DomainTools Blog

Buying and Selling Domains – Advice from the Experts
One of the workshop sessions on Day 2 of Domainfest featured a panel of experts who talked about the best tips and strategies for buying and selling domains. The panel included Michael Berkens, Larry Fischer, Tessa Holcomb, Jason Miner, and Kathy Nielsen. Whether you’re a domain investor, buyer or domains are part of your job description, the session was very informative.

Predictions for the Domain Market in 2011

Among the panel, the first prediction for the domain market in 2011 was that it will continue to grow with new players looking at domains for acquisition, monitization or brand building purposes. The second prediction was that the largest domain sale will likely happen this year, perhaps in the $20-$30 million dollar range.

Here are highlights of some of the best advice they had to share about buying and selling domains:

Selling Domains…

• Keep your Whois information accurate! Buyers are leveraging Whois, and by keeping your contact information accurate, you’ll help maximize your sales (There was a nice shout out to DomainTools.com when the panel spoke about Whois information and the best way to find it!). When buying a domain from someone you may not know or trust, make sure you protect yourself by researching the domain’s history. There are many websites that offer basic Whois lookup information, but DomainTools.com offers extensive historical information including Whois, IP Address (web hosting), Name Server, Registrar and Thumbnail History to help provide a complete view of a domain’s life cycle. Be sure to leverage DomainTools’ Whois for basic DNS checks.
• Provide a Ballpark Selling Price. If you want to sell your domain, the experts recommend starting with a buy it now price or at least start with some type of price point. This is more attractive for small and medium businesses in particular who are looking for a negotiation starting point and it also gives them a stronger sense of trust. If you simply have a ‘make an offer’ option, it may be more intimidating for those smaller and medium sized businesses to take the first step and approach you.
• Get your Domain in Front of Multiple Outlets. It’s strategic to extend your distribution points (again, make sure your Whois information is updated).
• For Larger Domain Sales, Go with an Escrow Company and Draw Up a Contract. These services protect both the buyer and seller. Escrow.com is an escrow company to look into, and you might also seek the guidance of a domain lawyer.
• Negotiating a Sale? It’s All About Speed to Market. As a seller, be sure to name your price, provide a link at the top of your domain’s page, and be quick to respond to parties of interest since many buyers are simultaneously looking into other opportunities.

Buying Domains…

• Do your Research and Investigate What’s Going On with Keywords and Extensions. It’s a must –  you need to nvestigate what is going on with other keywords and extensions to see if it might be worth your time and investment. Example: if you’re interested in purchasing a .co domain name, see how popular it is with a .net or .com extension to see what traffic it’s driving.
• To Buy or Not to Buy? Ultimately, choose a vertical or find domains you are interested in so you know facts and figures well. Also look at CPC (cost-per-click) trends and other domain sales numbers in your industry over the past year, and also trust your gut.
• There is a Strong International Buying Market. Kathy Nielsen of Sedo shared trending information: .de and .eu are some of the most popular ones to invest in.
• Diversify Your Portfolio. Like investing in stocks, it’s good to diversify your holdings. You can still register many good .co domains, and the buying market for .tv is also doing well (according to Sedo).
• Domain Brokerage Services: Good for Higher Priced Names. Constant feedback, goal to generate lots of interest among many parties bidding in name.
• Domain Investing Newbies Who are Looking to Get Started:Look at Name drops. Some registrars drop into certain places (example – some drop with snapnames.com so you’ll want to check there), others drop at certain times. If you want more guidance, work with an adviser or broker who can walk you through the process of name drops.
• Popular Categories for Buying and Selling Domains are in Health, Fitness, Finance and Gaming. Look at google traffic and SEO rankings.
• Heavily Consider the Brand Value of TLDs. Also, heavily consider the content (if it is built out) as this will impact the long term value.

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We are exclusively listing Harmony.com for sale. It is being offered at a $5 Million dollar reserve price. We will consider all creditable offers for the next two weeks. If you would like to place a bid, please contact me at “harmony [at] domaintools.com”. This is a fantastic generic domain with a lot of uses. This domain gets an incredible amount of traffic. This is a private auction. To participate you must apply. Earlier this year, Fund.com sold for $10 Million. I have no doubt this is a bargain deal. The current owner is looking to raise some money for a development project and is willing to let the domain go in our private auction process.

Domain: Harmony.com
Private Reserve Price: $5,000,000.
Contact: harmony[at]domaintools.com
Auction Date: May 12th

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Today is a big day, Fund.com sold for $10,000,000. Well, technically it sold for $9,999,950 in an all-cash transaction, though I am not sure why $50 was withheld from making it an even $10M. Even in this slow market we are seeing record-setting sales figures. A publicly-reported transaction of this size is rare, I know of a few domains well above $10M, such as Poker.com and Sex.com, that never officially disclosed their prices. The few runners-up so far have been Business.com and Porn.com which both didn’t quite make it to the $10 Million dollar range but were very close.

It takes a lot of work to broker a domain at this price, what could have been registered for nothing 20 years ago is now worth more money then one man could spend. The generic domains that command power are these category domains. With our upcoming auction in April at the Domain Roundtable in San Francisco we will be selling a few domains that may set off a price alert. We encourage anyone with great domains who wants liquidity in a Live Auction to contact us. Last year we sold just under $4 million dollars in domain names in a few hours.

Submit your domains, we are sorting through them right now to find the very best. Our Live Auctions are huge and are not to be missed.

A little more media coverage of Business.com today, this time from CNBC. While Business.com was less about a domain transaction, this last time it was sold, Squawk Box called it a domain transaction and it sheds more light on the industry. The first time it sold it was very much a domain transaction.

You can read some of our previous coverage of Business.com. Enjoy the video clip below.

Sedo just sold LI.com for $500,000. This is the second 2 letter domain to sell for $500,000 this month.  The other one was AZ.com at our auction last week. There are only 676 of these 2 letter domains in the world and most of them are owned by large corporations. I know there is a lot of pressure on ICANN to release a few of the single character domain names. If they did get released, they could fetch a few million each and bring ICANN some extra funds to help administrate the Internet.

I remember back in 2001 when you could buy a two letter domain name for $8,000. Granted the one I was looking had an X in it. But still, the price of 2 letter domain names are going up.

Rumors are running around that there is a $50 Million dollar sale pending on Pharmacy.com. Leah Messinger of the Red Herring said the sale could be as close as 6 weeks away. The firm that is brokering the domain is FairWinds out of DC. They have sent out approximately 100 emails to potential buyers, letting them know the domain is coming available and letting them know the price. FairWinds has emailed pharmacy chains, retailers such as Wal-Mart and Costco, and websites such as Drugstore.com. There is no doubt that Prescription Drugs are worth a lot of money online.

Companies like Drugstore.com have turned their noses down at the notice. They think they have a good name and didn’t think it was worth buying another really good one. CVS Pharmacy as the buyer makes the most sense. I am not sure why CVS is even in the title of the company. If this company is the buyer, I suspect they will re-brand all their stores to Pharmacy.com.

Sometimes it only makes sense to have one name, and getting that name is not about the upfront money. It is about what the brand will yield for decades to come. When this sale closes it most likely will not be disclosed to the public what the purchase price was but you will notice the domain changes hands.

We covered this story as it went up for sale earlier this year. The Wall Street Journal is reporting that the sale just happened. The final purchaser is R.H. Donnelley who bought Business.com to increase their influence of the Internet in the yellow-pages and white-pages business, which publishes paper and online directories in 28 states under the AT&T, Dex and Embarq names, among others.

The Dow Jones and the New York Times were both bidding on the company. The sale was expected to close between $300 to $400 million. So the price was right on target. Business.com currently brings in about $15 Million dollars a year in revenue. So the sale was 24 times earnings. This is a rather high price for a company but generally bigger companies sell for a higher multiple. 24X is very healthy. If a company is able to demonstrate $1 Million dollars in revenue that would make it worth about $24 Million according to these numbers. However, smaller companies sell for a smaller multiple. Generally between 8X to 15X. Now you can see why 24X looks so good for this company. One could argue it was the domain name that made it so valuable.

The parent company has revenues of $442 million and has a market capitalization of $9.67 Billion. R.H. Donnelley’s stock currently trades at nearly 22X their current revenue. This purchase is right in line with the value of their stock so it is a good purchase from my perspective.

In a private sale, NewYork.info was sold for $70,000 last week. Had this been NewYork.com this would have been a Million dollar sale.

It goes to show the power of the dotcom vs anything else. Other extensions don’t stack up so well when comparing sale value. The main reason behind this is the trillions of dollars that goes into advertising of the dotcom brand. Everybody knows what a dotcom is but not everyone knows about dotinfo. A lot of times when you operate a website at a Brand.net the visitors tell their friends to go visit Brand.com. We see that online poker companies realize this and they advertise the free version of their product at dotnet domains. They transition the traffic to the dotcom website that uses real money. It gets around a lot of laws that forbid the advertising of online gambling sites which use real money. Advertise dotnet, but expect people to type dotcom.

This has got to be a buyers market for dotinfo right now. I predict it will stay this way for a while but for sure not forever. After all, the New York Transit Authority’s official website is MTA.info. They could not get the dotcom so they got the next best thing dotinfo.

UPDATE: Wyvern LLC sold the site a year ago for about $35,000. This last transaction with a one year flip. Not bad, 100% return on money in a year.

“Dictionary.com’s success is built on its unique, descriptive domain name and simple, straightforward interface,” explained Bruce D. Smith, Chief Strategic Officer of Answers.com. The sale involves three built out domain names, Dictionary.com, Reference.com, and Thesaurus.com. These properties attracted 11.5 million unique monthly users in the U.S. during the month of June 2007 according to comScore. They generated revenues of $7 million, EBITDA of $2.9 million and net income of $2.8 million in 2006. Buying these three domains is a huge victory for Answers.com.

I recall that Google linked to Dictionary.com for definitions of words in the upper right corner of every search page. Then one day Google linked to Answers.com instead. It seemed like a huge victory for Answers.com that they got featured instead of Dictionary.com. I don’t know the back story but I am sure people inside of Google were tired of all the pop-ups on Dictionary.com and they just linked to a better place. The built in dictionary on Google.com is a huge source of traffic. If a word is spelled correctly then Google links people over to the dictionary definition, but if it is not spelled correctly then no hyperlink is applied to the word. I use these feature all the time to spell check things. I am ashamed to say it, but I don’t think I could spell tongue twisters without Google. When Microsoft Word fails I know Google will solve my spelling error. Who says a Search Engine is only good for find documents on the Internet. I use it as a dictionary too.

The sale of Dictionary.com to Answers.com represents a sale of Generic domain names with some elbow grease thrown in to make them sparkle. When you find a diamond in the wild it has a wholesale price, but when you take that exact same diamond to a cutter, you can make it sparkle and shine. The diamond gets a new wholesale price. Finally, a jeweler buys the diamond and mounts it on a ring or necklace and the value goes up again. This is what we have seen happen to Dictionary.com. A Generic domain name is valuable but not as valuable as when a team of programmers sits down and polishes it up. When the generic domain name perfectly converts visitors and leaves no doubt that anyone else could do a better job in that sector, this is when you know the domain name is worth selling at the multiples you see in this deal.

More names sold. Here is a run down from Sedo. There are a lot of good ones like Encrypt.com for $76K. I love first names and Pat.com was purchased for a awesome price of $63K. The Drug, PCP.com was sold for $12K. A huge $25K for PlayTennis.net. I think the diamond in the rough was MultipleListingNetworks.com for $1500.

Estately.com sells for $5500. We talked about that domain earlier this week. I think this was a real steal.