Why Are Companies Reluctant to Spend Money on a Good Domain?

Why Are Companies Reluctant to Spend Money on a Good Domain?

The last article on “Underpinning Domain Sales” sparked an interesting discussion on the domain forum, NamePros. One of the respondents asked the question, “Why are companies reluctant to spend money on a good domain?” In this article, I hope to answer that question.

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In my opinion, the dominant reason businesses don’t spend money on domain names is because of ignorance. On the whole the domain industry has not been able to mobilise itself and communicate cooperatively to businesses about the importance of domain names. I’d like to unpack this a little further.

The biggest problem has always been the question of whom should put up the PR/Marketing money to generate interest and understanding in domains. Some people point to the registries, others the registrars while others say the current domain owners should all chip in. These discussiona often degenerate into name-calling and a lot of inaction.

What domain investors need to appreciate is that once they have purchased a domain name the registries and the registrars have effectively done their job. There is NO incentive for them to try and market on behalf of existing owners to increase the demand for already registered domains so the price goes up. That’s an almost impossible job.

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Do the Domain Sales Numbers Stack Up?

Do the Domain Sales Numbers Stack Up?

I thought that I’d take a break from the series on “Building a Business” and examine what underpins the domain sales market. There are a huge number of domain investors that have bought into the market purely to sell their assets onwards…..so is this a sensible thing to do?

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In my investigation into the domain sales space I thought I’d first of all outline the two fundamental domain sales business models.

Domains as Stock Items

Stock item domains are those that sell for sub $2,500 and represent around 87% of domain sales by volume. The goal here is to move greater numbers of domains and NOT necessarily increase the sales price. The business focus is therefore to increase the stock-turn from 0.3% to say 0.6% of your domains per year….it’s all about speed and automation of transactions.

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The Challenges of Selling Domains - Part 2

The Challenges of Selling Domains - Part 2

In a previous article I discussed the topic of what a domain is actually worth and suggested that the great majority are actually worthless. So the questions that needs to be asked is why and how can we price domains effectively to maximise their sale potential.

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So let’s open up the stock item sales model of domains. This is where you have a lot of keyword related domains and are wanting to sell 1% of them each year for some average amount. This business model was first pioneered by Fabulous (remember them?) and Buy domains (now owned by Godaddy).

We’re going to use a really simple case study to help us understand how to price domains using this model. Let’s imagine I have a 1,000 domains that cost me $10/year to register. My cost is going to be $10,000 per year (ignoring my time for now).

If I want to make 100% return on my investment, then I will need to do $20,000 in revenue for the year. If I think I can sell 1% of the domains each year (ie. 10 domains) then what is my domain sale price? Pretty simple, it’s $20,000 divided by 10 domains which is $2,000 per domain.

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Selling Domains Part 3 - Moving the Stock

Selling Domains Part 3 - Moving the Stock

I was asked in a forum what I mean by stock-turn domains. These domains are typically multi-keyword names that have a price tag of around $1,000. Like a supermarket selling low-margin goods, the aim the domain investor is to increase the number of domains they sell each year. So what are some things you can do to increase the number of sales of stock-turn domains?

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There are some really basic things you can do. For a start, make sure that you have correct whois information with your contact details. Lots of buyers use this information to contact sellers and you can end up having a lot of very frustrated buyers out there if your details are incorrect or out of date (ignoring the fact that ICANN requires correct information).

There are two main markets where you can sell your domains. The first is the wholesale market where you are selling to other domain investors. You’re not going to get the best prices in the world here as they need to make a margin when they onsell the domain to an end user. The advantage of the wholesale market is you typically don’t have to educate it on the value and importance of a domain name.

The retail or end-user market is a little different and I would suggest that you have a selection of stock-item domains in a number of discreet market verticals. This will then allow you to target prospective buyers and potentially upsell them into higher value domains.

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Stop Pricing Burger Domains at High End Prices

Stop Pricing Burger Domains at High End Prices

Many domainers need to appreciate that we live in a world where the is massive oversupply of domain names and a steady demand. Sadly, the domains in your portfolio are not immune to this state of affairs.

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While on my recent trip around the world I met a domain investor that has several thousand domains and hasn’t sold any in the last few years. It was clear that they were getting a little desperate as the renewal fees kept on coming in each year. My advice was to drop the majority of their domains and take a look at the price of the ones they just can’t part with.

Just think about it for a second. What business model was the domain investor I spoke with applying to his domains? Was it the stock-turn or high value model? He was actually unclear and the result was no sales.

Many domain owners should actually be in the stock turn game where they are trying to sell 1-2% of their portfolio each year at an average price per domain of around $1,000. The problem is they have big prices on their domains and no sales result. They aren’t actually realistic about the pricing of their domains as they fall in love with much of the hype promoted by the “big sales”.

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