Domain Name Pricing Is An Art

[robert widener]

I took a Financial Accounting course my first semester of sophomore year in college. I don’t remember much from the class except for one thing the professor told us that I will paraphrase: “accounting is more of an art than a science.” I think the same thing can be said about the pricing of domain names on the aftermarket. Read more. . . www.domaininvesting.com/domain-name-pricing-art/

 

[Ostrados]

Pricing domains is a topic that is rarely covered.

Pricing domains is not an exact science, but there must be basic common sense when pricing domains, for example:

- How did you let your valuable 5 figures domain drop? You didn't see value in renewing it so why you priced it very high in first place and reduced selling chances to 0?

- Name value is directly connected with potential use. If a domain is suitable for a multi-billion company then shoot for the moon, if the domain is suitable for a small e-commerce business then price at low x,xxx, if the domain is suitable for personal blog then price it at low x,xx
And so on.

- Domain value is correlated with acquisition cost, the higher the cost the higher you should price your domain .. provided that you paid fair wholesale price and didn't overpay.

- Value of a domain is also proportional to number of taken extensions. Put higher prices on your domains that are taken in many extensions especially if some of them are developed.

- Names in an emerging future tech may hold hidden potential and can be priced very high depending on the quality of the name. But be prepared to hold the name for several years.

These are just few exampkes there are many other variables related to domain pricing.

 

[Recons.Com]

You can choose one of the two approaches:

- Each name is unique, I want to do deep research into the potential value and price it to a) max b) reasonable c) bargain for fast turnover

OR

- I am concerned with the stable cash flow on overall portfolio level. I am pricing to maximize profits, as well as smoothing the cash flow out through the year. Hence I group my names into several categories based on some predictor parameters and for each price at the point where price times STR gives me the highest return. I am not concerned if for any specific name I am leaving money on the table.

First approach is better suited for smaller portfolios and the latter for the very large ones.

Interestingly, Mike Mann seems to apply Approach 1 even though he has portfolio of 300k+ names. Even though he makes astonishing sales here and there, overall he might be losing money, as that kind of pricing is probably really hurting his STR. If he chose the approach where he priced 95% of his names at around $3k average (leave 5% for the shoot-for-the-moon stuff), he might be making around $9 million a year (minus $1mm commissions, $3 million for renewals, $5 million net before overhead and taxes). With his current approach, I estimate that he makes considerably less.

 

[Ostrados]

Hence I group my names into several categories based on some predictor parameters and for each price at the point where price times STR gives me the highest return.

I am interested to know if you use portfolio wide STR when pricing domains individually, or do you have estimate STR for each price range? (for example STR for domains below $1000, STR for domains from $1000 to $5000 ... and so on)

 

[ontiscal]

Please can you give me an opinion for this situation: old domain acquired for $59 from dropcatch.
Generically speaking, how much would you ask in the first instance?
The domain is evaluated around 1000$ from estibot.
Usually the domain is in make offer on Sedo and my prospect starts offering $99 or the minimum (for example $399)

 

[VadimK]

Please can you give me an opinion for this situation: old domain acquired for $59 from dropcatch.
Generically speaking, how much would you ask in the first instance?
The domain is evaluated around 1000$ from estibot.
Usually the domain is in make offer on Sedo and my prospect starts offering $99 or the minimum (for example $399)

All these factors (old domain, $59 dropcatch and $1000 estibot) have nothing to do with your domain sale estimation process. It's absolutely impossible to tell how much it can cost without knowing the name. Shoot it in the ''Appraisal'' section or you can PM me if you want an opinion in private.

 

[Recons.Com]

I am interested to know if you use portfolio wide STR when pricing domains individually, or do you have estimate STR for each price range? (for example STR for domains below $1000, STR for domains from $1000 to $5000 ... and so on)

I do have plan for that kind of analytics, but for now all the data just feeds into gut feel and intuition.

I have just the price that I use for most of my names and the STR that works with it. I haven't experimented with changes in STR based on pricing. Basically, the price elasticity. But I will do that this year.

I plan to take, let's say 6000 domains that I have priced at $2500 and divide them into 3 buckets randomly: A - $1950, B keep at 2500$, C - raise to $2950. And then keep it like that for few months and see which bucket performs better.

Currently, about 75% of my names are priced at $2500.

 

[AEProgram]

I wonder who started with the 8's in the domain pricing

 

[Recons.Com]

I wonder who started with the 8's in the domain pricing

Well, we definitely know Mike Mann was doing it even from BuyDomains time, since those guys still continue with lots of 8s.

But probably started with a Chinese domain investor. As it is meaningful for them.

 

[equity78]

You can choose one of the two approaches:

- Each name is unique, I want to do deep research into the potential value and price it to a) max b) reasonable c) bargain for fast turnover

OR

- I am concerned with the stable cash flow on overall portfolio level. I am pricing to maximize profits, as well as smoothing the cash flow out through the year. Hence I group my names into several categories based on some predictor parameters and for each price at the point where price times STR gives me the highest return. I am not concerned if for any specific name I am leaving money on the table.

First approach is better suited for smaller portfolios and the latter for the very large ones.

Interestingly, Mike Mann seems to apply Approach 1 even though he has portfolio of 300k+ names. Even though he makes astonishing sales here and there, overall he might be losing money, as that kind of pricing is probably really hurting his STR. If he chose the approach where he priced 95% of his names at around $3k average (leave 5% for the shoot-for-the-moon stuff), he might be making around $9 million a year (minus $1mm commissions, $3 million for renewals, $5 million net before overhead and taxes). With his current approach, I estimate that he makes considerably less.

Good points

 

[infosec3]

Many great points made here... I think that, in many cases, sales are not made, in spite of having good names, due to not being realistic with your pricing.

Here is an example. A couple of years ago, I changed the price on about 50 of my names on Afternic, moderate quality names for which I had $X,XXX expectations. I reduced the price on the 50 names and put a $888 tag. As a result, I sold seven of those names within approximately five months.

I have also had individual cases in which I lower the price on Afternic and the sale happens soon after.

The key is to moderate greed and expectations. Unless, of course, you can play the long-waiting game.