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DAVID CASTELLO, CCIN - INTERVIEW

David Castello, famed international domainer, thank you for talking to Grainmash. Your brother Michael, together with you and your mum, run CCIN, and are the owners of the website whisky.com. You must feel honored that you are now written into the pages of the mighty Grainmash.com, but let’s get serious now.

GrainMash: How many visitors come to your whisky.com website, and how is your site developing?

David Castello: Funny, Mom doesn’t run the site, but she does own a share of it. Actually, our Editor Joanne Bergstrom does the lion’s share of content and editing (and a brilliant one at that). Whisky.com receives over 3,000 unique visitors a day. It does very well on the search engines (currently #2 on Google for a search of “whisky”), but I believe its strong point is the degree of direct navigation traffic it receives. Currently that stands at about 30%. That’s pure traffic no one can get any other way and is purely unique to Whisky.com.

GrainMash: By direct navigation, you mean “drop in” traffic – where users just type whisky.com into their browsers to see where they arrive, correct? So where does the other traffic come from, search engines?

David Castello: Yes, Whisky.com’s traffic is a combination of search and direct navigation.

GrainMash: Clearly, Google positions are important. Did you know that in the UK the same search for ‘whisky’ on Google has TheWhiskyExchange, and WhiskyMag as well as Laphroig ahead of you? To make sure you remain high in the rankings, have you got plans to introduce more content, or develop the site further?

David Castello: Yes, but it’s always a question of where and why. The Whisky.com Forum is immensely popular. Maintaining that alone is an enormous task because some of the questions involve a fair degree of research and if the other visitors don’t answer them accurately we will. It is our policy to not let any question remain unanswered for too long. Bringing aboard bloggers is an option and something we are considering. On one of our Geo sites Nashville.com we’ve brought aboard three bloggers and its working out quite well. One of the bloggers on Nashville.com is a former popular news anchorman from Nashville. We’d like to see the same situation with bloggers on Whisky.com, perhaps attracting someone who works for a distillery or well known in the industry some other way.

GrainMash: We were interested of course to see the domain name whiskey.com go for sale at auction recently for $185,000 USD. Do you think that is a reasonable price?

David Castello: I think they got a great deal if they intend to develop the site about American whiskey, which I believe they do.

GrainMash: Well, if they are planning to warehouse the name until the whiskey industry decides to buy such a domain, they could be waiting 25 years. But let me ask you, were you at the auction?

David Castello: My brother Michael and I both attended the auction at TRAFFIC NYC. We also spoke on a panel and (were shocked to discover) we won the TRAFFIC Domainer Hall of Fame Award.

GrainMash: Congratulations to both Michael and yourself David, it’s wonderful to be recognized as leaders in your field. I guess it’s that leadership status that makes you an interesting interviewee for whisky lovers who also work in the online world like Grainmash! So, did you bid for whiskey.com?

David Castello: Yes. We bid up to $175,000USD.

GrainMash: This suggests that, ultimately, there was only the new owners and CCIN even interested in the domain name. Why do you think that major distilleries – including Jameson, Bushmills, Jack Daniels and Jim Beam – don’t invest in what can only be seen as the most valuable generic dotcom domain they could own?

David Castello: Yes, that was exactly the situation. The problem here is not with the distilleries, but with their marketing departments and advertising agencies. At this point in time most simply don’t get it. On the other hand, some people do understand the intuitive power of these names. Click on “Rum.com”

GrainMash: I am not sure you’re comparing apples to apples. Rum.com is owned by Diageo, and they have assigned it to a single brand. And more importantly, Rum is one of the few distilled alcohols that do not have standard controls. It only has to age for a year (if that) whereas top whiskies age for anything between 20 and 40 years.I think there is a counter argument which I would like to present and learn your thoughts: The independent distilleries, call them the “independent artisan distillers” such as Mark Reynier at Bruichladdich, do “get it”. However, they have production capacities, and have no way to monetize the increased fame and brand awareness from owning whisky.com. They cannot produce enough of their product while maintaining the delicate balance of demand and supply that gives them their product price. Hence, they are better off controlling the value and price of “Octomore” – for example – and leaving the online world to evolve. If they keep their product strong, their own legacy and heritage takes care of much of their marketing.

For instance: When I spoke to the owner of Bruichladdich, he explained that he spent £80,000 on marketing to achieve turnover of £8,000,000. In order to maintain his ROI – he would need to increase his turnover from £8,000,000 to £24,000,000 following a £240,000 USD acquisition of “Whisky.com” – and he may not have the production capacity, or barrels, or distribution, or customer following to do so.

Meanwhile, larger players such as Diageo and Pernod Ricard, who between them produce 60% of the world’s whiskies and control 80% of the market, do seem to get it – and they have bought generic domains such as rum.com or malts.com – but have opted not to go generic for whisky. I remember “vodka.com” went for big bucks, but that again is a distilled alcohol that does not require any maturation period before shipping.

So, the summary challenge seems to be this: First you have to tell me how much I need to spend to buy the domain from you, and then I need to weigh up the alternative of spending the same money re-opening a distillery and/or laying down barrels on Islay for 10 years, before deciding which one is the better investment or brings me into the whisky world?

David Castello: You can add Scotch.com to the list. It is pointed to Johnny Walker. Furthermore, there is a larger marketing scope to analyze here. The common wisdom prevailing at the moment is that most companies would rather pay an advertising agency a small fortune for a 180 day marketing campaign than to obtain an intuitive site like Whisky.com that keeps producing revenue and dividends for years to come. And I don’t think it’s the distilleries who are thinking this way as much as it is their advertising agencies.

I also must disagree with your “maturation theory” here. People come to Whisky.com to learn about whisky or to research other brands. If they were drinking one brand, come to Whisky.com and switch to another their new choice would immediately reap the financial reward regardless of any maturation variables.

GrainMash: Maybe, maybe. I think that advertising agency staffs very clearly understand the value of “opted in” audiences, people who consent to marketing communications from major brands – and prefer to think they don’t advocate the acquisition of a generic domain because it does not really deliver them recurring media budgets.

Another interesting question to ask domainers is this one: If the investors behind whiskey.com and yourselves were the only two bidders at TRAFFIC, who do you see as being your target customer for the domain? And assuming that the buyers of whiskey.com would have paid you 500,000 USD for whisky.com, what’s the profile of a buyer who will offer you more than 500,000 USD for the domain?

David Castello: The new buyers would not have paid us $500,000USD for Whisky.com because they would have been missing a zero in their offer to be considered seriously . Also, you keep referring to Whisky.com as a domain. It is a combination of domain and site. Conversely, Whiskey.com is simply a domain.

Grainmash: Wait, you’re saying that you would be looking for $5,000,000 USD to part with the domain? Surely you’re not serious, and if you are I am even more confused why you would not bid more than 175,000 USD for a different spelling that attracts 65% of the search traffic that whisky.com attracts. You mentioned earlier that about 30% of your traffic is from “drop in” traffic – people who just type “whisky.com” into their browser and see where it takes them – which equates to about 1000 of the 3000 uniques per day, and the rest of the traffic comes from searchers. When we researched Google, we found that for every 3 people who search for “whisky”, there are 2 searching for “whiskey”. Logically, that behaviour would follow into drop in traffic. So, given that balance is only 60:40 in favor of Whisky.com, it seems that the buyers of whiskey.com got a “steal”. I’ve a couple more questions about the auction price and valuations.

So, if you say Whisky.com is worth $5,000,000 USD, why did you stop at that $175,000 USD for whiskey.com?

David Castello: The bottom line is that we had no intention of developing Whiskey.com. Frankly, we were looking for a bargain and didn’t think anyone else was interested because true development involves work and committment. Furthermore, the economy had gone off a cliff. The other party came over and told us they were going to bid upwards of $500,000USD. We bid to $175,000USD to see if they were bluffing. They weren’t. Our original strategy was to acquire the name for $100,000USD and that is a lot of money for us to spend on a name we aren‘t going to develop. In fact, it would have been the first time we’d done such a thing since we’d acquired our first domain name in 1995.

Also - and this is very important - many Americans believe that Scotch Whisky is spelled Whiskey. The promoter of the TRAFFIC auction wrote me that Whiskey.com was for sale and even he made that assumption in his email. That’s when my brother and I had a feeling there may be more than one strategy at work here.

GrainMash: The plot thickens. Presumably the buyers of whiskey.com would have paid you $500,000 for whisky.com instead, but you’re telling us that you would want 5 million USD for the domain. Of course, there’s an assumption in there and by stopping at 175,000, you left 300,000 of their claims untested of course. What I don’t fully understand is why you would stop at 175,000 USD, when perhaps another 50,000 USD would have left you in total control of the generic domains for “whiskies”. All that traffic could have been yours?

David Castello: In our minds, once we went over $200,000 we would be psychologically engaged and have to develop the name. And to be fair, Whiskey and Whisky represent two completely different spirits. Whiskey should be developed and when we realized that was the intention of our German friends it changed our strategy on the spot. The truth is that Michael and I own one of the best generic brand portfolios in the world including Daycare.com, Nashville.com, Manciure.com, Bullion.com, Banana.com, Suntan.com, etc. There are only so many hours in a day and when we develop a name we become personally involved on many levels. Go to the front page of Whisky.com and click on the photo section. We don’t just own and manage Whisky.com, we live it.

GrainMash: Wait, I am a little confused. The two names don’t really represent two completely different spirits in the minds of most consumers – they have no idea what the different spellings even mean. Are you saying that the development of whiskey.com by a separate outfit will improve consumer understanding of the differences?

David Castello: Exactly. And the owners of Whiskey.com are aware of this. If they try to pass Whiskey.com as a site for whisky it will kill their credibility. However, I know these guys, they’re very intelligent and I don’t believe that will be the case. There’s enough money in the American and Irish market to keep them quite happy and we’ll all win.

GrainMash: When you and I first talked back in 2008, you suggested that Whisky.com should have a value of more than $1,000,000USD, a case you made with reference to the sale of Vodka.com. Do you really still stand by that valuation given that only two parties bid with any intention for whiskey.com? Who do you see coming into the frame and investing a million for whisky.com?

David Castello: NEWSFLASH: We turned down $1,200,000USD AFTER the Whiskey.com sale.

GrainMash: Excuse me while I pick my chin off the floor! Can you tell us who made the offer, or at least clarify for us whether this was from a distillery, a distillery group, a trader or a domain investor? I don’t understand what someone would offer 600% more than the price of whiskey.com – given it attracts only 50% more traffic than whiskey.com – why would they not bid for whiskey.com? They can’t have been American?

David Castello: LOL. Actually, they were Canadian and because of an NDA I‘ve already revealed too much. However, there are two very important factors to consider in evaluating the two names:
1) Whisky.com is a well developed and respected site. Whiskey.com is currently a parked page.
2) With all due respect to American Whiskey distilleries, Scotch whisky is, in my humble opinion, a much more premium product with a greater history and legacy. I have a fondness for Wild Turkey 101, but is anyone going to seriously compare it to a 21 year Springbank?

GrainMash: One counterpoint would be that it doesn’t take a million dollars to build a highly developed and respected website, and another would be that, for the exact reasons you infer, Springbank don’t think they need to invest $5,000,000 USD for a domain. I note that Wild Turkey own their domain and still have not moved on Bourbon.com which is currently warehoused by what appears to be another domaining operation.

Another counterpoint is the irony of the quality shift to which you allude. After all, the Irish and Americans introduced the extra “e” specifically because they had concerns about the quality of the Scotch whisky and – whether the bearded whisky lovers of the world wish it were not so –the big money big volume brands are still the cheaper blends of this world. If you’re selling a quality product, with history, legacy and aspiration, how can you be generic at the same time? Personally, I think that’s the specific whisky valuation conundrum. It’s just not the same for Rum or Vodka. But leaving aside the specifics of the whisky world, you must have good reasons for turning down such a large offer?

David Castello: When Michael and I got into this business in the mid 1990’s we acquired many of our names for FREE because no one thought they were worth anything. In fact, Michael couldn’t get his friends involved because their logic was that if the names were free they had no value (you have to love human nature). Since then, we’ve been offered well into seven figures for many of those same names - undeveloped. Whisky.com is a well developed site with a high degree of respect in the industry. Our Editor Joanne Bergstrom is inundated on a daily basis with content and photo updates from the distilleries. For us, selling off Whisky.com would be tough. It caters to a cultured, upscale audience, we both love our single malts and we‘ve met a lot of friends.

GrainMash: So you’re saying that it’s a lifestyle investment for you, not just a financial asset. And forgive me but $1.2MM USD is a lot of money, and it’s a lot of whisky. Surely 1.2MM would finance an incredible whisky collection, enough 21 year olds to keep your rockets polished for a long while, and more seriously even the down-payment on a finance deal to buy a mothballed distillery. So a lot of Grainmash readers will be begging me to ask you this question - why hold on to the domain?

David Castello: A couple of reasons: Whisky.com is one of those few domain projects that have become very personal. Michael and I are avid cigar and whisky devotees. We’ve also met more than quite a few friends at the whisky shows here in the States. On another level, we feel as if we’re living in the past. Advertising agencies are seriously behind the ball here and I’m beginning to sense the same desperation on their part that I see in my friends in print media. We know exactly what we have and will not consider relinquishing it until the marketplace catches up with us. And when that happens, it will become obvious why we passed on $1,200,000USD.

GrainMash: Given that you have turned down 1.2MM USD for the domain within the past 3 months, what do you think the development of whiskey.com will mean to the value and potential of whisky.com?

David Castello: When we realized that the other party was quite serious about acquiring and developing Whiskey.com it suddenly occurred to us that this could be a goldmine for Whisky.com. We recently launched a marketing campaign for the Dalmore on Whisky.com. The first thing they asked us before they even looked at the site was about the spelling. They wanted to be sure we had the Scotch/European spelling. Many in the general public, especially in America, don’t realize there is a huge difference between Whisky and Whiskey spirits. The development of Whiskey.com will clear this up. However, the great irony here is that you now have my brother and I who are American owning the Scotch/European spelling while the other party who is German owning the American/Irish spelling!

GrainMash: I think we should be clear that whiskey is the Irish and American spelling – the Irish readers of Grainmash may not take too kindly to us ignoring that fact, but yes the irony is not lost. As I have said, I think there is currently a massive discrepancy between how online works and how distilleries work. Online is “real time” and “fast fast”, while distilleries are playing a long game. They are laying down product for 25 years, and many of them are stewarding brand names that are more than 300 years old. Do you think that ever the twain can meet and if so, how long do you think it will take for your own whisky investment to mature?

David Castello: Our investment in Whisky.com is not reliant on anything to do with the distilleries and their products. Our value has to do with our intuitive brand power to bring new people into the market and expose them to the joys of Whisky. People come to Whisky.com to research and ask questions. We keep a close eye on which brands/distilleries they’re researching because those are the people who buy. The Dalmore is an excellent study. When we began promoting them in August 2009 they were # 17 in popularity on Whisky.com. They are now # 3 and the Dalmore’s sales stats show a similar upward “bump” at the same time we began their Whisky.com promotion. Interestingly, the Dalmore came aboard Whisky.com because I personally met their US rep Dawn Lambert and she immediately grasped the impact Whisky.com could have on their sales. I doubt if I would have had the same success if I’d originally met with their marketing department or advertising agency, but this will all change over time. I don’t know if Dawn Lambert considers herself a visionary, but in my book she is one and it is because of people like her that this business is coming together.

GrainMash: Ah, bless you for being so lovely about Dawn, that’s sweet. Maybe Dawn would like to be interviewed by Grainmash too? You know, I’ve spoken to marketing directors from many distilleries, and they were not interested in retargeting, contextual or behavioural targeting, retargeting, or any of the other smart moves they can make using digital channels. They tell me it’s all about an “aspiration”, a brand, and more delicate matters than the web can truly deliver.

And maybe the big new market is “China” making the Chinese spelling for whisky a better buy than the Scottish spelling for whisky, I just don’t know. So far, all we know is that only two parties were interested in the US spelling of whiskey and they diverged at a value of 185,000 USD.

Here at Grainmash, we remain clear that generic domains have immense value, and watch with interest to see how whiskey.com – and of course whisky.com – evolve and develop.

But David, thank you for your time and insight into the world of whisky domaining, the world of whisky.com and for sharing your current views on the interplay between online and whisky. I truly appreciate it.

© 2010 GrainMash.