In the previous article in this serious I took aim at the two major marketplaces of Sedo and Godaddy/Afternic. I then proposed a business model that solved the problem of the marketplaces being full of bad domains that must reduce the likelihood of sales transactions for potential buyers. You can read more about this hear: Part 1
I now want to propose a business model to help unclog the domain brokerage arm of the aftermarket.
From a high-level perspective, the state of the domain aftermarket is as follows:
1. Massive over-supply of domains – courtesy of the new gTLDs.
2. Same demand.
3. Anyone can put a shingle out and say they are a broker.
The vast majority of “brokers” aren’t brokers at all but are really “order takers”. What they do is take on lots of domains and then respond to inbound queries. These “order takers” just do what every serious domain investor does, with one exception, they didn’t pay for the domain they’re selling. So who do you think is more likely to sell the domain? The investor or the “order taker”? I’ll leave this up to you to work out.
On the flip-side of the coin there are the REALLY good brokers that know how to sell and pitch domains to prospective sellers and these people get the job done. They are worth their weight in gold and on the whole do an outstanding job for their clients.
In a marketplace saturated with domains, the good brokers end up wasting a lot of time and effort on saying “no” to trashy domains or unrealistic expectations from the seller. The trashy domains are easy to handle but I would like to tackle the unrealistic sellers from a broker perspective.
Let’s imagine a broker is approached to sell a domain that they know through experience is worth $30,000 but the seller indicates they want $100,000. Think about this situation as a graph where the horizontal axis is price and the vertical axis the likelihood of selling the domain. At $30,000 there may be a 30% chance of making a sale, while at $100,000 there is 0%.
Faced with this situation the first thing I would do as a broker is demand a monthly retainer. If the seller wants me to waste my time, then they can pay for it. Just for the record, I don’t broker domains, I monetize traffic.
Secondly, I would say to the seller that for every $5,000 we are different in our expectations you will increase my retainer by $10 per month (some fee anyway). Essentially, what the broker is telling the seller is, “adjust your expectations in a saturated market” or “be prepared to pay”.
Remember, the business constraint here is NOT are there any good domains to sell at reasonable prices but rather good brokers who know how to move domains. Let’s face it, as time goes by the public will become more and more accepting of new gTLDs and this will depress the middle value legacy aftermarket domain prices. Prior to the new gTLDs the situation was in reverse and the supply constraint was definitely on the good domains.
Working for a flat commission where the seller controls the likelihood of a sale through pricing is not a good game to play in today’s market. The model I propose is fair for all parties unless the broker artificially depresses their sales price…..with which case you have to call into question if they are a professional broker at all.