Listen to Alan Dunn discuss a couple domain name deals, explain obstacles and why you should always consider strategy before attempting to acquire a domain name.
Hello. Today is December 19th, 2019. In today’s episode, podcast episode number five, I’m going to talk about why strategy matters when it comes to acquiring a domain name and the potential cost of employing the wrong one. As a general rule, we never report price details for any transaction. However, we can tell stories without naming companies, stories which are sometimes positive and at other times quite the cautionary tale.
Alan Dunn: 01:20 Today, I have two stories which are cautionary tales. Let’s call them, number one, A 404 That Earned a Million Dollars and number two, The Broker Who Didn’t Listen. Let’s start with the 404 story. It’s one of my favorites.
Alan Dunn: 01:37 This story starts with a typical request to acquire what’s called an upgrade domain name. This is when a company reaches out and wants us to acquire the kind of domain which directly improves the company’s existing domain name. For example, a client could be operating on companyabc.com, but they want to own company.com, removing ABC from their domain name. For many companies, this is probably the most critical domain name acquisition they can make, especially for companies who brand themselves by one name yet another company is using the exact match dot-com.
Alan Dunn: 02:14 A couple of years ago, we were approached by a company to acquire a certain dot-com. This was a national retail company where consumer experience was a critical component of success. They branded themselves one way, but the domain name was a much longer version. And with such growth and brand awareness, many consumers automatically assume they own the dot-com. So an acquisition became a pretty high priority. After reaching out to the actual owner of the domain name, we were met with a seven-figure asking price. This was not unreasonable for the type of domain, but certainly more than we expected on this one.
Alan Dunn: 02:50 So we went back to the client, and we explained the asking price and then were provided some additional background. Apparently, under another marketing lead, they had attempted to acquire the domain a few years prior and almost had a deal agreed on for a lot less than the now seven-figure asking price. But apparently, some marketing employee had the great idea … and I say that with huge air quotes … to register the company’s formal company name in a domain.
Alan Dunn: 03:20 For example, let’s say the company who owned the domain was named Company 123 LLC. He acquired the domain company123.com and then tried to negotiate a lower price in the final moments by saying, “Hey, and we registered your best domain name.” The marketing person even went as far as literally copying the logo and putting up a site of the company they were trying to buy the domain name from, again while asking for a discount.
Alan Dunn: 03:51 Well, obviously, that didn’t go over very well. While the intent may have been somewhat good, the entire approach, especially asking them for a discount, was shady at best, borderline extortion, and caused the owner of the domain to automatically increase the price to seven figures, walk away, and refuse to talk to them again.
Alan Dunn: 04:13 It was an incredible moment. I mean, think of it like playing football with 60 seconds left, and your team is three yards from a touchdown to win the game. All of a sudden, something wild happens, and you look up. The clock has ended. The other team has gone. There is no game to play anymore, and now you have to explain to the coaches and your executive team what happened. So it was not good, not good at all.
Alan Dunn: 04:38 Eventually, as a third party, we were able to start a more civil discussion with the owner and then started to hear both sides of the story. While the owner never came down in price, hearing both sides allowed us to navigate the waters appropriately and at least get a conversation started again. The negotiation went on for a few months and then died again. The buyer just didn’t want to pay a seven-figure price for the domain.
Alan Dunn: 05:02 At this point, we thought the deal was dead. However, fast-forward a couple months later, and some unintentional magic happened. You see, the current owner was really developing a new site on the domain versus all those people who say they will but never do. And something occurred which caused the domain name to show a 404 page instead of just timing out or a blank page they’ve previously shown for years.
Alan Dunn: 05:28 Now, this was in December, mind you, and being that the buyer was a well-known retail company, the number of customer service complaints skyrocketed from customers typing in the domain, and it didn’t work. Remember, it wasn’t the domain name the company owned they were typing in. It was the domain name they assumed they owned. Years ago, a blank page didn’t have this effect. Presumably, the same customers just went to Google and typed in the brand name.
Alan Dunn: 05:54 However, this year, a big 404 page saying the site was down was now in their face, and people with holiday orders and returns were calling in to complain. Enough was enough. Two weeks later, the seven-figure price was paid, and all prior mishaps were put to rest with a seven-figure wire. The takeaway here, execute strategy as a team. Plan your moves, and don’t do anything which is going to provoke people you want an asset from.
Alan Dunn: 06:23 Next up is another favorite and, well, all too common, The Broker Who Doesn’t Listen. A part of every broker’s business are clients who have received an offer from another broker and now wants assistance dealing with that broker. Sometimes, this request for assistance comes from an owner simply wanting their own representation. Other times, it’s because they want to understand aftermarket values more. And in some cases, my personal favorite, is when an acquiring broker just said the wrong thing.
Alan Dunn: 06:53 We had a case once where a multibillion dollar corporation rebranded and hired a broker to approach a legacy owner for his exact-matching domain name of their new brand. In fact, it wasn’t just the domain name, but rather the dot-com name, social handles, and more. Basically, the guy had chosen the exact same brand name 10-plus years ago, was lucky enough to grab matching social handles, and really did operate a successful business on the name. He even secured nontransferable state licensing under this brand name and more. The only catch was he wasn’t very active online, so it didn’t look like much on the outside.
Alan Dunn: 07:33 A certain broker reach out to this owner and offered $25,000 or something close, eventually increase in it slightly. However, the moment everything went south is when our soon-to-be client spoke to the broker on the phone and explained how having this business literally saved his life by being able to work from home. You see, he had suffered a car accident and for a number of years had to work from home.
Alan Dunn: 07:58 Well, the nature of his business and his licensing allowed him to do just that. If it were almost any other job, he would’ve lost his ability to earn income, so this domain and the appropriate assets were worth a lot more to him now than ever before. These assets provided a sense of security so if anything like this ever happen again, a sense of security which is often only truly valued after a person goes through something like this. We’re not talking about a small accident either. The client literally had to learn how to walk again.
Alan Dunn: 08:31 After hearing this story myself, I not only felt great inspiration, but also a more than normal amount of empathy to want him to get a great price for the domain name. What soured me was that the original broker who reached out also heard most if not all of the same story I heard. And after doing so, he raised the offer by $10,000 or something minimal. I mean, I was livid and ready to go to war for this guy. And at the end of the day, we did just that, where the buyer ended up paying hundreds of thousands of dollars more purely because he was essentially a dick to begin with. His lack of empathy, his minimal offer increase, possibly even his tone all led to the client engaging us.
Alan Dunn: 09:16 For us, this was obviously a win and for our client also. But I think for many people … and I’m not perfect either … the lesson here is be nice. Listen to not only your client, but also understand the person you are trying to buy a domain name from and make fair offers. If you only focus on money, many times, you’ll lose the attention and trust of the very person you need to make a deal with.