Morning Folks!!
You can go back to my writings in 1996 to see that I always compared a great domain name with a billboard or even a storefront in Times Square. I always saw physical stores as limited in their reach and thus limited in their sales. Domain names are limitless. You can attract customers from the 4 corners of the world. Expansion is limitless. Limitless. In the real world when you have to expand the costs are going to be huge and in most cases you will have to change your location.
See the way I look at life and where we are going is that when the price of Times Square is par with domain name leases, that is the starting point for ME. Go look at the cost of retail space in Times Square. Do the math. Look at the cost of a modest 2500 ft. Retail store in the mall. Pick the nearest city near you, find a decent retail spot of 2500 feet and post the monthly cost just for the rental. What's the monthly $$$ outlay? $1000, $2500, $5000, $10,000, $25,000?? More!!?? (Update, see below)
Then add up the costs. The costs after you walk into the space with cement floors and no walls. The cost of manning that business. The electric, the garbage pickup, the insurance. How about cleaning and maintenance. Don't forget to wash your windows every week.
So when you list everything and even in Times Square you are limited to your audience. THAT is my case and rationale for leasing domains. Land ho!! I can see it from here. After 17 years the parallels will begin to form and take shape.
Nobody has to agree with me. But that was what I saw in 1996 and that is what I see today only more vividly and much more evidence at my disposal. It's the reason I won't do long term leases. Some want 10, 20 and 30 year terms. Sorry, ain't gonna happen because I see what I see and we are right on schedule to arrive in 20 years. (2016 and before)
The power of a GREAT domain name is superior to the best location in Times Square and someday soon they will intersect in value. When? Between now and 3 years. In 3 years there will be no doubt what I have been saying and waiting for all these years. Why sell when you can lease for the $$$ you can sell at and get it back over and over again.
The single clearest vision I have ever had about domains and their proper place in the business world is what I describe here. It's the basis for everything. How do you buy 2 decades of time to watch something bloom and produce fruit? How do you resist the temptations along the way? How do you stay true to a belief?
Have a GREAT Day!
Rick Schwartz
UPDATE: Released just hours after my post I think this says it all. Which begs the question....If a company had to close up shop on Fifth Avenue or relinquish their domain name, which would they choose?
- Hong Kong’s Causeway Bay, rent $2,630 a square foot per year
- Fifth Avenue, $2,500 a square foot per year
- Times Square, $2,100
- Hong Kong, Central $1,856
- Hong Kong, Tsim Sha Tsui, $1,547
- Paris, Avenue de Champs-Elysees, $1,129
- New York, East 57th Street, $1,100
- New York, Madison Avenue, $1,100
- Tokyo, Ginza $1,057
- Tokyo, Omotesando, $972
http://newyork.cbslocal.com/2012/11/15/fifth-avenue-no-longer-the-worlds-top-retail-address/
Kobe Green
No one in their right mind would lease a domain when they could buy an alternative domain and control their own destiny.
As a domain investor, it would be nice to lease out my domains but I see no chance of that. Buyers are smarter than you give them credit for. In fact, they’re probably smarter than you. They’re the ones holding the money.
Leasing domains is a solution looking for a problem.
Rick Schwartz
Sure they can. That is why we have options and exit strategies
It provides a way to test drive a domain and have the option to buy it.
Plus that is why we focus on category defining domain names only. There is no equal.
Kobe Green
Well, I wish you luck but as they say”The proof is in the pudding.”
Let’s see in 6 months to 1 year how your plan for world domination pans out.
Rick Schwartz
Thank you!
The proof has been repeated 10X already just by me and I am sure other domain owners have similar deals. But like I said, it only works with very meaningful, category killer domains.
Puckerhuddle
kobe
If there is a flaw in the leasing model then explain to me why most of the successful retailers in the world have locations in very expensive shopping mall locations that they don’t own and not back in some industrial area where the property is less expensive and they can control their own destiny.
Robin
Max
No, they are not the ones who have the money. They are mainly the ones who have left A LOT of money on the table in the last 15 years, those who have earned too much less money in the last 15 years than what they could.
And why?
Only for a reason of pride.
Pride is the most common mistake in business: succesful men are always more smart than proud.
Kobe Green
The analogy between physical location (i.e. Times Square) and virtual location (domains) discounts an important factor.
Say you own”Brand X”. You lease a space in Times Square to sell your”Brand X” wares. The space is just an avenue to push your brand. You could re-locate somewhere else be you still own”Brand X” free and clear.
When you lease a domain, the domain IS the brand. But in this case, you don’t own the brand. So if you lease a domain and build it out, all you’re doing is adding value to a property that someone else owns. Who wants that?
Any sensible, business minded person would start out by making sure he owns a domain free and clear even if he needs to forgo that”big yellow page phone book super duper category killer zombie cult defining domain” and go with something else. There are virtually millions of domains to be had out there on the cheap. I should know. I spend upwards of $20K/month on them.
Max
and in the meantime you lose customers and visibility for your brand and real money
Steve O'Brien
It works great for us Rick. Leasing domain names has been good for our companies over the years. We always have several hundred or more, lease agreements in place every month. We started offering domain leasing on our holdings about 10 years ago as we were approached from clients requesting this service.
A number of companies end up buying the domain names, or many simply renew their lease terms. There is always a small percentage that we have issues with for nonpayment and we just evict their lease and start over. I know of more than a few domains that have been leased a number of times to different companies over the years.
We set this program up just like our real estate development group does for”real property”. Contracts, deposits and legal is similar for our domain names as it is for our real property leases. Management and asset control for the most part, is much easier in the domain space.
I have always been surprised that we never hear more about domain leasing. We have found that as a business model it can work fine and become a nice monthly cash flow stream, if managed properly. It does take a person or department, some time to manage payments, agreements, domain management and lease renewals every month. Maybe that is why we have not heard that much about this from other companies, as the”domain sales model” is just that – sell the domain name, cash the check and move on – no management after the fact in most cases.
Best of success with your domain leases! Steve
Max
I can not understand why some of the great player like Afternic, Moniker etc. don’t give yet the leasing service
I”understand” Sedo, they have”agreements” with Google.., but the others? Clearly, we have them too……
They will make a lot of money, much more than now…
Joao
You keep forgeting something called”exit plan”.
Max
“…but the others? Clearly, we have them too……”
Sorry, I wanted to say”they” not”we”….
P.S.no more messages for today :)
Max
only the last message, I swear ;)
EVERYONE MUST GIVE THE LEASING OPTION FOR HIS DOMAINs!!!
If you don’t make it, how do you think the market will be born?!?
BullS
that why Kobe Green is worthless
Cara Mia
Kobe you can take your”Brand X” out of Times Square and relocate but where else are you going to get the kind of traffic that Times Square gets?
TommyT
So That we don’t send you crap over.
Do you take Geo-Names related to certain industries.
Like CaliforniaLoans.com, Texasinsurance.com just examples We wished we owned these.
Would these be able to get into the 500-1000 month range etc.
And Anunt please don’t respond
Happy Regards
TommyT
Max
just the latest latest post :)))
OFFERING THE LEASING OPTION IS NOT A CHANCE, IT IS A MUST, IT IS AN OBLIGATION!
It’s too much longer to explain and I think everyone can understand the reasons even by himself, I hope, but I am sure (think to investors in particular: interest rates, financial returns, etc.), but without the rental market there would be no market for the sale in the real estate business.
At the same manner without leasing market there will never be a REAL market for domains. Please note that I am speaking about REAL market. There would be a very small market and especially with very very low prices.
So, please, make your efforts to offer the leasing option for all your best domains. I know, it takes a long time, but it is ABSOLUTELY NECESSARY.
If you can not or do not want to make these sacrifices, let those domain expire, sell them for cheap prices: it is the only solution and the best for everyone: for you and for all.
Joao
I just loved this post of yours: http://www.domainbenefits.com/you-know-youre-a-domainer-when/
Kudos
UFO
A leased domain with a bullet payment end payment to acquire is a definite winner. I’m not sure though Rick too many investors would want you along for the long haul as an equity participant in the context of sharing a portion of the profits. But on the best of best domains that is possible because the compliance costs are sufficiently low relative to the cost of the domain.
Another angle is a perpetual right of renewal of the lease with say a 1 year break clause on the leasee side.
But lets face it, if property.com is done correctly it should turn into a 300m+ business. That really is the golden goose. Thats where the effort should be.
Jon
Last year, Uniqlo owner Fast Retailing Co. paid $300 million for a 15-year lease on the 666 Fifth Avenue space, which is located near competitors Gap and Zara, setting a retail record in New York.
“We’re really excited,” said U.S. CEO Shin Odake”We have a great store on the best shopping street in New York.”
Rick Schwartz
How is this for timely??
http://newyork.cbslocal.com/2012/11/15/fifth-avenue-no-longer-the-worlds-top-retail-address/
Hong King Retail now more than 5th Avenue.
Ron
BullS nothing wrong with Kobe providing a discussion, I may not agree with him, but he has a right to throw questions out, which domainers who are in the business can explain. I think you need to be more relevant in your statements.
Cara Mia
Cool. Thanks.
@Rick That is interesting I thought Madison Ave would be higher on the list since nearly 50 stores have opened in the last 18 months.
craig
Kobe: would you start an airline by purchasing airplanes?
Airlines don’t own any!
Bogdan
KObe, what’s your NJ and Sn handle?
Mervengin
Thanks to Rick Schwartz for this great post! We also started leasing our domains last year as NoktaDomains.com. Leasing is a great business model for the domain sector. The reason is that you don’t have to wait for increasing your budget to buy a domain name. You can start your project by leasing a domain name at a very fair prices. In addition to its benefit to the investors, it an innovation in domain industry, as it is the salvation of monetization. The parking revenues are decreasing tremendously over the years. If you can’t sell your domain, you have to lease to increase your revenues!
I really do not think any sector that can live without leasing. I mean we see leasing in real estate, automobile, airline, etc. So, there is no reason that we can’t lease domains in domain industry!
Considering today’s post, I see that the leasing fee of world’s top retail addresses are around $2,000 per year. Ours start only at $60 per year!!!
Leasing is the opportunity for everyone!
Christian
Rick, Great post as always. I just leased my first domain last month. The process has went wonderful and the lessor and I are both happy with the contract and the exit strategy for both. I am looking forward to more leasing opportunities as they come along. Good luck with your JV’s! Congrats on Navigation Glasses too from me!
Christian
Mark Talbot
Rick,
“Nobody has to agree with me”
To be honest, I often agree with you, which is why I dont post here often. Conversely, I dont always follow you with my tail wagging, which is why I dont post here often.
I do like the way you explain things, and your analogies,….
but I have a problem with the way you expressed above.
The X factor,.. oh,.. I mean the G factor.
The owners of Park Avenue buildings, Times Square, Tokyo, do not have to lose sleep at night fearing that some overlord of traffic may roll up the streets in front of your building while you sleep, or make the streets one way only, therby depreciating your”great”, or even just”pretty danged good” rental rates. Let alone worry about what kind of ransom the G-force may demand to roll the streets back out.
Anyone who may lease a great domain name for their organization, wont want it for long or for as much if G decides to roll out the”lemer” update to restrict traffic to the godforsaken leased domains that they percieve as bad for the world as parked pages or minisites were percieved.
The short for those bored, I find the analogy comparison difficult to accept,… too many dangerous variables or unexpected eventualities.
That said, I considered leasing over a decade ago, and got laughed at by a couple of end users who didnt want to buy, but I think that time is long gone and would love to revisit the potentials for at least one or two of my domains.
But not without my Ding Dongs. ;)
Tony
It works great for us Rick. Leasing domain names has been good for our companies over the years. We always have several hundred or more, lease agreements in place every month.
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