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Bob Hawkes

Wholesale and Retail Domain Name Transactions

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By Bob Hawkes, May 13, 2020
  1. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP Gold Account Trusted Blogger

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    A wholesale domain name transaction refers to a domain investor acquisition. For example one investor buying a domain name from another here on NamePros, or an investor acquiring a domain name in an expired domain auction.

    A retail transaction is a sale to the business, organization or individual who will be the final user of that domain name. Wholesale prices need to be much lower than retail, in order to allow for holding costs, a profit margin, and the possibility that the acquired domain name will never sell.

    Typical sell-through rates indicate that most domain names will not sell to an end user for many years, if ever. Sometimes the domain investor abandons the domain name before it sells, and the domain name changes hands in a wholesale transaction, either before or after expiration.

    This article looks at how many wholesale transactions, on average, occur for each retail sale.


    The Numbers

    The NameBio database includes both wholesale and retail transactions. While venue and price provide indicators of which sales are likely retail, no dividing line will be perfect. In this analysis, I use the simplified model that domain sales at prices of $201 and above are considered retail, and others are categorized wholesale transactions.

    Under wholesale transactions, I include sales between $100 to $200 from the public part of the NameBio database, as well as sales under $100 accessible through a NameBio membership plan. I looked at two years of NameBio data, for the period ending April 29, 2020, although all results are expressed in per year values.
    • Across all extensions, there are about 377,000 wholesale transactions per year, compared to about 62,000 retail sales. Note that sales from many venues are not included in the NameBio database, and therefore the real numbers would be substantially larger in both categories.
    • Due to the dominance of .com, the numbers are not much different for .com only. Just over 84% of retail sales are .com while about 85% of the wholesale sales are .com.
    • The ratio of wholesale to retail sales numbers across all extensions averages about 6.1. In other words, on average, for each retail sale, there were about 6.1 wholesale transactions.
    • While by number most transactions are wholesale, by dollar volume, 90% are retail.
    • I looked at how the wholesale to retail ratio varied by domain extension, obtaining the results shown below. The ratio of wholesale to retail transactions is similar in .com and .org at just over 6.
    • The wholesale to retail ratio is about 9 for .net.
    • The ratio of wholesale to retail transactions is much higher in .info at about 30.
    • Taken as a whole, there are fewer wholesale transactions for each retail sale in country code extensions, with an average ratio of about 3.1.
    • In new extensions, the ratio is even lower, with only 1.7 wholesale transactions for each retail sale. That is partly influenced by registry sales. The shorter time since public availability also plays a role.
    MainRatioRetail.png

    The wholesale to retail sales ratios for the more common general-purpose country code extensions are shown below. The ratios range from about 1 to 15. It should be kept in mind that the statistics are much more limited, and possibly less meaningful.

    CountryCodeRatioRetail.png
    • The .me extension has the highest ratio, with slightly more than 15 wholesale transactions for each retail sale. The vast majority of the wholesale transactions are at prices less than $100.
    • The .ai extension is different from any other extension, with almost equal retail and wholesale sales numbers. Almost all of the “wholesale” transactions, about 730 per year, are between $100 to $200, whereas in most extensions the pattern is most wholesale sales at prices less than $100. I think what we are seeing here is that many NameBio-reported sales in .ai are wholesale, and the $200 dividing line is inappropriate for the extension.
    • In a few other extensions, there are probably many retail sales less than the $200 cutoff I assumed.
    • In the .co extension there are about 1540 sales per year at prices less than $100, another 170 between $100 and $200, and nearly 290 retail sales per year.
    • Almost 90% of the wholesale .tv sales are at prices less than $100, while the overall ratio of wholesale to retail is 6.6, not much different than for the legacy extensions.

    Keep In Mind

    The $200 cutoff is probably inappropriate for some extensions. For example, there are probably more .info and .me retails sales that dip below this cutoff, while many .ai wholesale acquisitions may be above that cutoff.

    Due to the venues that report, NameBio is almost certainly more efficient tracking wholesale transactions. Therefore, the actual ratio of wholesale to retail sales would be less than calculated here.

    Also, keep in mind that hand registration acquisitions did not enter this analysis. If included as a wholesale transaction, hand registrations would increase the ratio.

    The ratios reported here are applicable to the universe of domain names being sold. Your personal ratio can be very different, of course.

    I did this largely as an exercise, wondering how often domain names change hands between investors. If you track your own ratio of wholesale acquisitions to retail sales, the ratios presented here can be used for comparison purposes. The ratio of wholesale acquisitions to retail sales could be another number to track in your portfolio.

    A high ratio of wholesale to retail sales can be viewed two ways. It might mean that domain investors are abandoning that extension, and putting up more domains at wholesale prices, or simply letting them expire. Alternatively, it could mean that investors see a bright future for the extension, and are making wholesale acquisitions to be well placed for future retails sales.

    Liquidity in domain names has received a lot of attention of late. The analysis here supports the idea that some extensions are much more frequently traded between domain investors. What domain investors more readily purchase, it seems, does not perfectly track retail interest.

    The Domnomics book by jmcc presents data showing the number of domain names that have been held 2, 3, 4, etc. times by different owners. A small percentage of domain names have been held by ten different domain investors.

    Please share your views in the comments section.
    • Are you surprised by these ratios?
    • Do you compute your own ratio of wholesale acquisitions to retail transactions?.
    • Do you think we trade domain names too often, or too seldom?
    • I used $200 as the dividing line. What value would you have used?

    Thanks to Michael for the NameBio data I used in researching this article.
     
    Last edited: May 13, 2020
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  4. Bob Hawkes

    About The Author — Bob Hawkes

    Domain analyst, writer and educator, with particular interests in domain name phrases and non-business uses for domain names. I am a risk averse domain investor who only invests modest amounts in a variety of extensions and niches. Don't hesitate to contact me - I like to help!

    This is Bob Hawkes's 39th blog post on NamePros. View all blog posts

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  5. Comments (37)

  6. The Durfer

    The Durfer Top Contributor VIP Blue Account

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    $200 is a good cut off figure, although alot of potential domains have a $125 start . lol. ty.
     
  7. topdom

    topdom Top Contributor VIP

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    If a broker knows you will accept 200, then if an enduser might be willing to pay 4-5 figures, you will be offered only 200, and even that amount may not be paid if the enduser di(sapp)e(ar)s.
     
  8. BradWilson

    BradWilson Upgraded Member Gold Account

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    Another great topic and an excellent subject to ponder.

    I'd say ratio trends over time compared to other extensions would be really good to track because it may add some wonderful insight to use while investing.
     
  9. FolioTeam

    FolioTeam AMDB.tv VIP

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  10. biggie

    biggie Top Contributor VIP ★★★★★★★★★★

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    Hi

    lets start with the premise

    is everyone who buys a domain in an expired auction, a domain investor?
    is every person who buys a domain on namepros, a domain investor?

    since businesses, orgs, individuals, and domainers alike, can all purchase a domain at wholesale price, and each can be the end-user....
    then, would that make it a retail purchase?

    if anybody registers a domain that is classified as Registry Premium and registration is $300 or more per year to renew..... is that a retail sale or a wholesale purchase?

    if anybody buys a domain from a business and uses it themselves, was it a retail purchase
    if anybody buys a domain from a business and resells it to another business, was it a wholesale purchase?

    how much difference between the wholesale price and the resale price must there be,
    in order to consider it, a retail sale?

    if a domainer purchases a domain at NP or expired auction and never sells it....
    was it a retail purchase?

    is a domain investor, the same as one of those newfangled domain flippers?

    smoke smoke, puff, puff...

    imo...
     
  11. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP Gold Account Trusted Blogger

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    Thanks for your interesting questions @biggie. Here are my answers, but of course others may well have different views.

    No. Although I expect most are, but clearly each day NameBio has some expired auction sales that seem to be retail bidders. But note that the article never said an expiry auction sale was wholesale, it said a name bought by a domain investor at an expired auction.

    Not quite, although in vast majority of cases I would think the buyers on NamePros are domain investors. Occasionally a new registrant makes a Request and it seems from context they likely are not an investor.

    Yes, to me. If the person buying it uses it, or intends to use it, I would call that retail, even if they managed to get a wholesale price. Clearly especially the registrar marketplaces have a mix of wholesale and retail buyers. So I would consider it a retail sale, but the cutoff in this analysis might categorize it as wholesale. As mentioned both in this article, and previously, no dollar figure cutoff will separate exactly retail and wholesale.

    Well all hand registrations, as noted, were not explicitly taken into account (I talk in the article about that), so it would not have been considered either for this article.

    But to answer for the general case, I would class it according to the buyer. If the buyer purchased it to resell, or hope to resell, for a profit, then I would consider that wholesale, despite the $300. The ad at the top of NPs, and in most recent DNW podcast, were both registries promoting investing in premiums. However, if the premium domain name was bought by say a boutique planning to use the name for their own site, definitely retail.

    There are probably grey areas, but I would consider yes, in most cases.

    This is a challenging one. If the idea of buying it was to resell, then yes wholesale, imo.

    One always hopes there is a significant difference (say a factor of 5x at minimum). But sometimes that does not work out, and you liquidate names at something more like what you have invested in them. A similar discussion came up with respect to sell-through rates. Different people calculate their own sell-through rate different ways and that is entirely fine. To each their own. I personally do not consider it a retail sale unless I have covered at least all my costs associated with that domain name as a minimum, but a higher standard than that makes sense. I do realize I did not give you a specific answer. Even if I did it would just be my answer. Sometimes I think investors sell names to end users, particularly nonprofits, for not much profit because they feel the buyer is worthy. As long as your costs were covered, I would still count those as retail sales.

    Not to me. If the domainer purchases it is a wholesale purchase, because the intention was to sell it (presuming that was the intention).

    That came up in the previous blog post a little. See section 8 of this article that deals with investing and flipping. I respect those who like to do fast flips and those who like to hold out for that great sale down the road. I see lots of room in the domain tent.

    As noted in the article
    With different assumptions you could get somewhat different ratios. It is easy for anyone who wishes to do their own with different assumptions, such as using venue to divide wholesale and retail, or to use a higher, or lower, cutoff.

    As noted, it was an exercise because I always wondered about it. I realize some may find it either too simple to be useful, or why does it even matter. That is fine. Everyone can choose what they read or not. I found it interesting, and I think means a little, but have zero problem if others feel differently.

    Thank you very much for the questions and commentary.

    Have a nice evening.

    Bob

    PS You seem to often say the following when responding to things I write.
    To each their own, but could I politely ask maybe not when I am around, please? I never smoke myself, and well worry about second hand smoke. :xf.grin: Thank you very much for any consideration. Seriously, please. Thank you!
     
    Last edited: May 14, 2020
  12. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP Gold Account Trusted Blogger

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    This is a superb point, Brad. This, like most of my articles :xf.eek:, was already long even with one recent time period, but I would so love to see how trends have, and will in future, change.

    I was partly inspired to look at this by something Michael of NameBio wrote when they were introducing the membership plans that include access to sales under $100. He mentioned that in some general country code you first see activity in wholesale low values, and that precedes later higher value retail sales. If one could spot that happening, it might be valuable. Like who first began the .gg and .cx trends, that we are early on. I may try to look into that, and also for legacy what the ratios were for say a longer ago period.

    Of course one problem in looking at long term trends and separating wholesale and retail the way i did is that as we all know wholesale prices have gone up steeply in recent years. So a cutoff that might have worked 5 years ago dividing wholesale and retail does not work now.

    But long term trends is an excellent idea. Thank you.

    Bob
     
    Last edited: May 14, 2020
  13. hawkeye

    hawkeye Top Member PRO VIP ★★★★★★★★★★

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    :xf.eek: Oooh boy.., looks like the ground layings to lead into another 'offensive avatar' debacle, 'offensive personal tag lines'. Start popping your corn peeps..
     
  14. PhongSGC

    PhongSGC Established Member

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    Thanks, can you write a dept analysis about hand-reg domains for newbie like me to learn?
     
  15. CraigD

    CraigD Established Member

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    Thanks Bob - fantastic analysis!

    As I expected, it is the entrepenuers/investors that are driving the industry.

    Can you imagine how different everything would be today if there had been a 'use it or lose it' clause introduced in 1985 or lifetime registration?
     
    Last edited: May 14, 2020
  16. werejack

    werejack Established Member

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    Thanks @Bob Hawkes for another insightful article. I enjoy your analysis.
     
  17. karmaco

    karmaco Top Contributor VIP

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    Great article Bob. Its nice to see examining of these things but as we know only a portion of sales hit NameBio.

    I know everyone loves NameBio but it is a single window into a house that has many more windows with the drapes closed: brandable markets, private transactions, registrar transactions,DAN, and other sites that don’t report etc. Working with what we have is good but cannot give us complete results.I still always appreciate your efforts to figure it out for us 🙂

    With that being said, we probably each have a lowest number we would sell for retail transactions. I think the general retail number even at the lowest end is higher than $200.
     
  18. Zagalee

    Zagalee Established Member

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  19. biggie

    biggie Top Contributor VIP ★★★★★★★★★★

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    Hi
    guess i have to repeat the question

    is everyone who buys a domain in an expired auction, a domain investor?

    so what's the difference between what you said above and what you said below

    seems like a contrary or contradictory statement to me
    you're trying to define wholesale and retail,
    and mentioning "retail bidders" in expired auctions, which is supposed to be wholesale marketplace.

    at what amount does the current high bid in an expired auction, classify it as a retail bid?

    imo...


    doesn't seem fair to me,
    if you can blow smoke..

    why can't i

    imo...

    i feel yah!

    i saw a cloud of smoke, so I blew thru it, to clear some air

    puff, puff

    imo...
     
  20. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP Gold Account Trusted Blogger

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    Yes, very true. I like your house windows analogy. While we should all be grateful that NameBio provides information on so many sales, as you say, we don't know for most part what is selling many places. The possible bias in this ratio analysis is great, since by covering the GoDaddy, NameJet, Dynadot auctions, but not many of the retail sites, almost certainly there is more complete coverage of wholesale than retail.

    I expect many agree and it is a good way to look at it. The dividing line should be wherever 50% of actual sales are retail. What value would you, and others, suggest for a price point where overall half of the sales are retail? We should answer not on what we would accept, but what we anticipate the domain investment community as a whole would.

    Just to see the impact, for the last two years NameBio data, I did the calculation on a $501+ dividing line instead of $201+. At that point there are far fewer sales considered retail, so the wholesale to retail ratio would be 14.4.

    Thanks for your insightful comments.

    Bob
     
    Last edited: May 14, 2020
  21. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP Gold Account Trusted Blogger

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    Yes, indeed a different world had the rules of registration essentially eliminated domain name investment (although I am sure clever people would figure out ways around the rules but setting up minisite uses, and then sell them as a 'business' not a domain name.)

    Lifetime registration in early days would have had a definite impact, since take away any rush to sell, probably driving up retail prices. I had not thought about that before your post, thank you @CraigD .

    The early years had required 2 year registrations. If we went to a system of required say 4 year registrations, how negative or positive do people think it would be for domain investing? I wonder, if it would help in one way, since the higher registration cost would cause investors to really be critical what they choose to invest in, and then have the knowledge they have it for years when they are negotiating.

    Bob
     
  22. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP Gold Account Trusted Blogger

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    I would really appreciate people providing their thoughts on the following. Do you think overall we tend to give up too soon on names we hold, or do we hold on long after we should have let names go?
    Related to that, how do you decide which to keep? Obviously meaningful offers is one measure. Or lacking that, inquiries or unreasonably low offers might mean something. Or even simply significant traffic to name, or possibly any parking revenue if you park.

    In conventional do-it-yourself investing there is evidence most people trade stocks and ETFs too often. The transaction costs are much lower than they once were, but with the spread and commissions, and possibly money conversion, each transaction has a cost. Situation different with domain names, but there are usually some forms of costs when selling one name and replacing it with a different one.

    Thanks for input.

    Bob
     
  23. CraigD

    CraigD Established Member

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    In regards to higher cost and longer registration periods of the past, I think it makes a world of difference.
    My first domains were purchased in the late 90's through Verisign and they were EXPENSIVE and the process to register and pay was not nearly so simple as there were identity documents and paperwork that needed to be filled and faxed through to Verisign. The cost and amount of work involved to register made me very careful about my first few domain choices as they were long-term business ventures, not purchased with the intention of investing or flipping.
     
  24. ultradog

    ultradog Established Member

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    Hmm. In my recollection, the late 90s signup process was fast and furious; you grabbed any name you could think of that sounded good because if you waited there was Rick Schwartz getting it before you. And you didn’t have to pay up front, so if you changed your mind, you would just let the domain drop.
     
  25. ultradog

    ultradog Established Member

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    But getting back to the article subject, I was noticing that I know very little about sales at the range of XXX. However it seems clear to me that at XXXX and higher sales, you cannot discern between end user sales and resellers. For instance Andy Booth just sold a 4L/CVCV at a price that could have been to a reseller who is preparing to hike it up 3, 4 or more times. Or else a developer got a wonderful brand inexpensively.
     
  26. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP Gold Account Trusted Blogger

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    I believe that Network Solutions were given permission to charge for them starting in 1995, and at that time you had to register for two years at $50 per year. Not sure what date that changed to single year registrations - anyone know? $50 per year back then was more than it is now, of course.

    Re domain tasting, John talks in detail on that in his book Domnomics - domain name tasting (trial registrations with ability to not actually pay if cancel within a few days) definitely peaked in 2006, but was active for years before that. I summarize from book here. The numbers were huge of tasted domain names.

    Bob
     
    Last edited: May 14, 2020
  27. hawkeye

    hawkeye Top Member PRO VIP ★★★★★★★★★★

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    I recently found a bunch of my NetSol receipts from my ‘98-‘02 ish regs, it was $50 and 2 years, then it went down to $35 and 2 years.
     
  28. BradWilson

    BradWilson Upgraded Member Gold Account

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    Regarding the price point set at $200 for the Retail/Wholesale split...

    I'd really like to see an analysis of any patterns that stand out over time which might suggest where that price point could be.

    How exactly could we do that? Hmm I'm not exactly sure atm but I'm going to ponder that for a bit and maybe it'll come to me in a dream. I'm serious, many good insights have come to me while dreaming, in fact some of my best coding I do while asleep.

    Barring a solution to this problem, I think the important point of this analysis isn't to debate the merits or validity of the exact price point, instead I think it best to take the info it provides to identify any patterns.

    If those patterns help when making decisions about domain investing, than it's worth doing. Over time this analysis can be refined and hopefully additional more "trustworthy" patterns will emerge.

    Just criticizing the analysis doesn't really help UNLESS it leads to a better way to do the analysis. So for those who may want to criticize this analysis, my question is... do you have a better way to do this?
     
    Last edited: May 14, 2020
  29. BradWilson

    BradWilson Upgraded Member Gold Account

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    For me I think it's both.

    Over time as in 20+ years, I've held onto bad domains far too long and they never sold, oh well. I've also held onto good names and then either lost interest or had life "glitches" and forgot to renew them. Some I've lost would be worth a small fortune by now so that's why I say it's both.

    As a whole, I think we tend to hold too long when just starting out. As we gain experience, we either improve our skills and find a good balance, or we don't improve, panic and start letting good names go too soon.

    Currently for me I look at each of my names with all of it's history and determine it's worth. If it passes my test I keep it, if not it's liquidated or I let it expire.

    For me I usually have a clear purpose for each name I register. If that purpose still exists at renewal, I renew it, if not it's gone.
     
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