Domain Spotlight:

Don’t Worry About Appraisals: Everyone Is GUESSING Anyway….Everyone

Michael Berkens doesn’t have any prices on his names prior to receiving an inquiry. None.  At a lunch I had with Michael and a group of domain investors,  one of the guys at the table asked if he kept a spreadsheet and put ranges on his names.  Answer “Nope”.   Until someone puts in an offer he doesn’t worry about the price.  The reason is simple.  Its a unique name, therefore there truly are no comps and why worry about pricing until its time to sell.

Elliot Silver had a little fun yesterday over at his blog and let users put up names and welcomed public appraisals of those names.  As we all knew it would be, it was like a bunch of monkeys trying to screw a football.  Tons of what I thought were lower end names (there were quite a few good names as well) followed by appraisals all over the board.  But it was entertaining and I can’t really say that most of them were wrong about their appraisals.  Why?  Because I am surprised every….single….day..what certain names go for.  As an experienced domain buyer and seller (yes I consider myself experienced) I can come up with a range but my range is often wrong, very wrong.

Acro had an understandable post that only qualified people can give domain appraisals and while I agree with this statement for tax and asset use, I bet you they aren’t as accurate as many think.  If I had a contest where I took the top 10 names at Namejet and had a professional appraiser and a randomly picked reader guess the final prices at auction,  I think the reader has a very good chance of winning.  “These aren’t their true value”    This is the problem.  What is the true value?  If an auction in front of the largest group of domain buyers on a daily basis isn’t, what is?  Is it what the final end user would pay?  If I own it and Michael Berkens own it does it have two values because he always gets higher prices than I do?   Herein lies the problem.   WE ARE ALL GUESSING.

Here’s how I explained domain prices to someone last month.  Domains are like girls.  All girls are different, no two are the same, even twins (they have different personalities).  There are girls that pretty under the traditional view of pretty.  Brokers are like a modeling agency and have a good understanding of what the general public will think is pretty and they choose to work mostly with those types of girls.  But among all women are women that other men find attractive because all men have different opinions as to what “pretty” is.  There are chubby chasers, tall lovers, guys that like athletic types, and thousands of other “looks”  Domains are the same thing.  There are names that are obviously nice names but it really comes down to how “pretty” somebody thinks it is. What you are seeing on Elliot’s blog are a bunch of ugly girls waiting for the one guy that will find them pretty.

Yes, I understand that there are names that have higher paying keywords or may be terms in a popular segment that give it more value.  But even then,  people are making up what kind of multiples should be used from this info.  For every 5 people that are using comparables, I’ll give you 10 that are creating their price based on the buyer’s pockets.  While I don’t know exactly how Rick Schwartz prices his domains but I can guarantee he could care less about comps or multiples. He’s trying to set the price for which all multiples and comps will be based.

To call somebody’s domain “pigeon shit” is like calling someone a fatty.  One is bad for your pocketbook and the other is bad for your health, but neither is really bothering you. I cringe when I see overweight people. Not because they are lesser people but because they really have no idea how much better life would be if they lost the weight. I feel the same way about people who buy what I deem valueless names.  It’s a shame that they don’t know better.  That they could have spent their money more wisely.   But who cares if a person spends $10,000 on junk names?  I don’t give a shit. It’s his money.  If he thinks they are worth $20,000 I don’t care either.  I’m not buying the names so what does it matter to me.

I NEED people that think they know better than me.  I need people to buy my domain because they think it is worth more than I paid for it.  Most of our domain sales are between ourselves.  Final users step in and buy quite a few, but the majority are purchased by someone who is going to try and resell it.  To make the picture even more unclear take a look at the Sedo and Afternic weekly sales.  Still think you know the value of a domain?  You are lying if you thought that many of those domains would ever fetch the prices they fetched.  Again, you aren’t appraising a name, you’re really appraising the amount of chances that someone with deep pockets will want that name. High, Low.

In short, every domain appraisal in my opinion is a guess.  It’s like the weatherman.  There are some guesses that are more educated than others but it’s still a guess.  And like the weatherman, nobody is surprised when they are wrong but yet they still get paid to do it.

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13 Replies to “Don’t Worry About Appraisals: Everyone Is GUESSING Anyway….Everyone”

  1. “If I had a contest where I took the top 10 names at Namejet and had a professional appraiser and a randomly picked reader guess the final prices at auction, I think the reader has a very good chance of winning.”

    Can you please do this? Just for entertainment value? I would love to see the results!

    1. Joel,
      The problem would be that the “pro” would have nothing to gain. If they win they were expected to win, if they lose they lose face. But I’m open if anyone wants to give it a try

  2. Shane – One of the lessons I learned directly from Rick Schwartz, is that if you don’t ask, you don’t receive. In other words, if one cannot accurately evaluate the worth of their domains, once the offer comes in they face this predicament: 1. Ask for a figure pulled out of their butt, usually too high 2. Ask too low of a price, afraid that they won’t sell, hence leaving money on the table.

    While one would not keep a spreadsheet of price ranges, they definitely keep the same spreadsheet in order to track what they paid for the domain (either in registration, renewals or acquisition fees, if any). In other words, when the offer comes, the first thing you need to know is your cost.

    Another point: making an appraisal does not equal to an offer to buy. It seems to be an on-going argument, that if I appraise at $200k then I should buy it at the asking price of $100k. That’s an example of a wrong philosophy, not to mention, wrong pricing on the seller’s end (for the sake of example, that is.)

    NameJet is a different horse, as you know. It’s a microcosm of domain auctions, just like SnapNames. I once left a domain there for two weeks past the end of its auction (it didn’t sell,) and someone contacted me asking about how they’d buy it (they could not buy it, since the auction had ended.) In other words, when something that didn’t sell at $500 reserve at NJ, somehow ends up selling for $2,500 privately, it means that NJ is a closed system for domainers. It works well for selling, but does not reflect accurately the true price of domains; it’s seriously discounted. I’m sure you got some great deals there, as a buyer; I know I did.

  3. The truth is Michael Berkins owns over 75,000 domains and has made well over 10 million dollars selling them so to be realistic he is not in the position to have to place a buy it now price on his domains because he can sit on them and wait for the ultimate buyer. Same is true for Rick Schwartz which owns over 5,000 names but has only sold 16 over the past 25 years because on those 16 he has made millions so he is also in the position to sit and wait for the ultimate buyer and can play the Hardass game because ultimately he doesn’t care. When he needs some money he will pursue some buyers when they come. Do you really think is worth 750k? but Rick did his homework and found out he was dealing with CNN and since he was already in a good financial state he could easily play the game and throw the dice and see what he could make stick. The problem for you and I and most domainers is we don’t have the big bankroll so we have to price to sell.

  4. Very interesting discussion.

    There are some facts that we should follow to their logical conclusions.

    First of all, domain names are commodities. They are subject to market conditions. They obey the law of supply and demand. Domain names are no different, really from any other commodity. Except in one area: cornered market. Who you are tend to play a role in the daily market place. If you are a Berkens, or a Schwartz, or even an Elliot, there’s a perceived aura that your name must be valuable because you know what you are doing. This may or may not be true. There a bunch of “elite brokers” at Sedo, and other places who determine if your domain can even see the light of day in an auction. Yet, they themselves own domains for sale, hence a glaring conflict of interest. These “brokers” form a gang with some popular bloggers, and seriously damage the law of supply and demand.

    Many people who bought domains in the last 10 years were burned due to their hype of what constitutes a “great domain name”. Of course these range from “descriptive, key word” names, to “generic”, two letter, and so on and so forth…

    Even tho we see major companies, start ups such as Google, Amazon, Ebay, Twitter, Yahoo,… do wonderfully with the opposite recipe, these people tell you “don’t believe your lying eyes”. Usually followed by : “oh you can succeed with any name if you spend millions promoting it”. Well, these companies are smart, yet the mantra is that “they don’t get it”.

    All I can say is that domain names can be like any commodity, it can be appraised, and the true value of name ascertained only when these cabals are sidelined, the market opened up to everyone, the conflict of interests removed, everybody stops worshiping idols, and everyone is truly given a chance, and equal opportunity. Will this ever happen? I doubt it. The character of these individuals, and company’s, especially Sedo is injurious to the whole polluted domain market. Try submitting a name to Sedo for auction if you don’t know any of the “brokers” and see, then go back and look at the names they sold and tell me. Some days they may sell for $43,000, and another day day nothing. Something is fishy and rotten. However, if you owned, even a used car, you can sell it in the market regardless of who you are. Join me to expose these idols.

    1. Uzoma,

      You need to look up the definition of commodity. Second,if you hate this industry so much why do you continuously come to talk about it and comment on all the blogs? You also complain about all the wrongs in this industry yet somebody sent me a little story about this electronics guy that was kind of ironic

  5. @uzoma

    Domains aren’t commodities. Commodities are products that are indistinguishable from each other and priced in bulk – i.e., corn, oil, pork bellies, etc. Domains are all unique- each one is one of a kind. Big difference.

  6. “there’s a perceived aura that your name must be valuable because you know what you are doing”

    I should only be so lucky that people would buy names at higher prices from me because there’s a perception that my names must be valuable.

    I do my homework when I acquire a domain name and that involves industry as well as keyword research. I don’t buy or own thousands of domain names, but I am very selective and try to buy valuable domain names at good prices, which I can sell, monetize, or develop to drive a solid ROI.

  7. I am very selective and try to buy valuable domain names at good prices, which I can sell, monetize, or develop to drive a solid ROI.

    That is a perfectly summed up sentence on why appraisals are valuable. Without the ability to appraise a domain you would never be able to run your business. IMO, the problem with honest appraisals is, there are too many domains and too few people with real-world experience WHO DO NOT HAVE AN AGENDA and who are willing to share knowledge.

    There MUST be ways to appraise a domain or they would never sell. Even an idiot who grossly overpays has a method to his madness. It may be the wrong method, but it was still his attempt at scratching out an appraisal.

    I think another part of the problem is the wildly different backgrounds that domainers bring to the table. If you are a hard-balling SEO who can deliver ranking and traffic in highly competitive industries YOU WILL value a domain with a different set of criteria than someone who hires out the building of an 8 page micro-site. Someone who only parks domains will have yet another method to appraise domains that they swear by and further still – smart business people that can visualize brands and spot trends will have even more ideas.

    Is one better than the other? Are they all wrong?

    I propose they are ALL CORRECT – even though they may all give very different values for the same domain. You just need to know what kind of appraisal your getting, the experience of the person giving it and whether or not that person has anything to gain by appraising the domain high or low.

  8. You just never know why someone wants a name or what they will pay. My teenage son told me to register some “MMA” names a few years ago, it was an up and coming sport (Mixed Martial Arts).

    One ‘silly’ name we registed was and low and behold a buyer came along and paid a very nice price for it! Frankly, it got no traffic and I probably would have dropped it next time around.

  9. Let’s take a look at an authoritative definition of commodity. Now, bear in mind the context in which I used it, I meant that the bearer of an item should not determine its worth. Here we go:

    “In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs.[1] Economic commodities comprise goods and services.[2]
    The more specific meaning of the term commodity is applied to goods only. It is used to describe a class of goods for which there is demand, but which is supplied without qualitative differentiation across a market.[3] A commodity has full or partial fungibility; that is, the market treats it as equivalent or nearly so no matter who produces it. “From the taste of wheat it is not possible to tell who produced it, a Russian serf, a French peasant or an English capitalist.”[4]”


    Of course, the word also reflect the points made by my critics, but not exclusively.
    “Commodification (also called commoditization)[ disclaimer: I OWN ] occurs as a goods or services market loses differentiation across its supply base, often by the diffusion of the intellectual capital necessary to acquire or produce it efficiently. As such, goods that formerly carried premium margins for market participants have become commodities, such as generic pharmaceuticals and DRAM chips. Another example is the credit card product, where all suppliers offer almost identical interest rates, fees, rewards programs, and bait & hook incentive models for new customers. Since the core credit card product is essentially identical, the only remaining market differentiators are branding & customer service.

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