Domain Sales

I was thinking about the disconnect between domain owners and end users today and trying to think of ways to bridge the gap. While it may be a bit of an unrelated tangent my mind went on, I came to a simple but accurate conclusion about selling a domain name for a lot of money.
The only way you can sell a domain name for $1 million is by walking away from $500,000. It’s a simple statement, but I believe it’s true.
Several years ago, I was playing Double Down video poker on a cruise. If you’d win a hand, the game would show 5 cards. One card would automatically flip for the player and the player had to choose the game’s card. If you win you get a certain payout, and if you lost, you would lose everything you had earned. Every time you got it right, your winnings would double. You could either double again or collect your winnings.
The long of it is that I won $1,200 by doing this several times, and when I stopped and got 3 buckets full of quarters (and a Jackpot t-shirt). Instead of thinking about how cool it was to win, I only could think about what could have been if I hadn’t stopped. A couple hours later I was playing and had winnings of $1,600 by doing the same thing – only to lose at $3,200.
Point of this is, you never know what you can ultimately get for a domain name if a buyer is motivated enough to buy it. It takes guts to turn down a $500,000 offer, but you won’t get a million dollars for your domain name if you don’t walk away from $500,000.

I’ve heard a lot of mixed views about structuring deals that don’t require 100% payment upfront. Instead, the owner typically receives a payment upon closing and either a profit share or structured payments over time, depending on the success of the company who buys the name. If you can afford to wait to be paid, I think these types of deals are fantastic.
When I was at AIG (accident insurance sold via direct mail, phone and web), many of our deals were structured to benefit the marketing partner more on the back-end in exchange for concessions on the front end.   Our partners knew our group’s track record, the LTV of customers, and they knew a back-end deal could be more lucrative. This allowed our group to spend more on testing and helped our current P&L. Only if the campaigns were successful would we have to pay a greater share of the long term revenue.
For domain deals, I think this could work in the same way. The caveats, of course, are that the buyer has a track record of successful Internet companies and that you retain control of the domain name if the business fails. While the upfront profit may be less, the back-end potential should be set up to be far greater than if someone would pay all cash. Doing a deal like this really requires you to not need the cash upfront, but it could be beneficial if structured correctly.
Many of the largest domain companies and domain venture capital companies have been successfully structuring their deals with less cash upfront and greater back-end considerations. If someone with a proven track record and a solid deal were to approach me, I would strongly consider a mutually beneficial deal structured in this manner.