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Domain name trading – viable?

Posted by Michael Bloch in ecommerce (Saturday March 18, 2006 )

I’m sure you’ve heard the stories of domain names that are registered for under $10 a year being resold for $1 million + – ah, it’s stuff that dreams are made of. Back in late 2000 through to 2001, I turned my hand to domain name speculation and trading. Was it successful?….

Hell no! I positively sucked at it :)

But there’s many entrepreneurs who didn’t suck in their domain name trading/speculation businesses and they are still operating today. Some work with blue ribbon domain names only – buying for thousands of dollars and reselling for thousands more. Others buy cheap and sell cheap.

With a re-emergence of high levels of domain name speculation occurring, I thought it time to write a little more about my experiences (what didn’t work) and my observations of those who made it work for them.

Read my new guide to domain name speculation and trading.



 

 
2 comments for Domain name trading – viable?
  1. Hi Michael,

    I enjoyed reading your article on domain name trading. Your experience actually reminded me of a bad experience I had a few months ago with one of the domain marketplaces you listed – and I feel compelled to post someting about it.

    I am unsure of how appropriate it is for me to name the organisation.. so I won’t for now. Anyway, I was simply looking for a third party to transact a domain purchase and protect my anonymity. The domain I was after had NO traffic and was a lengthy domain which was quite obscure. As part of the service I received a complimentary evaluation of the domain’s worth. Their price: 5000 Euro!!

    Some points from my letter to the company asking them to cease acting on my behalf offers the reasons behind my annoyance:

    “1. The appraisal failed to determine the industry from which the domain
    name is derived, despite information revealing this at the domain (a
    simple static page), and information freely available on google, etc.

    “2. The amount determined to be fair value was absurd. The site has no
    traffic, is not used in any substantive way, and I don’t need to do a keyword analysis know that virtually no-one is searching for the domain name by keyword.

    “3. Your fee policy for domain purchases reveals a clear potential for conflict between the buyer’s best interests and that of ****. A
    transaction fee as a proportion of sale price is clearly at odds with the
    buyer’s ‘contract’ with ****: that **** act to negotiate on their client’s behalf to secure the domain name at the best possible price.

    “All of the above lead me to suspect that **** over-estimates the value of
    domain names. This would artificially inflate prices and effectively
    create a greater market for ****.

    “Trust in essential in the online marketplace, and I do not feel that I can trust **** to assist me in meeting my business objectives. I have been
    disappointed with my experience, not because I am a stingy buyer – I would
    be prepared to pay up to $1000 USD for this ‘latent’ domain that has been
    untouched for nearly a year – but 5000 Euro is ridiculous.

    “Although I understand I may set my budget regardless of the appraised
    “value”, I do not believe that ****’s policies are consistent with their
    stated charter for negotiated purchases.”

    This experience was a stark warning that many ostensibly respectable sites/organisations may not be so, and to exercise diligence and caution despite the professional appearance and language of the company. My letters of complaint to the company were never responded to – and they kept my $49 USD.

    Whether for domain trading or simple transactions I would warn the buyer about systematic biases in the system to inflate the price – and the hole in your wallet!

    Tom Nehmy

    Comment by Tom Nehmy — March 19, 2006 @ 6:27 pm

  2. Hi Tom,

    Thanks for your comment – out of interest, was it the escrow service run by the marketplace or another escrow service advertising via the marketplace? If it was the former please email me the name.

    I’ll do some research and remove mention of it if I can find correlating evidence. It’s not that I’m doubting you at all, I just like to dig into these things.

    It’s always difficult making recommendations, no matter which high profile company involved and which service, there will always be a companynamesucks.com type site around.

    When I hear these things from people I know though, it’s somewhat a different matter :).

    Comment by Michael Bloch — March 20, 2006 @ 2:27 am

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