I was chatting with a friend at The Domain Conference, and I congratulated him on a deal that I recently read about. Coyly, he told me that I shouldn’t believe all that I read. After chatting with him for a couple of minutes about it, I think I understood what he meant, although he wouldn’t share any details with me!
The vast majority of domain name sales are all cash. In some instances, in addition to a cash component, a company may give the domain seller additional compensation. Some types of compensation that I can think of off the top of my head include shares in the company, an earn out opportunity (% of sales for example), or some type of stock options. I am sure there are other types of compensation I am not thinking about.
Domain sales platforms and brokers that report transacted sales tend to only report the cash aspect of a deal. How much a buyer pays in cash is more reliable than extrapolating a sales price based on the value of a private company or potential value of shares. In addition, most brokers and brokerages do not participate in the additional compensation since it likely isn’t worth much at the time of the deal. For these reasons (and the fact that most of the additional compensation isn’t as trackable for DN Journal as a wire receipt or Escrow.com receipt), domain sales are generally reported for only the cash value at the time of the sale.
The next time you read about a deal that looks very good for the buyer, perhaps there was more to the deal than the reported cash transaction. There is a decent chance the seller received some sort of additional compensation or will receive additional consideration long after the domain sale closes.