Do reported domain name sales really matter to the value of a domain name? Listen to Alan Dunn explain his thoughts on the value reported domain name sales data.
Alan Dunn: 00:50 Hello. Today is December 18th, 2019. And in today’s episode, podcast episode number four, I’m going to talk about reported domain name sales, and whether or not they really matter. This is definitely one of those topics which warrants a long discussion. However, instead of debating this topic for a week, I’m going to address five topics about reported domain name sales data.
- What defines a domain name sale?
- Where can you view reported domain name sales data?
- What percentage of domain name sales are actually reported?
- Are automated appraisals valuable?
- And number five, the X factor. Why buyers should ignore sales data.
Let’s start with number one. What defines a domain names sale?
I love this question. At the very core, a domain named sale is simply that. A sale of just the domain name registration rights from one party to another. However, over the years, many headlines have caused confusion. For example, there are many companies around which include a domain name extension in their business name.
Alan Dunn: 02:04 Some are really generic and intuitive, like hotels.com. While others are simply companies who brand this way, such as x.ai or bitly, which is bit.ly. Very often when a company named in this fashion is sold, there are reports of a huge domain name sale. The almost $50 million purchase of carinsurance.com by Quinn Street, 49.7 million to be exact, is a big one that comes to mind here. No doubt this domain name alone is worth 10 million plus. However, that sale reportedly included real business revenue, a licensed insurance agency, years of goodwill and more. In fact, it was so much more than a domain name sale. However, many reported it as a domain name sale versus a business sale. Even years later, people often read the headline and think, wow, $50 million for a domain name. That wasn’t the case then, and it isn’t now. A domain name sale is simply that. The sale of a domain name. That’s it. Nothing more, nothing less. Some kind of financial compensation is paid simply for the domain name registration rights. Again, nothing more, nothing less. Just cash or some kind of compensation for just the domain name.
Alan Dunn: 03:30 Any other sale is a sale of a website or company which includes a domain name, but it wasn’t just a domain name sale, and should never be included in domain name sale reports. Where can you view reported domain name sales data? Number two. In my opinion, there’s only two primary sources to view reported domain name sales data. The first and foremost is Domain Name Journal, also known as DN Journal. Ron Jackson first started reporting domain name sales data almost 20 years ago, in 2003. And he’s considered the gold standard for industry sales reporting. Ron’s website, dnjournal.com has been quoted in almost every news publication from Tech Crunch to the Wall Street Journal, and provides weekly and annual reporting. The second is Name Bio located at namebio.com. Name Bio has an extensive data set of domain name sales data, and users can sort it through wide range of filters. Number three, what percentage of domain name sales are actually reported? This is a really good question. And an answer you should really pay attention to. My guess is over 75% of domain name sales, especially high end ones, are never reported.
Alan Dunn: 04:51 The easiest way to justify this number is to simply look at the players in the space, and start crossing off who does not report. For example, CSC, Mark Monitor, Com laude, almost every trademark lawyer, many brokers and more never report. In fact, pretty much anyone who’s involved with acquisitions for brands never reports. A couple marketplaces are the only exception, and a few brokers will report the odd name, but even that data is limited. Also, I think it’s important to ask who benefits from reporting. At the end of the day, it’s really only the domain name investment community who benefits from seeing high prices out there. So there’s no real incentive for much anyone else to report. There are some great stories where founders have leveraged a domain name acquisition into a great recruiting or PR strategy. And I think we’ll see more of those in the future. However, those are one offs by often single, one time domain buyers who really have no other inventory to report.
Alan Dunn: 06:07 Number four, are automated appraisals valuable? I think the best way to look at automated appraisals of domain names is by simply looking at the facts of what an appraisal system means. If an appraisal system, any appraisal system, is only used when it’s a positive tool in negotiating, then you should probably discard that system. Any appraisal of anything, is supposed to reflect a fair value of an asset to other comparable assets. Successful appraisal systems, take real estate, or even diamonds for example, are then adopted by other parties in that particular financial ecosystem to offer services such as lending, star ratings and more. Such services really do not exist in the domain name industry. Those who have tried have mostly adopted their models to rely on experience. In short, the actual number behind an automated appraisal does not really have much material meaning in the world today.And this is mostly because almost every domain has intangible factors, such as a buyer’s or sellers need for cash, the value of a domain to a specific IP portfolio, or more. Intangible factors which are entirely unique to each deal, and not scalable in any algorithm.
Alan Dunn: 07:31 This doesn’t mean automated appraisals have no value. As with many industries, there’s so much more value you can extract from big data sets. For investors, reported domain name sales can show patterns, baseline values for certain domain subsets like three character .com’s and more. For domain name buyers, reported sales can provide knowledge of what comparable companies paid for domain names. Even provide insight into new products and services within the respective industries, or from specific companies. Most domain name appraisals also kick back a lot of different data, along with that appraised dollar number. My recommendation is basically, ignore the sizzle which is the appraisal dollar figure, and look at the stake, the underlying data to find the value.
The X factor, number five. What questions buyers really need to ask. If you’re buying a domain name for use, then I think the best approach is to simply focus on how much the domain name is worth to your company and work from there. At the end of the day, that’s almost all that matters for you, the buyer. The seller is going to initially price the domain according to his or her needs.
Alan Dunn: 08:43 You can react to that as you like, but if you don’t understand how much the domain name is worth to you internally, then your only reaction is an emotional one. Which let’s face it, if you were buying almost any other asset, you would likely be a lot better prepared going in. Do the preparation for domain names also. Yes, the prices can be anywhere, but if you don’t know the value of the domain name to your company, then well, basically it’s like going shopping with negative Uncle Bob, who’s probably going to complain at every step, and never see the value that’s right in front of him. Because he has no value reference of his own. Once you know how much that internal number of value is, then it makes everything easier.
Alan Dunn: 09:25 It makes negotiation faster. It makes making a decision faster. It even helps establish a relationship with the seller, that you at least know a little bit about what you’re doing. And that can go far. For certain subsets of domains, like two letter, three letter and single word .com’s, I think it’s really important to speak with a broker to understand floor values. Since these domain name categories have a very liquid wholesale market, especially in China, mostly an unreported market. Always focus less on the automated appraisals, and more on the value that domain can bring to your company. After all, you’re not trying to resell the domain, you’re mostly trying to build a company around it.
Thank you for listening, and don’t forget to subscribe or visit namecorp.com for more information about buying or selling a domain name. Have a great day.