Submitted by Kevin Ohashi on Fri, 09/20/2013 - 06:07

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Today is an interesting and perhaps historic day in the domain industry. GoDaddy has acquired Afternic and SmartName from Name Media. Name Media is probably best known for the BuyDomains brand. They own one of the largest portfolios of domain names in the world at nearly 1 million domains.

GoDaddy is the largest player on the consumer side of the domain market by a wide margin. However, they aren't the biggest player and/or have serious competition in a lot of the secondary and domainer markets.

Domainer / Secondary Markets

Market Large Players Domain Registration GoDaddy Selling Domains (Secondary/After Market) Sedo, Afternic, BuyDomains, GoDaddy, DomainNameSales Expired Domains NameJet, SnapNames, Pool, GoDaddy Domain Parking/Monetization InternetTraffic, Google, Yahoo, Sedo, (many more) Domain name Conglomerates Demand Media, Marchex, GoDaddy, Name Media, Oversee

Why Most Of These Markets Don't Matter Anymore

The expired domain names market is drying up as companies switch to pre-release agreements. With pre-release, the registrar where the domain is kept automatically sells off the domain and there is no competition. As GoDaddy grows bigger, they will capture more of the this market automatically in the long run.

Domain Parking and monetization has seen a pretty steady decline since about 2007-2008. Consolidation is happening, the market is shrinking. The vested interests are large portfolio holders, which GoDaddy doesn't have like all of the other conglomerates.

The Conglomerates with the exception of GoDaddy all have their own domain name portfolios. They are focused around monetizing their assets rather than customers. Almost all the conglomerates have failed to see major growth (Demand Media just turned its first profit in 2012).

What Does Matter?

With GoDaddy's acquisitions from Name Media today they have taken a serious foothold in the secondary market. Afternic is one of the largest markets and GoDaddy is probably on equal ground in terms of selling domain names from Premium Listings (pre-acquisition), although they don't publish any numbers that I could find. If we were to assume Sedo, Afternic and GoDaddy were similar in size, GoDaddy just became the dominant player by 2:1.

Why does it matter?



GoDaddy's strategy has long been economies of scale and cross-promotion/cross-selling products/services. They dominate the consumer side of the market and have the audience to sell products to. Now they own the market for secondary sales as well. They already charge a minimum 32% commission to sell a domain name with them. My intuition tells me they've struggled with getting the best inventory and streamlining the process to their liking. This isn't the first time we've seen them partner up to sell secondary market domain names, they tried it once before with Domain Distribution Network but there hasn't been much talk about the results. There was even a short termination between the companies over the deal. This deal expired on June 7, 2013 according to DNN. I could find no evidence of it being renewed.

Meanwhile, Afternic has solved this problem. AfternicDLS has a deals with many of the biggest registrars: Network Solutions, Register.com, Enom, Moniker, Name.com, and more. This solves the listing and selling problem. Their current Premium Listings only work for domain names at GoDaddy. A lot of domainers don't use GoDaddy and don't want to put their domain names there. Acquiring Afternic solves the technical and business problems that may have blocked GoDaddy in previous attempts to gain more of the secondary market.

What About SmartName?

I am not as sure about the SmartName play for GoDaddy. They could be trying to make a more serious run into the domain monetization space with a parking platform. They could be looking to upgrade their auction platform. Both of these could improve their bottom line, and it makes them more attractive as a larger one-stop shop for domain services.

Conclusion

GoDaddy is now the biggest player in the domain name sales channels both for new registrations and selling in the secondary market. With the upcoming release of new gTLDs, they couldn't be better positioned to sell more domain names and make more money. It doesn't hurt that they offer fairly comprehensive offerings for business owners such as web hosting, email, marketing and more. Economies of scale are real and GoDaddy is taking advantage of them more than anyone else in the business.

Consumers may actually be the big winner here. If this gets executed well, the customers who use GoDaddy will get access to a larger inventory of domain names listed on the secondary market and purchasing them may become as easy as registering a new domain name.

Update

(9/20/2013) I made a mistake with saying the auction platform was Smart Names, it's actually Afternic. Also, someone linked me Godaddy's auction stats. They don't give dollar values, only sales volume. So it's still apples to oranges to pears with Sedo/Afternic/GoDaddy.

I have also received a lot of criticism because of the company in question comes off in a positive light. My startup tracks GoDaddy's reviews and it's overwhelmingly negative. I understand a lot of people don't like them for a multitude of reasons. That being said, the point of this article was to acknowledge a very prudent business move by them. I went into this open minded and came out surprised. I think this is a win for consumers in the short to medium term because it's reducing the friction and pain involved with buying domains in the secondary market. It makes it far more accessible and easy than it ever was before with a brand consumers recognize. Consolidation of the secondary domain market also puts a downward pressure on domain prices if it stays integrated as an option versus buying new registrations. The consumer who is thinking about spending $10 is far less likely to spend $100,000 instead. But $100, $500, $1,000 may be more reasonable and likely to induce a sale on the secondary market.