For clues as to who is making money during the economic downturn, take a look at the quarterly earnings reports for Amazon and NetFlix. Read to the end of this post to see how domainers can ride the same wave.
Amazon crushes it and Netflix impresses
In case you missed the news today, Amazon reported quarterly revenues of $5.45 billion. The company crushed the analyst estimates on earnings. The stock rocketed to a new all-time high:
On the same day, Netflix impressed analysts with the apparent traction of their streaming product and the continued traction of the traditional DVD-by-mail product. The cable companies should have had the on-demand video business in the bag but Netflix has a brand and a superior platform for social discovery of movie selection. Netflix stock also popped to a new high today.
Why this matters to domainers
The Netflix result was not entirely unpredictable — consumers are still hurting, so they are staying home and watching more movies. In past downturns, physical world theaters were so-called counter-cyclical plays. During the present economic downturn, the traditional theaters are competing with (1) dirt cheap DVDs that are being liquidated by retailers in the head-long run to higher margin Blu-Ray, and (2) video on demand made possible by cheap broadband. By comparison, $5 for theater popcorn does not look so rational! Result: traffic for NetFlix is UP, Fandango (a proxy for theater traffic) is DOWN, Blockbuster is BIG-TIME DOWN:
In the aggregate, the offline economy is still hurting but the online economy is not.
This is just the beginning — much of traditional retail is still on the wrong side of history
As commented previously, I am absolutely convinced that the web remains the most efficient platform for commerce. Business models are getting crushed by well-executed web strategies and the noose is tightening. The clothing vertical is particularly ripe for further reinvention. Amazon knew this when they acquired Zappos.com. For more insight into Amazon’s philosophy, and Bezos’ logic for the deal, check out this video from Bezos himself:
To see why many traditional mid-market clothing retailers are toast, consider this story. Last weekend my wife, Jill, went to take our oldest boy, Klaas, out for some clothes shopping. Klaas has a 36″ inseam which apparently is a problem for mainstream retail who apparently no longer carry that size. So they ordered the product online while at the store. The product has not arrived yet. In other words, traditional retail is not only weakening their offline presence by reducing SKUs, their online logistics are still far from benchmark (Amazon). The consumer will figure this out. As traditional retailers drop SKUs and reduce service, consumers will initially complain, and then they will simply go elsewhere.
Why is this good news for domainers?
What Zappos did in online shoes is a repeatable model on the long tail. The big difference now is that today it can be done with a lot less capital. What most people don’t realize is that Zappos actually raised a ton of outside capital. Their last round was a Series F round. For those who don’t know venture rounds, a typical VC-backed company might go through a Series A, B and C rounds in order to get to positive operating cashflow with high revenue growth. In other words, Zappos required a tremendous amount of capital to build an online shoe store. These days domainers can build an affiliate store for almost nothing. Think I’m kidding? Epik has just rolled out the first wave of online stores using a platform-based approach made possible through an exclusive partnership with Seattle-based Wishpot.com. While it is still early in the evolution of this jointly operated platform, it is a very efficient way to build new retail portals that offer consumers both selection and price. Here are a few of the first sites to go online:
How domainers can get started
Businesses like Zappos are clearly not built overnight. That said, it does not have to cost a fortune to test the water. For starters, you can do what Epik network member Kenny Hartog is doing. Kenny loaded a few product-related domain names onto Epik earlier this month. We then produced online stores for him at no cost. Kenny is now watching his earnings ramp fast. Here is Kenny’s revenue share as reported on his metrics portal:
What is notable is that most of Kenny’s traffic is coming from search:
Thanks for sharing, Kenny.
Some of Kenny’s stores will get queued for development into custom store formats like the ones described earlier. The product platform that we are developing allows us to go beyond affiliate feeds to work directly with manufacturers, wholesalers and dropship networks. This means that as volume grows it is possible to increase gross margins as well as take greater control of the customer relationship both within the individual store, but also across the network of stores.
Got product domains? Let’s talk. Send me an email: email@example.com, or see you @ TRAFFIC.