Realistic Domain Prices Could Lead To More Sales

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.