DomainInvesting.com

Yesterday, I blogged about the “Art of Selling a Domain Name,” and I want to take a step back a bit and discuss an important step in the process: Pricing. If you price your name too high, it won’t sell, and it will set a price ceiling for the name. If you price it too generously, you won’t achieve as high of a return as possible. There is an art to pricing a domain name, and I would like to share my own personal process for pricing my domain names when I sell.

For the sake of this blog post, I will use my domain name AlcoholCounseling.com as an example, and I will set a sales price for the name at the conclusion of this.

When I decide to sell a domain name from my portfolio, I look at a variety of factors in order to determine the price, including:

1) Traffic the name receives
2) Revenue the name receives
3) Google listings for the “bracketed term”
4) Advertisers on Google
5) Comps of recent sales
6) Gut feel    

Although I don’t buy my names based on traffic or revenue, I know that many of my clients pay close attention to these figures. The amount of natural traffic a domain name receives is important because it shows how many people are looking for something on that domain name without having to incur advertise costs. I also use the Overture search tool to get an idea of how many people are searching for the phrase or keyword of the domain name I am selling. For AlcoholCounseling.com, the traffic is light, only receiving about 1/2 a unique per day.

The revenue is important because a name might receive very little traffic, but the revenue per click may be very strong. Conversely, a domain name might receive a ton of traffic, but the click through rate might be low and the revenue per click might be low as well. This is important because if a name has strong revenue, a developer can build compelling content, increasing search engine traffic, and dramatically the revenue produced by the name. For AlcoholCounseling.com, the CTR is about 25% and the revenue per click is around $1.50. It is important to keep in mind that revenue share and CTR will differ for each parking provider and can be very different. This is one reason I only use this as a guideline.

I use the number of Google listings for the word or term in my domain name as an indicator of how much information is being published about the topic. It is likely that there is a parallel between the amount of information available and the number of people looking to find information. In the case of “alcohol counseling,” there are 154,000 Google searches for the topic. It is important to put the term in brackets, otherwise the results will include all pages that use alcohol or counseling, which is deceptive.

The number of advertisers who are paying per click is also a good indicator of the importance of a keyword or phrase, and thus the value of it. The more advertisers, the more competitive the bidding is, and that may mean a higher revenue per click figure. In the case of “alcohol counseling,” there are 8 sidebar advertisers, and there are 2 top advertisers, which is very strong in my opinion.

In order to get comparisons of other sales (both recent and historical), I like to use DNJournal’s Domain Sales chart or DNSalePrice.com. I also reference personal sales and other sales that might not have been published. For AlcoholCounseling.com, I would compare it to other psychology, rehabilitation and counseling domain sales. I have been fortunate enough to have sold a few similar names, so I have a good internal base. There have also been several public sales ranging from $3,500 – $10,000, which is in line with names I’ve sold.

Just like a real estate broker, I spend countless hours analyzing the domain market. This has given me a good “gut feel” for certain domain names. I also take my clients’ needs into account. I think about their verticals, their needs, and the types of names they buy as well as the price they would consider for this name.

In the case of AlcoholCounseling.com, I will set a price of $5,800 for the domain name with the hopes of a quick sale. Of course, if you are interested in acquiring the name, drop me a note or post a comment.

***Updated***

I just want to add that these are the most important factors I consider when setting my prices. There are plenty of other considerations, including: whether the other extensions are owned and used, registration date of the name, prior sale price/listing of the name, amount of inquiries the name has received in the past….etc.

Ed from Michigan asked me to discuss how to sell a domain name, and I am happy to give some pointers. There are many factors to consider once the decision to sell has been made, and each factor can have many implications.

The first thing I do is evaluate the domain name based on its natural traffic, revenue, estimated number of searches (Overture or Wordtracker), number of Google listings for the “bracketed term,” number of advertisers for the term, and comparisons of recent sales of similar names from DNSalePrice.com and DNJournal.com. Using all of this information, I determine my ideal sales price.

With my price in mind, I decide whether I should target an “end user” or a domain investor. End user sales can be more lucrative, but they can also be very time consuming. Conversely, selling a domain name to a domain investor will almost certainly yield a lower sales price, but the sale may be completed more quickly because there are less hurdles to leap to close the sale.

In order to sell the name to an end user, it is important that the name be a one word .com or “category killer” name to avoid wasting anyone’s time. For example, I wouldn’t try an sell a name like AwesomeDevices.com to Advanced Micro Devices, however, I would consider selling Devices.com to them if I was interested in selling it (which I am not).

If I decide to sell the name to an end user, I first compile a list of potential buyers. The next step is to hone in the decision maker for each end user company. More often than not, an email to the Whois contact will not yield a response. Keep in mind that while I may think this particular domain name would suit them well, they may not feel the same, and they may not respond regardless of their thoughts. I would also target each company’s advertising agency in an attempt to close the sale. If all of this fails, I would try to contact a broker or possibly another domain investor.

It is very important that the domain name be generic when contacting end users. An attempt to sell a domain name can possibly be considered bad faith if it isn’t 100% generic. If you are unsure, consult an attorney.

In order to sell a domain name to another domain investor, the domain name must have a clear meaning, and it should have some inherent traffic. Unless the domain investor intends to develop the name, he will usually want to know the traffic and revenue generated by the name. Although I have never sold a domain name based on revenue, I believe it’s important to be honest about these figures. If you are dishonest once, it could cost your reputation, something that is most important in a small industry like this.

Naturally, the next question is about finding other domain investors who might be interested in buying your names. My best piece of advice is to use various outlets such as the domain forums or even Ebay to make contacts within the industry. You can list your names there, and when someone buys a name from you, there is always the opportunity to upsell other names of interest. Another option is to contact a domain broker who may have more connections within the industry. Typically, brokers charge anywhere from 5% – 15% of the total sale, and can be an invaluable resource. If you are looking for a broker, drop me a line and I will put you in touch with a couple people I know.

If you are honest with yourself and set a reasonable price, the sales process is much easier. You generally shouldn’t expect to sell a newly registered name for thousands of dollars, as it just isn’t likely to happen. People with thousands of dollars to spend on a domain name typically do enough due diligence to know you just paid $8. Selling domain names is much harder than buying domain names. I think people should do their due dilligence, research the market, and specialize in a niche before spending recklessly.