Domain Sales

Domain Sale to an End User

11

End user sales, that is sales to people or companies who plan to use the domain name to enhance their businesses, can be the most profitable (and satisfying) domain sales.   Since most domain owners monetize their domain names using methods that are financed by advertisers, these advertisers may prefer to outlay a lump sum to acquire the referring domain name rather than paying per click daily. I recently sold a domain name to a company that intends to use it for their corporate website, and I wanted to share how I went about selling it and provide other tips to people who might wish to sell a domain name to an end user.
The first thing I did was a Google search for the term that made up the domain name.   While most of the paying advertisers were large companies, I opted to contact several companies who had organic positions in the results page, but were fairly low.   In my experience, most companies who have decent rankings (but still lower than top 10) would like to do what they can to improve their rankings, and they have the knowledge to do this.   Having a top 5 ranking can boost traffic tremendously, as I have seen with my own websites, and many of these companies need just a bit of an edge to get there.
I figured that most of the small companies I contacted had some good inbound links to achieve the decent ranking, but many of their current domain names were poor. With some redirecting of the old domain to the new one I wanted to sell them, rankings could be lifted due to a more relevant domain name.   I didn’t mention this in my pitch, as it isn’t a guarantee that this would happen, but at the very least, customer awareness of the new domain name would be impacted.
The reason I reached out to the SMB audience (small to medium sized businesses) is that there is less hierarchy involved in decision making.   Previously, I contacted a fairly large company for the domain name, and the mid-level manager told me the name was fantastic and the price was good, but he would still have to get authorization of the CEO for the expenditure.   Well, it’s been over a month and I still haven’t heard back.   SMBs tend to make decisions quickly, which is something I like, and there isn’t a whole lot of red tape to cut a check or send a wire.
In my email to the businesses, I told them that I own the domain name for their field, and I wanted to sell it since I don’t have plans to develop the name. I mentioned that I thought the domain name would be perfect for their company, and I listed the sales price. My pitch was quick, as I have found that if you need to extensively explain why a domain name has value, it is very difficult to convince someone to spend the money on it.   The company either gets it or doesn’t, and if they don’t get it, their competitor will.   Companies that do get it, will end up getting it – if you know what I mean.
I quickly received a response from one SMB and after a short conversation it was a done deal.   There was a bit of negotiating on the price, but we worked out a fair deal. I’ve found that it’s easier to negotiate a better price than have to spend more time pitching the name to other people.   The fact that my opening price was reasonable was also something of note, as a SMB isn’t usually going to blow through their marketing budget (if they even have one) on a domain name that was pitched to them out of the blue.
There are a few things to keep in mind when contacting end users.   Sometimes they don’t like that a person outside of their industry owns a domain name from their industry. Some don’t understand that it is a free market and that you have just as much right to the domain name as anyone else.   There really isn’t much of a reason to engage in a pissing contest over this issue.   I have never dealt with this although I know of people who have, but if the potential buyer isn’t receptive, there is no reason to continue the conversation.
Also, don’t ever pitch a potential trademark infringing domain name to a company. I’ve seen many UDRP decisions which cite the owner’s contacting the business as a sign of bad faith.   Unless you plan to give the domain name to the company for free, do not do this.   Do not contact a company’s competitor either. Even acronyms (3 & 4 letter .com names) aren’t immune to UDRP or other legal troubles.
After writing this in my head at the gym this morning, I saw that Rob Sequin also posted a guide to end user sales.   I think there are some very good suggestions there, and I urge you to check his site out when you get a chance.
Incidentally, pitching a domain name to an end user is far different than negotiating with an end user who has approached you. When someone approaches you to buy a domain name you may or may not want to sell, you are in the driver’s seat.   IMO, someone with experience negotiating end user sales should build a business around their skill.   If you receive an inquiry from a potential buyer, the negotiation company would take over for you and would close the deal.

LastWillAndTestament.com

I decided to sell my two legal domain names so I don’t lose focus on my main projects. I blogged about them to get opinions about which to develop, although I am going to sell rather than spend the time/resources developing.
LastWillAndTestament.com
1,120,000 Google results for “last will and testament”
Many top and side advertisers several pages deep
Aaron Wall’s Keyword Tool – 340 daily count
LegalZoom has a great affiliate program for these legal agreements
BIN price is $20,000.
UPDATE:
PrenuptialAgreement.com has been sold.

Things to Consider When Selling a Domain Name

Some of the largest domain portfolio owners rarely if ever sell a domain name. They’ve built strong (and profitable) business plans that are effective by not selling a domain name, or only selling for a very, very compelling offer. While I would like to be able to keep every domain name I acquire, it isn’t feasible for me and my company. When I do decide to sell a domain name because of an unsolicited offer or if I put the domain name up for sale, there are several things I consider prior to the sale, and I thought I would share these things.
Is the domain name generating revenue as is?
Before selling a name (or before pricing a name), it’s important to calculate how much revenue is being generated and at what cost. If the domain name is generic and it’s parked, the name can typically be priced anywhere from 8 – 20 times its annual revenue, all depending on the name. For many category defining or product (non-TM) domain names, people have sold them for hundreds of years multiples. Most people with category defining domain names won’t sell simply based on a revenue multiple so this is a guideline.
If the domain name has a website, the owner should take the monthly hosting costs into account as well as other costs that are incurred, such as commission for advertising sales. Additionally, advertising agreements that are in place should be considered, since the new owner may not wish to keep the site as is, so contracts may have to be broken with advertisers once a domain name is sold. All costs and revenues should be considered when a domain sale is contemplated.
Are there plans to develop the domain name?
If the owner is planning to develop this domain name because of a particular interest in that industry/field, or development would be made easier because the owner has content or access to content, the price to sell the domain name could be higher. Sometimes a particular domain name fits well within the portfolio of a domain owner, so selling might not be in the best interest of the owner. A domain owner should think about what opportunity costs will be faced if this particular domain name is sold.
Can the domain name be easily replaced?
One reason why domain names are so valuable is because they are virtually irreplaceable. There can only be one ElliotsBlog.com, and likewise there can only be one of every domain name. If a domain name is sold, it might be impossible to find a similar domain name at the same price level. If you think you will regret selling a particular domain name down the road, you should probably hang on to it. In my opinion, domain names are going to continue to increase in value in the years to come, so don’t make a sale you will regret. However, don’t miss out on other opportunities because you became too attached to a domain name that you value more than the market – unless you have plans for the name.
Can the sale proceeds be used to reinvest in a better domain name?
On occasion, a person will want or need a domain name owned by someone else, and they will offer significantly more than the market value to acquire the domain name. While this might seem like a great deal if it happens, the domain owner needs to weigh whether he will be able to reinvest the money in a similar/better domain name. If the seller can upgrade, it might be worth selling the domain name. If the name isn’t easily replaceable and the owner has plans for it, selling might not be the best bet.
I’ve heard people praise others for passing on a $200,000 offer and selling a name for $300,000 4 months later. This is great only if the person couldn’t do something else with that money during the same period. If the domain owner could reinvest that money in other domain names and sell them for more in a short period of time, it might have been a better deal to sell for $200k, buy other names and sell those for more.
The one caveat is that the seller must be conscious of the tax implications of a sale/purchase. If the seller makes $100k profit on the $200k sale, he needs to be cautious when reinvesting that $200k because he is in the hook for around $35k of the $100k profit. If he buys a $200k domain name, he will still need to pay taxes on the profit.
Can the domain name be sold to someone else for more money?
The seller should analyze the market to see if he could get more money elsewhere. As any real estate broker will tell you, a home owner usually values his home more than the market would actually value it. Likewise, many domain owners believe their domain names are worth more than the market will yield. The domain owner needs to determine whether someone else would pay more than a current offer, and if so, what the effort to make that sale would be. Time is money in this industry.
Like with any negotiations, the dynamic of the negotiation really depends on whether the domain owner is actively selling a domain name or a potential buyer inquired to buy a domain name. In the first case, the seller may be the motivated party in making a deal, and this may somewhat dampen his prospects unless there is more than one interested party. When a domain owner receives an inquiry, the sales price really depends on the owner’s motivation for selling. If he has plans for the domain name or if he doesn’t need the proceeds from a sale but the buyer needs the domain name, the sky could be the limit for the price (just ask Rick Schwartz).
If the domain owner is actively marketing his domain name, he should strongly consider any offers before rejecting or counter offering on one. I’ve experience domain sales where I asked $25k for a domain name, and upon receiving a $20k offer, I’ve tried to counter at $22.5k. Sometimes during this period of negotiations, the potential buyer purchases another domain name, so his offer became voided.
From my experience, if you are the seller and you are the person seeking offers, if you receive a counter offer that is acceptable, you should consider accepting it rather than trying to make a small % more. Even major companies like Yahoo have overestimated the value of their assets, and they lost a sale they would be happy to have now.
As any domain investor knows, there are many other facets to valuing a domain name and negotiating a domain sale. These are just a few things I consider when selling, and I wanted to share them. As always, if you have questions or need help, drop me a line and I will do my best to respond shortly.

Why I Don't Sell at Live Auctions

Unlike many domain investors, I rarely ever submit any of my domain names for live auctions anymore, and there are reasons for this. I don’t like the terms offered by the auction houses, nor do I believe it’s in the best interest for me to sell my names this way. For what it’s worth, I think the commissions are too high for what is offered, I think the exclusivity period is far too long, and the time it takes to be paid appears to be much too long.
First things first – the commission. I have no problem whatsoever paying someone a fair rate for selling my domain names. No, I don’t expect an auction house to contact every potential end user for my name. However, I don’t believe banner advertising on domain-related websites or email advertising to the same crowd is enough. Simply selling my domain names to a group of domain investors at an anticipated auction isn’t enough incentive to pay 50-100% more commission than other outlets.
If I want to sell my domain names to other domain investors, I know many buyers, and I am very happy to try and sell on my own first (no cost). There are also the forums (like Namepros or DNForum) where people are looking to buy domain names (no cost). Additionally, there are some great newsletters (like Rick Latona, Eric Rice and DomainsNewsletter.com) who reach these same potential bidders at a much lower rate (5-10% per name).
My next issue is the long period of exclusivity that’s required and the exclusivity renewal period if you don’t notify the auction house in time. Yes, I understand that they need to protect themselves so others can’t wait until the day after the auction to buy a name that didn’t receive bids. However, I don’t see auction houses (other than Jay’s blog posts before his auction) that really spend time on particular names. IMO, the auction house should get one opportunity to sell a good name at a good price. If they can’t close the deal, they shouldn’t hold exclusive rights on a domain name. If it really is priced fairly, it will sell at auction. If it isn’t, then maybe it shouldn’t have been listed by them in the first place.
As I told one person that has run domain auctions, there are ways to get around the exclusivity even if the domain is tied up (I won’t mention them because I don’t endorse this whatsoever). Although it’s unethical to do and a good reputation is the most important thing in this business, if a good customer of an auction house does this, I highly doubt the auction house will track them down over a few thousand dollars. The legal fees to take action would be high, it would be tough to prove an illegal activity occurred, and the cost of future lost business would be high.
Finally, I think the period of time it takes to be paid can be ridiculous. When I see a domain sale reported in DNJournal from an auction 2 months prior, I think that’s a bit crazy. If a person has a reputation of not paying on time, they should be prohibited from bidding. Also, something should be done to ensure payment is made ASAP. I bought Secaucus.com at the geo auction, and I am ready to pay. As soon as I receive the wire instructions, I will make payment. I wish others did this.
As Rick mentioned yesterday, there are going to be 5 auctions by 5 auction houses at TRAFFIC New York in September. I think this is going to be great for the industry. I have a couple of great domain names I would consider selling – if the terms are fair for me. Once the 5 auction houses have been selected, I will review the terms. If it’s too late to submit, well, I have no problem selling to clients I know or using the less expensive alternatives available now. I think live domain auctions have reached a saturation point and people expect more from them than is realistic, but I do think the 5 auction format is going to change things quite a bit.
I also believe that auction houses should actively seek to find domain names to list at auction. Forget about asking people to submit their names. Most of these are either repeats or just junk. While the auction houses get blamed for listing poor names sometimes, it must be difficult to sift through 100k+ domain names. I’ve learned that most people think their names are more valuable than they really are to other domain investors (I am prone to this, too), so it’s tough to find good names at fair reserves. The auction houses should go after strong domain names that might not be making money (more on this in a future post). They could hand select their names and use past auction results to entice non-domainers to sell.
For what it’s worth, I would love to see the following auction houses in New York: Moniker, Trafficz, Sedo/GreatDomains, Bido, and Afternic/BuyDomains. I think this would make a very successful show in terms of domain sales – although it’s getting very close to the show.

Fandango Buys Movies.com from Disney

The Washington Post is reporting that Fandango recently purchased from Disney for an undisclosed sum. Fandango is a subsidiary of Comcast, a company that unsuccessfully tried to acquire Disney a few years ago. The article cites Disney’s desire to remain focused on its core brands (ABC, ESPN, and Disney) as the reason for selling Movies.com.
I understand that one needs to remain focused on its core competency, but doesn’t Disney make movies still? Doesn’t Disney have more than enough talent to be able to continue operating Movies.com without impacting its other businesses? I think this is a big buy for Comcast. I wouldn’t be surprised to see Fandango become rebranded as Movies.com, giving it more of a presence in the full movie market, rather than being a movie preview and movie ticket facilitator.
While the price may be undisclosed at the moment, the purchase price may be revealed at a later date, as both Comcast and Disney are publicly traded companies, and the price for the domain name and accompanying business could have an impact on earnings, albeit minimal.

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