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sales Domain Sales Don't Add Up

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Whizzbang

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ParkLogic.com
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I was crunching some numbers today on the domain sales market and a number of things just didn’t add up for me. It would appear that as an industry we are going backwards….which should be a little bit of a concern.

The first thing I wanted to do was try and dimension the size of the domain sales market. I decided to start with the estimated size of the Sedo marketplace as they quite regularly published their numbers. I was more interested in the number of domains sold and also proportions of the size of each sale.

After some mathematical magic, I came to an estimated sales volume of just shy of $37m for 2016…..I think this is a little low as some of the larger outliers will push the number up to around $50m. If there’s anyone from Sedo that can confirm or deny this number that would be awesome!

The next question I asked was what proportion of the total market does Sedo have? Sedo actually sold around 99 of the top 304 domain sales for 2016….which suggests about 32% of the domain market. This seems a little on the high side to me.

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The views expressed on this page by users and staff are their own, not those of NamePros.
@Whizzbang "This means there is a lot of potential for the aftermarket to sell domains to new registrants….the challenge is how to reach them."

It's a great business opportunity. There really isn't an even an informal, let alone a formal secondary marketplace publication or website. End users are stuck going to the largest registry advertisers. When they arrive, they are bombarded with 1200 new confusing extensions whereas there isnt any "craigslist", (for lack of a better description) that has legacy, aged preowned names. As a new person to this industry, it surprises me nobody has really built a central classified like marketplace for end users to visit and view all names, categorized, priced or otherwise.

If you want to buy a used Lear Jet even for a million, there still exists a publication in both digital and print that gathers dealers and end user buyers. Same with other surplus assets.

Afternic syndicates, but relies on end user exact searches. A few clicks and people run out of patience. The brandables marketplaces are about as close to what is needed but the time and search effort plowing through pages and pages of oversized logos and some less than interesting names is time consuming.

I dont know how much time in your experience you have spent in reviewing drops, but for 8 months solid I have been reviewing them and shocked at the non use from seeing thousands of archive. org screen shots all of orphaned names, dropped from several of their guardians multiple times and only parked on speculation. I find generally speaking many of the lower quality names like those with mixed numbers and or with dashes are actually built-out, and domainers continue to hold on for years to the best ones.
 
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After some mathematical magic, I came to an estimated sales volume of just shy of $37m for 2016…..I think this is a little low as some of the larger outliers will push the number up to around $50m. If there’s anyone from Sedo that can confirm or deny this number that would be awesome!

"never trust a stastic which you didn't fake yourself...."

when looking at sedo sales
its worth to have a much deeper look at it


1) sedo doesn't publish every sale.
- lower value sales are not reported at least not mine ... and some higher sales don't show at all -
- as they don't report weekend sales on weekends, I suspect the sales report is done manually -

2) when a german sells to a german using sedo
- 19% VAT has to be taken off the reported sales price ( which be reported including VAT ) -
- but not in every case;) -

3) sedos commission may vary from 10% to 20% as far as I know
so if you want real data you need to calculate the payout to the domain owner - and not the reported price.
 
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Domain traffic still accounts for a chunk of the shortfall but many of the traffic portfolios have been aggregated, stripped clean of non-performing assets and don’t represent the significantly large number of domains they used to.

if I understand you right
you say :
"parking is not what is used to be"
 
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then the total number of domains in the world sold in the aftermarket is 70,745

its more like 70.800 as most of my domain sales are not reported....
 
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Here’s an interesting figure…..about 0.37% of all new domain registrations come from the aftermarket.

I don't get that
are those not "used" domains?

and no new regs?
 
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This means there is a lot of potential for the aftermarket to sell domains to new registrants….the challenge is how to reach them.


I was hoping you answer that question
 
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Many thanks for taking the time to comment.

A few additional notes about my analysis.

1. The reported sales I used looked at the total volume of transactions - this includes the typical reported and unreported sales.
2. The breakdown of the size of the sales came from a 3rd party.
3. The estimation of the market size is irrespective of commission, tax, jurisdiction etc. It is the total volume of revenue coming into the market. How this is split up is determined by the companies and authorities involved.

I hope that clarifies things for you. :)
 
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I don't get that
are those not "used" domains?

and no new regs?
If about 19m domains are purchased each year and only about 75,000 come from the aftermarket then there is a lot of potential upside for the aftermarket to soak up.
 
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3. The estimation of the market size is irrespective of commission, tax, jurisdiction etc. It is the total volume of revenue coming into the market.

sorry this is nonsense

the VAT Taxes are no revenue
same is true for the fees

and there is nothing coming into the market from those amounts
 
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If about 19m domains are purchased each year and only about 75,000 come from the aftermarket then there is a lot of potential upside for the aftermarket to soak up.

not really as you compare a lets say $1000 USD investment with a $10 USD investment
 
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sorry this is nonsense

the VAT Taxes are no revenue
same is true for the fees

and there is nothing coming into the market from those amounts
When you look at market size you take the gross revenue for that market.....it's pretty standard practice.
 
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When you look at market size you take the gross revenue for that market.....it's pretty standard practice.

True, it's measuring what people are willing to spend, not what sellers net.
 
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When you look at market size you take the gross revenue for that market.....it's pretty standard practice.

standard doesn't equal to correct

as the market is mainly US based
there are mostly no VAT taxes to be taken into consideration
so the main players -the americans- are used to ignore VAT of other countries

I have heard it can be up to 50% in some countries

the german market is the second largest for domain sales to my knowledge
so it may eventually falsify the big picture
 
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Thanks for sharing this @Whizzbang

I was more interested in the number of domains sold and also proportions of the size of each sale.

I recently tried to map out the trends for average transaction values, it may be of some use to you: https://www.namepros.com/threads/soft-sales-in-2017-anyone-else.1022744/page-3#post-6262103

I think we're going to see some of the speculative investing dry up over the next couple of years. A bunch of reasons for this:
  • Reduced capital flows from Chinese buyers (compared to 2013 to 2016)
  • Many investors moving across to crypto
  • A compounding effect of the above two will bring down liquid values, reducing the influx of new speculators.
  • An ever increasing volume of small businesses using Facebook pages / social media instead of building websites
  • Continuing decline of PPC / display ad revenue.
The market won't implode but it will shift back towards domains that actually have real end-user value... domains that businesses will actually use.
We won't see the same level of use for domains as speculative commodity-like assets (or to move money between borders), as bitcoin/altcoins have filled this void.
 
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True, it's measuring what people are willing to spend, not what sellers net.

if a VAT registered comany in germany buys a domain from a VAT registered domain seller
( me for example )


the 19% VAT is no expense on their side
as they get a refund from the government
 
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When you look at market size you take the gross revenue for that market.....it's pretty standard practice.


and I have to admit that the VAT issue makes stuff a little complex

thats why everybody is reluctant to look at it
( even sedo )
 
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Thanks for sharing this @Whizzbang



I recently tried to map out the trends for average transaction values, it may be of some use to you: https://www.namepros.com/threads/soft-sales-in-2017-anyone-else.1022744/page-3#post-6262103

I think we're going to see some of the speculative investing dry up over the next couple of years. A bunch of reasons for this:
  • Reduced capital flows from Chinese buyers (compared to 2013 to 2016)
  • Many investors moving across to crypto
  • A compounding effect of the above two will bring down liquid values, reducing the influx of new speculators.
  • An ever increasing volume of small businesses using Facebook pages / social media instead of building websites
  • Continuing decline of PPC / display ad revenue.
The market won't implode but it will shift back towards domains that actually have real end-user value... domains that businesses will actually use.
We won't see the same level of use for domains as speculative commodity-like assets (or to move money between borders), as bitcoin/altcoins have filled this void.
I completely agree with you.
 
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if you don't use correct values to be put in
how can you expect output to be correct?

standard procedure?
yes

remember derivates?
lehman?
sachs?


oh yes it nearly 10 years ...
 
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another issue with sedo reports:

some sales are in euro some in usd
at which point in time do you calculate the euro into usd?

at the sales day?
which is the sales day? sedo doesn't tell you
some sales are long ago initialisted before finalisted
when did payment happen?

so we partly have a 20% chance of wrong euro to usd convertion in your stats
and we partly have a 19% VAT discrepancy

so your input data is partly 39% incorrect
 
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another issue with sedo reports:

some sales are in euro some in usd
at which point in time do you calculate the euro into usd?

at the sales day?
which is the sales day? sedo doesn't tell you
some sales are long ago initialisted before finalisted
when did payment happen?

so we partly have a 20% chance of wrong euro to usd convertion in your stats
and we partly have a 19% VAT discrepancy

so your input data is partly 39% incorrect
All numbers are in USD but I think you are missing the point.
The data is showing a 100% problem for the market. What you're saying is the problem is worse than my numbers.....which makes me get even more concerned.
 
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While there are unreported sales I believe there are reported sales which are not legit third party transactions. I believe some reported sales are published to generate registrations in or boost interest in a particular TLD. I also believe that for the majority of forum members sales over $50k are not relevant because most domain investors who started in the last decade don't see six figure domain sales. Marketplace commissions must also be considered as they take a significant portion of domain sales proceeds even though it is the domainer who is paying the renewals. In the end it does not surprise me to see an analysis indicating that industry turnover is under 1% and given the metrics needed to generate positive cash flow (average sales price, portfolio turn, average renewal cost, commission) there was no need for hundreds of new extensions. There were already too many aftermarket domains for sale. The problem is that most end users just do not care to pay much more than reg fee for a domain. Thus over the next few years a large percentage of the new TLD domains which have been registered will be dropped.
 
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All numbers are in USD but I think you are missing the point.
The data is showing a 100% problem for the market. What you're saying is the problem is worse than my numbers.....which makes me get even more concerned.


if so
your worries are at least based on more realistic facts

" all numbers are in USD "
yes I was aware of that

but are you aware that there is a fluctuation in currency convertion
and some sales are in Euro at sedo
and it make a huge difference
WHEN you do the convertion

at the end of the year?
when sedo report the numbers?
at the time of you doing your analysis?

or at the time when the seller was actually paid ?
( I highly doubt it , but thats the only correct value )
 
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