Friday, February 26, 2010
Interview with Jeff Kupietzky, Oversee.net
Story by Benjamin F. Kuo
It's been awhile since we caught up with the folks at Los Angeles-based Oversee.net (www.oversee.net), which has a very big businesses in the domain name area, so we thought we'd sit down and hear how things are going for the firm. We talked with Jeff Kupietzky, CEO of Oversee.
What businesses is Oversee.net now in?
Jeff Kupietzky: There are three primary areas we play in, but what ties them all together, is the mission to increase the value of Internet real estate. For folks outside of the industry, domain names are analogous to physical real estate, in that it has tremendous value both before you develop it, as well as after you develop it or lease it out to someone else. The areas we're involved in include the primary monetization business, our parking business, which people have known us through our brand DomainSponsor. The industry there continues to consolidate, and we've been leveraging that here in the U.S. and expanding overseas. We recently opened up an office in Germany, and are expanding throughout a lot of Europe. The other key business we are in is the aftermarket and registrar business, through SnapNames and Moniker, two acquisition we made. There's still an opportunity there, with very few names traded which should be traded. In commercial real estate, three to five percent of commercial real estate is traded every year, but in the domain space it's less than a half of a percent. Virtual assets are easy to transfer, but the reason there's not more trading is that there is not lots of transparency on what a name is worth, so people are not as comfortable in buying or selling those names. Our view is that more transparency, and more data, will create more comfort so that people will know what they're buying is at the right place. The third and most interesting and exciting part for us, is building out the domain names we own. The view there, is that while it's great to have a name start as a parked page, or that it's great to buy or sell a name, ultimate, all names should be developed. The business you put on them, is the most value you can create. So, we've started to do that organically, and through some acquisitions. I'm very optimistic that there is a huge opportunity to create longstanding businesses on some of the domain names we own.
You were seeing great growth in last few years, how has economy affected you?
Jeff Kupietzky: I think, like other folks, we had challenges at the end of 2008, and through 2009. This year we think we'll return to the growth profile we had. Certain things were based on the economy, and some frankly were structural, based on the space we play in. We're now continuing to broaden the lead we have in our own industry, and we continue to see growth, and we think we'll see consolidation around the market leader.
What do you mean when you talk about consolidation?
Jeff Kupietzky: The notion is that there are now two primary upstream providers of search, Google and Yahoo. Yahoo, for the most part, is ceding to Microsoft and Bing. So, you really only have one primary competitor, which is Google. Google is forcefully and clearly telling folks, that they're looking for a certain profile of partner, and quality of traffic. Those actions are putting pressure on the bulk of the players in our industry, and I believe those that will emerge will have a strong operating portfolio. Frankly, most people don't have the capital and management depth to be able to scale up and take advantage of the economy of size. What we've seen with acquisitions in the last year--for example, Sedo buying two parking companies in our space, in the registry area we saw Afilias buy dotMobi, and then the tons of rumors you hear--I tell everyone the rumors you hear are true, and everyone is talking with everyone else about possible combinations that make sense. Our view, is ultimately, if you have the right business proposition and partners, you will end up growing because of a flight toward quality, and people will park with those with staying power.
Is the domain name industry now mature, or where are things now--it had for awhile a pretty wild reputation?
Jeff Kupietzky: I think it's still the Wild West. It's still early, though we're definitely making strides. If it's a nine inning game, we're in the second inning. What we're starting to see, is that there is professionalism from folks like Oversee and Demand Media, who have gotten bigger by being in the monetization business. The other actors, like you mentioned, are getting less and less exposure, and losing the ability to survive. But, there are elements out there not running business like we'd like to run it. I think where the turning point will be, when it's not the traditional domain investors, those individual entrepreneurs, but where more institutional money comes in. We haven't seen that as much as we'd expect to see.
Do you still maintain your own portfolio of domains--we recall you had one of the bigger portfolios out there?
Jeff Kupietzky: It's still growing, at a million names. We are still seeking out good opportunities to be a long term owner of real estate, which can generate cash flow or build value. Lots of what we're creating is what makes those properties valuable.
There's lots of complaints that there aren't any good domain names left. Are there any good ones left?
Jeff Kupietzky: It's definitely getting harder. If you're looking for that $9 registration on GoDaddy, it's much harder. However, if you look at SnapNames, it's easy to spend less than $100 to build a business from a domain. There are tons of opportunities for good names, and although they might not be in the $10 range, they're still very reasonable. It's less than the cost of a half hour of a lawyer's time to find something you could build a good brand around. The challenge most people have is that you have to find what is out there. It's a secret in the industry where the good inventory is, and we're hoping to make that more transparent.
Back to the company--how big is Oversee.net now, in terms of employees?
Jeff Kupietzky: Last year we were around 150, this year we expect to add around 20 percent to that number. We're back in hiring mode, and looking for great engineers and developers. We definitely feel this is an expansion year for us, and that we'll be making investments in multiple types of businesses. We're very optimistic we'll be evolving in many areas, and will need good talent to help do that.
Finally, you mentioned you're looking at building out some of your domains as businesses, what is your thought there?
Jeff Kupietzky: There's a huge opportunity to build out websites, as performance marketing vehicles, for lead generation, and to engage users on a sustained basis. We are aggressively talking to people who want to sell a web site, and might have a great property but need to scale to grow faster. We've got a pretty aggressive business development effort to determine what our next future businesses will be. An example of that is in travel, with Lowfares.com, which we acquired. It's now about five times as big as it was. There are lots of those kinds of opportunities which people have created, where they've taken it to a certain level, and we can help take it to the next level.