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What percentage of assumed end user price should a domain investor pay to acquire a domain?

Labeled as discuss in General Domain Discussion started by garptrader, Mar 17, 2019.

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  1. garptrader

    garptrader Top Member VIP ★★★★★★★★★★

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    In the stock market a 10% annualized return would be decent and 20% would likely be far above the average mutual fund. In real estate projected double digit annualized returns would also be considered suitable investments. Yet few domain investors consider backorderng a domain to resell it at $100 or hand registering a domain to sell it for $25. What should be a realistic expectation (ROI or annualized return)? Factors to consider include portfolio turn, annual renewal costs, average sales price, commissions, marketing costs, etc.
     
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  2. D Haynes

    D Haynes Top Member VIP

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    2/3 percent sell through rate (of portfolio) is considered average and you should be looking at 10x investment for an individual name.

    For me personally it's not worth investing 5k in a name that might sell for 7k as there's no guarantee it will sell and if it does you could be holding for years which means that capital is tied up.
     
  3. NameLlama

    NameLlama Established Member

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    Demand for pre owned domain names is so low that people think they need pay $10 for domain they sell for $1000.. Otherwise they think you be unprofitable..
    "Demand is so near nonexistent that we must mark up everything crazy to try and break even.."

    Sellers will aim to double their money in 1 year.. Buying 1000 domains for 50 each average.. Maybe selling 20 of them for 5000 each average.. Or buying 100 domains for 500 each average.. Selling 10 of then for 10,000 each..
    Imagine aiming to double your money in in one year in other investment..
     
  4. Asfas1000

    Asfas1000 Top Member VIP

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    I don't think it can be answered with a plain %.

    It depends on a lot of factors (price range, liquid-semi liquid-illiquid etc)
     
  5. garptrader

    garptrader Top Member VIP ★★★★★★★★★★

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    I believe there is an industry tendency to price for the perfect end user though most domain buyers have $xx to low $xxx expectations. So turnover is low compared to other retail sectors.

    Another challenge is assuming that an end user price should be x% of the equivalent .com or assuming that a reported sale in the same extension translates into higher value for one's holdings.

    Unless the domainer is doing very aggressive outbound and also pricing domains very aggressively, one should expect a multi-year holding period - bringing renewal costs into consideration. An $8 renewal cost is one thing whereas a $50 renewal cost for a large number of domains is completely different. Trying to recoup the holding cost of expensive renewals can price one's domains above market.
     
  6. bmugford

    bmugford www.DataCube.com PRO ICA Member VIP ★★★★★★★★★★

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    It depends on many factors, one being how liquid the domain is.

    If you are buying some random 2 word .COM 5-10% (or less) of an expected sale price is reasonable.

    If you are buying a LLL.com that ratio has to be much higher obviously.

    The average turnover rate is so low you really need to sell domains for a very high ROI to account for all the ones that don't sell in a typical year.

    Brad
     
  7. garptrader

    garptrader Top Member VIP ★★★★★★★★★★

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    Well I guess another related issue is how much one can influence sales turnover by pricing more aggessively. I recall domain sales studies seven or eight years ago showing the ratio of domains sold in different price ranges. Far more domains are sold below $1500 than above that price but as an industry we tend to base pricing on a best case DNJ reporting scenario.
     
  8. Asfas1000

    Asfas1000 Top Member VIP

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    I'd love to see this study....even it may not be valid today.
     
  9. hookbox

    hookbox Top Member VIP

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    ROI would be far more realistic if it weren't for those damn renewal fees. 😤 Holding costs kill realistic expectations.
     
  10. garptrader

    garptrader Top Member VIP ★★★★★★★★★★

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    A SEDO domain market study from 2012 showed 86% of sales on their platform $2500 or below with the median .Com sales in the $650 range. Sales in other extensions were slightly lower in pricing. I believe most of the market studies I have seen show .com with about half the market. That leaves CCTLDs and other extensions sharing the other half.

    But it seems I recall a study published by DNJ about some other large portfolio holder which showed a n overwhelming portion of sales $1500 and below. If course one-word .com domains or LLL domains can sell much higher.
     

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