Just the other day, I got a message from a potential client claiming that a price I had quoted for one of my domain names was ridiculous. Yes, that was the exact word they used: ridiculous. It got me thinking, what makes a domain name price ridiculous? Is that quoted price really ridiculous? In fact, how can the buyer possibly know?
Can the buyer know more about a domain name that the owner? In my opinion, unless the potential buyer works with domain names on a daily basis, the answer is no. Actually, even if they are firmly in the industry, there is still no guarantee that they know more about a specific domain name than the owner. I personally don’t know everything there is to know about every single domain name out there. A colleague in the industry recently asked me for my opinion on an offer they had received for a domain name. I couldn’t comment because I didn’t have enough information on the matter.
If you think the price is ridiculous, I just wonder what you’re comparing it to
A domain name registered in 1996 is not the same as the one registered for free at GoDaddy today. On the other hand, the price might be too steep compared to your budget. It might even be ridiculous compared to the use you have in mind for the domain name. There are probably myriad reasons why you might think the price for a domain name is ridiculous.
However, I thought I would provide a few tips to help you deliberate. Be sure to remember them the next time you think a domain name’s price is “ridiculous”.
1. Domain Names Cost a Lot More than $10
They don’t. That, my friend, is the renewal rate, depending on what extension you have. These days, some new extensions cost between $50 and $3000+ per year to renew. A simple escrow transaction alone can cost thousands of dollars, depending on the price of the domain name. Add to that all the little fees in between such as transfer and conversion fees and your costs start to look enormous. If you want ridiculous, check out the transaction costs.
2. Preowned Domain Names are Pretty Expensive
A good place to start is on Google. Google the domain name you’re looking to purchase and see what similar names are selling for. People are willing to research a stock before buying it and yet won’t do the same for domain names. Simply doing your due diligence will save everyone a lot of precious time.
3. Domain Name Owners don’t Care Why You Want to Buy the Domain Name
When a domain name owner sets the price for their domain, they usually have a certain ideal buyer in mind. This is usually a company, especially if it’s a short, catchy domain name. They certainly won’t adjust their prices for you and your science fair project. A domain name owner is not in the business of charity so don’t expect them to lower their $60,000 price tag to $30 for you.
4. The Owner Knows Best
You don’t know more about a domain name and the domain name business than the owner. The worst thing you can do is go to a seller and dictate what price they should offer based on a narrow view of how the business works.
5. The Owner is Probably Already Earning from the Domain Name
If you know about the concept of parking a domain name, then you can imagine how much money a domain name owner can make from a domain name in theory. Once the owner sells the domain name to you, he’ll have to forfeit that revenue.
The owner also paid a certain price to acquire it. More often than not, a professional seller will have paid between 4 and 6 figures to obtain a domain name. In fact, that doesn’t even really matter. What matters more than the purchase value of a domain name is its current price.
A domain name that was registered in 1993 for $20 isn’t going to cost $20 today. That’s just not how it works. A lot goes into determining what the present-day value of a domain name, including past sales of similar domain names and the business potential. Your uneducated guess/feelings can do nothing to impact this reality.
I enquired about a 1-word domain name with a .com extension last week and the owner told me he had paid a lot more than what my offer was, which was $10,000. I did a quick search online and discovered that he had paid $40k for the domain name in a 2006 auction! That just goes to show that even I, someone who’s been domaining professionally for the past decade and a half, can’t know everything. I certainly can’t know more about a domain name than the owner.