Launching a Business on a Generic, Exact-Match Domain Name

StockPhoto

A mutual friend recently introduced me to Jon Yau.  Jon purchased StockPhoto.com in January, 2013.  Today, StockPhoto.com is an online stock photo business operating on a well polished website.  Jon was kind enough to answer some questions about the domain and the business.

Mike:  What led to your purchase of StockPhoto.com?  Your history as a CPA with a Management Information Systems background isn’t necessarily an obvious path to the acquisition of a stellar generic domain name.

Jon: I’ve dabbled a little with domains before and used to listen to Monte Cahn’s podcast a lot when he was with Moniker. I was always inspired by the interviews he did with Marc Ostrovsky, Rick Schwartz and Brian Null (amongst others) – I knew deep down that eventually I would try my hand at developing a generic, exact-match domain name.

You’re absolutely right. I have a very nice career away from the web space (as a consultant) that I enjoy very much. However, I’m 43 years old and felt that there was one startup in me that needed to get done. I wanted to build something cool from the ground-up, or at least look cool going down in a fiery ball of flames 🙂 and so had been refining my requirements for a few years before the Stockphoto.com domain name came up for sale.

I wanted:

– Something in the B2B segment

– A digital product so I would not have to worry about physical logistics and fulfillment

– To be in a growth market

A number of products such as themes, software, music, ebooks etc. would have fitted the bill, however, Stockphoto.com was by far the most attractive proposition that arose and was hard to walk away from.

I agree with your sentiment that my professional background isn’t necessarily what you would expect but it’s certainly come in handy. Formulating the financials, working with attorneys, project managing the software development effort and then defining the processes required to support the business is made a little bit easier given my prior experience. This leaves me time to focus on the business building functions such as sourcing quality inventory and making sales.

 

Mike:  Do you own any other domain names?

Jon: Apart from Stockphoto.com, I’m most proud of ManagedFund.com (the equivalent of mutual fund in the UK, Australia and parts of Asia) and BroadwayNewYork.com. Neither are developed at the moment. Perhaps one day 🙂 I also own 3248.comwhich has significance in the Chinese (Cantonese)-speaking part of the world.

 

Mike:  You’ve been pretty transparent about the fact that you purchased the domain on Flippa.com and paid $250,000.  In fact, I really enjoyed your post on the Flippa blog.  What made you decide that the $250,000 “buy it now” price was a fair value?

Jon: There’s no exact science or formula but I estimated (via Compete) the traffic that I could get from direct navigation as well as Search, then I applied a conversion factor plus a rough operating margin. For a given level of inventory and sales, I figured I could make a reasonable return on the initial outlay. However, the value of the business I could build could exceed $250,000.

The truth is, however, is that this is my mid-life crisis 🙂 As long as it was within the budget (and there’s not a whole lot of offline businesses you can setup successfully for less than $250,000) then the question was whether this was something that could ‘scratch my itch’. I could’ve bought an expensive car that I would only get to drive on weekends, or blown it on travelling only to find myself back at the point in my life where I was looking to dig in and make a creative stand. Sometimes it’s a bit more than how the numbers stack up. As long as it’s roughly profitable and growing steadily, I’ll be more than happy.

The CPA in me could give you a million reasons why it’s worth less than the $250,000! However, the romantic/dreamer/domainer/punter in me just wants to know one thing:

How cool would it be, if you could hold your own in a straight-up, toe-to-toe against a NYSE-listed Goliath worth over 2 billion dollars with little more than a slingshot of a generic, exact-match domain?

 

Mike:  Having launched on September 9, You’ve got a few months post-live under your belt.  How are things going so far?  Are you seeing the level of sales you had hoped for?

Jon: The initial launch was nothing more than ‘Lean Startup’-inspired test of the MVP (Minimum Viable Product). Armed with one superstar photographer (Sergey Nivens) and 57,000 images from his amazing portfolio of stock photos – will they come? Will they buy?

We generated enough sales from the first month on to leave a little profit on the dinner table after Sergey’s commission, webhosting and other back office expenses. All without any paid advertising or PR. So from that point of view, it gives me confidence to grow the business.

My focus now is to recruit other superstar stock photographers with great portfolios to add to my inventory. If my theory is right, then we should see at least the same level of search-to-sale conversion, if not a better sale-to-inventory ratio. We might even improve our returning customer count.

2014 will be a year to consolidate on our initial learnings and then aim for growth in quality inventory.

 

Mike:  What is the volume of traffic you’re seeing on the site?  How much of that is type-in traffic?

Jon: I’ll just say that the volume of traffic was, thankfully, higher than the estimates I initially came up with using the Compete data. Over three-quarters of all unique visitors are via direct navigation and over 80% are those that have never been before. Traffic has been consistent since the domain name came out of escrow in January 2013. I installed Google Analytics along with a Mailchimp email sign-up form and up until I launched in September 2013, I was tracking traffic as well as building a list (segmented between photographers, image purchasers and those that were just tyre-kickers).

If I am able to increase my inventory for the same level of quality, then I expect that returning visitor component to increase. Recurring sales should also slowly increase as the website becomes more ‘sticky’ for image purchasers.

 

Mike:  As you pulled the trigger on StockPhoto.com, were there other domain names you had your eye on, or was this really a focused plan?

Jon: No, this was the first opportunity that arose which made me sit up. It fit all the criteria I had in mind (see above). The Buy-it-now price really forced me to ask myself if I was serious about this web startup idea. After much soul-searching and discussions with those in my life that mattered most, I decided that this would be the blank canvas upon which I was happy to put my name to. There weren’t any other domain names that fulfilled the prerequisites and had that ‘Wow’ factor.

If something like ebooks.com or themes.com came up for sale, I would also be just as interested. However, they didn’t and you can only make a decision based on what you know at the time and also what is available to you in the marketplace.

Like I said, I’d love to develop ManagedFund.com in the future but at this time, Stockphoto.com is my baby.

 

Mike:  What are some of the challenges you’ve faced with starting an online business?  What advice do you have for domainers looking to do the same?

Jon: I was asked an interesting question on Warrior Forum (http://www.warriorforum.com/main-internet-marketing-discussion-forum/869058-250-000-domain-name-guy-crazy.html) – “What if that domain didn’t appeared at Flippa? Do you think that you would do worse if you have purchased any new .com and spent 249.991K on branding and advertising?”

I don’t think there’s anything wrong with either approach. I didn’t take the latter path because my skillset does not include any branding, SEO and advertising. I would be competing with guys on the Warrior Forum that do conversions and SEO-related stuff for a living. I would get lost in the crowd before even making it into the ring to fight Goliath. I’m a pragmatist. I don’t want to take a knife to a gunfight (as the line in the movie goes). If I had the same budget then I would want as much of an advantage as I could get – UPFRONT. Not in Round 12. And the most valuable commodity on the internet is web traffic.

Other than that, I’ve been really happy with the way things have panned out. The domainer community has been very supportive. I’ve been able to slowly add more photographers and sales have been consistent.

Other than the above, my tips are:

–        Writing detailed business requirements on how your business should work

–        Documenting functional specifications on what that means at a website/user interaction/use case level

–        Making sure you build enough fat into your test cycles

–        Keeping your eye on the bigger picture (What am I trying to achieve in this phase?)

–        Remembering to have fun and laugh when you pick yourself up off the floor

 

Mike:  Any parting advice on buying domain names, what to consider, what to look for?

Jon: Traffic, traffic, traffic J (And read Sullysblog!)

 

5 Comments Launching a Business on a Generic, Exact-Match Domain Name

  1. Michael

    If you spent 249.991K on branding and it didn’t work, you would have nothing! You totally did it the right way and will always have the valuable domain name. The site looks great 🙂

    Reply
  2. Christopher Enderle

    Marvelous interview Michael. Mr. Yau provided great insight which should not be overlooked. I loved the part where Mr Yau based his decision on the romantic dreamer in him rather than from the cpa perspective. That decision is what life and living your dreams is all about.

    Reply

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