sales Do the Domain Sales Numbers Stack Up?

[Whizzbang]

I thought that I’d take a break from the series on “Building a Business” and examine what underpins the domain sales market. There are a huge number of domain investors that have bought into the market purely to sell their assets onwards…..so is this a sensible thing to do?

In my investigation into the domain sales space I thought I’d first of all outline the two fundamental domain sales business models.

Domains as Stock Items

Stock item domains are those that sell for sub $2,500 and represent around 87% of domain sales by volume. The goal here is to move greater numbers of domains and NOT necessarily increase the sales price. The business focus is therefore to increase the stock-turn from 0.3% to say 0.6% of your domains per year….it’s all about speed and automation of transactions.

Think of these domains as the fast food end of the industry….so many people make the mistake of trying to sell their burgers at high end French restaurant prices. Not surprisingly they don't make any sales.

This business model is the bread and butter for companies like Afternic and Sedo who have done whatever they can to get wholesale domains exposed to potential buyers. You really need to have your domains listed in both these major marketplaces if you are to maximise your ROI for this business model. There are other markets but they are substantially smaller.

High Value Domain Sales

High value domains are typically single word .com or prominent ccTLDs (eg. .de, co.uk). There have been a few new gTLD sales for high value and this will increase as adoption of the new gTLDs become more widely accepted.

It should be noted that only about 1% of domain sales are over $50,000 in size. So the next time you try and push a buyer up over this amount you’re really in the stratosphere as far as typical domain sales are concerned.

So who wins in the domain sales market? The registries, registrars and governing bodies all get their fees when domains are renewed or first registered. The marketplaces take a commission on each sale and the buyer secures their long-lost domain. The seller…..well in some cases they win but not always.
http://whizzbangsblog.com/article-archive/do-the-domain-sales-numbers-stack-up
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[WatchDogue]

Very well written and your positions are supported by rational reasoning - a bit of light rain on my portfolio's parade but nevertheless, a great read!

 

[Whizzbang]

Very well written and your positions are supported by rational reasoning - a bit of light rain on my portfolio's parade but nevertheless, a great read!

Thank you for your kind comments. It's an interesting time for domain sales and despite the appearance of large numbers, in the scheme of things they are quite small.

 

[urlurl]

nice article.

i've been lucky with a turn of 3-4% (depending on the year) in the $x,xxx range, but i keep my portfolio tight and manageable. The average for a hand picked good portfolio in the industry is around 2-2.5% turn IMO

you are right though the registries are the big winner, and always will be.

 

[frank-germany]

...The goal here is to move greater numbers of domains and NOT necessarily increase the sales price. ....

This business model is the bread and butter for companies like Afternic and Sedo who have done whatever they can to get wholesale domains exposed to potential buyers.

again and again you surprise me with your analytic approach

but listen:
that is not the the business model of sedo and afternic

as their business model is not at all
selling their domains
as they sell 3rd party domains only

thats why they do not have direct impact on the price of the domains are offered for

yes I agree
they try hard
to make you set a buy now price

but thats not up to them to do so

 

[frank-germany]

You really need to have your domains listed in both these major marketplaces if you are to maximise your ROI for this business model. There are other markets but they are substantially smaller.

I doubt that this is a good idea
as you reduce your income substantially by about 20% to nearly 40%

As you pay at least 15% to 20% commission

and in case you sell as a german to a german
You would lose an additional 19 %
as the prices offered are including VAT ( 19% germany )

-VAT can be much higher in many countries
like france, sweden or bhutan - like 25% up to 50% -

in that price range
that can eat most or even all of your profit

 

[frank-germany]

High value domains are typically single word .com or prominent ccTLDs (eg. .de, co.uk). There have been a few new gTLD sales for high value and this will increase as adoption of the new gTLDs become more widely accepted.

It should be noted that only about 1% of domain sales are over $50,000 in size. So the next time you try and push a buyer up over this amount you’re really in the stratosphere as far as typical domain sales are concerned.

high value domain sales typically are domain sales that help the buying company to grow their business in a way that the price of the high ticket domain is looking small to them in relation to the additional income.

I would not want to wait for new tlds become more widely accepted
as I can't wait for more then 100 years myself

and yes whats good about domains:
only the sky is the limit
( sky is higher then stratosphere )

 

[joro001]

Fantastic article, a healthy dose of realism which i always like to read, I get bored and tired of all the endless hype and big sales being reported. What many of the big sellers won't reveal is their bottom line, are they actually profitable or losing money. They are often happy to talk up big sales and what they purchased them for but they never seem to want to share what their overall ROI for the year is, one can only guess why that is.

Domaining profitably is far harder than most newbies can imagine, articles like this spell it out in black and white just why that is and how much up against it you are from day 1. In addition auctions are often so competitive nowadays that domainers pay up more than end users will pay making acquisition cost even higher than in years gone by, making ROI even less likely than before.

domainingtips.com has been recently writing other similar articles proving why 3l and 4l.coms are not good investments and also give some real perspective on the reseller/end user markets.

Great job OP.

 

[garptrader]

Not all 300+ million domain registrations are aftermarket domains. Some are in use for business websites, others are trademark protection names, others for personal use but not necessarily for sale. Regardless, there may be 100 million aftermarket domains and this article argues that aftermarket sales are in the 100k range - so only one in a thousand domains sells annually. Even if average renewals are only $10, if you pay 20% commissions to SEDO or Godaddy, you need a solid five-figure sale just to break even. That is not typical as most sales are $1500 or less.

 

[Whizzbang]

Not all 300+ million domain registrations are aftermarket domains. Some are in use for business websites, others are trademark protection names, others for personal use but not necessarily for sale. Regardless, there may be 100 million aftermarket domains and this article argues that aftermarket sales are in the 100k range - so only one in a thousand domains sells annually. Even if average renewals are only $10, if you pay 20% commissions to SEDO or Godaddy, you need a solid five-figure sale just to break even. That is not typical as most sales are $1500 or less.

Completely agree with you that not all 300+ million domains are aftermarket. What I was attempted to do was to size the aftermarket market as a percentage of the whole. I also agree that the vast majority of domain sales are less than $1500 as you stated.

 

[NigelD]

Nice article - great stats
a quality portfolio will obviously greatly increase the rate of return as will a bit of outbound marketing.
But for most smaller domain investors (i.e. say under 2000 domains) the way forward is domaining and development. Pick out some of your nice domains and start monetizing them. That takes the pressure off having to sell your other domains too cheaply. Also be careful about lapsing domains that you might have held for 10 years but haven't been attracting bids. We regularly sell domains that haven't had bids for years - it doesn't mean that they're not good domains - in fact most of them are very nice - you wonder why they haven't had bids - so be careful with your lapsing.

 

[garptrader]

I will add that from "a few years" in the industry that $XXX sales are far more common than $XXXX sales and sales over $1500 are relatively uncommon.

However, I still ask the question, "Why is it that companies are so reluctant to spend money on a good domain?" It is not difficult to do a Google or Bing or Facebook or Youtube search and find POTENTIAL end users with inferior quality domains or no domain whatsoever (only a social media presence). As a finance professional I see invoices and budgets and accruals for all types of expenditures which are just part of doing business. Domains are almost irrelevant to many outside domaining and few get domains as brands. Will this change in the foreseeable future or do we just give up domain investing altogether except for sites we plan to develop?

 

[frank-germany]

Will this change in the foreseeable future ..

only those who understand the obvious will survive

when I started selling domains in 19xx the common question asked was:
"why the heck should I care about the internet ? "