NetShops.com Offers a Twist on Domain Plays

Been hunting for a hammock, coat rack or grandfather clock online lately? Then perhaps you stumbled onto one of the Web sites owned by NetShops.com, a venture-funded e-commerce startup that has been snapping up generic domain names and building stores on them. Its 100-plus sites include Hammocks.com, CoatRacks.com, GrandfatherClocks.com, DayBeds.com, Pans.com and Telescopes.com. Sources tell me the company has been one of the most aggressive in recent months in seeking to acquire domains owned by individual investors.

Omaha, Neb.-based NetShops’ business model contrasts with most others in the direct-navigation market. Most domain aggregators have fashioned themselves as new media ventures and rely on revenue from pay-per-click advertisements. NetShops is backed by Insight Venture Partners and Sequoia Capital (an early investor in Google). Though it’s a startup, it’s been around for more than five years. It was known until the spring of 2005 as Niche Commerce. The company started out with one site, Hammocks.com, and moved into multiple storefronts in 2002, according to the Omaha World-Herald. Last year, it was ranked the nation’s 13th-fastest-growing private company by Inc. magazine. Annual revenue topped $62 million in 2005.

NetShops’ sites, it should be noted, rank high in organic search results, so they’re not dependent on type-in traffic, though undoubtedly they get plenty of it. The company was mentioned in a recent article on the domain industry by Constance Loizos of the San Jose Mercury News. In the article, Jeff Horing of Insight Venture Partners said, “As of of late 2004, it wasn’t obvious to us that you could turn domains into a real business, but that’s definitely proving to be the case.” He said he’s still kicking himself for passing up on an opportunity to invest in another domain venture.

Demand Media, a startup run by former MySpace.com Chairman Richard Rosenblatt, who’s also mentioned in the Mercury News article, has been doing some innovative things with domains that move beyond a traditional online-media approach. For instance, the company created Deals.com, an online community whose members post links to discounts, coupons and bargains offered for products on the Web. The deals are ranked in the order of how many favorable votes they receive from the community. Deals.com is modeled in part after Digg.com, a popular news Web site in which members submit links to articles and blog entries.

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