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New gold rush: Internet domains snagging huge amounts of money

NEW YORK — Inside a midtown hotel, Larry Fischer [pictured right] is on his cell phone with a financial backer as his partner Ari Goldberger [pictured left] does quick research on a laptop computer.

They are bidding furiously at this auction of Internet domain names, with hopes of snagging megayachts.com. The duo won’t be deterred. They want this name.

“$110,000, yes or no? Quick,” Fischer barks at Eli, the investor at the end of the phone.

Someone else makes a bid for $120,000. Fischer and Goldberger up the ante, and then again.

Going once, going twice … sold to Fischer and Goldberger for $150,000.

“You got it,” a smiling Fischer tells Eli. Mazel tovs are exchanged.

These are boom times in an estimated $2 billion industry that involves the buying and selling of domain names and pay-per-click advertising revenue for the owners of the names.

“This industry is like the wild, wild west right now and people have no idea how fast it’s growing,” said Jerry Nolte, managing partner of Domainer’s Magazine, a new trade publication devoted to this little-known world.

Experts believe the industry’s market value could reach $4 billion by 2010 as people continue to purchase approximately 90,000 names a day.

At the end of first quarter 2007, at least 128 million domain names had been registered worldwide, a 31 percent increase over the previous year, according to VeriSign, a company that tracks the industry.

“It’s like real estate,” said Monte Cahn, founder and CEO of Moniker.com, a company that specializes in domain asset management and ran the Manhattan auction. “This industry is only about a decade old. People looked at domain names as a commodity. It’s a piece of real estate on the Web that can’t be replaced. It’s your stake in the ground, your stake in the Internet.”

At the Manhattan auction, Fischer and Goldberger snatched up four names for more than $1.2 million and a fifth for a client, representing only a handful of the names sold for a total of $12.4 million during both the live and a silent auction.

One name _ creditcheck.com _ went for $3 million but paled in comparison to the sale of sex.com, which Cahn said sold for $12 million last year.

Fischer, 44, of Brooklyn, N.Y., and Goldberger, 46, of Cherry hill, N.J., figured there was money to be made early.

Goldberger’s entry into the business was unorthodox to say the least. In 1996, the Hearst Corp. sued him, alleging trademark infringement after Goldberger registered esqwire.com, which resembles one of the company’s magazines.

The two sides eventually settled and Goldberger, a lawyer, was allowed to keep the name. Word got out that Goldberger knew something about the thorny legal issues involving Internet domain names and people began approaching him for advice.

Goldberger’s fascination with the burgeoning industry was sealed.

“I was an entrepreneur strapped into this suit-and-tie job,” Goldberger said. “Kind of a square peg in a round whole and this lawsuit just kind of changed everything for me.”

He eventually left the respected Philadelphia law firm where he worked in 1997 and joined a small startup in Manhattan called mail.com, which was buying up domain names.

Goldberger began collaborating with Fischer in 2001, building their portfolio of domain names. Together, they became a formidable yet quirky team (imagine George Costanza and Jerry Seinfeld with the pioneering spirit of Lewis and Clark).

Two years later, they created a company called smartname.com, which they sold earlier this year. The company took names and monetized them for owners, getting a cut of the advertising revenue. At one point, smartname.com represented 150 owners with about 150,000 domain names, generating 50 million unique visitors a month.

Most the sites are lucrative for their advertising dollars. For example, home.com isn’t an actual site to buy or fix houses, but it contains numerous links for real companies like lendingtree.com and ADT.com. The owners of the site get paid each time a viewer clicks on one of those links. Goldberger and Fischer declined to say how much they make from this type of revenue.

Over the years, Goldberger and Fischer have sharpened their formula for acquiring domain names and developing the sites, relying on research, savvy and plenty of instinct.

“You either know it or don’t by hearing the name,” Fischer says.

They look for names that hit the “sweet spot” _ short words that describe a high-value product or services related to it. Words that allow them to own a category such as bald.com and cardiology.com, two of the domain names they bought at the auction.

“My biz plan is building sites around top generic names which serve as a key words,” said Fischer, who works from his windowless basement home in Brooklyn, where he is surrounded by computers and stacks of paper.

They don’t bother with dot-nets or the others.

“Dot-com is king,” Goldberger said. “Dot-net is worthless.”

But there’s a big divide between thinking of a good name and getting it. There’s usually a chase, with Fischer trying to persuade owners to sell the names after he locates the owners unless its up for auctions.

“He’s kind of like a rhinoceros,” Goldberger says about Fischer. “He chases them up a tree and waits them out. He has patience and determination. You got to be aggressive. It’s a tough game now. It’s like the gold rush. The first guys did really well then it became more difficult.”

And expensive. Five years ago, the duo could get a good name for $10,000. Now the minimum is more like $100,000 _ as the auction proved. The cheapest name they bought at the auction was blogging.com for $135,000.

At the moment, Fischer, Goldberger and Eli have declined to sell individual names. They’ve recently turned down million-dollar offers for stocks.com and home.com.

But as white-hot as this business has been, the right offer will no doubt come along.

“Everything is for sale,” Goldberger says.

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