How Rick Schwartz's Lost Auction Bid Made Tony $1 Billion Richer

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How Rick Schwartz's Lost Auction Bid Made Tony $1 Billion Richer


Let's play six degrees of domain separation:

1. Tony Hsieh (now famous dotcom mogul and ceo of Zappos) made his first $200 million selling LinkExchange to Microsoft. It was, like most big internet success stories, a very simple idea that grew with little budget or staff.

2. Tony invested the proceeds in a company called Venture Frogs and was looking for his next play. He became attuned to Domain Names and paid $800,000 for Drugs.com beating Domain King Rick Schwartz who narrowly missed out on the purchase when his $850,000 bid came in two minutes after the auction closed. Tony hooked Drugs.com up to then parking provider GoTo and started making some nice a revenue on the highly typed-in domain.

3. One day Tony gets a voice-mail from a guy with a compelling proposition about selling shoes online. He argued that many people have large sizes and walk out of shoe stores unsatisfied 90% of the time. The business with the simple domain name ShoeSite.com needed $600,000k to move ahead. So Tony according to Wired "kicked his domain habit" and sold Drugs.com at a loss and put the money into the little shoe store, became ceo/partner and changed the name ShoeSite.com to Zappos, a names based on zapatos, the Spanish word for shoes.

4. Fast forward nine years ahead and Zappos is a billion dollar business growing by hundreds of millions a year. Now Amazon buys Zappos and Tony's decision to turn his back on a Drugs.com PPC/Parking model and invest in growing a real business with customers and solutions and unlimited future potential earned him a billion dollars.

5. Morale of the story- do you put a million dollars on a domain or a business. The evidence for ROI is pretty conclusive. Making a name for yourself beats buying a name for yourself.

Note: Of course Hsieh worked like a animal 22/7 for 10 years while Schwartz cruised the world in the ships best suites on the scraps of his domain feast.

SOURCE: The Frager Factor: How Rick Schwartz's Lost Auction Bid Made Tony $1 Billion Richer
 
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