When The End User Price is Less Than a Resellers Price

I see it more an more every day. Instances where a domain name is worth more because of speculation than the actual value of the domain to a person in that particular business or niche. Not because of the end user is unwilling to pay the high price. Because the value or competitive advantage it would give the buyer is less than the price of the domain. The value of a domain name as we know is based on many different things from search volume, cpc, or income from parking but most of all, the name is valued because there is only one of its kind and the speculation of what someone MAY be willing to pay.

Many domain investors wait around years trying to find that person willing to pay the price they think it’s worth. It’s becomes easier to give a value if there have been sales of names that are similar. You can also put a minimum price on a name if it earns income from type in or ad revenue from a developed site. Even previous offers can help decide what others may be willing to pay. But what if there aren’t those metrics? There are plenty of domains that don’t get offers of any substantial amount, receive little type in traffic, and while the CPC is high, because there is no traffic, it doesn’t earn. Why would this domain be worth money? Yet the owners are looking for tens of thousands of dollars. Many are waiting for that national company to come in that spends millions of dollars on advertising that feels $25K a drop in the bucket to spend on a domain. Is your domain more likely to receive that offer than the millions of others?

I received an email regarding a domain that would seem to be a very good keyword in my industry and the price was $3X,XXX. I know my business as well as anyone and probably know the plant domain business better than anyone. When it comes to making money, this domain holds little to no advantage over a name for $1000 that is a two word or maybe even a memorable original name. It actually may be too generic because most likely nobody would name a business with this domain. In my opinion, it has more value to a reseller who can sell it to the next person that will sell it to another person that thinks they can find the end user. End users probably aren’t going to want to spend the anywhere near the money the owner wants. They feel they would be better off using the $30 plus thousand to brand and advertise at a trade show or conference.

While I’m not saying that the speculative nature of our business is wrong or unhealthy. The contrary. It gives us all liquidity. If we relied on final users we would all be sitting on many names for eternity. I sell most of my names to people that think they can sell it for more than I sold it to them for. I need those buyers. There are some that have become apps or sites that are now no longer for sale and will be used for the purpose domain names were intended. The reason they are not all that latter category is because speculators are willing to pay higher prices that the people that actually want to use them. We are all searching for people that are willing to pay more than the speculators. Unfortunately this may never happen and the last owner holding the bag will realize this and be forced to either sell at a loss or become the end user through development.

There are some people that will tell you that if you wait long enough you will eventually sell that domain. I am here to tell you that may well be true but for many it will not. I am also not telling you to sell your domain assets cheaply. You have to know your domains and their value in relation to the final users. In general, the further it gets away from dot com the less value it has. In my opinion, if you own domains outside of com,net,org and a few premium dot me and tv you are only going to be able to sell to other speculators and are one yourself. There is nothing wrong with this. It’s like buying options instead of stock. Both risky, but the options are much riskier yet have a high return in relation to investment cost. In these cases the reseller price is much higher than end user price. As long as the resellers don’t dry up you’ll be fine. Only one problem, for most of the newer tlds they WILL dry up and your liquidity will become nil. Ask the dot co guys how easy it is to sell their names. No end users, and very few speculators.

So my point is this. Try and stick to names that have more value to end users rather than speculators. I can’t tell you exactly what those names are because I don’t know the business and industries behind the domains. I don’t go to cookie and cupcake shows so I don’t know how strong the online cookie sale business and the value of many of their keyword domains. But if you do know an industry, you should be able to pick out the names that if you found the right person, that particular name would give them a competitive advantage over their competitors. Those are the names that will hold value for a much longer period of time. Unless that industries fades, that domain will always have value, even if the speculators have moved on to hotter categories.