I’ve been asked what ROI I expect to achieve with my domain investments. While I have heard (and probably said) a 10x ROI is a good goal to have, I really don’t really have a hard and fast rule that a 10x return on my domain name investments is critical. Perhaps a 10x return is a fair goal across a portfolio, but it is difficult for me to think like that when it comes to selling individual domain names.
Last week, I received a $5,000 offer for a domain name I like that I priced at $25,000. In backing up his offer, the buyer cited my NameJet purchase earlier this year for a bit less than $500. I chalk it up to a good buy on my part, but I am not going to sell a domain name like this one for $5,000 simply because it would yield a 10x return on my investment. Names are getting harder to acquire at good prices, and it will be difficult to replace this name in my portfolio with an equally valuable domain name.
Similarly, I have bought more domain names at GoDaddy Auctions this year than prior years. I don’t know if my overall spend is up or not, but I am buying more names at less than $100 than prior years. Many of these domain names cost about $20 total after the bid and renewal fee. I certainly wouldn’t set prices on these $20 names at $200 or close to that figure. Some of them are priced in the low 4 figures on Afternic because it’s pretty easy to sell that way, but I wouldn’t do a private sale at that level. It’s often too much work and not worth the effort.
On my higher value domain names that I spend a lot of money to acquire, I am not always looking for a 10x return. I paid a bit more than $15,000 to buy Chilly.com at NameJet a week ago, but I would not price it at $150,000. I have it priced at just over a 5x ROI on Afternic / GoDaddy. The profit margin is not 10x what I paid, but if it sells for $83k on Afternic, I would net a nice return on my investment.
The majority of domain names are not very liquid. In fact, they are quite illiquid. As a result, a higher margin is necessary when pricing domain names than other types of investments or inventory. While a 10x ROI may sound like a reasonable target, I don’t typically look at that as my goal on individual domain names.