Does a Domain’s Value Change When Acquired by an Investor?

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At NamesCon last week, I had a chance to briefly speak with Andy Booth. I have known and done a modest amount of business with Andy and his brother James Booth, and I was sorry I did not have much time to speak with them. One topic Andy and I chatted about was if the value of a domain name changes (at least on a psychological level) when the domain name is acquired by a domain investor from a larger company. Andy thought it would be neat to spark a discussion about the topic, and we are both eager to see what readers think.

This is a topic that I have not really thought much about before. There are many different factors at play here, including the following:

  • It becomes known that the domain name is available to buy and companies that have been monitoring the domain name may rush to buy it before it is re-sold, driving up the demand.
  • The domain name must have been expensive for the investor to acquire and will have a premium.
  • On the flip side, prospective buyers may think it was relatively cheap if an investor bought.
  • A domain investor may not be able to afford to sit on the domain name for a long time whereas the company that owned it was likely not forced to sell.
  • The domain investor may be more susceptible to legal threats, especially when a new acquisition resets the registration clock according to UDRP rules.

There are many factors that prospective buyers think about when the domain name changes hands from a large corporation to a domain investor. Chances are good that others did not acquire the domain name because they either assumed it was not for sale, thought it would be too expensive, or they did not have luck getting in touch with the right decision maker at the company. A transfer to a domain investor changes the psychology a bit because the domain name becomes more acquirable.

From my own point of view, when a domain investor, especially a colleague I know well, acquires a great domain name, I sometimes feel a bit of envy. If I had tried harder to connect dots or made a stronger offer, I could have bought that domain name. From that point of view, I think the domain name seems to be worth less when it moves to the hands of an investor. Maybe they spent what I would consider retail pricing to buy it, but without knowing that, my first assumption is that the domain name was worth less.

Prospective buyers, on the other hand, may think the domain name is worth more. They can see a transaction has been made, and it is generally obvious that quite a bit of money was paid to buy the domain name. In addition, the investor will require a ROI, so the domain name is even more expensive. Finally, they may feel the need to act fast and make a substantial offer, fearing that another company will swoop in and buy the domain name right away.

What do you think – does a domain name’s value change when it is acquired by an investor from a large company?

6 COMMENTS

  1. The Name’s value must have come down in the mind of the seller depending on how long it was available. The potential worth though, will almost always be in flux depending on many, often unforseen market influences and trends. That said, most names will be almost worthless to some, while invaluable to others. My 700 name portfolio happens to be worth billions, I might add.

  2. In theory at least, a larger company has more to spend so might respond better to somebody holding out for a higher price.

    I buy names for my own investment purposes and generally in my own name, but I use them to support my businesses which are both profitable.

    That doesn’t mean I’d pay more than I felt a name was worth to me.

    It’s all relative though. I don’t have Apple or Microsoft’s budget! If I did, I’d probably just blow everybody else out with a high offer.

  3. I don’t believe there is a halo effect around domains, whether a company owns a certain domain or an investor does. The domain’s meaning and digital footprint are more important IMO.

  4. New Dropcatch sucks 🙁
    I got logged out before I managed to place next bid, it was too late when I logged back in. And that was less than 5 minutes after the last bid. Why force log out users if they are being active on the site right now?

    To the topic: of course the domain value goes up. Investor is there for profit. Argument #4 is really weak, you buy an expensive name and then can’t afford the renewals? Can’t believe that.

  5. I think it lowers perceived value. They see it is now buyable whereas before they probably thought the price was so high as to be unbuyable.

  6. “A transfer to a domain investor changes the psychology a bit because the domain name becomes more acquirable” Yes if the history of the investor is blue chip

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