Whose Job is it to Make an Auction Successful?

Oct 21 2011

By  Chris Woodward



“What we didn’t foresee is people who submitted premium domains did not keep their promises to us. We made it clear that if a person or company was submitting a domain with an end-user Reserve, that they had an obligation to bring in end-user bidders to the auction, either live or by phone. There was not one end-user bidder at the auction. We not only knew in advance that those high-end domains would not be sold to domainers, but made it clear to those who submitted them that the domains would not be sold without their active participation in obtaining bidders.” -Howard Neu on the lack of TRAFFIC auction bidding/sales

Whose job is it to make an auction successful? I have always been under the impression that the auction “house” had the responsibility to promote the items and bring in interested buyers. If the owner of a fine piece of art decides to sell at an auction house like Christie’s, it is Christie’s job to promote the piece and bring in those willing to pay top-dollar. Christie’s benefits from the promotion as the more the piece sells for, the higher the commission they make.

According to Howard Neu’s comments, the TRAFFIC domain auction seemed to be relying on sellers to bring their own buyers if they were going to be selling the domains at the end-user reserves that were set. This was obviously a risky move and the fact that “there was not one end-user at the auction” confirms that it probably wasn’t the best strategy.

Shane and several other readers addressed Howard’s comments with responses of confusion. Why bring the domains to auction if there are multiple end-users interested?  Why not just strike a deal with the end-user or users directly? Howard was kind enough to reply…

“A person can negotiate a price for a domain with a potential buyer/end-user, but it is not the same as when you can get 2 or more potential buyers/end-users to bid against each other for a quality premium domain. The price will always go up, not down. So when someone enters a premium domain in any auction and that person knows that the only bidders will be domainers who will price it at a wholesale rather than retail price, it is in the Seller’s best interest to find interested retail buyers (end-users) to bid on the domain.”

Personally, if I owned the domain Dubai.com and had or could find multiple end-users interested, I would most certainly handle the private sale myself or hire an experienced broker that would manage the offers/counter offers from the interested parties. Why give my end-users the chore of having to travel to an auction? I’m trying to sell my domain and would cater to someone willing to spend millions of dollars with me. Handling a negotiation between multiple parties in a private sale has been done before. Ostrofsky did it when he had two parties interested in Business.com, and he didn’t even need a broker. He had his lawyer handle the negotiations and 7 or 8MM later the deal was done.

This is in no way an attack on Howard or Rick or TRAFFIC itself. I just felt that the comments from Shane’s original post posed a great question; whose job is it to bring in end-users for a domain auction? I come from the view-point that the more the domain sells for the more the auction house makes and therefore the proper promotion should be done to get the appropriate end-users to the event, or simply don’t allow unattainable reserves. Domain auctions are unlike fine art or classic car auctions that will attract both collectors and dealers. For a domain auction, chances are it’s going to be all domainers. If top paying end-users are desired, a completely separate type of promotion is going to be required. I don’t think we should rely on the domain sellers to spread the word, obviously we see this doesn’t work.

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Outsmarting the Dumb, Outworking the Smart

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  1. Leonard Britt

    Just my view but if an auction sponsor is going to take a 20% commission then why do they have no responsibility to seek buyers? One could just use SEDO or Godaddy auctions with a reserve and promote the auction on some domain forums. Or set up an auction on Namepros etc…

  2. John

    The only reason one hires a broker or auction house is to get access to interested buyers. That is why one pays a commission or spends money to attend an auction. Take a cue from Investment Bankers who make deals happen. Companies go to them for funding because of their ability to find buyers for sellers (which they often have from years of doing it). IPO roadshows as well. For that skill they receive a commission. Domain industry needs to become more automated and educate the end users. Conferences are great for industry professionals and corps that service those professionals. To think End Users are going to take time out of their schedule and pay to attend them is a bit of a stretch, especially in today’s electronic world.

  3. Rick Schwartz

    Hi Shane,

    Thanks for the post. I think Mike Law did a great job explaining it. I am on record all year of explaining why this would work if they followed the formula. You need 2 to tango. Plus when you get a great domain like cheese.com just days before the auction, sure does not help getting the end users. It is a 90-180 day time frame to get the word out and do it right. I had less than 180 hours at a point in time where putting in the show was the entire focus.

    Cheese.com could have been a domain to run a campaign around had I had it in Augu.st. And at $1MM was not overpriced for an end user. It is not that far out of range for a domainer. It has at least the same value as candy.com and I could make a case that it is a higher ticket in a more mainstream biz that could also branch out into wine. So this was a GREAT domain and maybe it will move at $750k. It’s a business.

    Domainers can use our credible venue with a date and time certain to bring end users to the table for a “Unique opportunty in time” to get a THEIR category killer domain name whatever category that is. If this happens, you have a contest. And if you have a contest, the prices go up. Demand drives prices. When they see their competition is there, that DEMANDS they they also get in there. With every passing day that is getting easier to happen not harder.


  4. Rick Schwartz

    Leonard, we don’t charge 20%.

    Our rates are between 7.5 and 15% depending on the program selected.

    I have articulated a formula that can extract the most value in an auction environment. Brokers can use the auction to their advantage by finding multiple interested parties and having a contest that will drive up the price to a truer value. We can all sell short, the idea is getting the most you can and when you have a few folks competing for the same thing. I have stated we can’t do it alone. It’s not possible. I stated it up front. Domainers MUST participate in the marketing IF they want to extract the most value. If not, just put the domain up at no reserve and let the market decide the value.

  5. Jon

    Very spot on Shane. Bringing end users to live auctions will never work. Someone needs to offer long-term end user negotiating service for high-end domains like dubai.com for 3% commission. That someone would ideally be domain attorney with good negotiating skills. Most negotiations will not lead to sales, but even one sale a year at $2 million is $60K in commission. Not bad for a small side gig for an attorney. Trying to get 10%-20% to sell domains like dubai.com is a complete joke. Who in the right mind will pay $ hundreds of thousands to someone for what amounts to 10 hours of their time making phone calls.

    Or you can do what I do. I make a list of obvious end users for each high-end domain. I wrote nice templates for letters and phone-calls. Then I hire a girl with good phone skills for $15/hour to get through to CEOs by phone and by sending letters. Her job is just to get the CEO or CEO’s assistant to have a conversation with me. Then I do all the negotiating myself. Even if she does not get a particular CEO interested to have a conversation with me at this time, I still have the names, phone numbers and emails to contact next year and each year after that, etc…

  6. ChrisWoodward

    Rick, my name is Chris Woodward and I write with Shane on his blog here. This was one of my posts and I really appreciate you taking the time to comment and provide some insight.

    One of the domains I was really intrigued with in the auction was Dubai.com. With the growth and wealth of Dubai I really thought the domain had a chance to sell for big money. I figured there would also be several end-users interested in the domain. I was just wondering what efforts we put into the promotion of Dubai.com and were there any attempts to promote the domain in Dubai itself?

    Again thanks for commenting and I look forward to hearing back from you.

  7. Jeff

    Nobody seems to have noticed that the post was written by Chris, not Shane. Incredible that writing it twice at the beginning of the post, once in bold with lots of space around it, doesn’t make this clear.

  8. Ron

    “We not only knew in advance that those high-end domains would not be sold to domainers, but made it clear to those who submitted them that the domains would not be sold without their active participation in obtaining bidders.”

    So Howard wants you to submit your premium domain to him, and he wants you to bring the buyer there, and for his slice of the sale price he is doing exactly what? Providing a chair for the end user to sit in for an hour?

    Why would anyone submit a domain if they had to find the buyers too? What is the benefit of the middle man (i.e. the auction) then if as Howard states that the people that will naturally be there are domainers and won’t pay the high prices?

  9. Trico

    “Nobody seems to have noticed that the post was written by Chris, not Shane. Incredible that writing it twice at the beginning of the post, once in bold with lots of space around it, doesn’t make this clear.”


    I think it would help greatly if you also put your name

    -written by Chris Woodward

    at the END of the blog post.

  10. Don

    Paying 15% to a broker is not a big deal. If that person connects you with a buyer then they should be paid accordingly.

    People give away 6% to Real estate agents everyday. Does not matter if it takes 1 hour or 500 hours it all averages out. I would be happy to pay someone 15% if they have a buyer and get a good price. Can’t see what the big deal is. I would be more upset at putting my life savings into a house and then give 6 or 7% away to an agent than giving 15% to a domain broker. People are just trying to make a living. When you go out for dinner are you going to complain that they make 100% off your food for just preparing and serving to you.

    With auctions “it is the sellers responsibility to get people to the auction”.
    With brokers “it is the brokers responsibility to sell the domain name”.
    If your having an open house it is the agents responsibility to get people to come to the open house. It is that simple.

    In my view of domain auctions, category specific auctions are the way to go.
    If I was selling financial name, I would submit my name ColoradoLoan.com with a broker or auction that just sold Loans, but none exist that I know of. So I hold on to hit until I find a good broker.

    If I was selling my name medicareplans.net I would sell it with me because it is what I do. It only took me one time to see what an auction house does for PR last year to know that if you want the most money out of your domain name you better get a broker.

    But you can’t expect the auction to bring in buyers. Remember nobody knows your domain name is up for sale at an auction expect domain investors and PPC companies. Your missing out on the potential 99% of buyers by not placing it with a broker. At the same time some people just want to unload and auction houses are great for that.

    Our business is insurance and so what we sell 90% of the time are insurance names. We understand the insurance business so it gives us an advantage when talking with companies. I rarely sell other people’s insurance names because they don’t want to give up 15%, and not to many come around that are worth 250k or above. Except income websites.

    Don M

  11. Hal Meyer

    Real estate agents get 6% and they typically pay for all of the advertising expenses, which can be significant.

    In my view, all domain auctions should have a similar marketing commitment including a dedicated staff member who does nothing but contact prospective buyers.

  12. Mark

    I don’t think any of these people have ever worked at a big company to understand why these auctions don’t work for end users.

    If you had 6 months to drum up a buyer for Cheese.com – and you got Kraft interested, and you got somebody from Cabot interested and maybe a few others – they aren’t going to say “oh, ok – the only way I can bid is at your little auction thing featuring prosciutto di parma? Ok – see you there with my checkbook”.

    They are going to say “we’re interested, but we’re not playing in this auction game. We have lawyers, and they aren’t going to let us just go and bid on the name without all the i’s being dotted”.

    How many of these auctions do we have to watch before we realize the big corporate end users aren’t going to happen in this scenario? How many $100k+ end user sales have happened in a live auction? Not many. It might work for the $25k domains to Joe Smith the end user (even though it really hasn’t) but it’s not going to work for the $500k corporate targeted domains.

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