That was really the big tipping point for the industry. Once people started to understand that you could earn money from these things, private equity started coming in, you had people buying up portfolios. Then it was like— there were these glory years for 5 years or so. Then between '08 and 2010, Google started saying, "Wait a minute, instead of giving you 90% of the pie and we keep 10, we're going to keep 90, you take 10." And so the whole thing got flipped on its head. The revenue from parking went to the floor. And that's basically where we've been for the last, call it, 8 years, 9 years, 10 years. And in the last 2 years, I'd say we're starting to see some comeback in the monetization path for these really premium domain names. But we're not back to where we were a decade ago. And so that's been the life cycle. But as the monetization part of this passed, it also opened the door for, let's say, the fourth or fifth wave of domain investment, because now you had guys that were holding these things because of the cash flow. Now, that cash flow was diminished, and so now they were ready to flip them to somebody else, who wanted to come in and pick up that hot potato on the speculation that they could buy it for less than they could sell it for versus I'm buying this because of the cash flow value. The profile of the average domain investor switched at that point. That brings us to today. Now, we're seeing really serious consolidation of portfolios, registrars, monetization companies across the board. The whole industry is being consolidated. With that comes some benefits, and with that comes some hurdles. But yeah, it's been quite a ride.

Yeah. So it sounds like, if I understand correctly, there's really two sides to your business. There's the pure brokerage side, and then there's the synergy with the other side, which is your own book of domain name properties that you're sometimes selling, sometimes monetizing, sometimes trading. So if that's right—

Yeah. Just to touch on that. So the brokerage side is pretty obvious. We're like, Christie's Real Estate, where we're handling only high-end domain names. We're doing buy-side representation. We're doing sell-side representation.

What is high-end? Is that $10,000 or above in terms of domain?

More like $100,000 and up. We might mess around with some $50,000, $75,000 domains. Sometimes we'll do something smaller if we're working with a client who we're working on bigger domains for, but for the most part, we're really looking for $100,000 and up.

And typically the client for that would be a startup, somebody with a big brand.

I would say the vast majority of it is venture-backed startups.

Okay.

But then again, you know, there's also large corporations who are, you know, launching a new brand, a new product, a new service, etc.

Got it. Okay. So $100,000 or above, they, they contact you and they say, I want to buy this, I want to buy this domain name. Then what happens next?

So then if we're representing a buyer, then there's different scenarios. Sometimes they come in specifically, "Help us buy this domain." Sometimes they come in saying, "Can you help us find a name?" Where it used to be that you come up with a name and then you go backward, go find out if you can get the domain, negotiate the— Most companies have realized now that If you can't get your.com, you probably should change your name. And so they're starting with finding the right domain name first and then building the brand around that second. And so whatever process we go through there will help them understand value, will help them understand the options, will help them understand the transaction lifecycle, timeframes, fees, all of that stuff, how to securely complete the transaction. And then obviously, we engage with the domain owner, which is usually the hardest part. A lot of this comes down to, because of GDPR, the European privacy laws, domain name owners are now obfuscated. There is no more public WHOIS that you can go look and find who the domain owner is. And so, we use special tools that we've created over the years to be able to get behind that and understand who the domain owners are. We have We track certain patterns from name servers, registrars, landing pages. There's all kinds of attributes that we utilize in order to understand who likely owns these domains because at the end of the day, the vast majority of the domain names that are, let's say, parked, not in use, the vast majority of them are owned by a small subset of owners. Interesting. I would say there's maybe 300 to 500 domain owners in the world that own 80% of all the most valuable domain names that are still not in corporate hands. And so the benefit of working with somebody like us is that we have a relationship with every single one of those. And so you can't bullshit a bullshitter.

So if, for example, if there's a $30,000 domain name, which is too small for a brokerage like yourselves to get involved in.

We actually will get involved with a $2,000 transaction. We just did one today. We just did a $2,000 transaction. Oh, okay. Our fee is $1,000 minimum, 10% or $1,000, whichever's more. And that's worth it to many people, just because they can't get ahold of the person, whatever. It's on the outbound side that we have this threshold of more or less $100,000. But on the acquisition side, if you want to hire us to acquire a domain, we don't have any minimums.

Yeah. Well, I mean, in the old days when you could go on, use the Whois tool and you could see who owns it and track them down pretty easily. That made it easier for folks outside of the brokerage space like myself or whoever to track down an owner. Now it sounds like it's made your business better, right? Because—

Michael Girdley It has. It's made it more difficult in some ways. It's made it better in terms of volume in other ways. I would argue that certainly it's had a positive impact, but I would argue that even at a time, even if today GDPR didn't exist, You could easily go to the public whois and identify who the domain owner was. Again, so few people understand what is a domain worth. They don't know, is this fair market value? Is it way off? There's a few different considerations. It's like one thing is what's your budget, but another thing is what is the domain actually worth? And so helping people work out some of that stuff, and then in particular, helping them to actually complete the transaction, safely and securely without fraud and any of the potential pitfalls, that adds a lot of value. And then lastly, it's just like, we know how to negotiate these things. This is all we do all day, every day. It's crazy to me, but I still get emails almost every day from people saying, "I'm a college student and I'm doing this project and I'd like to buy pegasus.com from you." And it's like, "Would you accept $100?" And it's like, "Come on." And so you're never going to get it. You're not even going to get a reply from somebody that's serious. You know what I mean? So I think just getting a response, getting an accurate price, cutting through the bullshit, safety, security, efficiency, all of these things are— I think that we more than make up our value by getting involved.

Trey Lockerbie One of the things I've noticed that's just fascinating about the valuation of domains is I've never bought a domain more than a few thousand dollars. So that should tell you where I play in the industry. I think $7,500 is the most I ever paid for one and it wasn't my money. But it's fascinating how quickly they'll go from $30,000 to $3,000 to $300 and you make a deal in terms of the seller looking at your willingness to pay for a premium domain. And I guess that's where somebody that's a broker who really is seeing the market can make a huge difference.

Michael Gayed Absolutely. Absolutely. I mean, again, one is that nobody knows— very few people know how to value them. And so whether somebody tells you $300, $3,000, or $30,000, or $300,000, you don't know. The vast majority of people, they look at it, they go, "I don't know. $300,000 feels rich." 300 feels low and cheap. Somewhere in the middle feels right. Is that 300? Is that 30,000? Is that 3,000? And as you said, we help get through, cut through that. But an important factor is also like the guy that owns the domain also probably doesn't know what it's worth. That's just the truth. And so, they're just throwing spaghetti against the wall. And trying to see what sticks. And so, it's like, you know, $3,000 or $330,000 is fairly ambiguous for the vast majority of domain owners. They really, they don't know because it's not a liquid market. And because it's not a liquid market, you can't just go ping the exchange and say, "What's my domain worth today?" Right? There's no liquid buyer out there ready to buy it at the drop of a hat. And therefore there's no market price. And so you have to figure out how do you measure these things objectively? And so that's actually been sort of our secret sauce is we came up with a methodology, which the industry has proclaimed as the Rosner Equation. And this methodology was the first objective way to assess the value of a domain. Now, I would tell you that most domains don't sell for their objective value. They sell for the subjective value. But the objective value at least gives you an anchoring point, either in negotiation or in your understanding or in assessing what is fair market. And so objective value is a very, very, very important principle. And it basically is a measure of use in commerce and use in culture of whatever is to the left of the dot.

Preston Pysh Got it. So then, so what— can you double-click on that? What factors go into— so this is your appraisal process, basically? in terms of the equation? What all kind of factors go into that?

Okay. So, this could be an entire podcast in and of itself. If anybody wants to really drill down into this, we actually do have our own podcast. It's domainsherpa.com. There are probably 3 or 4 videos that are dedicated purely to this, and they're probably 2 to 3 hours long. So, you can go have a blast. But just at a high level, back of the napkin, We can look at 3 or 4 factors and that'll get you 70% or 80% of the way there. And it gives you a good, just sort of, like I said, back of the napkin. Somebody says, "Hey, you want to buy this domain?" You're sitting at a bar and you're like, "Well, that kind of sounds like a good deal. Here's kind of some quick rough numbers you can look at." So again, we're trying to measure use in commerce and use in culture. And the way that we do that is we look at exact match Google search, and we look at exact match YouTube search, and we look at the number of hashtags, and we look at, you know, the number of Crunchbase profiles with that keyword or acronym. We look at the number of LinkedIn profiles with that username or acronym. We're looking at all of your typical sort of social media, search, and content platforms, and we're trying to assess how often is this keyword or acronym being used. We're then looking at the competition factors, and the best way to look at that is your cost per click that advertisers are paying to Google or YouTube or PayPal, Facebook or whatever, right? And so real quick version is say, you know, I don't know, let's give me a keyword. Apple.

That's not very—

Terrible keyword. Give me another keyword.

Evergreen.

Evergreen. Evergreen. All right, good one. So we come over here and you know, you can use SEMrush, you can use Ahrefs, use one of these SEO tools to assess some of these factors, right? And so I use the Ahrefs, ahrefs.com, the keyword explorer. And if I type in evergreen as all one word, you have 89,000 searches per month in the United States for the word evergreen. You have 393,000 searches per month for evergreen worldwide. Number 1 is USA, followed by United Kingdom. Some of these countries I would generally discount. So Indonesia, Vietnam, that's not going to be our target market in most cases. And so I'd be discounting those, but France, maybe Italy, yes, UK, US, et cetera. So keyword difficulty, super hard, 78, high competition. Very strong search volume, and advertisers are paying Google $2 a click on average. Okay? So let's say 89,000 people a month are searching for the keyword evergreen. And let's say that, you know, I want to try and compete with the people who are organically ranking already for evergreen. And so I'm going to come in and I'm going to come, I want to, you know, buy that traffic from Google. So let's say I'm only targeting, you know, the US for now. Okay? Not global. And depends on your niche, depends on the keywords, depends on a lot of different factors when you're making this assessment of the value. Generally speaking though, I would say that a.com domain name has a global audience. And so you should be looking at the global search volume, because even if that search volume doesn't apply to your business, it does apply to somebody's. And that somebody is going to be competing against you for this domain. And if they value it higher than you, then they're going to be willing to pay a higher price than you. And so, that goes into the value. Let's use the global, call it 400,000 for round numbers, $2 a click. So, 400,000 people a month search Google. If you buy that traffic, meaning if you pay Google to be the little sponsored listing at the top of the page, you can on average expect to get around 18% to 25% of that traffic. Could be a little less, could be a little higher, but I like to use 20% as just a nice round number. It's probably about right. Okay? And we say 400,000 people a month searching. You're gonna get 20% of that traffic. That's 80,000 people a month that are going to click. Okay? 80,000 people a month to click. That's $160,000 a month that you're gonna spend with Google to buy that traffic. Your conversion rate on that traffic is gonna be, call it roughly 2% on average. So 2%, you know, you're talking about, what is that? 2,000 people, 3,200, 3,200 people a month that will convert. So you'll get 160, you know, from 400,000 people searching, you'll get 160,000. From those, 3,200 will convert. Okay. 3,200 conversions for the keyword evergreen. And then you gotta do the math on your side of what does that mean? Right. But The point of owning evergreen.com is that according to several studies, the best of which was a Microsoft study done in roughly 2011, which basically says that brands that use terms that are an exact match of what people are searching for, basically you're matching the brand to the intent, or brands that are a household name or perceived, that's the keyword, perceived to be a household name, will I believe it's cut your cost of customer— well, what it'll do is double your conversion rate. So from 2%, you go to 4%. Okay. So what that does when you double your conversion rate is in effect, you're decreasing your cost of customer acquisition by half. And so if you take that savings, that decrease in cost of customer acquisition by marketing a brand, which is perceived to be a household name because it's a one-word.com, that everybody feels familiar with, comfortable with, trust. Trust is ultimately the currency of the internet. And so if you have a brand that people perceive as trustable, you will increase your conversion rates. It's that simple. And so, you know, obviously that factor is going to vary depending on industry, depending on a lot of things. You know, I always say like if you're in the cabinets industry, 99.9% of households couldn't tell you a brand of cabinets, right? They're just— they do a Google search, they're looking for cabinets. And if you're cabinets.com, you got a good chance of being clicked on. If you're searching for mobile phones, it doesn't quite work like that, right? People have an attachment and a familiarity with Samsung, Google, Apple. Having mobilephones.com is going to have less relevance in a keyword search for mobile phones than it would in the keyword search from cabinets. If you get my drift. But on average, again, high level, you're going to roughly cut your cost of customer acquisition in half. Now, extrapolate that out using a reasonable business multiple. If you were going to go out and buy a business, you're typically going to pay, let's say, anywhere from, at the very low end, 2 times EBITDA, at the high end, could be 20 times EBITDA. But let's just say roughly, I don't know, 5 times EBITDA. So we had 2%, so you had 3,200, it cost $160,000 to get 3,200 customers. What if you could get the same 3,200 customers for $80,000? Cut your cost of customer acquisition in half. Now take that $80,000 in savings and extrapolate that out by your reasonable business multiple that I leave to you to decide what that is for your industry, et cetera. And if we're going to use a multiple of 5, it's $80,000 a month times 12, call it $100,000. Okay? Call it $1 million, right? $1 million a year in savings. Extrapolate that out by 5-year business multiple, you arrive at $5 million. Now, these are very rough numbers. Somebody in the comments will probably say, "Well, you did the math." I'm just trying to give you sort of back of the napkin, right? But we arrive at roughly value of $5 million. And I would tell you that's about right. Evergreen.com, that's about right.

Yeah, fascinating. So it, it's, you're backing into basically the same type of stuff that a real estate broker does, right? Like, how do we, our real estate appraiser, like, how do I, how do I see the future cash flows of this potential thing and then turn that into a market value? So how often do, do comps play into that? So comparables in terms of transactions, unfortunately they play a factor too often.

So, I'm a very loud voice in my industry and I'm hated for this because everybody wants to talk about comps because it's so easy to say, "Well, voice.com sold for $30 million. It's 5 letters and my domain is 5 letters. And so, well, my domain must be $30 million." No, it doesn't work like that. Do you own voice.com? No? Great. Then start from zero. So, I believe that with very little exceptions, there are exceptions, particularly when you get into the exact match keyword type stuff where you're not looking for a brand, you're looking, can I compare lifeinsurance.com to carinsurance.com, not on face value, but what you can do is break down, okay, lifeinsurance.com sold for whatever, let's make up a number, $10 million. Lifeinsurance.com sold for $10 million. What does that mean for carinsurance.com? Well, let's take, let's get a ratio of amount of search, exact match search per month, and in ratio with the cost per click that advertisers are paying, and then take that ratio, do the same thing with car insurance, compare those two ratios, and then based on that, let's say, lowest common denominator, you can then make a comparison and extrapolate it out based on the amount of search for the other one. But you can't just say car insurance, life insurance, eh, one letter difference, roughly the same value. It doesn't work like that. It's really driven by search and cost per click. And, you know, That's just what it comes out to, right? Lifeinsurance.com, fastinsurance.com, same amount of letters, both great brands, night and day in terms of value.

Yeah, totally cool. So, okay. So just to finish out the brokerage side of your business. So the, uh, the search side, you, you charge a retainer and a percentage of the eventual purchase, or how, how does that get structured in terms of you having a business?

Yeah, we used to do a retainer. You know, honestly, it just gets too complicated and more than anything, it just slows down the, the, the cycle. And I just, I'm not a patient person. So we actually did away with the retainer and we're just more selective with who we work with and what projects we take on. But it's just a straight percentage of the sale price. On the outbound sales side, we charge 15%. Sometimes in larger deals or in deals where, you know, they're looking for a fast sale and they've priced it very aggressively, which makes our job easier, we'll reduce our fee. But for the most part, it's 15%. And then on the acquisition side, it's 10%. And we've got a minimum fee of $1,000, but outside of that, there's really no restrictions. On the outbound side, as we said, we're really only looking for big names.

Yeah, I hear you. And then in terms of your company, it's you and how many other people are in it?

Yeah. So today, we're 7 people. 7 or 8. Yeah, and we're totally distributed. We don't have any central office. I've never had an office. When this whole COVID thing happened and everybody's like, "Oh, work from home and oh, these big shifts and all the other." I was like, "Business as usual." Yeah, we didn't really skip a beat.

One thing I've been curious about with the domain business, by default, it's been buy-sell, right? It's like everybody's owner-occupied. Is there any hope—

We've been trying to change that.

Yeah. Is there any hope of somebody coming to me and being like, "Hey, I want to rent girdley.com and I sign a 10-year lease with them," or how is that? Are you doing that with your portfolio? How's that going?

Yeah. My friends over at Venture.com, they've got an amazing portfolio of domain names and their model is only leasing. If you want them to sell a name, you're going to really have to dig deep in your pockets, but they are very affordable if you want to just do a lease. Now, I am envious of that model, but I don't necessarily believe that that's a sustainable model or at least a scalable model, because I think that most of these businesses, they require a path to ownership. Even if they don't need to be able to execute that ownership in a short period of time, they need to know and their investors need to know and their shareholders need to know that at some point in the future, if they do become the next Uber, Google, Facebook, Tesla, whatever, that they can acquire that name, that they'll never be held over the coals into some undue circumstances over that domain name because they didn't have a path to ownership with a fixed price. And so the model that we promote and the model that we try to utilize in our owned and operated portfolio is a lease with an option to buy. Usually, it's a small deposit upfront, which buys you the purchase option, basically a call option on the domain. Typically, it's 5 years. Typically, that looks like somewhere between 5% and 10% of what that call option is. Let's say it's a $500,000 domain. You show up, you say, "Look, I want to buy pegasus.com." That one would be quite a bit more. It'd be more like $2.5 million. Let's say it's $2.5 million. All right. So I say, "All right. Well, look, I'll do the deal with you. Give me $100,000 down. That'll buy you a call option on the domain, and you can exercise that call option at any time over the next 5 years for $2.5 million. Okay?" And then in parallel, we're doing a lease agreement, which allows you to immediately start using the domain. And so that lease agreement is typically going to be somewhere between 0.5 points and 2 points per month, depending on the value of the name. The higher the value, the lower that percentage is typically going to be. And so, again, if we come back to that Pegasus example—

Is that one of your domains, by the way? I'm just—

Yeah, it is. It's one of my favorites. It's one of my favorites.

Is that your best one, or do you have—

No, no, it's not, but it's one of my favorites. I really love the pegasus.com domain name. I love the brand of Pegasus. I love what Pegasus represents.

What is your best one, if you don't mind me asking?

I mean, just in terms of pure liquidity, probably em.com. Oh, wow. Or, well, clear.com. Clear.com is probably the most valuable. Yeah. Oh, wow.

And I assume clear the— Oh, and you have a redirect to your Twitter page. That's great. Oh, here. So, okay. And then clear actually just goes to mediaoptions.com. Yeah. Clear is one of the brands that we actually utilize.

So clear Clear is a white glove domain acquisition service where we do go a lot more in depth in providing you real, like a 9-page evaluation of the domain, trademark search, the whole gambit. Our COO is an intellectual property attorney, and so we were able to provide a lot of additional value-added services.

So Clear and Pegasus, those seem like domains that for this lease-to-own model or just a straight lease model—

Ideal.

Yeah. So what's, what has prevented you from monetizing those? I mean, that feels like millions of dollars of unlocked value. If you told me, if you told me clear was multiple hundreds of thousands of dollars or millions of dollars, I'd be like, okay, I believe that. Like what?

Yeah, yeah, yeah. No, I mean, you know, clear.com, you know, we're looking for, uh, 9 figures for that domain. And so, you know, you asked me what's preventing me from monetizing them myself.

Um, $100 million or more, right?

I started 8 figures, 8 figures, $10 million or more. Although, you know, if they wait another 5 years, probably will be 9 figures.

It's like 9 figures, you'll own most of Portugal at that rate.

You'd be shocked. You know, just sort of finishing out that example though, you know, let's call it, you know, half a point per month is, you know, I don't know, what is it? What is that? $10,000, $12,000, something like that. Let's call it $12,000 a month. They're going to pay $100,000 down, that buys them a call option for 5 years, then they enter into a 5-year lease agreement, they're paying $12,000 a month. It's the cost of the marketing guy in your office. It's like for $100,000, $150,000 a year, and the company that's going to buy a name like pegasus.com, this isn't a little 2-man shop in his mom's garage. This is going to be a serious business. $100,000, $150,000 a year is nothing to have full utility of that domain name, be able to go out and raise capital while using that domain name, build your customer base, build trust in the marketplace, build your brand, build your reputation, not having to pivot to a better brand later after you gain success, being able to start out on the same— on this brand from day one, putting that wind in your sails. There are so many intangible but very material benefits from owning your exactbrandmatch.com. It's difficult to even explain. So now you've got 5 years to sort of ramp up your business. I like to tell people, domain pays for itself. And at any point in that 5-year period, you can stop the lease, execute your option, and you own the domain. And so, I think that that's the right model. That's the model that I promote. That's the model that we try to exercise in our portfolio. And we've done it very successfully. We've done deals with Vida.com, is a very successful healthcare startup. I guess no longer even a startup in the United States. They're crushing. We've done that with beacon.com, which is a logistics startup backed by Bezos, backed by Eric Schmidt, backed by some really heavy hitters. We've done that with, I don't know, whiff.com, which is a white label fragrance, direct-to-consumer platform. We've done this with a number of our properties and it's gone extremely well for all parties involved. And so, I think it's just a matter of time where this becomes more mainstream. I think that people have it in their minds, they have an inherent distrust of the domain market to begin with, they don't like negotiating for domain names, I don't blame them. Everybody just wants to get on with their business. It's just not intuitive to them necessarily to say, "Oh, let me lease this thing." I don't understand why any startup in the world would say, Yeah, let me lay out all this cash upfront. Now, you have a lot of domainers who are weak-handed, they don't necessarily have a lot of capital behind them, and they are looking for a cash buyer. I don't want a cash buyer. I'd rather get the cash flow. I don't even want to sell my domains. I want to lease them. And so, go start your business, use the domain, give me some money to make sure you got skin in the game, pay me a little cash flow. I'm not greedy. I want you to— It's in my best interest that you've got a business that's sustainable. And if you turn into a huge success, paying me the price I need is a fart in the wind. And so, I think it's a win-win for everybody. And for that reason, I do believe that will be the model in the future, but it's not today.

Preston Pysh Yeah. Super fascinating. Well, I know we're running up on a hard stop here. I have a couple more things I definitely want to hit on. In terms of the Chinese domain situation, I'm curious to get your take on it. I know they love domain names with numbers in them, like 8s and stuff like that. What's your perspective on the Chinese domain situation and where it's headed?

Yeah. I will not in any way say that I'm an expert on this subject. There are a few people in the industry, my friend George Hong, from Guta, G-U-T-A.com. He is certainly an absolute expert on Chinese domain names, but I have sold tens of millions of dollars in domain names to China, and I do have quite a bit of experience in the market. So, my observation is that there's this very unintuitive system or culture around numbers to people in the West. And each number is a symbol, the pronunciation of a particular number, can be sort of have an opinion equivalent pronunciation of a word or a phrase or a meaning. And so, they use these numbers in order to identify words or stories or phrases. And so, you can have, I don't know, 163.com, I think means like live long and prosper or something like that. I could be completely making that up, but it's something like that, right? And so, These two-number.coms in particular are basically priceless. They almost never change hands. I've sold, I think, three of them. We sold 50.com, we sold 11.com, and we sold— I don't remember what the other one was, something with a 4 in it. And then these three-number.coms are, again, super liquid, super valuable. Prices start at a few hundred thousand dollars, $200,000 for any three-number combination. 4-number.coms dropped down by about an order of magnitude. Prices started about $20,000 and they can go up to $500,000. Then in 2014, '15, there was this massive wave of investment out of China, purely speculative. I've never in my life witnessed anything like it. The closest thing I could equate it to is GameStop. It was suddenly this mass frenzy of speculation on numeric domains, Somebody realized, "Okay, basically, there were no 6-number.coms registered." The 5-number.com market had gotten to a point where basically any 5-number.com had a minimum value of $1,000 or $2,000. Somebody said, "Well then, why— Probably the next market will be 6-number.coms." The moment that frenzy started, it turns into a feeding frenzy. It was like one guy started registering 5,000 domain names, Domain names are like a blockchain in that you can see in real time as this stuff is happening. Somebody noticed that all these numeric domains, 6-number.coms were being registered. If you do the math, there's a lot of 6-number.coms. 6 to the 6th power, whatever that is. It's a big number. I remember my buddy called me up and he said, listen, There is a run on 6-number.coms. Yesterday, half of the entire spectrum of 6-number.coms got registered. The Chinese are buying them. You just need to avoid anything that's got a 0 and a 4. 4 is death and 0 is bad luck or something. And so, you don't want anything with a 4 or a 0. 7s aren't ideal, but if it's multiple 7s in a row, that could be good. And I was like, "All right, whatever." And so, I was blowing it off, And he's like, "No, no, no, I'm telling you, just buy some." I got out the credit card, went to GoDaddy, ran a spreadsheet with all the 6number.coms. I could do 1,000 at a whack. Started running this program to start registering these things. I registered 10,000 of them. And it was like, that was a lot of money. It was like $8 a pop. It was like $80 grand. I was like, "All right, this guy's crazy." But it's somebody I've done millions of dollars of business with. He's really smart. And usually, he has a good nose for finding the money. And so, I said, "All right, I'm going to give this thing a try." Within 2 days, every single SixNumber.com was gone. Suddenly, the floor price went from registration fee to $15. I thought, "That's interesting. I could literally flip the whole portfolio and double my money in a course of 72 hours." But it wasn't really scalable because all this was happening in forums and stuff. There was nobody saying, "I'll buy 10,000 of these." And so, then they started showing up at some of the auction marketplaces. I thought, "Okay, now we're talking." Okay? And now, what's interesting is that it was only the best ones because the auction, Namejet was the auction that was really hot at the time, and Namejet had a minimum order of $69. So, your domain couldn't sell for anything less than $69. And so, only the best ones, things that had triple 8s in them, things that were repeating numbers or whatever, they started showing up on there and they were selling for $69. And those people, just like me, had registered them a week or two earlier at that point for $8 or $9. And I thought, "This is very interesting." And so, as the days went by, and it was literally day by day, the market developed. And Suddenly, lower quality started showing up and they started selling. Okay. So, I started selling, listing all of these things. And I'm telling you, by the time we got to the end of the list, any of my SixNumber.coms were selling for between $200 and $1,000. And it was the most mind-bending thing I've ever seen. I mean, we made so much money and it was just like no reason. And then from one day to the next, that whole frenzy lasted maybe 6 to 8 months. From one day to the next, it was like the tap went off and that was it. Speculation was gone. Your six-number.coms were worthless again, and they still are today for the most part.

Preston Pysh Anyway, just time check. I know you got to run and have a hard stop. Clearly, you could go for hours. Well, actually, I got to run too. If it's all right with you, I'd love to wrap up. This has been super cool. It's fascinating to learn about this whole world and appreciate you spending the hour with me to really go into it. How can listeners and folks support you, follow along on your journey? I know you have a Twitter page and you have the business also. What is the kind of best way that people can watch what's going on?

Yeah. So just really quickly, one last thought I wanted to leave you with was, I think it's interesting that before we came on and started recording, I was talking to you a little bit about why you started the show. And it's this curiosity about people finding ways to make money in odd niches, odd industries that people aren't paying attention to or aware of. And what makes me— I love what I do. I truly believe— I have friends that are billionaires. I have friends that are worth stupid amounts of money. They make more money than I do. I do very well, but I love my job. I wouldn't trade with anybody because we have this expression, all roads lead to Domainz. And it's the similar curiosity as you have with your show that I get to speak with people in every facet of life, every industry imaginable because it all starts with a domain name. It doesn't matter if you're a pizza shop owner or if you're Google, you need a domain name. It all starts there. And so, I just get to meet so many interesting people. And so, yeah, I think we have a shared interest there. So, yeah, it's quite appropriate industry, I think, for your show. But you can find me on Twitter @AndrewRosner, A-N-D-R-E-W-R-O-S-E-N-E-R, company's mediaoptions.com, Also on Twitter @MediaOptions. And as I mentioned earlier, we have the industry-leading education platform/podcast, and that is domainsherpa.com, also on Twitter @DomainSherpa.

Super cool. Well, thanks for being here, man. I really appreciate it. And I know the listeners will get as much out of this as I did. So really good.

I appreciate the invitation.

All right, dude. Talk to you soon.