Domain Sales Don’t Add Up

20170817_domainsales

I was crunching some numbers today on the domain sales market and a number of things just didn’t add up for me. It would appear that as an industry we are going backwards….which should be a little bit of a concern.

Escrow.com

The first thing I wanted to do was try and dimension the size of the domain sales market. I decided to start with the estimated size of the Sedo marketplace as they quite regularly published their numbers. I was more interested in the number of domains sold and also proportions of the size of each sale.

After some mathematical magic, I came to an estimated sales volume of just shy of $37m for 2016…..I think this is a little low as some of the larger outliers will push the number up to around $50m. If there’s anyone from Sedo that can confirm or deny this number that would be awesome!

The next question I asked was what proportion of the total market does Sedo have? Sedo actually sold around 99 of the top 304 domain sales for 2016….which suggests about 32% of the domain market. This seems a little on the high side to me.

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Video - Domain Sales

Video - Domain Sales

This is the third video in the 10th Anniversary of Whizzbangsblog. In this video explore the topic of domain sales and how you can increase your own domain sales.

Escrow.com

I've sold a lot of domains over the years and in this video I discuss a number of techniques I've found that greatly assist in selling. I also begin to open up my thoughts on the future of domain sales and more importantly how to better price domains.

I hope you enjoy this video and I would encourage you to leave any comments and questions for me to answer.

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mgilmour
Creating an artificial purchase point doesn't really work with really big deals where a lot of people are involved in the final pu... Read More
01 May 2017
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A Simple Way To Sell More Domains

A Simple Way To Sell More Domains

Domain marketplaces are rewarded on a commission basis for bringing buyers and sellers together and doing whatever they can to ensure a transaction occurs. What domain investors need to appreciate is that a marketplace gets paid a commission on a sale transaction, whether it’s the individual investor’s domains or not.

Escrow.com

What am I getting at here. One of the most valuable assets that a domain has is traffic. In fact, there is a whole business model of monetization that is based upon the fact that advertisers love the traffic so much they are willing to pay a lot for it.

Ask yourself this question, “How much did a marketplace pay for your domains traffic?” Each day you are sending red hot leads into the marketplaces and yet most of those leads go to buying other people’s domains. My second question is, “What commission did you received on those sales?” Here’s the answer, zero.

The counter argument to this is the commission levels are set by taking into account the traffic. I don’t buy into this argument because if that was the case there would be differing commission levels based upon traffic and this does not happen.

So how do you get around this problem? The best solution would be to add all your domains to the various marketplaces so that they can receive offers via everyone else’s traffic. Then build a website that features your own domains.

On the individual domain pages have links that allows the buyer to purchase via each of the various marketplaces or via an Escrow buy link (then you'll be protected in the sales transaction).

All the sales links on your domain parked pages should then point to a page that features the domain inside your own website. This will then give the buyer the scope to easily view your other domains you have for sale that they may wish to purchase.

What you’re trying to do here is leverage your own traffic to help sell more of your own assets. If you don’t have any traffic then I wouldn’t bother with this strategy but if you do then you’d be crazy not to try it out.

I should state that I don’t have anything against the domain marketplaces…..in fact, I think that on the whole they do a good job. If they have created a large opportunity in their business models that can be exploited, then why wouldn’t you take it?

On the other hand, there is an opportunity for one of the marketplaces to break ranks and to pay a referral commission to the domain owner that originated the lead. Now that would shake things up a bit!

Battleframe

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Domain Sales - Bundled Pricing Strategy

Domain Sales - Bundled Pricing Strategy

How many of us have lamented the fact that we receive enquiries on individual domains while the great majority of our portfolio seems to just be a great big cost? Is there a way to swing this situation around? Yes, there is and it’s called bundled pricing.

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Bundled pricing is taking a desired product and making it for sale with something else which you may have had trouble selling.  The average sales value is increased at little to no additional effort in the sales process. This is a strategy that many corporations use to sell us things we really don’t need so they can continue to move products.

A classic example of this is the sale of the “Big Mac Meal”. Do you really want fries? You don’t actually but it’s just so easy to add a few cents more and get an entire “meal” rather than buying a Big Mac and coke separately. In the process, McDonald’s has dived into our wallets and pulled out some of the loose change.

I’ve always wondered why McDonald’s sells a Big Mac, Coke and Fries together. I’m sure they’ve done a lot of research on the topic but I would have thought that a Big Mac, Fries and Apple Pie would be a much better combination……after all, everyone will buy the drink anyway.

This brings up an interesting point. If you wish to extract additional value, then bundling products together is not as easy as it first seems. Sometimes the obvious bundle is actually not obvious at all.

Let’s imagine you were after bingonight.net (one of my domains) and offered $8K for it. I could say yes and the deal would be done. Or I could tell you that the domain is part of a bundle of five bingo related domains that I’m selling for $12K.

All you were originally after was bingonight.net but now I’ve just told you a number of things:

1.       I have more bingo related domains.
2.       You can’t get bingonight.net by itself.
3.       I’m getting these other domains for half price!
4.       I'm also telling you that I'm the place to come to for domains in the future.

Suddenly we are having a much larger conversation than just purchasing a single domain. From my perspective, while I’ve now turned a $8K sale into one for $12K. This works for the both of us.

I could have bundled bingonight.net with an aviation domain a couple of Indian domains and a Spanish domain. This would allow me to move unsold inventory but rather than enhance the sale it would potentially turn off the buyer. Like McDonald’s and their meal deals, picking and choosing your bundle is critical for a successful outcome.

At the price levels of stock items, every enquiry should be viewed as an opportunity to sell not just one domain but a bundle of domains. Even if you have to discount a little the overall revenue line has increased.

When you look at your portfolio it’s often the traffic domains that bring the sales enquiries and the domains with no traffic that are of higher value. So bundling both sets of domains together brings potentially brandable domains and traffic together…..which can often sweeten the deal for the buyer.

The challenge here is that many of the marketplaces don’t allow a bundling strategy and deal with domains on an individual basis. More on this in another article….

Battleframe

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Part 2 - How to Price Your Domains for any Market

Part 2 - How to Price Your Domains for any Market

This article continues directly on from How to Price Your Domains for any Market

One possible way to derive the mid-point number is to examine the average advertising spend by market vertical. We can then pin the mid-point for this data as being worth $2,000.

Escrow.com

The below chart shows the “drink” category as being at the approximate mid-point in spend. This would suggest that domains above this category would have a higher mid-point value and domains less than this category a lower mid-point value.

Global spend by vertical

Once again, with a little bit of Excel wizardry we can calculate the financial sector average domain spend being at $1543, which little less than the $2,000. Once again, we have a problem where the methodology being used is linear where in fact it may not be the case. Nevertheless, the financial services industry is a little above the mean point for the market verticals so our numbers shouldn’t be too far out.

We can now update our financial demand curve chart from the previous article so that now looks like the one below.

Demand Curve

So where does this entire analysis go wrong? Domain investors are less concerned about the left-hand part of the demand curve but argue incessantly about the right side of the graph. They should rightly do so.

Since we know the mid-point we can plot a reasonable price for each domain. On a keyword by keyword basis we can allocate the level of demand divided by the total demand for all those keywords above the mid-point. We can then multiply this ratio by the $1543 we calculated earlier. And presto! This will mean that “homerefinance.com” is valued at $613,475!

We essentially then do the reverse process for those domains worth less than the mid-point. By using this method, we have the following valuations for the suite of “second mortgage” domains we looked at earlier.

Secondmortgagerates.com - $1,157
Secondmortgageloans.com - $1,548
Secondmortgage.com - $1,683
Refinancesecondmortgage.com - $3,669

The question needs to be asked, do these values look sensible? Yes and also no…..and here’s the double conundrum for the domain investor.

For a motivated buyer, these valuations can be out by a factor of ten. The pricing will be influenced by the what you glean from the conversation and this is the “art of the deal”. It’s one of the reasons why some domain investors work exclusively with select brokers.

The second issue, is how long do you want to hold your domain assets? If you’re prepared to hold your domains for ten years, then start dividing the prices by an increasing value of 10% per year. This means the first year the domains will be worth ten times the above and the second year 10% less etc.

BUT if you are wanting to sell the domains with some science behind the pricing then these don’t feel absurd. A component that I have not taken into account is the excess in supply for the volume of searches conducted on each keyword. This can potentially influence the pricing discussion.

Now before you jump up and down claiming your domains are worth far more than what I’m suggesting then ask yourself these simple questions.

Am I looking at a domain that is close to the right-hand asymptote? If you are then the methodology will likely be a little shaky.

How many offers have I received in the last 12 months for this domain? In other words, are you pricing your domain outside of the market's expectations.

What is the average offer size? If you have received offers, what are they?

Over the years ahead I plan on continuing to refine the model to dig into what else that can be influencing a domain sale’s price. What I don’t want to do is get into market comparables. In my opinion discussion comparables completely undermines the uniqueness of a domain and potentially pushes a buyer to look for other options.

I hope you have found these couple of articles an interesting read. Please leave any questions and comments below.....I'd love to receive some :-)

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