Don’t Rely on Outlier Sale Data

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Every day, NameBio reports the largest public sales that transacted at domain name aftermarket platforms and auction platforms from the prior day. Nearly every day, I see at least one domain name sale that leaves me scratching my head a bit. “Why on Earth would someone pay $x for this domain name,” I think to myself.

A critical error a domain investor – especially a new domain investor – can make is buying or registering other domain names that look similar based on the sale price of an outlier domain name sale.

People and companies buy domain names that make sense to them but may not make sense to others. Perhaps the buyer is working on a marketing campaign or wants to secure a domain name for a project or rebrand. A domain name is a unique piece of Internet real estate, and sometimes a company or person needs a very specific domain name when an alternative will not work. If the domain registrant is unwilling to lower the price and the buyer has the funds, it can lead to a sale that stands out to others. This is obviously great for the registrant, but it likely doesn’t mean that similar domain names are worth any more than they were worth before the sale.

Here’s a fictitious example:

Let’s say 5 college friends want to start a company called 5 Crazy Guys and decide they need 5CrazyGuys.com for their website. They see the domain name is registered (this is an example and is not registered – nor should be), and the owner won’t sell it for less than $25,000 because he bought it for a specific project. Well, as the name would tell you, these guys are crazy and decide they need this domain name. They buy the domain name via Sedo for $25,000. Both parties are happy.

Shortly after Sedo reports this sale publicly, NameBio, DNJournal, and perhaps others will record the sale. Domain investors should not look at the sale price and decide similar domain names are worth anywhere close to the sale price. For instance, people probably should not try and register names like 4CrazyGuys.com or 5CrazyDudes.com because they are similar. Likewise, people probably shouldn’t register names like 5Crazy.Guys either.

Each and every domain name is unique. It is why one domain name can be worth thousands, and a domain name with a one letter difference may be worthless. Comparable sales are important, but people need to know how to identify outlier sales and not rely on those sales for their own purchases.

13 COMMENTS

  1. What makes an “outlier” sale different?

    The same applies to the use of a generic as a brand, that has nothing to do with the keyword, e.g. Sumo.com.

    Comp sales are important, whether the domain’s characteristics are length, age, generic qualities or brandability. If anything, you can point your potential buyer to similar sales, when they lowball you.

    • Different being unrepeatable. Something totally unusual that people should not copy.

      With the sale of Sumo.com, one can infer a 4 letter word .com domain name has substantial value. There is worth. Other 4 letter word .com domain names would also likely have substantial value – or at least some value.

      In my example, very similar names would likely be worthless. Just because “5CrazyGuys.com” sells for $25k, it doesn’t mean that “2CrazyDudes.com” or others are worth anything at all.

  2. As I have been (correctly) mentioning in the blogs for a long time now, this works both ways as a double-edged sword, and leads as much to fallacious (low) valuation by those who are supposed to be experts as much or maybe even more than it does to this kind of inexperienced mistake.

    In my observation, the main reason for this is fallacious thinking about the notion of “comparables” – the very mistake described here in reverse – because of taking the most certainly excellent and desirable (but most certainly also limited) real estate analogy to fallacious extremes. People engage in such extreme conscious or unconscious fixation on the real estate analogy that they automatically view the matter in terms of what they mostly know – and what they mostly know, at least here in the US, is the phenomenon of “residential real estate.” It’s easy and comfortable, but for digital real estate it leads to costly error both high and low.

    As has rightly been pointed out above, but for the one opposite error, just because a domain looks like a “comparable” doesn’t necessarily mean that it is by a mile, even a thousand miles. One that someone will glibly think of as a “comparable” can truly be intrinsically far more valuable than that to which it is “compared” by any sensible and rational consideration of all the relevant details.

    • And P.S.

      Love how Estibot was still “appraising” crypto.com at $48k last time I checked only days ago… 😉

  3. I understand what you are all saying.

    I am primarily referring to poor domain names selling for decent amounts of money and new domain investors try to find similar names to register thinking they must be worth something.

    • Agree that this is very common. These types of names are all over Namepros, it happens with more valuable domains as well then people register available junk that looks slightly similar.

      Look at all the threads fill ed with tech fad terms for example. Every year there is a few new words, 10 years ago it was “Dubai”, today it is “Crypto”. Even in 20 years ago this used to happen I think e.g. “Cyber”. Those names date really fast.

      Most new investors will just waste their money on something.

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