How DigitalTown Will Use 11,000 .City Domains (DT Bought 400 .City Domains In The Aftermarket)

Robert Monster, CEO of DigitalTown.com and Epik.com, made a lengthy comment (and then a few more smaller comments) on the article I wrote about the announcement of the new DigitalTown platform involving 11,000 .City domain names, explaining how the whole project is going to work.

He also revealed that the vast majority of these 11,000 domains were purchased for $3 thanks to a special deal with Donuts, the .City registry, and that the wholesale renewal cost will be $13. Even highly premium domains like Sydney.city, Melbourne.city, Perth.city and Brisbane.city, etc, renew at under $70 each.

Rob also shared 2 of DigitalTown’s acquisitions so far:

1. an existing technology company called Cloud.Market, and
2. a portfolio of 400 .CITY domains for a combination of cash and stock in a deal worth $75K.

He explained that where possible the city itself will be the administrator of each .city website.

Here are all the comments by Robert Monster:

Guys,

As for the CEO of DigitalTown, I have a little context to offer here.

In short, DigitalTown is building a Global Smart City platform. This platform is designed to enable any city to be an authority on itself. It is a branded vertical search engine for a city, combined features for community and commerce. Where possible the city itself is the administrator of the site. That may not happen overnight but that is the preferred configuration, for which the city, county or state, licenses the Software as a Service.

An early demonstration site can be found at: http://www.leavenworth.city/ . You can also download the mobile app for iOS or Android. There are 2 test markets live, the main one being Sibley County, MN which has 7 live cities online. We are learning how to engage local stakeholders in the adoption of a platform that brings together content, community and commerce in a way that is designed to support thriving local economies and engaged communities.

The DigitalTown platform is also designed for single-sign-on. This allows a user to have portable identity, portable reputation and portable payment methods as they come from city to city. We believe the notion of having to use a different app for every town or city would be silly. So in our solution, the city sites are branded for each city but the mobile app is shared across the network.

As for the domain ownership economics, the year 1 wholesale for the vast majority of these domains was $3 thanks to a special deal that is available through Epik registrar. The wholesale renewal cost is $13. Even the highly premium domains like Sydney.city, Melbourne.city, Perth.city and Brisbane.city, etc, renew at under $70 each. Without question, Donuts priced the .CITY registry very reasonably. The special pricing here was in part because Donuts is supportive of our efforts to bundle the .CITY domain with a scalable content management system for adoption by cities.

As further context on how I am looking at domains, I posted a related blog post the other day on the Epik blog:

http://www.epik.com/blog/why-digitaltown-bought-10000-city-domains-and-why-it-matters.html

We there is an important need for some type of logical architecture for these new TLDs. For cities there are some very logical points of entry. We are starting with .MENU for local restaurant directories, but there will be more of these niche platforms for verticals bundled with the domains, and using the same digital wallet framework.

As for the software itself, Uber has given us a small preview of what “Smart City” technology looks like with software serving as an organizing force among stakeholders. However, we think cities are a stakeholder and should be brought along. For example, Austin threw out Uber and is doing their own Ride Austin as a public-private partnership. I met with the organizers of Ride Austin on Wednesday. In short, template is set for cities around the world to play a greater role in equipping citizens and visitors with Smart City technology.

Candidly, this is the most excited I have been about a new Internet venture in my entire history as a tech entrepreneur. And while there are some trade-offs with operating a public company that needs to maintain SEC compliance, I think the benefits outweigh the costs, which is why I agreed to take on this role last May, and to bring what I think is a world-changing plan into an existing public company.

One of the main benefits of having public shares is an enhanced ability to do acquisitions. The acquisition targets get shares in a public company. So far we have done 2 acquisitions: (1) an existing technology company called Cloud.Market, and (2) a very nice portfolio of 400 .CITY domains for a combination of cash and stock in a deal worth $75K. I anticipate that there will be more of such deals as we assemble strategic components of the ecosystem and the associated value-chain.

For more information, visit DigitalTown.com, or contact me at rob@digitaltown.com to request the whitepaper. We will be exhibiting in September at the International City Manager conference in Kansas City, and at the Global Smart City Expo (15,000 attending) in Barcelona in November. For anyone trying get up to speed about Smart City technology, I recommend the Barcelona show. If you set up a Google News alert for “smart city”, I think you will be surprised by how much is going on in this space.

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As for the city list, most of the .city domains that are worth owning are now taken. We obviously checked before talking publicly. There are just a few guys remaining with significant .city domain portfolios. We have pretty much talked to them all. It is not imperative that these city sites be built on .city domains. Indeed for the largest cities, there are ample solutions in place for most of the obvious use-cases. DigitalTown’s development focus is on empowering the city with between 1000 and 100,000 population. We have the vast majority of these .CITY domains covered for the US.

What you may not grasped is the idea that this platform is intended to enable the city to be an authority on itself. This role is ideally filled by city administration who is the primary target customer for this solution, though local private sector civic leaders can certainly fill that local leadership gap to the extent it exists. Friday’s press release was intended for US Mayors meeting in Indianapolis this weekend. The domain industry picked up the story which is great but not the target audience.

For calibration, the typical mid-sized city is spending between $30K and $300K per year on maintaining a website that almost very few people visit. In addition, the visitors bureau and chamber of commerce will often have their own sites, which again are rarely visited. The scenario DigitalTown proposes is that the city should have a city-wide search engine administered by the city populated with the content that is curated by locals. As we say, “See the world through local eyes”.

The software leaders in the city website sector are highly profitable companies like Civic Plus and Vision Internet, plus a large number of custom sites built by local dev shops. These platforms are largely for broadcast, not dialog. We think city management should play a greater role in economic development through the branded web presence that connects the community, and supports merchants online — 2 areas where cities do remarkably little today.

The other thing you have probably not grasped is the massive amount of innovation going on in the area of Smart City and Internet of Things (IoT) specifically for city-level innovation. As these various services come online, consumers will need an onramp for engaging these services. We think this can be effectively achieved through (1) intuitive direct navigation, and (2) a unified mobile app. In other words, we don’t think that it is practical for each city to have its own app.

Specific to direct navigation, I have no idea if geo.TLD domains will be a big thing. However, I do feel strongly that the domain industry needs to make direct navigation more intuitive and that geo TLDs are a fine place to start. The first TLD to sign on to that vision .MENU for powering local restaurant discovery. Similar strategic deals are pending for other TLDs. These long term strategic deals are category exclusive, i.e. for restaurant discovery it will be .MENU.

Of course we don’t claim to have the monopoly on good ideas, and welcome the intellectual banter. At the same time, I do see the recurring pattern of guys with city.com coming out of the woodwork talking their own book. So, readers of these threads are advised to form their own opinions being mindful of personal domain portfolio agendas that at times may seek to defend the .COM forever status quo.

So, stay tuned, and thanks for watching!

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The vertical search engine for the city will still operate for each city and the mobile app will still have aggregated and curated content for each city in the network. No decision has been taken around local franchising to non-city managers. That said, it is conceivable that private sector civlc leaders could stand in the gap if city management in a particular city opts not to engage. Our focus is on city managers and county managers. Funding for some cities may come from state and federal grants, notably for economic development and tourism development. There are also specific grants for smart city innovation, including a $40 million award announced last week to Columbus, OH from a Department of Transportation program called Smart Cities Challenge.

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@Rich –

I joined DigitalTown in May 2015, initially for a 1 year interim executive position after being recruited by the Company’s Board. On June 3, 2016 the Board ratified a 2 year contract extension on the same terms as the first year.

As for executive compensation, the overwhelming majority of my compensation is in the form of common stock. In the early days of the turnaround, the SEC filings will show that I deferred cash compensation and then took it in the form of common stock. I fly coach. I was in Cleveland on Thursday/Friday for meetings — took a red-eye to CLE on Frontier and stayed 1 night in the Residence Inn, renting a compact car as it was cheaper than taking an Uber for my itinerary. You get the idea. I know how to live comfortably, but I don’t do so at the company’s expense as it would set the wrong example and create a culture of profligacy, to which I strongly object.

As for the shareholders, I have personally met with many of the long-time shareholders, long before my involvement. I have held 3 live sessions to a full room of 100+ persons in a facilities room in a bar/restaurant called Neisen’s corner in Belle Plaine, MN. These are farmers, real estate agents, professionals, retirees and school administrators. While I am familiar with the pump and dump penny stock operating model, that is not what the Board signed up for. Just FYI, a number of the Board members are Bible-believing Christians with plenty of money. Yes, we want the stock to go up, but in an orderly way.

I believe the likely exit for the largest shareholders — most of whom hold restricted stock, including myself — is for the company to be acquired by some larger entity that needs a compelling platform on which to execute the Smart City strategy. That being said, we are building responsibly and for long-term value. I know how to contain expenses, raising funds as needed in order to minimize dilution of existing shareholders. And, just for calibration, the company did book $250K in orders in May from 3 customers, so there is a least some validation from the market that there is demand for these solutions.

If you feel really strongly about your views, I invite you to short the stock. This would be helpful as none of the existing shareholders are selling, even on Brexit Friday. So, we could use some extra free-trading float right now. At the end of the day, I view DigitalTown as a high potential early stage company that just happens to be public. As such, I suggest you set aside your pre-conceived notions. If you choose not to do so, then by all means please short the stock. In a few years, we will both know if you were right or not. If you do short the stock, just be aware that your potential loss is uncapped, so seriously don’t do this just to prove a point.

By the way, people who know from me the domain industry generally know that I am an open book. My cell phone number is 425-765-0077. I warmly welcome thoughtful critique from smart people who can temper my optimism and who can help anticipate future roadblocks.

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@ John.

See here:

http://whois.epik.com/LasVegas.City
http://whois.epik.com/Newyork.City

For Las Vegas, if you visit the site, you will see that they already have done a nice job building a platform for monetization that works for Vegas.

For NewYork, it is a reserved domain.

You can however buy this one for $77.88 here:

http://whois.epik.com/newyorkcity.city

Admittedly the city.city pattern sounds a little dorky but it is available. Regardless, New York will be a tough nut to crack for anyone.

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@ Sean – We talked to most of these owners. Most of the big cities are held by one individual who splits his time between Ottawa and Dubai, where 2 of our team members did meet with him in person earlier this month. A deal may eventually get done there, but for the moment, there is no deal to be done there. We are actively looking for .CITY acquisitions that make sense. However, we don’t need every big city to execute the launch. It is in fact the smaller cities that need the most help with economic development and tourism development. We have plenty of great cities with which to work now as we go from test market phase to global rollout in the coming months.

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To read all the questions and replies please go to the initial post here.