To Chad Folkening, the internet is full of unsettled frontier and affordable real estate. And he's both a homesteader and a landlord.

Folkening is the co-founder of Domain Holdings, a developer of online domains, and owner of tens of thousands of URLs, many of which his various companies have turned into profitable websites. And that's big business--when it comes to selling the dot-coms. Recently, Domain Holdings sold LocalRegister.com to Amazon. Some other successes in its past are Tagged.com and WebEx.com. The company did $10 million in sales last quarter alone.

In general, domainers get a bad rap. (Just check out the downvotes on this Reddit AMA, as well as the explanatory comments.) We decided to talk with this one about how his business actually works--and what you can learn from it when trying to buy your URL.

When did you buy your first domain?
In 1996. I was always an entrepreneur--even as a kid. Now I do it 24/7.

Well, I take five days off a year. Maybe 10. 

What's the state of the industry right now? Aren't all the good domain names drying up? What's left?
The supply of good names coming into the marketplace hasn't necessarily slowed down. It's picked up. There are still a lot of really good deals coming in. The opportunity for people to get in is still there. I thought that window would close years ago.

Interesting. What kinds of domains are coming in?
Yesterday I bought SkillsAssessment.com for $200. I bought StartupOffice.com for $300. I bought StoryDesigner.com for $22. If you hunt enough, you can find the good deals.

But this is for maintaining a massive portfolio--you have thousands of URLs at any given time.
It's all about timing--when to buy and when to sell. That's the business.

What about coming from the other perspective--if someone has a startup and needs a URL, what advice would you have for them?
If you have a good business, you can build it on whatever your TLD [top-level domain, such as .io or .uk] is. What we are seeing from our client base, and we've done almost $35 million in transactions this year, is that if and when you get venture capital money and are ramping up as a legitimate company, you need to be as close as possible to your customers. Spend the money now, because the price on the domain you want is only going to go up.

I see 98 percent of your sales last quarter were URLs that end in the traditional .com. So .coms are still the way to go in your mind? Why?
Russia and China are keeping the .com portfolios up, because startups there want to go global from the beginning. That keeps everybody's level up. Thirty or 40 percent of our business now is from Russia and China.

How long has that been the trend, as far as you've seen?
That started a few years ago, and has picked up in the past three to six months. They're being more aggressive in acquiring those assets. That's forcing startups to make the moves now. You have to look at your competition as in not the next state, but everywhere around the world.

So say a startup founder approaches you wanting to buy a domain name you own. What happens?
I go for fewer sales, bigger volumes, and the only way for me to squeeze that price up is to say "no." We've got deals that start at $3,000 and go up to six digits. It can take a day or a year.

Is time ever on your side as an entrepreneur trying to buy a URL?
Sure, sometimes. If the owner says, "I want $100,000 for this domain," do your research. It may change and go to $50,000, over time. What happened in our industry before the new TLDs were released, for example, is a lot of instability, and people loosening up their inventory. [Folkening is referring to what happened beginning in 2013, when hundreds of new top-level domains, such as .bike and .ventures, started to hit the marketplace.] Some owners started selling URLs they had been holding, based on uncertainty over how the market would react.

What advice would you give to a startup founder trying to acquire a domain name that a professional domain-owner has in his or her portfolio?
That's why people hire us to do negotiations! But really, the No. 1 rule in domaining is open communications, because if you can't even communicate with the domain owner, you can't negotiate. Second: Have a list of names, branding, and how you name your company. Having some options and doing a little variation can get you a far better value. Get prices on several options--and then you really have options. Another thing: If you're going to buy a .co, make sure you know who owns the .com. Know your competition before you step in.

Are there trends to be aware of, price-wise?
Premium names are going up, middle-markets are going up, and lower-value names are going down.

One thing I've heard from lots of company founders is that when they bought their URL they didn't want to disclose who they were, for risk of being overcharged.
I'd say, don't be dishonest. That person you're buying from is going to do research on you anyway. That's their job, to find out who you are. If you have your set budget, don't play patty-cake. Say, "Here's our budget. Can we do a deal?" Stay firm to that. That's one successful way.

Will you ever be flexible on your price?
Sure. I've given away domains. But not if people are lying. Trust me, we get people all the time: "Oh, I'm a student." Sometimes you don't care. We say, "This is the value we have on the asset," and that's firm.

So it's a human-to-human business at the end of the day?
Well...sometimes, yes.

 

Published on: Dec 10, 2014