NameSilo

HUGE DOMAINS SNIPING GODADDY CLOSEOUTS

Located in Domain Marketplace Reviews started by wwwweb, May 6, 2019.

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  1. wwwweb

    wwwweb Top Member VIP ★★★★★★★★★★

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    I have been doing the same thing lately making them pay $1xx-$2xx more than anyone else is willing, except them. I am sure they get daily reports on spending, but I still see a lot of people outbid them to win their name.

    That is pretty good you pull out before they stop bidding. Given they are active on anything with a pulse, I think at this point you are aware who is on the other side very quickly when you get that outbid notice, or that large proxy wall that is hard to outbid on subpar names into the hundreds.

    You can surely agree that no domineer can throw away profits by purchasing such domains by the tens of thousands as the sell thru is not there, so any idea what their angle is? There has to be some kind of incentive attached to this activity?
     
    Last edited: Aug 27, 2019
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  2. Dave

    Dave Top Member VIP ★★★★★★★★★★

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    I think it's as another poster mentioned. They are happy with a much smaller profit margin than typical domain investors. Maybe they're happy making 20-30% margins. I mean clearly their model must be working for them or else why would they do it.

    If they can scale up their inventory size whilst maintaining relatively consistent margins then their revenues increase, which in turn makes their business all the more valuable.
     
  3. wwwweb

    wwwweb Top Member VIP ★★★★★★★★★★

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    Why pay all your profits to
    godaddy, people usually invest in new technologies, or ideas.

    As stated above the domain business is very high risk, especially when dealing in tier 3 type name.

    I wonder if they have a side deal where they only pay 5 percent commission for names won, and sold at Gofaddy etc... for the way they are bidding there has to be a built in incentive?

    If you could make 10-20% margin as constantly as them, then why has everyone here stated they have given up bidding, isn’t. that free money?

    Only reason I question is because I know the grind with these kind of names, it doesn’t add up.
     
    Last edited: Aug 27, 2019
  4. Dave

    Dave Top Member VIP ★★★★★★★★★★

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    Well it appears they've removed the human element from decision making on what domains to bid on. The reason the average domain investor won't bid them up is because it isn't free money.

    It takes considerable time each day to browse the lists and place bids at auction. Time is money and if huge domains have removed that human element it isn't costing them anything in resource to place those bids, so it isn't eating away at their profits like it would for a typical domainer.
     
  5. NameBuyer.com

    NameBuyer.com Member PRO VIP ★★★★★★★★★★

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    Due to their monstrous size, they need to purchase about 125 domains per day just to maintain their portfolio size. If they want to grow by double their sales, they would need to buy 250 domains per day. Even if they buy 250 domains per day for $200, their expenses would only be $18,250,000 for the year and they likely have over $100,000,000 in sales each year, so no problem there. I think their average is probably closer to $70-100 per domain if you include all their purchases and auction BIN snaps.

    upload_2019-8-27_12-28-4.png

    Here are some of the domains I lost to them in July & August:

    NameDev.com - $206 (HD bid until $201)
    WallMates.com - $37 (Listing price $2,795)
    CompuConnection.com - $27 (Listing price $3,995)
    InsuranceForTeens.com - $45 (Listing price $3,195)
    Cheeked.com - $204 (Listing price $3,895)
    InvestorNames.com - $65 (Listing price $3,595)
    SureVacations.com - $54 (not listed yet)
    BackyardWarehouse.com - $17 (not listed yet)
    GripAssist.com - $204 (not listed yet)
    Calendoo.com - $50 (not listed yet)
    Fittro.com - $136 (not listed yet)
    DietTrend.com - $210 (HD bid until $205)
    Wallberry.com - $104 (not listed yet)
    Bivys.com - $134 (not listed yet)

    Average Auction Purchase Cost: $105.93
    Average Sales Price: $3,495 (From what I've seen, they don't negotiate)

    If I apply this same logic to my portfolio, there is no reason why I or any domain investor couldn't do the same thing to maintain their portfolio or slowly grow their portfolio. The month of August so far has been one of my biggest months at $29.1k in sales for 5 domain sales. That is an average of $5,820 per domain (2 over $5k, and 3 under $5k). To replace these domains, even if I had to spend $500 per domain, it would only be $2,500.

    The most expensive and painful process is building your portfolio. Growing more once it is big is the easy part.
     
    Last edited: Aug 27, 2019
  6. werty

    werty Established Member ★★★★★★★★★★

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    What's your sales rate if you don't mind me asking?
     
  7. wwwweb

    wwwweb Top Member VIP ★★★★★★★★★★

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    They own over 6 million names, good record keeping on your bids, all those low domains they most likely had proxies exceeding over $150 on most of them. This is just a sample of you being 1 person that you lost out on, imagine across the board. I have seen them win domains in the high hundreds, and cross over into the $1,xxx range also. Great insight though.
     
    Last edited: Aug 27, 2019
  8. NameBuyer.com

    NameBuyer.com Member PRO VIP ★★★★★★★★★★

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    I'm just under 1% @ 0.95% or so. I just updated all my pricing to NameWorth pricing this summer to "take my own medicine".

    This month would have been $11,850 if I hadn't updated my pricing. But $22.5k of the $29.1k are lease-to-own sales, where it probably would have been cash-in-hand if I hadn't updated my pricing. So it seems like it is a little give and take so far.

    Sales rate is about right for August even with the pricing increase. Buyers just seemed to flip to lease-to-own instead of buying upfront.
     
    Last edited: Aug 27, 2019
  9. NameBuyer.com

    NameBuyer.com Member PRO VIP ★★★★★★★★★★

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    Ah, ok. I didn't realize they were up to that many. So, it should be even easier for them to buy if they have double the inventory.

    With the big purchases, they may be filling inventory for their PremiumDomains.com site that is due to launch.

    From a supply and demand perspective, the bigger they get, the more weight they'll have on causing prices to rise both in the aftermarket and retail pricing.
     
    Last edited: Aug 27, 2019
  10. werty

    werty Established Member ★★★★★★★★★★

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    Thanks for the info. I really can't see how (using your example above) paying $500 per domain makes the business worth it with 1% sales rate. Like $500 x 100 domains = $50K just to sell 1 domain? How do you make it work? Perhaps my sales time frame is too short term (within 1 year most of my sales) vs investing longer term. But even paying $200 per domain x 100 domains is 20k. So in theory seems unlikely to even breakeven. This is what I don't understand with many of the auctions in which known domainers are constantly paying these prices... How do they even turn a profit...
     
    Last edited: Aug 27, 2019
  11. Dave

    Dave Top Member VIP ★★★★★★★★★★

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    If people really are overpaying that's their choice. Look on the bright side, anyone who is overpaying for domains won't last long in this game, which means in future less competition for you.
     
  12. NameBuyer.com

    NameBuyer.com Member PRO VIP ★★★★★★★★★★

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    When building a portfolio, I would suggest trying to stay around the $20-40 range if possible.

    What I was referring to is if you have a decent number of domains already, and you are just buying domains to replace the domains you sold, then I was saying (as an extreme example) $500 per name is a bargain if you are selling them at $3,500 or more. Ideally the price would be $100 or less.

    After doing this for 15 years, I have about 7,000 domains. Some years I went up by 1,500+ names, other years I went up by maybe 100 names.

    But now, if I'm selling 70 domains per year, even if it costs me $500 per domain to replace them, it is still only $35k. If my average sales price for the year is $3,500, my revenue before registration fees would be $245k.

    Realistically though, my average auction cost has been $172.78 per domain for the last 3 months. But I've been focusing on purchasing what I'd consider Tier 1 & Tier 2 domain names otherwise I'd be spending much less per domain.

    So the plan was to increase the prices to NameWorth suggested levels (where I feel it makes sense) and then try to get to $250k in annual sales from the current $130k-$140k. So hopefully I'll get there, or maybe I'll crash and burn because the prices are too high. But the first month is looking great so far and on track.

    But based on the recent results, I would only suggest raising prices with a lease-to-own option.
     
    Last edited: Aug 27, 2019
  13. Josh R

    Josh R Owner of BrandConsultants.com & PremiumBrands.com PRO VIP

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    Pretty sure you can't buy tier 1 names for less than $20K but I get your point :)
     
  14. Recons.Com

    Recons.Com Top Member VIP

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    This is the way to go. To create the poison pill until the model is no longer viable.
     
  15. Lox

    Lox ----- Gold Account VIP

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    2300 in, 2100 deleted, 200 transferred out in a day, ... almost every day (estimate) 200+ sold >$2k+
     
  16. werty

    werty Established Member ★★★★★★★★★★

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    I currently have about 2700 domains and sales rate should be closer to 2%. However, since last year, I decided to stop bidding. Don't consider it profitable so I just buy as cheap as I can and very rarely backorder very few on the top (snap and dropcatch)... And when I do, I will most probably not bid if it turns out to be an auction.

    Even with the sample numbers you have posted (calculating sales, renewals, and purchases), one can see it's not as lucrative as it once was. At least when I started out 10 years ago, it was much better. I would go on buying sprees of 2-5 days and refill my inventory easily with many good deals. Now it seems one has to be year round buying (or trying to buy) in order to get some average/mediocre deals.
     
    Last edited: Aug 27, 2019
  17. NameBuyer.com

    NameBuyer.com Member PRO VIP ★★★★★★★★★★

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    I just mean Tier 1 domains of $30,000 or more. If I buy InternetFriends//com for $2,550, I wouldn't want to sell for under $30k.
     
    Last edited: Aug 27, 2019
  18. werty

    werty Established Member ★★★★★★★★★★

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    But in theory 2,550 x 100 = 255k. Just to break even. I know you are saying of buying 1 and including it in your overall portfolio but nothing guarantees you are going to sell that 1 domain. PS not trying to grind your gears. Just saying why I don't see the profits with such purchases. Eventually the odds will play against such purchases.
     
    Last edited: Aug 27, 2019
  19. slobizman

    slobizman Established Member ★★★★★★★★★★

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    It's definitely not as profitable as it once was, and it will be getting less profitable. These are my top ideas of why:
    1. Ad-based websites based upon keywords has been decimated. Just cannot get the sites to come up on page one of Google anymore without extreme difficulty. Also, ad rates are down, and ad blocking are up.
    2. Apps are taking the place of many websites, and these do not require domain names, and if they do people just get something like [brandname]app.com or get[brandname]. Domain name so important.
    3. It's more accepted now to use another TLD, such at .io or .ai for example, than it used to be. Sure, a major brand wants the .com, but small to medium sized companies don't value it as much.
    4. People are not searching Google as much as before for information. They now search Amazon and within social media apps for info.

    I have about 2700 domains also. And I am letting more expire than I purchase. I'm trying to not purchase any new names unless something is really appealing. I like the larger cash flow from throttling my new buys. And I most definitely do not want to be left holding thousands of names when sales deteriorate further. Honestly, I think going full on in the domain market is a fool's game now and in the future.
     
  20. Mister Funsky

    Mister Funsky Top Member VIP

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    That is the key...correct pricing. I see so many names sold at 1/10 or 1/20 of what the sales price should be (talking retail here). If we (investors, flippers, etc.) would hold out for what a domain is worth, we would all benefit.
     
  21. NameBuyer.com

    NameBuyer.com Member PRO VIP ★★★★★★★★★★

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    This was in reference to the Tier 1 example ($30k or more). The price I have on it is $75k.

    But to your point, that is correct. If you want to make a profit in the first year, then you would need to pick names you can 100x the return. If I'm replacing 70 Tier 3 domains I sold with 70 Tier 1 & 2 domains for $1,000 each (at $70k total), I'm still making a profit for the year if I 30x them, and I now have a ton of Tier 1 "whale food".

    I'm trying to do a mix of domains I can 30x-100x to see if I can get some big sales. Plus, I'm currently paying $60k per year in renewals, so upping the quality of domains will make the renewal costs less significant as compared to overall sales, especially while upping the prices of my current inventory. Currently I have $60k in renewals with $130k-150k in sales, while I'm pushing to get to $80k in renewals with $250k+ in sales.

    I'm just working at trying to get more Tier 1 sales. Will let you know if it works or not. But my $15k sale this month was from a $150 domain that I bought 2-3 years ago so it's looking alright.

    Much of my influence came from Mike Mann and Rick this year.

    upload_2019-8-27_14-38-39.png



    Real Advice
    https://twitter.com/DomainKing/status/1156858192711888896



    Below is one of the most interesting videos I've seen on valuation. It has to do with Logo values, but the concepts can be applied directly to domain names. If you don't make it through the whole video, you should watch the last 20 seconds starting at 36:02.

     
    Last edited: Aug 27, 2019
  22. NameBuyer.com

    NameBuyer.com Member PRO VIP ★★★★★★★★★★

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    Just for comparison. Working off that same example, let's calculate the 2nd year in this scenario.

    Let's say you sold 1 name for $75k in year 1. Giving you a loss of $180k ($75 -$255k domains purchased).

    Now you have 99 domains that cost you $841.50 to renew for the 2nd year.

    You purchase 1 domain for $2,550 to get back up to 100 domains.

    So your total expenses for year 2 are only $3,391 ($842.50 + $2,550) and you have the same chances to get a $75k sale that you had in year 1. Where year 1 cost you $255k.

    So if you can maintain a 1% sell through, your profit would be $71k for years 2, 3, 4 & 5.
     
    Last edited: Aug 27, 2019
  23. werty

    werty Established Member ★★★★★★★★★★

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    Yes but no. IMO the higher you go in asking/sales prices, the lower the sell through rate. Also, I have noticed not just with my portfolio but from others as well, chances of selling a domain you hold seem to go down each year. So lets assume I am wrong and it's 1% for the sake of simplicity, the other 99 domains might not have or maintain that same rate imo. Most domains will never sell at all. It could be that of those 100 only 1-2 will ever sell.

    So year 2, 180K + $3,391. Still in the red and without having funds to reinvest and grow. I am sure that at 75K you might go a few years without sales. Why not take that 255k and invest in a more liquid market? It's money stuck without liquidity.

    And even if it where 1% every year, how many years to turn a profit? Assuming the same annual costs of $3,391 and assuming you get lucky with a 75K sale every year (not counting sales commissions if sold via third party). Small profit after 4 years (below 35k).... That's a very bad yield imo for a 255k risk. You can double that 255K in 4 years in other markets like real estate if timed correctly (not right now lol). But you get the point... Nothing surprising and that's assuming everything goes excellent with the wind on your back which is not realistic imo.

    This can put things into better perspective (nothing special with those returns):

    namepros.png
     
    Last edited: Aug 28, 2019
  24. slobizman

    slobizman Established Member ★★★★★★★★★★

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    For me, my best selling names were purchased 8-12 years ago. I had seen the future and bought up lots of robotics, solar and virtual names. Plus, lots of pronounceable 4-5 char names. But maybe I just got lucky.
     
  25. wwwweb

    wwwweb Top Member VIP ★★★★★★★★★★

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    i think they could get more value in buying private portfolios, most likely what you guys own, if they are willing to pay $200-$500 for these names in auctions, why not just make a deal with people like you who hold what they are buying in a big batch?

    That is why I think there is more to this relationship than we can see. If they are so hungry for names, why are they letting people dropcatch for $59? When they are paying $200 to godaddy? Why not only let the names that have 20 or more bids go to an auction, and keep the rest? They have all the registry connections already, why support their competitors?

    The Uniregistry portfolio buy program
    did not turn out to well because they are disciplined, but these guys like variety, and I know you aged namepros members have exactly what they are looking for...

    If you got $200-$300 for 3000 domain portfolios would you guys sell?

    Domaining at these prices is a newbies game. I am seeing names I sold many years ago, drop, and go back into auction and sell for 100x what I paid at the same venue years ago . Some I only got that 1 inquiry, and sold, which I was lucky because my cost basis was low. Now they go for 100x well that buyer needs to get a 3-10x multiple on their buy to sell it also, making it even harder.

    I don’t know why these idiot buyers can’t see that they can get better value in talking to large portfolio holders, and buying from them instead of playing the bid up game at godaddy.

    I mean 95% of the time, you are chasing a tier 3 name, you know it’s huge names on the other side when it goes from $12 to $200 in 0 to 60.

    Namebuyer didn’t hit them hard enough, I make them pay the full $150-$200 if their bot wants it’s that bad.

    We all know they can’t make money paying $200 for these names by the thousands

    Although they have been gaming godaddy for years, they got a lot of good names when they were buying thousands of backorders, and placing backorders as soon as the auctions closed. Only thing was you could beat them to the punch by placing a backorder 2 seconds before the auction closed, and beat them on the lag. They got tens of thousands of great closeouts like this for under $20. Don’t assume they have always played fair, and even with the sniping today, they are getting a pass as someone is looking the other way not wanting to upset the balance of things.
     
    Last edited: Aug 28, 2019

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