Realistic Domain Prices Could Lead To More Sales
Filed under: Domain Buying, Domain Names For Sale, Domain News
As someone who has always enjoyed reading the blog at Ebusinessdomains.com I was pleased to have Kevin Jackson accept when I reached out to see if you wanted to do a guest post here. Kevin is working hard to take his business to the next level and has said as of late his focus is on building awareness at the end user level rather than between domainers, that is the good fight and I am happy to have him say a few words here.
Good read below, and thanks Kevin!!!
For you to fully appreciate my viewpoints in this post, simply imagine that domain parking did not exist, and the only way to make money is to buy and sell domains (domain aftermarket) and develop domains into profitable ebusinesses (web and brand development).
All domain investors go through phases before they see the light of day. Quite a few will register or buy domains that have little to no resale value in their first few months of domain investment.
One thing I have noticed is that every domain investor, old and new, will think that their domain collection is priceless, or at least worth a fortune. You will most likely aggravate domainers if you try your best to honestly tell them that their domain names are not worth as much as they think.
Now, we really still do not have any foolproof method of valuing domain names. Over the years valuation techniques come and go. The reality is that when someone invests heavily in a particular niche, extension or type of domain name, they will form all sorts of theories as to why their domain niche is the best thing since slice bread.
One good example is the LLLL domain names. Some people invested heavily in these domains. They bombarded the forums and blogs with all sorts of reasons and theories as to why these domains were worth the big figures. Well, where are they now?
I am a domain investor, developer, and also a broker that operates a domain marketplace. People will naturally get suspicious when they hear me calling for domains to be more realistically priced. However, I am making this call for the overall goodwill of the domain aftermarket.
I invest in all sorts of businesses. The industry that mirrors the domain industry the most is the real estate sector. Even during the incredible credit crunch and economic downturn that we have been experiencing over the past 2 years, I still find it worthwhile to invest in real estate. Why? The rules of the game are clearly stated.
The domain aftermarket is very inefficient and illiquid. Domains are selling, but the volumes are extremely small when compared to other sectors such as the stock market and real estate. This makes it extremely difficult for one to carve any form of successful business in the domain industry.
The real estate sector is driven by supply and demand. There is no quick way of supplying new homes, and there will always be people seeking to buy a place to live in. Property investors will always have tenants waiting. Here in London, I literally have estate agents begging for my business (to supply tenants) long before I close the deal.
Now, if people are proclaiming that domain names are so valuable, why is it that there is no sort of conveyor belt system in the domain aftermarket? Where is the overwhelming demand from end-users?
This is the point I’m trying to make here. Unlike with real estate where it takes time to build new homes and introduce new inventory, domain end-users have loads of choices. They have an orgy of other domain extensions to choose from, and they also can come up with all sorts of concoction of a domain name.
Yes, we all know that the right domain name will help with branding. However, let’s not get ahead of ourselves. The most value that a domain name will add to any ebusiness will be the credibility that it brings. No matter how premium a domain name is, the business will still need to advertise. The domain name will only cut advertising dollars if it has some sort of traction (branding) with the customers. By this I mean repeat customers that will come again without having to see any fresh advertising. Anyway I will expand on that in another blog post, in the future.
Hope you are still with me.
Now, let’s look at domain registration. Companies do not argue about having to register a domain name and then pay subsequent annual renewals. They accept it. It is digestible.
What a lot of people will not get is how they could justify paying big dollars for a domain name when they can hand register an alternative, easily.
This is why we need to price domains realistically, and create a culture of a very active and liquid domain aftermarket. While some companies will need to justify the cost of a premium domain name, some small and medium size businesses just can’t afford to buy one.
We want to target the unemployed who are trying to start their own businesses, but yet we quote them $xx,xxx for an ordinary domain name. Why not make it easy for them to spend $1,500 for the domain name, another $1,500 on web design/development and then have another $2,000 to do press releases and advertisements. Yes, that’s $5,000 in total. I believe that should a good initial outlay for an entrepreneur.
Why demand $50,000 for a domain name when the buyer would need to spend as much if they want to make any sort of returns on investment within 5 years?
If we price domains more realistically so that entrepreneurs can easily utilise their scarce resources to develop brands and successful ebusiness, then we would have a lot more end-user activity in the domain aftermarket.
Now lets quickly look at the “old guard” - the domainers with the huge domain portfolios that they monetize though domain parking. The “old guard” don’t sell, because they don’t have to, or simply “don’t have the time to deal with domain offer emails”.
Have you ever wondered why any domain-related article that appears on TechCrunch.com always get a swarm of comments calling ALL domainers squatters? A typical comment would read:
“Such a pain in the ass when someone already owns the name that would be perfect for the project you just thought up, and when you go to the site all that’s there is a bunch of Google ads.”
Domainers know that it is legal to buy and hold domains and to monetize them through domain parking. However, as we know it, most domainers will only park domains. They have no intention or desire to develop the domains into any sort of meaningful Internet destination.
Yet, when an end-user wishes to buy the domain name, they are either ignored, or asked to buy the domainer a mansion, a Ferrari and a yacht. In most cases, no matter how robust the business plan is the end user would not be able to develop the domain into any sort of web destination that generates that type of cash flow.
Hence, I believe that regardless of whatever their domain strategies are, it would benefit the entire domain industry if domainers make it much easier for end-users to acquire premium domain names.
Let us hear your viewpoints.
Hi Bruce, nice of you to ask Kevin to write a guest post, i’ve been following his blog since i’ve entered the domaining “world” and he’s has been always very helpful to me. As usual Kevin gives good advice, and i wish more people would listen, he made very good points.
Like you said Bruce, Kevin has been working very hard, and his work benefits all of us too, he created an excellent marketplace, now with daily auctions too, he has been atracting end users, so i only have good things to say about him.
It’s also my first comment in your blog Bruce, i’ve started to follow it recently, and let me tell you yoy have sane and good advice here too.
Good work both of you
All the best
@Helder – You are correct, Kevin is doing a great job. Thanks for the kind words, many may say I am not sane, that usually means I should keep going:)
Do you think that LungsDisease.net is set at a realistic price with a minimum price of $750 (from your website)? Wouldn’t the optimal keyword be “lung disease?”
@Bruce,
The pleasure is all mine. I am very impressed with your enthusiasm and business skills. So, it is a real privilege to have the opportunity to get the eyeballs of your readers.
@Helder,
Thanks for your kind words and usual support. Much appreciated.
@Jacob,
I honestly believe that if the reserve price for LungsDisease.net was set $50, you would still think it’s too high. This is what motivates me the most to engage the end-user market. I find more business maturity there.
I am well aware that most of our auctions will result in no sale, because we do no set $28 reserves. However, as I wrote on my blog some weeks ago, We will not be providing an auction platform that encourages time wasting. I personally don’t see a business case in selling domains for $28. I mean no disrespect to Bido whatsoever, but that’s not a strategy that we want to experiment with.
I agree about not selling names for $28/each.
I see what you are saying, but let me tell you something I learned from being in the domain business 15 years.
Regarding brandables and mid-tier or lower quality domains your viewpoint applies quite thoroughly.
However, super-premium and premium domains should be priced high b/c you can “only sell a domain one time”. If you get that concept then you understand that the pot of gold at the end of the rainbow can be had if you wait patiently. If you don’t then the other party got a great deal and you probably won’t be able to acquire cheaply another high quality domain like that one again.
As an example, I submitted a domain to Sedo auction. They told me it was not high enough quality and they would not even list it. This is a generic hotel domain, mind you. I then submitted it to Afteric. They told me that my price was too high at $35,000. Yet is sold at Afteric for almost that amount. They had told me to lower it to below $20,000 or they would take it off of “Expanded Promotion”, but it sold before they could delist it to Standard Promotion.
It pays to hold your guns on your great domains b/c you get to keep you domains, make PPC, and only sell if the price is right for you.
@Belmassio
I get what you are saying, and I agree with you. I really do.
However, we are dealing with 2 different strategies here. You are dealing with the buy and hold strategy, where you treat the high-end premium domain name just like an art collector treats an expensive painting. That’s fine. I would not sell Aeroplanes.com for less than $5,000,000, despite the fact that at present it may only be worth low $xxx,xxx.
Now, this is where I’m coming from with m post:
If you have a restaurant as your business, would you want to wake up everyday wondering if you will have a customer walking through the door to purchase a meal? No.
It’s the same thing with domains. Just like registrars expect to have daily domain registration, we should aim to have end-users understanding that not only do they need a domain name, but THE RIGHT DOMAIN. When they understand the need for the “right” domain name, they should have ready access to a marketplace where aftermarket domains are priced realistically.
For the purpose of this article, by end-users I mean the typical small business owners that Bruce meets at his seminars. These are the entrepreneurs that can only budget $5,000 or less for a quality aftermarket domain name.
Excellent blog post. 100% agreed. Some domain investors are swinging for the fences when they should be satisfied with a couple singles or doubles. Sometimes people need to play small ball.