Mike Berkens wrote a post about Sedo’s Quarterly Market Study, and there is an important takeaway that should be noted, especially by people who are new to investing in domain names or are exploring the space. 94% of all sales transacted on Sedo are for domain names that are sold for $5,000 or less. 48% of all public sales are for less than $500.*
If you look at the sales reports issued by Afternic, Sedo, and other venues, we are able to get a look at some of the higher end public sales. Platforms like Afternic and Sedo help domain owners move somewhere in the vicinity of $1 million in domain names each per week. While those big numbers are great, the majority of sales aren’t large transactions.
Week after week, I see overpriced domain names listed for sale in various places, some of them comically overpriced. I don’t know if they actually expect to sell them for a lot of money, but they certainly price them wishfully.
Let’s say you buy 100 domain names for around $1,000. Perhaps you have a sell through rate of 1-2%. If you are selling them at levels similar to what Sedo is reporting, you’re probably treading water. If you continue to buy domain names, you may be losing money, hoping the “big deal” comes next month. For many people, that big deal never happens. Despite this fact, people continue to spend money “investing” in and renewing bad domain names.
I know this isn’t going to be a popular post. However, I get frustrated when I receive emails from people who are desperately trying to unload domain names I wouldn’t even consider hand registering. I feel badly that they thought investing in domain names was a great way to make easy money and that some of these people spent money before fully learning about domain investing. I feel sad that many of these people probably didn’t have the money to waste in the first place.
There certainly are people making an exceptional living from domain names. These people have learned the markets, know how to buy and monetize valuable domain names, and are able to close deals regularly. The number of people who are in this category pales in comparison to the number of people who are trying.
I would guess this might be similar to the number of people who want to play football compared to the number of people playing professionally. At some point, you need to have a reality check. The good thing about domain name investing vs. football is that investing in domain names is something that can be learned and mastered, while genetics plays a major role in professional athletics.
To all those who are continually buying domain names without the successful sales, I urge you to stop what you’re doing and research the market. Spend time really looking at what makes a good domain name and why domain names are selling. You don’t need to be a genius to make money investing in domain names, but you do need to put the time and effort into researching the business.
*The company stated that 90% of all sales are reported, and a great deal of the 10% of sales that are private are most likely above $5,000.