Why paying 3 and more years of revenue ?

[wow!]

What is the logic / sense behind paying
the revenue of 3 years and more for a traffic domain?

Lets say a domain making $20 per month .
If I want to buy it why should I pay 20x36 months = $720 ?

How can I be sure that I'll get same revenue in the next years?

Is it a good investment?

 

[floatingworld]

What is the logic / sense behind paying
the revenue of 3 years and more for a traffic domain?

Lets say a domain making $20 per month .
If I want to buy it why should I pay 20x36 months = $720 ?

How can I be sure that I'll get same revenue in the next years?

Is it a good investment?

Investments carry risks. You can never be 100% sure. Financial markets revolve around the management of risk. Re the price to be paid, you are using your market knowledge to assess the future. If you dont want the risk then do not speculate. Only death is certain in life.

 

[weblord]

:imho: i would be happy to pay that if somehow the first owner will assist you in some way where you can reach that sales goal per month or more. some tips and where do he/she normally advertises, the contact person, meaning you buy it as a whole and also the leads/membership and contacts that came in touch with the site.

What is the logic / sense behind paying
the revenue of 3 years and more for a traffic domain?

Lets say a domain making $20 per month .
If I want to buy it why should I pay 20x36 months = $720 ?

How can I be sure that I'll get same revenue in the next years?

Is it a good investment?

 

[Don]

It's not always the revenue of a domain that a buyer looks at.

The traffic some people make $20 a month with... another person might be able make $500/month or more using different methods... to them... it's a steal.

 

[Zilla]

well, I blieve while people buy the traffic/revenue name, they made an assumption first, the stat is there, see 20$/m, and assume it will keep stable...(some people want give a 20% downgrade while continue the payback caculation...in this way, people assume the domain will avarage earn 16$/m in future), and you need valid this assumption, some factor may impact this assumption like:

1. that is an old domain, some visitor continue visit it but after 3 month, no one will revisit it again..
2. the seller AD it and get the un-nature click
3. some interesting news/event bring more click just recently, while after this event, the visitor will decrease as well..
..etc

after valide/establish the assumption, then u need conside payback, the caculation is if U pay 720$ for it, the payback is 3 years in this case(still using 20$/m as the base)....

actually, if u have no other good investment channel, 3 years payback is good enough, not consider the domain itself have other value, may be some end user want buy it at 1000$...u have a lifetime to wait this kind of opportunity.....

so, for me, the strategy is

1. any domain if can earn the reg/renew fee itself is worth to reg/renew, u lose nothing while earn an opportunity to sell it in future...
2. if this domain can earn 20$/m. then 3 year payback if good enough to buy it, while the conside point is:
a. u need valid that assumption, if it really can generate the 20k/m or 16$/m
b. u lost the oppotunity invest the 720$ in other area..(opportunity cost I remember is the term accountant use) (eg: some other invest area can provide a 2 years payback)
c. u still earn an lifetime opportunity that domain may can sell at a great price in future...

 

[Jo]

well, I blieve while people buy the traffic/revenue name, they made an assumption first, the stat is there, see 20$/m, and assume it will keep stable...(some people want give a 20% downgrade while continue the payback caculation...in this way, people assume the domain will avarage earn 16$/m in future), and you need valid this assumption, some factor may impact this assumption like:

1. that is an old domain, some visitor continue visit it but after 3 month, no one will revisit it again..
2. the seller AD it and get the un-nature click
3. some interesting news/event bring more click just recently, while after this event, the visitor will decrease as well..
..etc

after valide/establish the assumption, then u need conside payback, the caculation is if U pay 720$ for it, the payback is 3 years in this case(still using 20$/m as the base)....

actually, if u have no other good investment channel, 3 years payback is good enough, not consider the domain itself have other value, may be some end user want buy it at 1000$...u have a lifetime to wait this kind of opportunity.....

so, for me, the strategy is

1. any domain if can earn the reg/renew fee itself is worth to reg/renew, u lose nothing while earn an opportunity to sell it in future...
2. if this domain can earn 20$/m. then 3 year payback if good enough to buy it, while the conside point is:
a. u need valid that assumption, if it really can generate the 20k/m or 16$/m
b. u lost the oppotunity invest the 720$ in other area..(opportunity cost I remember is the term accountant use) (eg: some other invest area can provide a 2 years payback)
c. u still earn an lifetime opportunity that domain may can sell at a great price in future...

Very good post...very good points ...rep added.

 

[Phronesis]

IMO it only makes sense to pay high multiples if there is good reason to believe the domain doesn't have a short shelf life. For example (I'll probably get butchered for saying this), I wouldn't pay more than a year or 2 at most multiple for a revenue generating "wii" domain because in 5-7 years, there will be a new, better console and traffic will slowly dry up. On the other hand, a dating or finance name will probably still be getting traffic for many years to come.

 

[Zilla]

thanks kerrijo for ur rep....

and Phronesis, you share a very good point to consider if a name can lasting its traffic performance...

 

[Dr.Lee]

Right,Phronesis, how many years payment is dependent on the name itself.
some names have very high brandvalue, but has less than $1 revenue per month, then how to calculate the value if the names is sold for more than $10K?
Some names may have nice revenue currently, but maybe after a period, the fashion tide is off, or the thing represented by the name will be out of style. Guess few buyers like to pay 96 months for these names.
financial names, poker names are external names. maybe for some nice names, 10-30 years revenue are not over paid.
revenue is mainly a bargaining tool used by resellers.
I seldom saw the dnjournal sales listed out the name revenue. For nice names, revenue can be omitted.
Resellers do not like to afford the risk. They may only be willing to pay 12 months revenue. This is no wrong for them.
The revenue and traffic are also often related with the parked ppc providers. Some ppc companies pay well for certain type of names, some pay 0.00-0.01 ppc, then how can you judge the name value based the $0.00 ppc clicks? If the seller park names at a very high ppc company and get $7 per click, but the buyer only get 1 dime revenue after one month,should the buyer ask for refund? or vise verser, if the seller got 0.00 ppc and lower than $1 revenue formerly, after one month of the sale, he was told by the buyer of hundred dollars revenue per month, should the seller cry?
so I think we should earn ppc, use ppc as a tool, but never rely on ppc revenue.