The auctioneer’s gavel is scheduled to fall on more than 2,600 properties Thursday in San Francisco, but these "properties" aren’t homes or land — they’re "geotargeted" real estate-related Web site domain names that incorporate the names of cities and places around the U.S. and the world.
Domain name auctions are commonplace, but it’s "extremely rare" for this many real estate-related domain names to be offered for sale together, according to Moniker, the company that will handle the transfer of the names after the auction.
The current owner of the domains, Craig Harrison, is a Colorado-based real estate broker who says he began registering the sites nearly 10 years ago. Harrison’s collection includes more than 2,300 domains that incorporate the names of most U.S. cities with populations of more than 35,000, and all of the major cities.
Harrison says the auction is no stunt or gimmick. It’s a chance for a company — or companies — to build a network of Web sites that, backed by the right content, will show up high in search-engine results.
To drive up the bidding, the domains have been divided up into 61 lots, making it possible for bidders to acquire the whole collection, a single state, or groups of states.
U.S. cities are divided up in 54 lots by state, with California and Florida each split into two lots and Washington, D.C., split into its own lot. Another lot consists of 51 domains incorporating the names of states and Washington, D.C.
Internationally, there’s a lot of 30 domain names based on cities and provinces of Canada, and another lot of 145 domains incorporating the names of 61 countries and 84 major cities around the globe.
For the most part, the domain names Harrison has corralled for sale follow a standard format: a geographic location, such as a city, followed by "RealEstateListings.com."
Some in the know about the algorithms employed by search engines like Google say there’s something to be said for building a network of "geotargeted" Web sites that combine a place name and a subject like "real estate" in their domain names.
The theory is that consumers looking for listings will often type the name of the state, city, or neighborhood where they want to live into a search engine, along with a term like "real estate" or "homes for sale."
"There is a lot of activity on domain names right now," said Victor Lund, a partner in the consulting firm WAV Group, with real estate brokers trying to buy or lease domains for search-engine optimization.
The process of buying domain names is analogous to real estate — "it’s that location, location, location mantra," said Chris Sivertsen, director of domain acquisitions for Moniker’s parent company, Oversee.net.
Lund estimates that each of Harrison’s domain names could be worth anywhere from $100 to $5,000, depending on the demographics of the city name and the amount of traffic and advertising it gets today.
That’s a pretty wide range — it works out to between $260,000 and $13 million — but Lund said he’s willing to bet the entire package sells in the low- to mid-millions, depending on the buyer and whether the domains are sold in pieces or together.
While the market for domain names may have cooled in the current downturn, foreclosure auctioneer Real Estate Disposition Corp. paid $1.7 million for Auction.com in early March.
The value of networks
As a group, Harrison’s domains are worth more than the sum of their individual parts, Lund said, because of the similarity in their names and the potential to cross-link the sites for search-engine optimization.
This "hub, spoke and rim" strategy — where a main site links out to more specialized sites at the city and neighborhood level — is explored in a recent WAV Group white paper, "Geo-Domain Targeting Trending to Assist Real Estate Marketing" (see story).
Harrison has posted the white paper on the Web site he created to promote the auction, and Lund said WAV Group counts Harrison among its clients. But WAV Group has no vested interest in Harrison’s business or the auction, Lund said.
Brett Young, a New Paltz, N.Y.-based real estate broker and software developer, questions whether the "RealEstateListings.com" domains will do much for their owner’s search-engine rankings. …CONTINUED
"This really is nothing more than a publicity stunt that falls short for anyone who has any knowledge about domains," Young said, commenting on a post about the auction at Inman.com. "I pity the person who sees this as a good investment."
Phoenix-based broker-owner Jay Thompson, commenting on the same post, said he had no interest in the auction because content, links and authority "are far more important than words in a domain name."
Reached by phone, Young said he thinks individual agents are probably better off putting together a network of domains themselves. He’s created a free application, Real Estate Keyword Tool, that he said agents can use to create "thousands of keywords specific to their area."
While Young doesn’t dispute the value of geotargeting — his brokerage’s Web site is NewPaltzRealEstate.com — he believes the key to search-engine rankings is the content provided on the site itself.
"I don’t see too much utility in buying 1,000 domain names, because the value in the domains is in the development you do with them," Young said. "At a smaller scale, I think if they fished a little, individual agents could get a good exact-match domain name for their area."
For those who want to build a network of domains using geotargeting, it’s become increasingly difficult to do so.
Harrison said he got the idea to buy up domain names a decade ago after trying to register DenverRealEstate.com and finding it and many other "RealEstate.com" domain names were already taken.
But in December 1999, the rules of the game changed when the maximum number of characters allowed in a domain name was expanded from 22 to 63. Harrison said he seized on the opportunity.
"I tried to figure out what word you could add (after a city or other location) beyond real estate," Harrison recalled. "Listings was the best I could come up with, because people are looking for inventory — they are not searching for agents."
Harrison put together a list of the largest U.S. cities by population and, on the day the rule changed, "I sat up around the clock registering sites, and one by one registered the biggest cities."
A few of the largest cities were already taken, but in the next several days, Harrison said he managed to get about 500 domains that incorporated the names of the nation’s biggest cities and "RealEstateListings.com."
Harrison said he’s continued to add to the collection over the years, and now believes he’s registered all but a handful of U.S. cities with populations of more than 35,000.
The auction process
For the most part, the domain names Harrison is selling follow a standard format: a geographic location, like a city, followed by RealEstateListings.com.
Domains that stick to the city and "realestatelistings.com" format are available in 16 of the 20 largest U.S. cities by population: New York City; Houston; Phoenix; Philadelphia; San Antonio; Dallas; San Jose; Detroit; Jacksonville, Fla.; Indianapolis; Columbus, Ohio; Austin; Fort Worth; Memphis; Charlotte, N.C.; and Baltimore.
There are some variations from the format here and there — a .net extension instead of .com, or the word "city" inserted between the city’s proper name and "real estate listings."
Major market domain names that incorporate .net instead of .com include San Francisco, Los Angeles, San Diego, Santa Barbara and Chicago. In Chicago and San Diego, Harrison is offering two domain names — one with a .net extension ("ChicagoRealEstateListings.net) and a .com domain with "city" inserted into the domain ("ChicagoCityRealEstateListings.com").
Of the 143 city domain names offered in Northern California, nine (Brisbane, Carmel, Dublin, Lafayette, Newark, Rancho Cordova, Richmond, Walnut Creek and Windsor) incorporate the word "city" even though the word is not part of the city’s proper name.
While critics like Young say agents and brokers can still build their own local network of geotargeted domain names, Harrison and the company handling the auction of his domain names think the opportunity to buy a regional, national or global set of domain names outright will prove attractive to large companies.
"We are not marketing to mom and pop," said Scott King, executive vice president and principal of auctioneer J.P. King Auction Co. "I think the highest and best use is as a national platform." …CONTINUED
Harrison has identified 10 classes of potential buyer, none of which could be described as "mom and pop" operations.
These include "domainers" — individuals and companies that buy and sell domains as investments — and real estate and mortgage lead-generation firms. Harrison also thinks title insurance companies and online advertisers like newspapers could use the domains to generate traffic.
Then there are the online real estate sites like Realtor.com, Zillow and Trulia that compete for traffic, and "your big brick-and-mortar real estate (brokerage) companies," both national and regional, Harrison said.
A brokerage like Virginia-based Long & Foster might snatch up domains in the Northeast, while a regional player like Seattle-based John L. Scott could corner states in the Pacific Northwest. Alternatively, another strategy might be to snatch up domains in the most populous states around the nation.
"I would think that purchasing a block like California, Texas, Florida, New York or Michigan would be a good strategic move for someone who wants to dominate real estate search traffic in a state," Lund said.
To get the highest possible price for the domains, auctioneer J.P. King will employ a system that will allow would-be buyers to place bids not only on individual lots, but on packages of lots tailored to their business plan.
"If someone comes in and says, ‘I want California, Oregon and Washington,’ and someone else says, ‘I’m in the Southwest, I want California, Arizona and Utah, they can do that,’ " Harrison said. "Or they might say, ‘I am a big-population player, I want California, Florida, Texas and New York.’ We don’t know know what will happen. That’s what will be fascinating on auction day."
The process by which packages of lots can be assembled and then broken up when higher bids are submitted for individual lots is too complex to be conducted online, King said. Would-be buyers must attend the auction in person, or hire someone to bid on their behalf.
At the auction, two screens will display all of the lots, along with the bidder in the winning position and the price for single or multiple lots. J.P. King employees staffing the auction will help bidders trying to assemble packages of lots calculate the price per domain needed to stay in the winning position.
When a bidder who’s trying to buy six lots is outbid on any one of those lots, their bids on the other five lots are no longer valid. The winning bidder on those lots reverts to the top bidder before the package was assembled, and the auction continues.
The system allows bidders for individual lots to compete against those seeking multiple lots or the entire collection of domains, Scott said.
"In the old days (before computerized algorithms), once somebody put together a combination, the bidding was pretty much over," Scott said.
The bottom line can be a higher selling price for packages of lots.
At a sale of land in Montana several years ago, for example, 120,000 acres were offered in three chunks, Scott said. Although the entire package ultimately went to a single buyer, bidders who were interested in individual pieces drove the final sale price up.
"If you have to pay $5,000, is that a lot to secure that domain name for your business?" Sivertsen wondered. "How many houses would you have to sell to pay for that? Maybe not many at all. If you really look at it, you can get past that initial sticker shock and say, ‘You know what, that is really important to my business.’ "
Whether the domain names go to a single buyer, a few buyers or dozens of buyers, their success in monetizing the sites may depend largely on the content they develop for them.
As the WAV Group paper on geotargeting paper points out, even a Web site that combines a city, community or neighborhood name with realestate.com can be beat out by others in search-engine rankings if it doesn’t offer "deep content that meets the consumer interest," Lund said.
"It is very competitive, and you have brokers, agents and big business" like Trulia, Realestate.com and Yahoo Real Estate all competing for natural, or unpaid search-engine rankings, Lund said. Many brokers and agents also pay for "pay-per-click" keyword ads, he noted.
Lund thinks it would be "very difficult" for someone to duplicate Harrison’s offering of 2,600 "seasoned domain names," and that a company with a Web marketing strategy "could command a major presence in the marketplace with these domain names for a lot less money than building a consumer brand."
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