Blogs about how you can best sell your domains or stories about how you may have sold or bought a domain in the past.

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.

Escrow.com

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.

The job of registries and registrars are to convince existing owners to renew and to get new registrations from wherever they can. On the whole, new gTLD registries have been excellent at selling their product to the domain investor constituency based on scarcity. “If you don’t buy this domain you’ll miss out like you did in the .com rush.”

Once a domain investor has purchased a domain then there is a great reluctance to drop it as the domain may represent a significant windfall someday in the future. Essentially the registries and registrars are selling hope. By the way, I actually don’t have any problem with this as long as investors go in with their eyes wide open.

Once invested, many domain owners then turn to the registries for help in offloading their assets at significantly higher prices. You quite often hear at conferences statements like, “If I was running that new gTLD then I would……” Well, you don’t run the registry so stop wishing you did and work on the problems that you can actually work on. This is a bit of tough love but stop complaining and don't expect someone else to bail you out.

All of us would agree that .CLUB is a reasonably successful registry with an awesome team. Let’s imagine for a second they spent $20m or near enough to 100% of their revenue on marketing. CLUB (back of envelop calculations here) to help existing domain owners. Despite .CLUB being regarded as fantastic marketers they will be the first to admit that $20m is about 2% of what they really need to do a proper ongoing global marketing campaign.

What I'm saying is the best the industry has doesn't have the fire power to move the needle in educating the entire world about the value of domains. What they can do and actually do is target their efforts to maximise registrations and renewals.....this doesn't involve educating corporations.

So here’s the bottom line with registries and registrars. They love you registering and renewing your domains. They aren’t going to spend a huge amount so cash (even if they did have it) trying increase the price of your domains. In the case of .com if you drop a domain it’s likely to be picked up in a second. ccTLDs aren’t typically profit motivated and have other objectives while the new gTLDs don’t have the cash.

This leaves you to market and promote your own domains. It also means you need to focus your efforts and really think about how you’re going to educate your target market rather than sell. You’re fighting largely against ignorance…..so once you get over that hurdle what’s the next one?

We live in a market that has a MASSIVE supply issue. The new gTLDs are inevitably eroding the power associated with incumbent TLDs and in the process, have devalued the entire market (top end .com excepted). If I’m a new business, why would I pay thousands of dollars for a domain when I don’t know whether I’ll exist in 6 months’ time? I’ll just grab a new gTLD, it’s not like there is a shortage of them.

If I’m an existing business, then why would I spend a bucket of cash on a domain name when I can just use something I paid $10 for. I could save the money on the domain and put it towards marketing the product or service I’m trying to sell.

Yes, we know the importance of a good domain name because we are in the industry. Your task is to imperically prove it. You can’t just tell someone to spend $100K because they should….you have to give them hard cold evidence.

Here’s your next problem. The whole point of a domain name is that it’s unique….one of a kind and the reason the buyer needs it. The first thing most people do is bring out comparables…..which undermine the whole value proposition of uniqueness. I’ve always believed this strategy is flawed.....so I'd try to think through this a little more.

So why don’t companies spend money on domains? It’s sad to say but it’s largely ignorance combined the domain owner’s lack of skill to make a compelling case. If there is no business case, then there won’t be a sale.

There are some exceptions to this rule where a wealthy individual just “want a particular domain” and will pay anything for it. These are lucky events and should be grabbed with both hands.

The essential point is unless you are prepared to spend the time putting together the business case then don’t expect companies to want to buy your domains. I will go one step further…..you also have to pick up the phone at some point and present the case to the prospective buyer….ideally this is done face to face.

I should also mention the last reason why companies don’t spend money on domains. Because they’re doing other stuff and domains are complicated. Just think about it, should the marketing, IT, or legal department manage the asset once purchased? An internal champion in a large organisation would inevitably throw their hands up in the air and move onto buying another TV spot.

This is definitely a question your business case needs to answer and it had better be the market department or you’ll end up getting a sale worth pennies.

I know that I’ve rambled a little in this article but I hope that it answers the central question posed in the title. Feel free to poke and prod some of my suppositions with any comments.

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whizzbang
mmm educate the corporation? Corporations are already educated and know their competition better than anyone else. Dish knows dire... Read More
02 March 2017
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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?

Escrow.com

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.

Think of these domains as the fast food end of the industry….so many people make the mistake of trying to sell their burgers at high end French restaurant prices. Not surprisingly they don't make any sales.

This business model is the bread and butter for companies like Afternic and Sedo who have done whatever they can to get wholesale domains exposed to potential buyers. You really need to have your domains listed in both these major marketplaces if you are to maximise your ROI for this business model. There are other markets but they are substantially smaller.

High Value Domain Sales

High value domains are typically single word .com or prominent ccTLDs (eg. .de, co.uk). There have been a few new gTLD sales for high value and this will increase as adoption of the new gTLDs become more widely accepted.

It should be noted that only about 1% of domain sales are over $50,000 in size. So the next time you try and push a buyer up over this amount you’re really in the stratosphere as far as typical domain sales are concerned.

 

So who wins in the domain sales market? The registries, registrars and governing bodies all get their fees when domains are renewed or first registered. The marketplaces take a commission on each sale and the buyer secures their long-lost domain. The seller…..well in some cases they win but not always.

Back in 2013 Sedo produced a wonderful infographic that outlined Sedo domain name sales and the fact that they conducted $70.5m for 37,241 domains. This provided an average $1893 per sale and a median of $577.

So why am I reviewing this bit of history? Let’s imagine Sedo did around $100m in 2016 and I think I’m pretty safe guessing they are about 33% of the market. Afternic is the other 33% with everyone else (private sales included) are the remaining third. This means the total domain sales aftermarket industry is around $300m per year. This is not big by global standards.

What’s interesting is that it also means that around 100,000 domains are sold each year in the aftermarket. Given there are approximately 340 million domains registered in the world these sales represent about 0.03% of the total domain market.

If all of the averages play out and you have a portfolio of 1,000 domains, then you should hope to sell 0.31 domains per year at an average price of $1893. This means your average revenue line will be $584 per year. Assuming an expense line of $10,000 for your renewals you are a long way short of the mark.

To have a profitable business you need to believe that your domains are 17.12 times higher quality than the average in the world. I calculated this by taking the direct costs of $10,000 and dividing it by the expected average revenue line of $584 for the year. This of course assumes domains are re-registered each year due to economically rational reasons…..which is not always the case.

The Belief Gap

If you sold $5,000 last year then your domains are only half as good as the average in terms of quality. On the other hand, if you sold $20,000 then your domains are on average twice as high quality than the average. There are a lot of questions in here such as, did you sell one domain at $20,000 and received no offers on any others……but let’s stick with the averages for now.

I should also state up front that I’m ignoring the cost of your time. Sadly, most people ignore this cost and continue to run their businesses more like a hobby.

So why do domain investors hold onto their stock? I’ve concluded that many people approach domains as something on the side which they hope will blossom into a lottery sized windfall one day.

It’s so easy to read about huge domain sales and hope that if you just hold on a little longer than it will happen to you. Hope is a very dangerous thing if  you've just mortgaged your house to take “advantage” of the domain opportunity.

So why am I laying out these numbers? Have I decided to become a cosmic killjoy and rain on everyone’s parade? No….but I hope to bring a dose of reality. Domain sales is a really tough game and if you are new to this industry then don’t expect to make an instant killing.

If you’ve been sitting with a portfolio of domains and wondering why you can’t make ends meet, then just do the maths. I hate to say it but the market has valued your domains and most of them should be dropped. Why renew something for the last ten years if you’ve never received an offer?

What the larger portfolio owners believe is their expertise combined with scale will allow them to become profitable. Along the way, they also get other income streams from their domains (eg. revenue from traffic) that help cover some of the renewal fees. Even still, many of the more skilled industry players have been reducing the size of their portfolio to remain profitable.

Ultimately, the question that every portfolio owner needs to answer is whether they are 17.12 times smarter than the average domain purchaser. By the way…..as I’ve outlined above, this is one of those cases where you can actually measure how good you are.

If you come up short, then think about getting a mentor who has a lot more experience in the industry than you do. It could be the best investment you’ve ever made and either save or make you a lot of money.

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mgilmour
I'm happy that the article resonated with you.
27 February 2017
mgilmour
Interesting point you raise. Sedo is largely in the marketplace space with a spattering of brokered sales.....but that marketplace... Read More
28 February 2017
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Part 4 - Portfolio Optimisation - Products and Services

In this series of articles, we are looking at how to optimise your domain portfolio across the different business models of sales (big and small), traffic and development. The first model I have been unpacking is development, not the technical aspects but the business aspects of domain development.

We’ve explored why people return to websites and how to earn money from advertisers. In this article I will be discussing how to build an online business selling services and products.

Escrow.com

The first thing we need to separate out is the different between building a business and conducting a transaction. Building a business is all about repeatable revenue that ideally grows over time while transactions are the big deal you hope to get one day.

My wife has a great saying, “Like clockwork.” What she means by this is that she would much rather have twenty dollars each month coming in from a customer than the big deal that may happen one day.

After attending a domain conference and hearing all about the great big things people are doing (most are not true btw) it’s easy to lose sight of what is really driving your business in the quest for the big deal. This is particularly appropriate for selling services and products. Don’t get me wrong, I love the big deals but they just take up so much time and have about a one percent chance of coming off.

So why am I a big fan of my wife’s saying? It proves a number of things about your new online business:

  1. You have traffic.
  2. The traffic is the correct type because it’s purchasing your service/products.
  3. Each month the revenue has the potential to grow with more subscribers.

Once you have these items in place all you need to do is repeat as many times as possible and ensure that the backdoor is closed. If two things happen, your business will then have no choice but to grow:

  1. You get more of the same type of people to your website.
  2. Your existing customers continue to keep their subscription/buying habits in place. This is the ultimate endorsement of your product/service.

Of course, I’m working under the assumption that you have your pricing right and that your customer acquisition costs don’t put you into a loss making situation.

People will subscribe to services/products for a variety of reason but generally speaking it’s because they can’t get the service/product from elsewhere. Associated with this is whether the new customers trust you enough to part with their cash. One of the problems that many news websites are experiencing is there is always another website where the same content is for free.

Let’s imagine that I decided to charge for access to my articles here on my blog. My guess is a few people would subscribe while the vast majority would write horrible things about me in the forums. My advertisers would abandon me and whizzbangsblog would become a shadow of its former self…..so I’m not too excited about this idea.

This raises an important issue that newspapers from around the world are wrestling with. When you’ve given something online away for free it’s really hard to then start charging for it. So going free is great as long as it’s in line with your overall business strategy.

In my case, I’m happy to write articles and share my experience with people because I believe in giving back to my industry and my sponsors like it. Although, if you have quality unique content that isn’t just a regurgitation of everyone else’s then you may get away with a paywall.....but it had better be really good content!

So let’s imagine I’m wanting to increase my revenue through some sort of subscription basis. What I may do is have premium content that is behind a paywall and leave the blog articles as they are. This strategy is used a lot in the software industry where you can have the free version of some software which has a few features or pay an annual subscription for the full version.

Another thing I could do is provide something completely different from my blog posts. For example, for twenty dollars a quarter I’ll automatically send you an awesome T-shirt with a really funny domain related statement on it or a domaining mini e-book/newsletter to help provoke your thinking about your business.

Better yet, why don’t I put together an online training course that takes a person from a novice domainer right through to a masterclass level. The course will include videos, notes and assessment so that it has some standing in the domaining community. There’s many different ideas you can adopt for your online business but my advice is you should test the market prior to investing a huge amount of money.

Two really interesting areas of subscription earnings that are only recently being exploited are subscriptions to highly targeted educational courses and products. For example, if I shaved with a blade I know that would love the concept of receiving new blades each month via a subscription service.

A couple of years ago I was listening to a radio show about guys and clothing. I couldn’t resist calling up the show and explaining to the presenter that I would love to subscribe to clothes. I hate going out to buy clothes and most of the time I just want to buy the same pair of jeans…..why not have a subscription for jeans?

I hope that you get the sense that all of these ideas are examples of subscription services. Just for the record, I have no desire to do anything with whizzbangsblog in that area…..I have enough on my plate!

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Part 3 - Why Domain Portfolio Optimising Works - Advertisers

Obviously there are a great multitude of business models that you can apply to your development project. Remember that we are looking at developing one of our domains into a business as part of our portfolio optimisation. The first business model that we will examine is advertising.

Escrow.com

In this business model you are trying to ramp your traffic so that it becomes worthwhile for advertisers to spend their money to reach your audience. A couple of things about audience, you can either provide mass numbers or the right people to advertisers. For instance, Whizzbangsblog doesn’t have millions of people visiting it every day but it does have the right people in the domain industry. This is valuable for sponsors.

With your new development you need to choose your approach and go mass volume of advertisers or a select few. If you have a mass of advertisers on your pages, then readers may revolt and advertisers won’t pay the big dollars. Less advertisers will potentially allow you to charge a higher rate and keep the readers onside. It’s a balancing act and it really depends upon your market vertical.

Remember that one person’s advertising can also be another person’s content. This is often the case in hobby publications where the advertising is just as valuable as the articles to the readers.

Unless you have huge volumes of traffic then I would recommend staying clear of selling on a cost per view basis. Likewise, any other performance based advertising (eg. Pay per click) may not be suitable for a business you’re launching out of the gate. A reasonable charge per month is often palatable for advertisers as well as provide some necessary initial cashflow for your venture.

As you write your content what you really want to do is provide value to your sponsors/advertisers. For instance, I use both Escrow.com and Epik and I wouldn’t have a problem recommending them to readers. You need to be careful that you’re not writing advertorial pieces but sharing your own experiences of using their products and services.

You can add a lot of value beyond a banner on a webpage. For instance, earlier this year I conducted a video interview with Jackson Elsegood from Escrow.com about some of the developments that he’s introducing at Escrow.com. Likewise, I will be interviewing Rob Monster from Epik about what he is working on at Epik. If you are looking at adopting this strategy, then the number one issue that you should be focused on is whether this is providing value to readers. There’s no point in conducting an interview that’s merely a sales pitch.

On the flipside of the coin, the ultimate mass volume model is a directory. Once again the biggest challenge for anyone building a directory isn’t the actual building (there’s lots of directory software available) but getting the high volume of traffic to the directory so that advertisers get a return on their investment. As an aside, as a directory grows they can often morph into market vertical or hyper-local search engines…..hence why Google is very interested in this market.

So there are a lot of decisions that need to be made with the advertising business model but they all tend to boil down to providing value in the form of highly qualified traffic. The only way you will keep your traffic is if you are providing reasons (see the previous article) for people to return to your new business. So be really careful in looking after your audience....they have a lot of demands on their time and for them to spend some of it with your new venture is a privilege and should be respected.

In the next article we will look at products, services and how building one of these businesses isn’t actually as hard as you may think.

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mgilmour
Hi Elliot, Thanks for the heads up on the links! I'm still wrestling with getting rid of the index.php......I think it's a weekend... Read More
05 July 2016
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Part 2 – Why Domain Portfolio Optimisation Works – Development

In this article I will be further expanding on how to develop a domain into a business. This is the first business model that can be applied to domains, the other three are monetising traffic, treating domains as stock-items and the last selling domains at high values.

The first issue for me with any developmental project is working out how the domain is going to make money. This seems like an obvious question but many people approach developing a domain from an aesthetic perspective (ie. pretty website) rather than being focused on the business outcomes.

Escrow.com

Generally speaking, all business models hinge on getting not just new traffic to your website but repeat visitors. A repeat visitor is gold as they perceived a value in your site enough that they returned for a second look. It shows that there is something about your business offering that they want.

So here are some reasons why people will return to your website.

Information
Users want to get access to information that you provide. This could be anything from technical documentation right through to an online training course or even an online newspaper.

Opinion
You and your business has developed a significant enough reputation that people are interested in what you have to say on issues, products and services. Before I buy anything I like to do my research by reading reviews on the product I’m interested in.

For example, when I write an article on the domain industry I try and not just report the news but understand what is happening and provide an opinion.

Useful
Google is the ultimate useful tool that allows us to effectively find things on the Internet but there are many, many other tools. How about domain tools, whatsmyipaddress.com or geoipview.com. These are all tools that I personally regularly use.

With the introduction of cloud computing there has been a blurring of the line between a site being useful and one that provides a service….which is our next item.

Services
Users will return to a website because that website provides a great service that they are willing to pay for. A website that is useful is one that often gives their service away for free because they earn money in other ways (eg. Advertising). Salesforce.com is an example of a massive company that provides CRM solutions to businesses all around the world. Businesses can subscribe to their base offering and pay more for additional features. Will your new venture offer a billable service?

Products
Put simply, I’m Amazon and I want to ship you as many physical or digital products as I possibly can. Gaming platform Steam saw the transition to pure downloads and built a whole ecosystem around selling software to gamers. If you have an exclusive product that people want, then they will return to your website to get it.

Funny
In many respects a website that is funny is a subset of the information category but it’s so big a segment then it’s worthwhile commenting on it. Websites that are genuinely funny provide content that you find irresistible to pass onto your friends. The good ones often have massive traffic and drive large amounts of cash from being paid pennies per visitor by advertisers. The challenge here is to ensure your website remains funny and not just become old-hat.

Social
A social website is centred on a community where the individual members can share their knowledge and expertise with the wider group. The first social communities were built using forums and Internet Relay Chat. This has quickly expanded to fully functional Facebook like applications that you can instantly install on any Joomla/Wordpress website. Beware, since Facebook is the eight-hundred-pound gorilla in this space, this segment is often a difficult one to crack but if you can then there can be some really big dividends.

 

There are a lot of other different methods to encourage users to return to your new venture but the above list should kickstart your thinking prior to you spending a whole lot of money. As I’ve mentioned before, I’m a bit of a SEO cynic and believe that if you give people what they want then Google will love you for it as well. So really think about why a person should return to your new venture.

I should mention that when I build an online business, I’ll often do combinations of the above. For example, I may have a social website backed up with regular blogging on topics that people find informative….so don’t think that each of the above items are completely separate from one another.

Whatever you do, pay attention to your statistics and interpret what they are telling you. It’s rare that growth is the answer you want. What most new businesses need is the right type of growth. If at all possible, do whatever you can to engage with real readers/customers as soon as you can as they will tell you so much about your business that you never even thought of.

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finddomains
Hi Michael, You may not remember, but I have met you several times in Vegas and I would like to do business with you regarding my... Read More
29 June 2016
mgilmour
Hi Richard, I sent you an email.
30 June 2016
mgilmour
Hi Jeff, The .com domain is more natural for people to type-in BUT it is not the REASON why people will return to a website. It ju... Read More
30 June 2016
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