discuss Is there a middle class in domaining?

[Molly]

Hi guys. I’m looking for the middle class — or hoping to help build it… wholesalers want to pay no more than 1-3% of retail prices for domains.

Perhaps I don’t understand economics or this industry well enough, but isn’t that a little excessive — 97-99% profit margin?

It feels a little bit like there are only two classes — poor and rich. Surely there’s enough for the in-between, no? And where might I find it? Thanks!

 

[Future Sensors]

Perhaps I don’t understand economics or this industry well enough, but isn’t that a little excessive — 97-99% profit margin?

You incorrectly assume that 100% of the domains are sold. That is not the case at all.

 

[phaethon]

Domains offer probably the best return of investment after a lottery ticket. Selling domains at this level of ROI though requires skills and knowledge.

 

[Callmejohn]

With a typical retail sell through rate of 1-2%, that kind of profit margin is necessary. @twiki has some really good posts covering pricing that help clear this up. Sure, it is possible to have more like a 10% STR if you focus on wholesale, but the basic premise is that you will be renewing or dropping 10-100x the number of domains that you sell each year

 

[bmugford]

Hi guys. I’m looking for the middle class — or hoping to help build it… wholesalers want to pay no more than 1-3% of retail prices for domains.

Perhaps I don’t understand economics or this industry well enough, but isn’t that a little excessive — 97-99% profit margin?

It feels a little bit like there are only two classes — poor and rich. Surely there’s enough for the in-between, no? And where might I find it? Thanks!

Well, the average end user sell-through rate is around 1%-2% a year. You need high margins on what does sell to pay for everything that doesn't sell in a given year.

Also, those type of ratios are more for nothing special domains. I might pay $100 - $200 for some decent two word .COM that I would price around $5K range.

The better the domain, the more liquid. The more liquid, the higher the ratio.

For instance if you are selling something like a LLL.com or CVCV.com you can expect a much higher ratio.

It's kind of like what a pawn shop will give on gold, silver, a rolex, vs. what they will give on some $100 used speaker.

Brad

 

[Molly]

Thanks for your comments, you guys! That makes sense, but doesn’t that mean the initial buyer is being forced to bear all the risk? All of my / our domains may not sell either — wholesale or otherwise.

 

[Molly]

Thanks for your comments, you guys! That makes sense, but doesn’t that mean the initial buyer is being forced to bear all the risk? All of my / our domains may not sell either — wholesale or otherwise.

…I can’t help but think selling to a wholesaler at 10-25% of retail should be enoug. …Says the newbie who’s sold only one domain [in three months of domaining].

 

[bmugford]

Thanks for your comments, you guys! That makes sense, but doesn’t that mean the initial buyer is being forced to bear all the risk? All of my / our domains may not sell either — wholesale or otherwise.

That is pretty much how it is.

That is why an arbitrage opportunity exists. The inefficiency of the market.

If it was easy, everyone would do it.

Brad

 

[bmugford]

…I can’t help but think selling to a wholesaler at 10-25% of retail should be enoug. …Says the newbie who’s sold only one domain [in three months of domaining].

It depends on the type of domain, floor value, upside, etc.

It also depends what you define as "retail value" as that is also subjective.

Brad

 

[Future Sensors]

Thanks for your comments, you guys! That makes sense, but doesn’t that mean the initial buyer is being forced to bear all the risk?

I wouldn't call it that, but I would like to point out that it is not unique to domain investing. In stores you also have to deal with a certain turnover rate. The products you sell enable you to keep other products in stock.

 

[bmugford]

I wouldn't call it that, but I would like to point out that it is not unique to domain investing. In stores you also have to deal with a certain turnover rate. The products you sell enable you to keep other products in stock.

There are also upsides to the domain business.

Sure, renewals suck. But, that is really the only major expense.

You don't need a storefront, employees, and all the other expenses related to most other businesses.

You can also do it anywhere in the world with an internet connection. So, you can essentially take your business wherever you go.

Brad

 

[Molly]

Thanks again. I suppose the lesson for us bottom-feeders, so to speak, is slow down! Don’t buy or reg more than you can afford to lose. I suspect that has been a difficult lesson for more than just me, lol.

 

[bmugford]

Thanks again. I suppose the lesson for us bottom-feeders, so to speak, is slow down! Don’t buy or reg more than you can afford to lose. I suspect that has been a difficult lesson for more than just me, lol.

There is really no need to chase domains unless they are that unique.

New inventory comes on the market daily in a neverending cycle.

Brad

 

[DrJacoby]

…I can’t help but think selling to a wholesaler at 10-25% of retail should be enoug. …Says the newbie who’s sold only one domain [in three months of domaining].

If you are willing to pay 10-25% of retail, go ahead and do it. No one is stopping you.

 

[Future Sensors]

Thanks again. I suppose the lesson for us bottom-feeders, so to speak, is slow down! Don’t buy or reg more than you can afford to lose. I suspect that has been a difficult lesson for more than just me, lol.

The positive thing is that you are on a forum full of experience and you try to learn quickly.

 

[Molly]

If you are willing to pay 10-25% of retail, go ahead and do it. No one is stopping you.

I meant it the other way — I’d sell to WS at 10-25% of retail. …or, maybe we’re saying the same thing? I’m not sure at the moment.

 

[Molly]

There is really no need to chase domains unless they are that unique.

New inventory comes on the market daily in a neverending cycle.

@bmugford — now that I’ve spent a couple of weeks looking at expired / closeout domains, I see what you mean. There’s almost more opportunity for cool domains there than hand-reg! I wish I had learned that lesson earlier, though I need to slow down there, too.

The positive thing is that you are on a forum full of experience and you try to learn quickly

@Future Sensors — I really appreciate that! I only wish I had found you guys sooner, lol.

Fun Fact — this is the first online forum I have ever signed up for and posted in, and it’s not because I just turned 18. My first post on NamePros felt like a pivotal moment in my life, lol.

 

[bmugford]

@bmugford — now that I’ve spent a couple of weeks looking at expired / closeout domains, I see what you mean. There’s almost more opportunity for cool domains there than hand-reg! I wish I had learned that lesson earlier, though I need to slow down there, too.

I handreg domains from time to time, but I think there is a lot more opportunity in existing registrations.

With 155M+ .COM regs the handreg opportunities are slim pickings IMO.

It is a lot easier to evaluate domains than create domains from scratch.

You can also filter through them based on whatever metrics you choose.

Brad

 

[biggie]

is slow down!

Hi

what class you fit in or get in, mostly depends on what you bring to the table

some folks may come with big pockets, buying 4 > 5 figure domains right off the back.
some come in and they'll be in a class all by themselves.

the bottom-feeders can get paid too.
especially if/when they know how to grab "low hanging fruit".
cuz, in reality, expireddomains, closeouts, etc. ain't nothing but places for us to pick up trash, that somebody else dropped.

again, it's what you bring to the table or what you learn, manners etc, while sitting at the table -
and perhaps which table you're sitting at and who you're engaging with at that table.

imo....

 

[bmugford]

Hi

what class you fit in or get in, mostly depends on what you bring to the table

some folks may come with big pockets, buying 4 > 5 figure domains right off the back.
some come in and they'll be in a class all by themselves.

the bottom-feeders can get paid too.
especially if/when they know how to grab "low hanging fruit".
cuz, in reality, expireddomains, closeouts, etc. ain't nothing but places for us to pick up trash, that somebody else dropped.

again, it's what you bring to the table or what you learn, manners etc, while sitting at the table -
and perhaps which table you're sitting at and who you're engaging with at that table.

imo....

Also, if you come in with a big budget and lack knowledge and experience it can just be a faster way to flush money down the toilet.

Unless you have an endless supply of money, most people that make poor decisions eventually hit a wall.

Brad