Why Do Domainers Pay More For “Dropped Domains” Than Owned Domains
This is a question that has puzzled me for years.
The psychology involved with dropped domains vs. Owned domains.
When a domain is in a drop auction at NameJet.com or Snapnames.com it seems everyone is willing to pay more, a lot more, than they would for the same name if it was for sale by the owner.
I have never understood why, but I see evidence of it all the time.
Take the name raspberry.com, which is currently in auction at at SnapNames.com, which closes on later today and already has a high bid of $15,500.
Now don’t get me wrong, raspberry.com, is a nice one word domain.
It is a fruit and it is used as a term as in “give the rasberry”.
However it is a singular word, which pulls no ads on a Google search, and not something you really can sell on the Internet.
It’s a cool Web 2.0 kind of domain.
If it was on the open market as an owned domain, through the TRAFFIC auction, with a reserve of $25K would people bid on it or says its overpriced?
This is certainly not the first nor the last drop domain which has sold for 5 or 6 figures but it still puzzles me why people seem more willing to pay “Big Money” for domains that are expired and drop than those actually owned by companies and offered for sale.
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Hi,
I also noticed this fact.
I plan to scan the WHOIS of the past domains sold from the drop channel and those from the marketplace/auctions channel to check if they are the same or no.
PS: Just back from Easter vacations…
A few reasons I think…
1. Auction mentality. When you want it, you want it and once you commit yourself to buying the domain and invest time in research, watching and bidding, you talk yourself into buying the domain.
2. Validation. If other people are bidding on a name you want, those other people are validating the desirability of the domain AND the value of the domain.
3. Clean transaction. No escrow needed and no negotiations, language barriers or payment problems.
So, these things make drop auctions more desirable for many people.
I’ve seen this for years. I think it’s the justification of having other parties interested in it. Makes people feel safer making the investment.
Yes, I have noticed this phenomena and it is frustrating. Domainers will bid hundreds on so-so domains at Namejet and then never offer another domainer more than $100 for a nice two-word .COM. Part of the answer is the auction format. In an auction you know you have competition whereas most domainer to domainer offers are one domainer trying to lowball another to take a good domain they hope to resell at a later date.
I agree with Rob. Validation is a big part of it. Otherwise, picking it up from a dropped list may give you a better chance at reselling it to a domainer. In other words, you can pick up a domain off a dropped list for $100 and resell it at NamePros or DNForum and it’s a very good chance no one will notice.
On the other hand, if you bought a domain from someone on NamePros, you usually can’t put it right back up for sale on NamePros or DNForum… people will know.
Guys
But I’m not talking about a couple of hundreds dollar domain, I’m talking about one at $15K with over 3 hours to go and the sale will reported in all the sites that report drop sales.
My point is that the domain is in say Moniker’s TRAFFIC auction with a reserve of $20K would it sell?
I don’t think so
Because people follow hype and can’t think for themselves.
Don’t see that much value in it. E-commerce is definitely a stretch.
I could see a company branding it, but with the common misspelling with raspberry and rasberry, don’t even like it for that.
Also why does estibot show this name as having the same search volume as raspberries. I can’t imagine anyone search for raspberry, just raspberries/rasberries.
It’s not about the auction format because as Mike wrote, if this name were at Traffic with a reserve of 20K, it probably wouldn’t sell. That is an auction format too.
It just might be that domainers would rather pony up big $ to a nameless company like NJ or Snap VS giving that money to an individual domainer that might be competition later on. From a competitive standpoint that makes sense to me. Although a lot of good names aren’t owned by domainers (competition) so this is not a wholly satisfactory answer as well.
I’ve always felt that if I could unload even the mediocre portion of my portfolio onto NJ, that I would make a killing. People would rather pay NJ than me.
N.B. Elysium’s stock symbol still needs to be updated.
Ahh maybe people are comparing it to the blackberry brand???
but again I don’t like this as a brand because of the misspelling
Back to question, I like Rob’s answer.
100% agree with you. This particular domain I can see the value in but there are 100’s .. make that 1000’s .. of examples of names that drop which would never sell for anywhere close in the aftermarket.
What I would love to see are success stories of non-premium domains that are re-sold after a buyer wins on NameJet or Snap.
Sure, if you paid $100k for movierentals.com (which I think frank did on snap) and sell it for $500k thats a good deal but these deals are expected.
Its the 99% of names that go for $1k, 2k and more I want to hear about. 100’s of names get sold every day … you may hear a trickle or two of success stories.
A lot of names I get – the SEO value and the missing pieces to a larger puzzle but many have no value and are purely purchased on the speculation of traffic but hold no value to endusers or developers alike.
Either a lot of people have too much money to waste or few understand the logic behind domain investing – have no idea, but this question will be here 10 years from now you can be sure.
Tony
Think we are going to remove Elysium’s from our index.
There stock now seems to be a penny stock with little volume.
@ Alan
“What I would love to see are success stories of non-premium domains that are re-sold after a buyer wins on NameJet or Snap.”
I know that MHB gets tons of those non-premiums for $10 + reg fee on Godaddy only to resell for the $2,500 minimum so rest assured those happen often. :-p
“A lot of names I get – the SEO value and the missing pieces to a larger puzzle but many have no value and are purely purchased on the speculation of traffic but hold no value to endusers or developers alike.”
You can’t predict what endusers want because they a lot of times don’t think like domainers. At least from personal experience, I sell more names that don’t make any sense from a domainer perspective than the ones that look good based on keyword and search frequency.
Mike,
You can say the same about Tucows, Banks, Live Current and Dark Blue Sea…
Nevertheless, I enjoy tracking them.
Tony
I think that company is now trading under a penny, (making it a true penny stock, and has changed it’s symbol several times in the last year, not a good sign for stability.
Tony,
“I know that MHB gets tons of those non-premiums for $10 + reg fee on Godaddy only to resell for the $2,500 minimum so rest assured those happen often”
very true, as do buydomains and many venues – but its not the $10 names, its the 1, 2 and 3k names where many of us shake our head at .. buy a name for $10 and sell it for $2,500 is a success but where are the 2k buys resold for 10,000 – from the names we all watched people bidding for to only say … why?
They do happen for sure – (and I think my prior response never made it for some reason so this may sound like a little duplicate if post 17 ever shows up).
Its a great industry but for logical thinkers its almost like an addiction – a puzzle with no answer … but we always want to find one.
I think it’s Rob’s #2 and #3. All of a sudden the camera moves and 100x focus is put on this one domain auction, creating a buzz and drawing people in. Plus, single words like these don’t reach pendingdelete everyday.
Jason
They may not make pending delete every week but just this week I picked up 3 one word .com’s off of Rick Latona’s List for $1,000 each.
regulating.com
transmitting.com
reproducing.com
So there are plenty of these around.
Let’s see where the domain ends. I have a couple 1 worders on my watchlist for today & tomorrow at snap. Replenishment & Misconception.
Mike,
An explanation for the reason why raspberry is a great name, are beyond the scope of this comment. However if you consider, the case study of Blackberry name, you will get a better understanding. Blackberry paid ~$70K to a californian naming\branding firm for coming up with the name, and that is just for the concept of the name alone without the domain. The book Wordcraft explains the story in more detail.
In light of that i think raspberry.com is pretty cheap for the branding value it possesses. So why didn’t anybody buy the owned domain? Perhaps branding is something most people don’t understand, and discount it until it’s too late, and then say why didn’t i think of that. It is not hard, but it requires a different mindset.
I agree MHB 100 % and it is at every level. Low levels like L-L-L.com min of $59 at Namejet, and people will post on Namepros.com just got L-L-L.com for $79 yet will not buy the same quality on Namepros.com for $20.
I remember I won BareBeauty.com on Namejet for $770 and was competing against other bidders. There are plenty of BareBeauty domains regged including the – and I like the name and wanted it, just for fun I put it up for sale taking any offers, not one. Now I had 5 bidders over $500 competing on Namejet so I think it is what Rob said he is 100% correct right.
I one time said to Ron Jackson in 2006 that snapnames sales seem not real compared to other segments of the market. Excellent post by you Michael it is one area that baffles and frustrates alot of people in the domain industry.
Mike (not MHB),
I have to agree with you and just noticed I never mentioned my thoughts on this name. To me its a $50,000 name or more – the scope of brandability is insane for this name and unique – extremely unique – compared to other names where alternative catchy versions are available.
Jason, the one word names regulating.com, transmitting.com, reproducing.com do not come close to the power of raspberry.com in my opinion – decent names all the same but not in the same category.
Tony quote -
“It just might be that domainers would rather pony up big $ to a nameless company like NJ or Snap VS giving that money to an individual domainer that might be competition later on. From a competitive standpoint that makes sense to me.”
The small, individual domainers are not your competitors.
It is the large, deep pocket domainers that are your competitors.
So, it would bother you to pay me $ 500. for ABCD.com (just an example) but you would be willing to pay NJ or SN $ 5,000.
Don’t you realize they are your competitors?
Those organizations (Demand/Enom) (Snapnames/DomainSponsor) are taking your money and buying more domains with it.
On the streets on Phila, one might call you a putz.
When a domain drops (or is dropping) suddenly you have a greater audience perhaps than a limited schedule auction would have.
I could advertise ThisDomainForSale.com on a forum, a site, a blog. And the hope would be that enough people would find the listing somehow.
Whereas a drop list is viewed by perhaps tens of thousands of domainers. You essentially have a greater market and greater exposure.
Suddenly, my “owned domain” that got minimal views now is getting thousands of views.
It no big secret. Look at a Sedo auction.
When you get and offer on a domain and decide to send to auction, the “owned domain” as a parked page may have XX views. Now, suddenly, it is not just an “owned domain” buried deep within the 77 million regged. It is featured as a domain that someone has placed an offer on. Of the thousands (perhaps millions) of parked names at Sedo, now a couple hundred of those are thrust upon the viewer’s eyes to hopefully create an interest where there was none. Not un-noticed is the jump in views from XX to XXXX.
The same is true with dropped lists. Yes, there may be a total of 53,000 names dropping on any given day. But there are so many tools out there that can parse the lists and make a customized list of anyone’s choosing.
I never gave Raspberry a thought in the world in my domain quest. Never once did I even consider this until it dropped, became available and the name was talked about and mentioned. This fledgling of a dropped name suddenly had an audience. Blogs, forums, talk, chatter, mention here and there. It no longer would languish as one of tens of thousands dropping.
One person on a forum went as far to mention that it is a fruit but one of hundreds of fruits. Sure. He’s right.
But there was only one Raspberry.com dropping.
I agree with Rob’s comments on auction pricing.
MHB, like you I enjoy using estibot as a rough guide. It values your reproducing.com at $4,700, so your purchase price of $1,000 is about 21% – nice buy.
Estibot values raspberry.com at $81,000 so a winning bid at snapnames of 21%, or $17,000, would also be a good buy IMO.
“…However it is a singular word, which pulls no ads on a Google search, and not something you really can sell on the Internet.”
Okay, spell the plural. How many would get that right? Raspberrys or Raspberries?
Raspberry
Raspberries
Raspberrys
1,000,000
165,000
1,600
average monthly searches on google in the month of March.
If people are going to search for raspberry on the internet (Google) most likely they are not searching for raspberry(s) (ies) to eat at this very minute.
Most likely they are looking for RaspberryPlants (regged), RaspberryRecipes (regged) and so on.
Results 1 – 10 of about 12,800,000 for raspberry
Results 1 – 10 of about 5,260,000 for raspberries
Results 1 – 10 of about 2,180,000 for raspberrys
Raspberry.com/plants, Raspberry.com/recipes, Raspberry.com/cobbler now belongs to the owner of Raspberry.
Honestly, I do not understand the reluctance of people to understand what this purchase can mean for the buyer. If the search gets 1 million a month and pays $0.77 per click, and of the 1 million searches 1000 people click on an ad (which is 1/10 of 1%), someone just made $770.00 in one month. In 12 months, at that rate, the winner will net $9,240.00 on his $16K purchase.
And to think that many are questioning why someone would pay this much.
At the same time, some are questioning why it did not go for more.
Raspberry.com ended for $16,499 to the bidder ID “Centex” btw.
Gerry pretty sure that’s not how to determine the amount of searches. That’s just the amount of entries into google. I don’t think this is searched very much at all but I do like the domain more then I initially thought. Same with cloud.com that was written about here a little bit ago. These are great terms that I can see companies branding on.
Some good comments on this Mike.
Gerry,
I have to disagree with your comment: “Whereas a drop list is viewed by perhaps tens of thousands of domainers” – glad you used the word perhaps since I think this industry is much smaller than most think, especially when it comes to drop auctions. When was the last time you saw more than 300 people in an auction for a domain? Even 200 or 100 is not an everyday occurrence if you exclude those 3 letter names.
Auction reserve prices are low – so low enough that if there were tens of thousands of people viewing these drop lists we would see 2,3 and 400 bidders in auctions much more of the time.
Any foreclosure of a home worth $500,000 that starts at $100,000 will have 40-50 bidders and that’s for a solid investment with investors who are very limited to the regions they will invest.
Domains are global.
Many $300 names drop every day with a reserve of $60. Same math and with such an incredibly low entry point (versus $100k for that foreclosure) we should see much more activity on the drops regardless of people slowing down due to the general economy.
Food for thought but my bet is this entire industry of full time and strong semi-part time domainers is less than 5,000 at the moment although it is growing – which can not be said for many other industries.
Side note -
It is rarely mentioned but do domainers realize the registrars (Enom/Netsol/Moniker/Tucows/etc) have very little cost in the domains they auction off?
(1 yr renewal, website and corporate overhead.)
It is almost pure profit for them.
The ROI must be skyhigh.
If known, it probably would make Debeers envious.
@gerry: $0.77 CPC? I would love to know how to get 100% of what Google shows as costs for Adwords advertising. You will only get a fraction of that when you parked it.
I myself think it’s not uncommon that people more or less regrets winning some domains at these services. More newbies are in these auctions driving the prices way up.
@Jody
Use this tool here.
It is google’s keyword tool. It will show the amount of searches on a monthly basis (one month behind) as well as any recommended keyword(s).
https://adwords.google.com/select/KeywordToolExternal
@Alan
“Viewed” does not indicate the number of participants (bidders) in an auction.
If someplace like DNF has 47,000+ members, well…I don’t know how many are actively active. That “active” word is a misnomer. There are tons of domainers that are off the forum, have never heard of the forum, and such.
Really, unless we were active bidders in the auction or any auction for that matter, we can honestly say that the value and worth is now established at what someone (perhaps not a domainer) was will to pay for something.
Being an active berry grower and cultivator, had I had the money sitting around I perhaps would have bid on this. All is speculation. If I had bid it up, who is to say the winner was not content to lose at $20K or even $25K.
Food for thought.
Food for my cobbler. =)
If you think this domain makes $9,240.00 per year parked your data is way off. I’d guess less then $100/year. This domain had to be bought on brand potential.
@Jody.
Why are you “guessing’?
First you try to convince me that my monthly estimation was off (you’ll need to take that up with Google) and now you are trying to tell me I am wrong and you are right (again) by saying this domain makes less than $100 a year.
Problem is, all your assertions are just that – damn guesses with nothing to back them up.
If a name per the google tool indicates that a search for the word “raspberry” is 1 mil a month, then that’s 12 mil a year searches entered in google per year.
In case you missed it, here is that link again –
https://adwords.google.com/select/KeywordToolExternal
Use it.
Don’t you dare take my word for it.
Use it.
Gerry
I think your relying on the Google stats way too much.
If you check out the stats from Alexa and Compete you will see that the actual traffic the domain name gets is relatively low traffic, lets say 100-500 visitors a month.
Moreover, the term only pulls up 1 advertiser on Google (just on the right nothing underneath the search term), so I would say the domain itself has minimal traffic with no advertisers.
Personally i agree with Jody the domain probably makes $100 a year parked.
I can certainly say I would agree with Google (even with the assertion that the stats are misleading) than to think this domain would make less than $100 a year parked.
If it was purchased for the sole objective of parking, then that is certainly a waste of a domain – to suffer the fate of parking at the hands of a domainer.
A quick and easy mini-site in no time would turn this amount in no time.
I am so glad I do not rely on domainers to make business decisions for me.
Imagine, spending 16K on a domain to park it.
If I spend 16K on something to park, it’ll be another truck to park when I am not using it on my berry farm.
Gerry
I’m still not sure what you can build this domain into other than just using it as cool word for a Web 2.0 site.
Domains should rarely be acquired based just on PPC earnings.
@gerry, if that is the case I guess you are bidding on it right now. If it’s just that easy to slap up a minisite and get top first page Google rankings…
Gerry,
You didn’t get my point – my point was I really do not think there are tens of thousands of domainers. Quality information surrounding the industry only comes from a dozen or two sources online. If there were tens of thousands of domainers (even 10% of those tens of thousands being active) these domain blogs would be seeing a hell of a lot more traffic. Just my opinion but I feel this industry’s membership is just in its infancy and nowhere near tens of thoushands.
Not sure where you are going with the Google stats – I agree with Mike about $100 a year in parking. Simple math assuming a percentage of traffic does not correlate to parking revenue in real life.
Gerry,
You are misusing the Google keyword tool. It is a staple tool of the domainer and it’s not a new invention that you have introduced. Google will count searches for ‘raspberry flavor’, ‘raspberry ice cream’, etc as part of the total results given the way you are using it. Also, the ratio of people who search on Google vs the people who directly type in the URL is not 1:1 but more like 6:1 (less type ins).
Probably the best way to estimate type in traffic to a given domain is to actually park one that you own and compare it to Google’s results and that will calibrate your scale. Do this for as many premium domains you have and you will find out that there is no reliable way to estimate. I use a number of other tools in addition but let’s just say it depends on other variables and is not as simple as you make it out. Guys like Frank S, Kevin H and MHB probably have sophisticated algorithms/programs to do this.
My best guess based on my own methods is Raspberry.com will get 10-15 type-ins a day. Assuming a CTR of 20% and you get an EPC of $0.10-0.15 per click, that nets you between $73-164 a year parking so the $100 estimate is actually pretty accurate IMO. It’s true an advertiser will have to pay Google about $0.77/click but you will only get a fraction of that as others have stated.
If you really think it would make $9K/yr parking, my question is why didn’t you mortgage the farm to get it? Even if you paid $20K for it, it would only take a little over 2 yrs to pay for itself. If a domain really makes $9K a year parking landed on the pendingdeletelist, I can almost guarantee you it would not be sold for anything less than say $50K. Too many of the big boys would not have let that happen.
Tony – well said.
I don’t even think this would make much money if it had the nr1 spot developed on Google for raspberry, cause I don’t think people are searching for raspberry and it wouldn’t be worth much having it, cause it’s targeting nothing. But I do think it is really cool word to brand a service or product on a large scale. I’d say there is high % a company would brand something with this name if the owner doesn’t do it himself in the future. For cars, they like animals – broncos, jaguars. Techies and maybe some other industries I’m sure fruit must come to mind. Apple and Blackberry jump out. Animal brands have been beat to death. There will be other big fruit brands! Raspberry sounds trendy to me. Tech, fashion etc.
Being a bidder myself at these auctions I must admit that I do pay more than I would if those names were for sale by their owners. My main reason is simple. I like the peace of mind of the whole process from bidding to owning a name. I bid, I win, and the name is in my account pretty much instantly. No negotiation, no waiting, no worrying about buying taking the money and going away. The auction fever of course plays a part too, but for me the ease of the transaction is the main thing.
Guys
I think the low expected returns in PPC revenue can be attributed to the fact that there are few advertisers for the term.
The $.77 a click is fine but if there is only one advertiser, who know what there budget is and once they are past it, there is not other advertiser.
If you can find a term that has 3 advertisers underneath the search term and then all along side the right hand of Google, you have a marketable domain
Michael, I think you hit the nail on the head with this statement:
“If it was on the open market as an owned domain, through the TRAFFIC auction, with a reserve of $25K would people bid on it or says its overpriced?”
Part of the reason Raspberry.com went so hi is is probably started out under $100. It gets bidders excited and involved and pushes the price up.
Back to Mike’s original question: “Why Do Domainers Pay More For ‘Dropped Domains’ Than Owned Domains?”
An important factor for many bidders/buyers is the conscious or subconscious belief that dropped domains; by their current “foreclosure sale” status; are inherently better buys.
I see this regularly in my realty business; where bidders/buyers–including experienced investors who should know better–regularly bid 90-100%+ of the actual value on foreclosed properties; both on the courthouse steps (when the lender takes the property) and soon thereafter; once the lender owns them (REO) if there were no bidders (usually due to the foreclosed loan being larger that the value–here in CA–usually much larger).
An amazing thing to see in action.
As Mike pointed out with his purchases of regulating.com, transmitting.com, and reproducing.com; all great values at only 1k each (especially for reproducing); many of the best buys are from sellers. Though, as FT points out, there’s more “involved” in doing such deals.
Nice writing style. Looking forward to reading more from you.
@MHB Domains should rarely be acquired based just on PPC earnings.
NOW we’re talking.
Who wants to pay that kind of money to park something?
This is where domainers are missing the boat.
People do not want to see a parked page. If a couple of weeks ago when I was searching for Caroline Raspberry Plants the last thing I wanted to do was land on a parked page.
Here’s the irony about all this talk regarding raspberry dot com. Yesterday, I was having a conversation with the owner of (another)berry dot com. He related that he had paid significantly more than the 16K for Raspberry.
He inquired if I would be interested in writing a few articles for his site. He had seen where I was a grower and a small berry farm owner. At no time was he even aware that this conversation was going on.
We began talking about Raspberry dot com.
He started out parking this domain and last year was averaging 8 dollars per day as a parked page. Now he has created a site and was doing very well with AdSense.
A couple of things I want to point out.
I know berries just as many of you know other markets. Perhaps that is where many are failing to adequately assess the situation here. How in the hell can you possibly adequately monitize and market this name if you know very little about it?
Many fail to grasp the basic concept that there are two products here – a domain name and a fruit. This is where domainers fall flat on their face. Domainers only see the domain name as a commodity.
How many of you want to tackle the complications/risks/morbidity of MRSA in a postop Cardiothoracic surgical patient increasing the hospital LOS? Thought so.
To all those insistent that this domain would make less than $100 a year I applaud you for your convictions.
@Alan -
Based on forum memberships and the number of domain related sites, on a global scale – yes, I think there are tens of thousands of domainers.
Are the good? No. Do they know what they are doing? No. Is the media stories of the money of domains bringing more in? Yes. Are these knowledgeable people? No. Do they want to learn? No.
I was on one forum recently. A person who had been a member since 2006 and nearly a thousand posts mentioned two things in a thread that floored me. One was, “what does BIN mean?” and the other was, ” I didn’t know there was a difference between a gTLD and ccTLD.”
These are the basics of the basics. Yes, there are tens of thousands of domainers and domainer wannabees.
When you consider 6.5 billion people on the planet, tens of thousands is a very insignificant amount.
@ALL -
Shame on you for thinking I use Google to determine my purchases. Google tools are just that – tools.
If you don’t know how to use the tool and what it is for then the tool will do you no good.
Might as well spend my time looking at a saw, screw, screwdriver and wood and shout at them. “Build me a bird house!”
I use my pointy hat made of aluminum foil.
Hey Berry Jedi,
No one is saying the name can not make $100 a year developed.
People are saying the domain would make around $100 a year if parked.
Any domain can make more than $100 a year if developed.
You are over anaylzing this way too much.